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China’s novel fertilizer: more opportunities with more challenges

The promotion of the new round of land reform and the centralized land transfer have resulted in the birth of China’s new agricultural players – major crop grower, family farmer, cooperatives, as well as formation of a new production mode - the scale up, centralized and modernized planting; these newly emerged phenomena are driving the start of reform of the agrichemicals business system.

For Chinese agriculture, the fertilizer industry is the most fundamental agrichemical with the highest proportion. Transformation of fertilizer industry has become very imperative in the eyes of government (food security strategy), farmer (increase of income) and enterprise (transition for upgrade). What has emerged behind the scene is a bold change taking place in Chinese agriculture.

Government’s big push to the water fertilizer integration

“Large population, small land area and short supply of water” is a serious problem existing with Chinese agriculture. In the past times, Chinese farmers would spray water and spread fertilizer by hand in a disorderly manner which had not only caused waste of water and fertilizer but also caused damages to land and soil. Soluble fertilizer is a novel fertilizer using a water fertilizer integration technology combined with dripping irrigation, which is highly efficient and water saving.

Presently according to the statistics of the National Agricultural Technology Education & Service Center, just in north China the water fertilizer integration has been promoted for use in about 3 billion hectares of wheat and corn field, which could save 20 billion cubic meters of water in the two seasons of a year. Water fertilizer integration technology and the use of soluble fertilizer are the key service programs of the National Agricultural Technology Education & Service Center.

The Water Fertilizer Integration Technology Guideline issued by the Ministry of Agriculture in 2013 states clearly that the water fertilizer integration shall be promoted for use in an additional area of above 750 million hectares of crops in 2015.

Change of fertilizer demand from new agricultural players

What is different from farmers of the past, the new agricultural players are not sensitive on prices of agricultural material but give more considerations to the input-output ratio. Conventional compound fertilizer could no longer fulfill the needs of new agricultural players.

The higher level of fertilizer demand has changed the market structure from the past compound fertilizer dominated market into a market where multiple novel products coexist. Besides the soluble fertilizer, the market of premium fertilizer like slow-release fertilizer and nitrate fertilizer has been opened up successively.

Domestic fund stepping into novel fertilizer market one after another

The statistics of the Chinese National Statistics Bureau shows that the profit of China’s fertilizer business reached Yuan 8.38 billion from January to May 2014, with a decrease of 40.1% year on year, while on the contrary the soluble fertilizer, nitrate fertilizer and slow-release fertilizer have generated considerable amount of profit.

At present agrochemical giants have seized the business opportunities brought by China’s land reform and urbanization process with continuous investment. The new agricultural market is a good remedy for fertilizer producers who are generally suffering from losses.

Application of premium fertilizer has certain degree of difficulty, which requires a strong technical support. To move into novel fertilizer market, Chinese enterprises would need to input large resources with establishment of sales network and technical support team to enable the change of the business mode from production toward service.