After a turbulent year, the fertiliser market stabilized at the end of 2016, and showed growth in early 2017. In fact, the market performance was stronger than expected in the first quarter of this year from a wide range of nitrogen, phosphorus and potassium. A key factor is that demand is stronger than expected, as illustrated by trade data from some major fertilizer consumer countries in the first few months of this year. At the same time, some major manufacturers said some of the products had continued well in the second quarter, better proof that market demand had risen in early 2017.
Brazil's big agricultural powers dream of supporting market growth
Brazil has long been optimistic about the fertilizer market. Despite the political and financial turmoil in Brazil, the agricultural sector has always been a strong contributor to its economic growth. Over the past 10 years, crop acreage and output have been growing strongly at a CAGR of 6%, and soybean production this year is expected to reach a record 1.08 tonnes.
At the same time, the consumption of chemical fertilizer in Brazil was closely related to the growth of agricultural output. In 2016, the total utilization reached a record 34 million tons (14 million 500 thousand tons of nutrients)
Brazil agriculture and fertilizer industry stakeholders are optimistic about the huge growth potential of Brazil. The view of the future can be summed up as: optimism is greater than prudence. In almost all of the discussions, from port operators to farmers, people can feel how people are prepared for the inevitable growth in the coming years. From the new investment in logistics infrastructure, the construction of new hybrid factories to the expansion of large farms to buy new land, Brazil is investing in maintaining the status of super agricultural giant. These trends are believed to support optimistic long-term growth theory.
China's land circulation to release more power
Unlike Brazil, where new land is put into production each year, China retains existing arable land and promotes improvements in agricultural production technology to increase productivity. Of particular concern is how China's ongoing agricultural integration has had a profound impact in the field. In 2008, Chinese released a new land policy, the policy is designed to ensure that farmers can make full use of land as collateral assets, while allowing the integration of farm management, this is a huge driving force. The policy will help boost the development of large farms that can better use agricultural technologies to increase crop yields and nutrients. We visited two partners in Shandong Province, who recently integrated about 600 acres (about 100 acres). Compared with those who are responsible for thousands of acres of land for agricultural operators, it seems not worth mentioning, but when you know this land consolidation before about 300 individual peasant farms, this view will change.
This type of integration is taking place all over the country and is expected to remain a major trend in the coming years. This trend, I believe, will help a greater degree of mechanized operations and balanced fertilization, as well as farming of more valuable and nutritious crops.
Other changes are also evident in china. On demand, there are targeted investments in new agricultural stores and e-commerce aimed at supporting agricultural development and increasing access to agronomic information. Both the industrial sector and the government are taking steps to promote special fertilizers to address specific nutrient deficiencies in the soil.
Although these projects are creating new opportunities, domestic fertilizer producers are also faced with the challenge of the supply market may reshuffle. The abolition of certain subsidies, increasing VAT and strengthening environmental regulation have reduced the competitiveness of many fertilizer producers. Although its status and competitiveness in the global export market may be lower than in recent years, China is expected to remain fully able to meet its domestic demand in the future, given its huge capacity for nitrogen and phosphorus. In any market, the coordination of long-term development and short-term interests is always a challenge. The balanced supply side will continue to play an important role in shaping the short-term market direction, but in the long run, we believe that "demand driven market" can not be ignored.