February has arrived, bringing the Spring Festival holiday closer. Following the holiday, spring plowing will commence across the nation from south to north, marking the peak season for agricultural fertilizer demand. What measures have been implemented to ensure fertilizer supply this year? Will fertilizer prices rise during spring plowing? Below is a detailed analysis of key fertilizer types.

I. Urea

The fourth batch of urea export quotas, totaling approximately 600,000 tons, was issued in early November last year. This boosted market confidence and helped stabilize urea prices, leading to a rebound of RMB250 per ton. While this increase appears significant, current factory-gate prices in Shandong, Henan, and other regions remain around RMB 1,700 per ton—a historical average level. Compared to corn prices, this is still affordable for farmers. Therefore, it is not that urea prices have risen excessively, but rather that they were previously too low.

Had the fourth batch of export quotas not been issued last year, domestic urea prices would likely have continued falling. Domestic urea producers might have halted production due to mounting losses, undermining supply security. In fact, from November last year to January this year, domestic urea output increased by nearly 1.5 million tons year-on-year, far exceeding the fourth batch of export quotas. This demonstrates that last year's fourth batch of export quotas served as a strategic move to safeguard domestic urea supply.

Current pricing levels ensure full utilization of domestic production capacity, with daily output likely maintaining above 210,000 tons—approaching historical highs. Provided export restrictions remain in place, I am confident domestic urea supply for spring planting is fully secured. Prices will likely resume their downward trajectory, ensuring farmers access more affordable urea during the planting season.

While urea supply is secure, complacency is unwarranted. The paramount concern is preventing speculative urea exports and avoiding a repeat of last year's overlap between spring planting fertilizer demand and summer stockpiling.

II. Phosphate Fertilizer

Phosphate fertilizer faces the greatest supply pressure due to persistently high sulfur prices. Conversely, these elevated sulfur costs stem from high domestic phosphate fertilizer operating rates—a positive indicator of ample domestic supply. Higher operating rates strengthen the foundation for supply security and actually support future price declines.

In late December last year, a series of supply assurance measures for phosphate fertilizers were introduced alongside intensified publicity efforts. This finally curbed the rapid price surge, buying crucial time for supply stabilization—a textbook example of effective expectation management.

The most critical supply assurance measure was suspending exports until late August. Given China's over 30% reliance on exports for phosphate fertilizers, maintaining this export freeze—even if short-term effects are limited—will yield sustained benefits over time. Price reductions for both phosphate fertilizers and sulfur are merely a matter of time.

Similar to urea, as long as we avoid a situation like last year's overlap between spring fertilizer demand and summer stockpiling, I believe the domestic supply-demand balance for phosphate fertilizer will ease, ensuring ample supply for spring planting.

III. Potash Fertilizer

Two key measures were implemented for potash fertilizer supply: First, a major import contract for the first half of this year was signed in late November last year; Second, on January 27 this year, relevant authorities convened a supply-demand coordination meeting for potassium fertilizer supply security and price stabilization. The meeting confirmed that upstream and downstream potassium fertilizer enterprises would sign long-term intent agreements and enforce existing price caps throughout the year.

The China Inorganic Salts Industry Association forecasts that China's physical potassium fertilizer supply this year will reach 22 million tons, nearly 2 million tons higher than last year. Specifically, a significant portion of last year's large-scale potash contracts may remain unfulfilled. Combined with the early signing of this year's major import contracts, it is anticipated that domestic potash imports in the first quarter will likely exceed 1.4 million tons per month—nearly 700,000 tons higher than the same period last year. This indicates a solid foundation for securing domestic potash supply.

In summary, this year's fertilizer supply measures are comprehensive and robust, presenting a highly favorable supply outlook. However, vigilance is essential to prevent market speculation and effectively manage market expectations in the latter stages.

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