Benefit From The Rising Prosperity Of Agricultural Products, Fertilizer Is In Short Supply In The Beginning Of 2021, And The Price Rises

Affected by the tightening of supply and demand structure, the prices of corn and other agricultural products continued to rise last year, driving the price of chemical fertilizer higher.

On February 21, the opinions of the CPC Central Committee and the State Council on comprehensively promoting rural revitalization and accelerating agricultural and rural modernization (hereinafter referred to as the opinions) were issued. The opinions require that the achievements of poverty alleviation and Rural Revitalization should be effectively linked up, agricultural modernization should be accelerated, rural construction activities should be vigorously implemented, and the party's overall leadership over the "three rural" work should be strengthened. The release of the document has become the most fundamental driving force and cornerstone for the strength of agricultural related stocks and agricultural materials industry.

According to the latest report data of Guojin securities, the downstream spring ploughing demand is superimposed with overseas price support, and the price of phosphate fertilizer remains high. The price index of primary ammonium product is 2109 yuan / ton, which has slightly increased on a month on month basis. The industry operating rate maintains 63.88% and the daily energy output reaches 36000 tons. The price index of diammonium products is 2650 yuan / ton, up 33% month on month. The price index of overseas phosphate fertilizer has continued to rise since 2021, forming a new trend The price of phosphate fertilizer is expected to remain high in the short term.

The reporter of 21st century economic report called Yunnan Yuntianhua Co., Ltd. as an investor on February 24. In an interview, the relevant person in charge said that it had been foreseen that the domestic and international prices of agricultural products would promote the strength of the agricultural materials industry. "Since September 2020, affected by the epidemic situation and the approaching demand for spring ploughing, the prices of agricultural products and chemical fertilizers have gone up together. Since the beginning of 2021, the industry has a good momentum of development. Although the cost has increased due to environmental protection related policies and strategic mineral protection and other factors, the gross profit rate of chemical fertilizer products will still increase and bring considerable profits."

In addition, tight supply and demand of agricultural products supported the rise of fertilizer prices. In order to ensure that the structural reform of agricultural supply side is further promoted, the sown area of grain remains stable, and the output reaches more than 1.3 trillion Jin. The continuous recovery of pig breeding capacity brings about the increase of corn demand. The supply and demand gap of corn, wheat, rice and other agricultural products, and the increase in prices drive up the demand for chemical fertilizers.

Resonance between chemical fertilizer and agricultural products

Fertilizer is in great demand this year.

Take nitrogen fertilizer as an example, as of February 10, mainstream urea prices have risen by at least 15%. As for phosphate fertilizer, the price of diammonium phosphate has continued to rise sharply since the beginning of the year, and the current quotation has reached a new high in nearly two years.

In this regard, Sheng Xia, chief agricultural analyst of CITIC Securities, said: "benefited from the rise in agricultural products prices, we are optimistic about the increase of agricultural products supply in 2021, which will drive up the demand for chemical fertilizers. Adding the tight supply of phosphate and potassium fertilizers, the price elasticity of chemical fertilizer products has a large space."

According to USDA data, the global corn production and consumption in the planting season from 2020 to 2021 are estimated to be 1.145 billion tons and 1.157 billion tons respectively. The global corn supply and demand gap is expected to appear for four consecutive years; the global corn inventory consumption ratio is expected to drop to 25.7% in 2021, showing a decline for the third consecutive year.

In fact, since 2017, the actual price of corn has rebounded to the bottom, and so far the price rebound has exceeded 25%; in June 2020, the global corn price was 148 US dollars / ton, and the wheat price was 170 US dollars / ton; by October 2020, the corn price had risen to 187 US dollars / ton, up 26%, and the wheat price had risen to 203 US dollars / ton, with an increase rate of 19%.

According to the industry consensus, the price of fertilizer is highly related to the price of agricultural products. According to the public data, in the consumption structure of fertilizer in 2019, the proportion of fertilizer used by cereals is the highest, among which corn accounts for 16.2%, wheat accounts for 15.3%, and rice accounts for 13.7%, accounting for nearly half of the total. Among them, there is a lag period of 2-4 months between the price increase of chemical fertilizer and the price fluctuation of agricultural products.

In addition, in the long run, the prices of different chemical fertilizer products change with synchronous fluctuation characteristics. The chief energy analyst of CITIC Securities calculated and calculated the global nominal prices of urea, diammonium phosphate and potassium chloride since 1970, and adjusted them to real prices by using the US dollar GDP deflator index. After observation, we found that urea, phosphate fertilizer and potash fertilizer fluctuated synchronously.

But the raw materials of different fertilizer products are different. Among them, the raw materials of urea are mainly coal and natural gas; diammonium phosphate is phosphate ore, sulfur and sulfuric acid; potassium chloride is potassium bearing brine ore. Because the market of each raw material is relatively independent, and the price amplitude correlation of each raw material is relatively low, the production cost of different fertilizer is relatively independent. Therefore, product price correlation is mainly driven by demand.

According to the calculation results of CITIC Securities, the price changes of urea, diammonium phosphate and potassium chloride usually lag behind the price index of agricultural products by about 3 months, 2 months and 6 months respectively. The potassium fertilizer represented by potassium chloride and the phosphate fertilizer represented by diammonium phosphate have greater elasticity compared with the price fluctuation of agricultural products. If the price of agricultural products increases by 10%, the price of potassium chloride and diammonium phosphate will increase by 12.6% and 11.9% respectively.

This also means that the future trend of fertilizer industry can be predicted through the price of agricultural products, disasters and favorable policies. On February 3, 2021, China's Ministry of agriculture and rural areas issued the key technical points of locust prevention and control in China and abroad, providing guidance for locust prevention. The emergence of insect pests also means that it is good for the agricultural materials industry related to chemical fertilizers and pesticides, and the impact of Spodoptera exigua on grassland in the same period, and there is certain support for pesticide stocks in the future.

Domestic and foreign price inversion disappeared

From the perspective of chemical fertilizer upstream raw material supply, domestic large-scale phosphate rock and related industrial chain will be increasingly affected by environmental protection. The industry is in the cycle of de capacity, and the supply side of phosphate fertilizer will continue to tighten, which also means that there is some support for the price rise of ammonium phosphate.

Hubei, Sichuan, Yunnan, Guizhou and other provinces are the main distribution areas of phosphate resources in China. The industrial chain from the upstream phosphate ore to the downstream phosphate fertilizer and pesticide is mainly distributed in 11 provinces covered by the Yangtze River economic belt. Since the tightening of environmental protection policy, some chemical enterprises near the main and tributaries of the Yangtze River have been shut down or rectified due to substandard pollution discharge. The corresponding supply contraction pressure of phosphorus chemical industry chain is obvious.

Under the pressure of environmental protection, there are integration expectations in the phosphorus chemical industry chain. The relevant person in charge of Yuntianhua analyzed and said: "in view of the environmental protection related problems in the phosphate fertilizer industry, companies with large volume may usher in certain opportunities. The" waste removal action "can optimize and integrate high-quality enterprises in the industry, such as some enterprises with large investment in environmental protection in the early stage and have the ability to produce beyond the target Or get more orders, but also means that supply side contraction is expected to provide important support for price rise. "

On the other hand, the export of international phosphate minerals has gradually shifted to Africa in the near future, and the global production capacity has declined steadily. The superposition of domestic and foreign factors may lead to the price rise of phosphate fertilizer, and the supply of East Asia and other regions may be in short supply. At present, the global output of phosphate rock is about 200 million tons, and the production capacity is steadily increasing.

According to IFA data, from 2019 to 2024, the global ore supply will increase from 240 million tons to 260 million tons, and the main new production capacity will be in Africa. Affected by China's environmental protection, integrated management of phosphate resources and other supply, East Asia's production capacity will steadily decline, about 85.8 million tons in 2019. Considering that phosphate ore is mainly traded within the region, and Global trade is conducted only after products (such as phosphate fertilizer) are formed, it is expected that some regions such as East Asia (represented by China) will show a tight supply situation. In 2019, the global phosphoric acid (equivalent to P_ 2O_ 5) The production capacity is about 57.8 million tons. Benefited from the continuous increase in global demand for fertilizer based phosphorus, the supply and demand pattern has been tightening in recent years, reaching the bottom in nearly 10 years, similar to the situation in 2011.

However, during the period from February 5 to February 19, 2021, the price of diammonium phosphate in the US Gulf rose from US $497 / T to US $530 / T, with a weekly increase of 6.6%, which reversed the previous price inversion phenomenon at home and abroad.

"In order to ensure domestic demand, domestic phosphoric acid and compound fertilizer enterprises are expected to give priority to domestic demand from February to April, and will accept a large number of export orders for international demand after April." Yuntianhua said the person in charge.