Fertilizer companies must adjust their production models and can no longer blindly pursue high yields

Fertilizers are produced all year round, but in winter, farmers use very little fertilizer, and they need to store the more produced fertilizers.
This is winter storage
.
However, this year due to the sharp drop in international oil prices, lower prices of agricultural products, overcapacity of fertilizers and other factors, dealers' enthusiasm for winter storage has been unprecedentedly low.
Many dealers have basically given up winter storage, and the pressure has been concentrated on the side of production companies
.
Faced with this new situation, industry insiders said that fertilizer companies must adjust their production models and can no longer blindly pursue high yields
.
Distributors stopped and watched.
Speaking of this year's winter fertilizer storage, a salesperson from a southern urea plant shook his head
.
He said: "We have some estimates for the difficulties of this year's winter storage, but we did not expect the situation to be so severe and the market so cold
.
As usual, distributors will start winter storage in October, but the start time of this year's winter storage Continue to postpone, but continue to be disappointed
.
Now it’s January, farmers are about to use fertilizer, and the price has fallen to a new low in more than 10 years, but dealers are still waiting and unwilling to store in winter, and manufacturers are under great pressure.

"An expert in the industry said that the coldness of winter storage of fertilizers this year is not only manifested in individual companies, nor in a certain region, but a national phenomenon.
It can be said to be the worst winter storage situation over the years.
In 2015, there were not a few dealers who abandoned storage
.
The expert analyzed that dealers were unwilling to store in winter due to four main reasons: First, dealers were afraid of falling prices and making losses
.
During the winter storage period this year, the price of chemical fertilizers has been falling.
In the early winter storage period, some dealers lost more than 100 yuan per ton, and later dealers were even more afraid of winter storage when seeing this situation
.
The second is that the efficiency of logistics and distribution can no longer be the same as in the past.
Now the roads and railways are very developed.
I used to worry that the trains were tight and had to be shipped in advance.
Now the train transportation capacity is abundant, and the delivery is very timely.
The farmers use fertilizer.
Demand can be met at any time, and it is no longer necessary to stock up first as in the past.
Now the necessity for dealers to stock up has been greatly reduced
.
Third, falling prices of agricultural products have a great impact on dealers’ mentality.
Dealers are afraid that farmers are less motivated to plant and reduce the amount of fertilizer.

.
Fourth, poor international demand
.
China's fertilizer production is surplus, and more exports must be used to ease the pressure on the domestic market
.
However, the international fertilizer market is not optimistic.
International oil prices have plummeted below US$30/barrel, and international fertilizer prices have also fallen all the way.
It is difficult for domestic fertilizers to absorb excess production through exports.
So much production is accumulated in the domestic market, which constitutes huge pressure
.
A dealer in Shandong said that the excessive production of fertilizers is one of the main reasons why dealers are reluctant to store them in winter
.
He said that the price of urea is true for cabbage.
It has not been seen at such a low price for many years, but the dealers are still worried about the risk, afraid of "there is no minimum, only lower", and they copy to the middle of the mountain
.
He said that there are many new urea production capacity in Inner Mongolia, Xinjiang and other places, and the urea operating rate is still as high as 77%
.
With such a high operating rate, dealers dare not purchase goods easily.
If it falls below 70%, they can also consider purchasing
.
The price of chemical fertilizers continues to fall due to continuous losses.
With the abolition of preferential policies, the cost of chemical fertilizer production is rising, and many fertilizer companies are in a state of loss
.
According to analysis by industry insiders, with such a low urea price, it is estimated that about 90% of urea companies are losing money
.
A urea company in the south said that now they are biting the scalp in production, with a loss of more than 100 yuan per ton of urea.
If the price continues to fall, the company will go bankrupt someday
.
Compared with coal-based urea, gas-based urea companies are more difficult, because coal prices are now market-oriented, and coal prices are continuously falling, which can also partially relieve pressure on coal-based urea companies.
Natural gas prices are basically set by the government.
The price of gas is too low and there are more preferential policies.
With the gradual cancellation of the preferential policies, the price of fertilizer gas is rising, while the sales price of urea has fallen sharply.
Guizhou Chitian Chemical’s gas head urea plant had to be released in November 2015.
Production will be suspended on the 19th, and its coal head urea plant will continue to maintain production
.
Why doesn't the company stop production if it loses money? According to the analysis by Lu Jianzhong, assistant to the general manager of the sales branch of Henan Jinkai Company, there are two main reasons: one is that various fertilizer companies consider stability factors.
Once the company stops the car, employee wages and even employment will be affected, and there will be problems.
Stability factor; Second, the company is still seeking a marginal benefit, whether it is a breakeven or a slight loss, it is more worthwhile than stopping
.
Therefore, the operating rate of urea plants across the country is still high
.
Experts suggest to adjust the model Guo Wen, manager of Hunan Toyota Agricultural Materials Company, believes that now is the time for fertilizer companies to change their concepts and adapt to the new situation without winter reserves
.
Fertilizer production is a continuous large-scale production, and the equipment is in operation all year round, while the use of chemical fertilizers has obvious seasonality.
Therefore, when farmers use fertilizers in the off-season in winter, dealers make payments to book fertilizers to solve the seasonal shortage of funds for manufacturers.
And to ensure the centralized supply of fertilizer when the peak season comes, the winter storage is also vividly called the "reservoir"
.
But now the role of this "reservoir" is obviously declining, and dealers' enthusiasm for winter storage is decreasing.
In the future, it will be a new normal for dealers not to store or store less in winter
.
Guo Wen believes that under this situation, fertilizer companies should strengthen close cooperation with distributors on the one hand, reduce the risk of distributors’ winter storage by means of Federal Reserve joint marketing and guaranteed interest calculation, and mobilize their enthusiasm for winter storage.
They dare to store in winter and are happy to store in winter
.
On the other hand, production companies must adjust their off-season production methods
.
Fertilizer companies basically carry out equipment overhaul once a year.
The overhaul should be arranged in the off-season as much as possible to reduce the sales pressure during the off-season; if there is difficulty in selling goods and a serious product backlog, the fertilizer company should actively and decisively reduce the production load , Instead of blindly cutting prices
.
Enterprises cannot simply think that full-load production is a good thing
.
Companies have to think about it.
If they produce too much, where do their products go? There is too much backlog in the warehouse, and I just want to cut prices.
Isn't it because the more production, the more losses? Facing the increasingly severe winter storage situation, fertilizer companies must establish an off-season production mechanism to actively adjust production according to market demand, instead of blindly pursuing high production.
If production is limited, production will be limited, and production should be stopped if production is stopped.
Take the lowest corporate loss as the principle
.
A marketing person in charge of a fertilizer manufacturer in Guangxi said that distributors are reluctant to store in winter, and fertilizer companies can increase direct sales and sell fertilizers directly to large growers and farmers.
Such low fertilizer prices are still tempting for farmers.
, Can reduce their planting costs, some farmers are also willing to save fertilizer now, they are also worried about the increase in the price of fertilizer during the peak season
.
As long as companies work hard, they can still find a market
.
Enterprises should broaden their marketing channels and cannot hang on a tree.
From the perspective of future development, it is an inevitable trend to reduce intermediate links and move closer to end consumers
.