An Increase in Fertilizer Prices Pushes up Grain Costs and Cuts Down the Profits

By CnAgri2018-08-08 10:33:26 Print Since a great decline in 2016, fertilizer prices have kept ascending for the last two years. Taking urea as examples, the prices in 2016 were lowest and decreased to 1,100 RMB/MT, however urea prices in 2018 doubled to 2,100 RMB/MT, and the prices of other fertilizer products also witnessed the similar trend.
 
An increase in fertilizer prices inevitably pushes up grain production costs. According to investigation data on costs and benefits from the National Development and Reform Commission (NDRC), fertilizer inputs for paddy, wheat and corn have averaged at 130 RMB/mu in the recent years, accounting for 15% of average production costs, of which NPK inputs take up 70% in total fertilizer costs. Based on typical investigations on farm households in Shandong and Hebei, fertilizer inputs for wheat and corn are around 150 RMB/MT and 120 RMB/MT, accounting for 30% and 37% of total production costs (excluded labor costs). Calculated at the growth of 15% in fertilizer prices, the inputs for wheat and corn increase by 23 RMB/mu and 18 RMB/mu respectively, and grain costs increase by 0.04-0.06 RMB/kg.
 
Calculated at the year-on-year growth of 15% in fertilizer prices in the first half of 2018, three grain production costs would increase by more 2% this year, and grain profits would increase by more 0.04 RMB/kg. Common farm households are less sensitive to fertilizer prices, however scaled farm households pay more attention to the fluctuations of fertilizer prices. Especially this year, due to a drop in the lowest purchase price of wheat and an increase in fertilizer prices, large growers would witness a fall in planting profits.