China’s fertilizer exports ban raises worries from global markets

Will China continue to squeeze its controls of the world’s phosphate supply?

The region is expected to further tighten its controls on exports of fertilizers, effectively shutting off the supply of phosphate to the global market and accentuating restrictions that have already driven prices higher.

Some reports suggest the country’s government has implemented measures that now effectively block phosphate exports through to June 2022.

The move would build on existing measures that have seen China suspend or limit fertilizer exports, particularly phosphate, since late July 2021.

That has exacerbated a shortage of global supplies and helped contribute to a surge in prices across international markets.
Where it began
The ban first came in late July when the world’s largest phosphate producer ordered some large, domestic fertilizer companies to temporarily suspend exports to stabilize prices and assure domestic supplies.

China’s August fertilizer exports were reduced by 26.3% from the previous month to 2.78 million tonnes, according to data from China’s customs.

Furthermore, recent electricity curbing actions on what is a high energy-consuming industry – part of the country’s efforts to cut emissions – aggravated the supply deficiency and triggered fresh rises on domestic prices.

Urea futures on the Zhengzhou Commodity Exchange, a key fertilizer and a litmus test reflecting rises values across wider agricultural inputs, set new records last week as they raced to the highest prices recorded since the inception of the contract in August 2019.

China’s state planner took urgent reaction through a joint effort with 13 other government departments last Wednesday and gave orders to “carry out inspections on import and export chemical fertilizers strictly under the latest regulations,” according to a notice from the National Development and Reform Commission (NDRC).

That instruction was interpreted by markets that China would continue to curb and limit its fertilizer exports in the next few months.

Impact on the agriculture sector
China is a key producer of fertilizers supplying urea and phosphates to the agriculture sector, providing vital inputs for North and South American corn and soybean production.

Limits on exports are likely to further tighten supply and drive prices higher, adding to farmers’ input costs, or forcing some to plant without using the fertilizers in a move that could lead to a reduction in yields.

Fertilizer exports from China have surged in 2021, with a total of 10.8 million tonnes exported for the first eight months of the year, a jump of 46% on the same period last year.

For fertilizer phosphates, around 70% of China’s fertilizer exports are destined to countries in South America, with Brazil taking 50% while Argentina takes around 15-20% of the volumes.

“There are few supplying countries of phosphates fertilizers in Argentina – only four countries, so the absence of China is likely to have an impact,” an Argentina-based source said.

Brazilian farmers are also facing significant cost pressures from rising input costs, underpinned by a combination of high demand, surging inland freights and supply shortages.

Brazilian producers, especially those who plant soybeans, are also worried about the availability of glyphosate – with yellow phosphorus a key input into production of the critical herbicide.

Glyphosate availability was already tight due to supply bottlenecks in China, with farmers heard hurrying to guarantee supplies over the last months.

“It seems like farmers are more worried about glyphosate than about fertilizers at the moment as prices have doubled and the product is quite scarce in the market,” HedgePoint Global’s Victor Martins said.

This article, by Cai Chen, Liliana Minton and Eduardo Tinti, was first published to on Thursday September 28.

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