Chinese regulators move to rein in surging urea prices after probe

China’s top economic planner and market regulator vowed on Monday to strengthen market regulation and crack down on urea hoarding and other illegal activities, in a bid to rein in surging prices of the fertilizer following an investigation into to market.

The National Development and Reform Commission and the State Administration for Market Regulation conducted a field research in Central China’s Henan Province and North China’s Hebei Province to learn about the supply and demand of urea, market prices, business operations and exports.

After visiting the Zhengzhou Commodity Exchange in Henan, urea producers and agricultural material stores, the two agencies said that they would strengthen regulation and firmly crack down on activities such as hoarding and price gouging to safeguard market order and maintain price stability.

The average price of urea in China has jumped about 56 percent so far this year to 2,800 yuan ($433.73) per ton, which has increased the costs of grain planting for farmers.

Following the regulators’ inspections, the most actively traded urea contract on the Zhengzhou Commodity Exchange fell 3.06 percent to 2,247 yuan per ton on Monday.

Surging coal prices, combined with maintenance work at urea production plants, have pushed up fertilizer prices, media reports said.

Expectations of higher grain yields by Chinese farmers have also affected the market for fertilizers, Li Guoxiang, a research fellow at the Chinese Academy of Social Sciences, told the Global Times on Monday.

In addition, India’s reduced urea output due to the COVID-19 pandemic has led to increasing global demand from China, a major urea producer.

According to official data from Chinese customs, China exported 3.67 million tons of fertilizers in May, the highest in two years.

The move on Monday followed earlier measures to cool rising prices of agricultural materials by various government agencies ahead of demand peaks for urea and other fertilizers in June and July.

The Ministry of Agriculture and Rural Affairs and other agencies on June 17 issued a document to enhance fertilizer supply to safeguard the production of summer grain crops.

“Since the spring seeding, multiple factors including short supply of raw materials and their surging prices have pushed up fertilizer prices in China by about 30 percent year-on-year, reaching a historic high,” read the document.

It asked relevant departments to strengthen monitoring and early warnings and to adjust fertilizer supply during the summer in order to secure the summer grain crops.

Meanwhile, on June 18, the State Council, China’s cabinet, said that the central government would allocate 20 billion yuan in subsidies to farmers in response to price hikes of agricultural materials.

Li said that fertilizer price hikes in China are a short-term issue, as the country’s production capacity for fertilizers remains stable and demand will fall once the seeding of autumn grain crops finishes.

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