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China Extends Price Intervention to Fertilizer

The National Development and Reform Commission (NDRC), China's top economic planner, announced on Tuesday that it would extend their price control policy to fertilizer, a move to protect farmers' enthusiasm and the nation's food security.

A senior official with the NDRC made the announcement at a warning conference on price control of fertilizer.

He said that fertilizer makers operated by the central government should not raise the ex-factory prices of urea while fertilizer manufacturers run by local governments should strictly control their ex-factory prices of urea, phosphate fertilizer and compound fertilizers. Other companies are now required to submit a report for official approval if they intend to raise prices.

This interim price intervention covers the spring plowing period.

According to government policy, price and market regulatory agencies have the right to ask any enterprises to lower their prices to normal or to reduce their price rise range if the increase is considered unacceptably large.

Due to forecasts of steady price rises the government decided to extend the official price intervention policy to fertilizer.

Statistics indicate that ex-factory prices of urea and compound fertilizers have surged to 1,725 yuan/ton (US$238.6/ton) and 2,600 yuan/ton (US$359.6/ton), respectively, both up more than 30 percent year-on-year.

Analysts attributed the price increase in fertilizer to international market fluctuations, cost increases and China's lack of phosphorus and potassium resources. The offshore price of urea in the Black Sea has reached US$400/ton, up 30 percent over last year. And in China the ex-factory price of monoammonium phosphate (MAP), the main raw material to produce fertilizer, has climbed to 3,100 yuan/ton from 1,800 yuan/ton early last year.

"Farmers are expected to suffer more from costs increase if the fertilizer prices continue to soar as the plowing season approachs," Li Xianbin, deputy president and spokesman of China's Agricultural Means of Production Group, said earlier this month.

Xu Shaohua, a villager living in a town off the Dongting Lake in south China's Hunan Province, was carefully calculating whether he could continue to survive by farming.

"The price of urea grew by almost half last year while grain prices rose only a little. Rice has sold at about 1.6 yuan/kilogram in recent years. The margins are really tight," said Xu.

Last year, numerous preferential policies were taken by the Chinese government to increase incomes and improve the livelihoods of rural residents.

About 150 million rural students have been exempted from tuition fees for China's nine-year compulsory education and more than 200 million rural residents are entitled to a living allowance provided by the central and local governments.

But experts noted that the government is to some extent in a dilemma - on the one hand it has to curb prices of agricultural products to tackle inflation, on the other hand it must introduce measures to stimulate the farmers' enthusiasm.

Surges in prices of edible oil, meat, milk, eggs and liquefied petroleum lifted the consumer price index (CPI) to 4.6 percent in the first 11 months of 2007, and an 11-year high of 6.9 percent in November, well above the government's three-percent target.

Fertilizer is one of the most important means of production for farming, so surges in fertilizer prices touches the most sensitive nerve of farmers.

"We hope that the fertilizer price will not continue to rise. Otherwise, it will offset all our income. It is good news that the government will introduce price controls," said Lu Guangchun, a farmer in the city of Changyi in eastern China's Shandong Province.

(Xinhua News Agency January 23, 2008)

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