China’s farming costs to rise in 2018 as fertiliser prices jump

Tuesday, 23 January 2018 00:00 - - {{hitsCtrl.values.hits}}

BEIJING (Reuters): China's agriculture production costs are set to rise fairly quickly in 2018, pushed up by higher fertiliser and pesticide prices, an agriculture ministry official said last week.

Domestic urea prices rose 34% in December on a year earlier and compound fertiliser rose 17.1% due to higher raw materials prices and falling operating rates at fertiliser producers, said Tang Ke, director of the agriculture ministry's market and economic information department.

Combined with higher agricultural machinery prices and emerging environmental protection costs. "Agriculture production costs in China are expected to go back to a relatively fast rising channel in 2018, after staying at stable levels in the past two years," Tang said.

His comments follow a government push to ensure adequate fertiliser supplies and stable prices ahead of spring planting, after a gas supply crunch tightened supplies of urea and other gas-based fertilisers.

Tang said production costs for wheat, corn and rice were expected to rise 2%, 2.8% and 2.4% respectively on 2017, based on an estimated 20% jump in fertiliser prices.

The price of corn, one of China's three major grains, was expected to rise early in the year but then remain stable due to China's huge stockpiles. Chinese corn prices have rallied since October's harvest on concerns about tight supplies because of cuts in planting, and on signs that corn farmers are holding back grain in expectation of higher prices. "The reduction of corn stocks in 2017 was faster than expected. The trend of corn prices becoming stronger was also beyond market expectations ... It is expected that farmers in the northeast are likely to grow more corn in 2018," Tang said. The fall in China's corn stocks was likely to accelerate in 2018, he added.

China may also import more sugar, cotton and oilseeds in 2018, putting pressure on domestic prices of some products, while prices of beef, mutton and other livestock products are expected to rise, but should be relatively stable, he said.

Wholesale pork prices in China fell 14.6% in 2017 from the previous year, to 21.24 yuan ($3.31) per kilogram, Tang said.

Prices of fresh agricultural products including vegetables are unlikely to rise significantly during the Spring Festival holiday, in the absence of extreme weather, he said. Fruit and vegetable prices in major cities in central and northern China surged earlier this month after severe winter weather cut off highways and damaged crops