Caijing.com – What Opportunities Does the Supply-Side Structural Reform in Agriculture, at the Forefront of Policy Debate, Bring to the Fertilizer Industry?

2017 was designated as the year for deepening supply-side structural reform.

On February 5, Xinhua News Agency, acting on authorization, released the 2017 Central No. 1 Document, which focuses on supply-side reform in agriculture. According to GF Securities Strategy Research, over the past few years, the central government’s “No. 1 Documents” have centered on three key areas—“increasing farmers’ incomes,” “agricultural infrastructure development,” and “agricultural modernization”—all of which represent long-term policy objectives that must be achieved as part of agricultural supply-side reform.

Reducing costs and improving quality are the long-term goals of supply-side reform in agriculture. As an effective pathway for sustainable agricultural development, the fertilizer industry is a powerful pillar in advancing agricultural modernization. Amid the vigorous momentum of supply-side reform, how can fertilizer companies seize opportunities and forge ahead against the odds?

Green agriculture is a key component of advancing supply-side structural reform in the agricultural sector.

Since 2010, prices of China’s major agricultural products have risen significantly. Key drivers include rising input costs, increasing wages for labor, and higher land‑rental expenses. As a result, domestic agricultural prices currently exceed international levels, leading to substantial inventory buildups at home.

Accordingly, reducing the cost of agricultural products and enhancing the quality and competitiveness of domestic offerings constitute the long-term vision of supply-side reform in agriculture, which is concretely realized through the modernization of the sector. The 2017 Central No. 1 Document likewise emphasized “strengthening science and technology innovation as a driving force to accelerate the development of modern agriculture,” covering key areas such as agricultural intelligence, agricultural informatization, and green agriculture.

Guangfa Securities believes that green agriculture represents the path toward sustainable agricultural development. In recent years, China’s agricultural sector has been increasingly constrained by two major challenges: long-term overexploitation and excessive resource depletion, with mounting pressures on both resources and the environment. Against this backdrop, Document No. 1 identifies promoting green development as a key task within the broader structural reform of the agricultural supply side, aiming to strengthen agriculture’s capacity for sustainable growth—a trend that is now firmly established. As urbanization advances, adopting healthy, eco‑friendly lifestyles has emerged as one of the guiding directions for agricultural development. Consequently, the market outlook for low‑toxicity, high‑efficiency new‑generation agrochemicals—such as fertilizers and pesticides—is promising.

The outlook for high-efficiency fertilizers is positive.

Ren Zeping of Founder Securities believes that agricultural supply-side structural reform presents six major investment opportunities, including leading companies in the fertilizer and pesticide sectors, which stand to benefit from the zero‑growth policy and capacity‑reduction measures driven by environmental pressures.

Ren Zeping pointed out that China’s current fertilizer product mix remains suboptimal, with low technological content and slow adoption of advanced, efficient fertilization machinery. In February 2015, the Ministry of Agriculture formulated the “Action Plan for Achieving Zero Growth in Fertilizer Use by 2020,” which is essential not only for safeguarding the ecological environment, enhancing the quality and safety of agricultural products, and expanding the supply of green, high‑quality produce, but also for helping farmers reduce costs and increase incomes. Meanwhile, increasingly stringent environmental inspections are prompting the fertilizer industry to accelerate supply‑side structural reforms, thereby alleviating overcapacity. Under these circumstances, the fertilizer sector—particularly leading companies specializing in high‑efficiency fertilizers—is poised to benefit, as survival will favor the fittest and the strong will remain dominant.

Hu Qinyuan, a senior fertilizer expert at the Anhui Provincial Soil and Fertilizer Station, analyzes that the Central No. 1 Document has ushered in a series of favorable policies and opportunities for the agricultural inputs sector: First, the policy of “stabilizing grain production, optimizing economic crops, and expanding feed‑crop cultivation” has bolstered market demand for fertilizers; second, subsidies are increasingly tilted toward large-scale farmers, encouraging moderately scaled operations, which bodes well for fertilizer sales; third, addressing pressing agricultural environmental challenges objectively calls on companies to develop products that can restore and improve soil health; and fourth, the shift toward organic fertilizers as substitutes for chemical fertilizers, coupled with water‑saving initiatives in agriculture, is charting a new course for the fertilizer industry.

Where lies the way forward for the fertilizer industry?

Hu Qinyuan recommends that companies should shift their business strategy by developing and producing a diversified product portfolio that integrates high-concentration compound fertilizers, organic–inorganic compound fertilizers, bio‑organic fertilizers, water‑soluble fertilizers, and various functional products, thereby reducing the sales costs associated with any single product. At the same time, they should place particular emphasis on forging strong partnerships with large-scale farmers and specialized agricultural cooperatives, establishing high‑level agrochemical service teams, and bolstering their core competitiveness.

Take Silter as an example: aligning with industry trends and market needs, Silter has successfully established six major product lines, including soil‑testing‑based formulated fertilizers, high‑tower fertilizers, water‑soluble fertilizers, controlled‑release fertilizers, bio‑organic fertilizers, and soil conditioners. At the same time, Silter maintains a long‑term, close partnership with China Agricultural University, jointly setting up the CAU–Silter Soil‑Testing and Formulated Fertilization Research Base. This collaboration has given rise to a new service model—“soil testing, research, formulation, production, supply, and application”—covering every stage of agricultural support: from collecting soil samples to product development; from meticulous manufacturing to organized fertilizer supply; from demonstration trials to widespread promotion; from agronomic training to on‑site guidance; from yield assessment to quality follow‑up; and from data collection to customized production. As Silter’s General Manager Jin Zhenghui puts it: “We must safeguard Silter’s brand and reputation as carefully as we protect our own eyes; we must prioritize product quality as attentively as we care for our children; and we must serve every one of Silter’s customers with the same devotion we show to our parents.” These thoughtful, customer‑centric initiatives have provided strong support for Silter to seamlessly connect with large-scale farmers and professional cooperatives, effectively integrating marketing with comprehensive services.

Changjiang Securities believes that compound fertilizers and new‑type fertilizers offer comprehensive nutrition, enhance fertilizer application efficiency, reduce labor costs, and improve product quality, making them better suited to modern agriculture. The firm recommends focusing on leading companies in the compound fertilizer and new‑type fertilizer sectors.