China’s Organic Fertilizer Market Would Reach 227 Billion Yuan by 2023

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China’s Organic Fertilizer Market Would Reach 227 Billion Yuan by 2023Organic fertilizer is a category of fermented fertilizers obtained from animal manure and plant/animal residue and the use of organic fertilizers has a long history in China. But in recent decades, the percentage of organic fertilizer in total nutrient input has steadily reduced from 99.9% in 1949 to 20% in 2010 and bottomed at 5% to 10% today. China’s per-unit-area rate of chemical fertilizer is 443.5 kg per hectare, almost 3 times the global average level of 120 kg per hectare and twice the internationally-accepted safety limit of 225 kg per hectare. This gives China an ever-increasing agricultural output at the expense of soil fertility: 26% and 44% of the farmland has the fewest organic matter and organic carbon of less than 1%. 64%, 53% and 40% of the farmland are in serious deficiency of Calcium, Magnesium and Sulphur. Since China launched the “Action Plan for Zero-growth of Chemical Fertilizer and Pesticide Use” in 2015, as well as other agricultural development policies thereafter, this reviving sector has witnessed a double-digital increase for the past few years and the demand would reach 227 Billion Yuan by 2023. In the course of China’s agricultural revitalization of quality enhancement and green development, it is vital for agribusiness enterprises to have a better understanding of the industrial actuality, key driving force and the developing tendency of China’s organic fertilizer market.

Industry Characteristics

Organic fertilizers can be conceptually classified into 3 commercialized categories: refined organic fertilizer, organic-inorganic compound fertilizers and microbial organic fertilizers and their market percentage were 43.5%, 17.6% and 38.9% respectively:

  • Refined organic fertilizer- Obtained thought the fermentation or decomposition of organic materials and typically formulated into powdery, granular, or liquid form.
  • organic-inorganic compound fertilizer-blended or compounded products of inorganic fertilizer and organic fertilizer in granular or strip form. Depending on organic matter content, this category of fertilizers can be further classified into 3 types: Class I, Class II and Class III.
  • Microbial organic fertilizer-Harmlessly treated or decomposed organic materials compounded with functioning microbial organisms and exerts the effect of both microbial fertilizers and organic fertilizers.

Category

Compulsory standard

Minimum technical indicator

Market Entry requirement

Refined organic fertilizer

NY-525-2012

Organic matter: ≥ 45%

Registered at the provincial agricultural authorities

organic-inorganic compound fertilizer

GB 108877-2009

Class I:

Organic matter: ≥ 20%

Macro-elements(NPK)≥15%

Class II:

Organic matter: ≥ 15%

Macro-elements(NPK)≥20%

Class III:

Organic matter: ≥ 8%

Macro-elements(NPK)≥30%

Microbial organic fertilizer

NY 884-2012

Living microbials ≥ 200 million CFU/g

Organic matter ≥40%

Registered with the MoARA

Note: China prohibits the import of refined organic fertilizers produced overseas and some of the animal/plant-derived fertilizers are formulated into a water-soluble formulation and registered with the MoARA as the water-soluble organic fertilizers

By the end of 2018, China has 2282 indigenous companies producing organic fertilizers but over half them produce organic-inorganic compound fertilizer. According to Chinese Agricultural University, who investigated hundreds of producers in 23 provinces, nearly 80% of them are small and medium producers with an annual capacity of less than 50,000 tons and only 5% of them are large-scale producers with an annual capacity of more than 100,000 tons.
China uses approximately 40 million tons of organic fertilizers(nutrient quantity) annually, accounted for about 60% of the agricultural wastes generated, mainly comes from the by-products of monosodium glutamate(MSG) production and animal manure. As the former is a full monopoly sector with a high market concentration ratio (CR3) of 80%, the plant-derived materials from the MSG industry would be stable and introduce little variation to the organic fertilizer sector. Animal-manure-derived fertilizers accounted for 30% of the organic fertilizer produced and the percentage is expected to increase even further along with the strategy of animal manure re-utilization, mainly driven by intensive livestock farming and environmental pressure.

Favorable Policies

“Action Plan for Zero-growth of Chemical Fertilizer and Pesticide Use” marks the beginning of the rapid growth of organic fertilizers. From 2015 to 2019, China’s organic fertilizer market has grown from 65.8 billion Yuan to 101.4 billion Yuan, a rate of 11.4% compounded annually.

In 2017, China MoARA launched the “Action Plan for the Substitution of Chemical Fertilizers Uses in Fruits, Vegetables and Tea Production”, aimed to reduce the uses of chemical fertilizers and improve soil fertility with quantitative goals:

  • By 2020, the percentage of the usage reduced will be 20% in general production regions and 50% in key/branded production regions;
  • By 2020, the organic matter content will be raised to 1.2% in orchards and tea gardens and maintained at above 2% in vegetable fields.

During that same year, the State Council issued a positioning paper on the reutilization of animal manure, specifying that a reutilization system will be well established by 2020 and 75% of the resource generated will be recycled. A 5-billion-Yuan governmental investment was spent on the recycling facilities in 204 counties. A lot of leading animal farming enterprises have engaged in organic fertilizer business, as a way of seeking new profit growth but also as a way of waste disposal.

Moreover, China offered comprehensive subsidies to the value chain including growers, animal farmers, organic fertilizer producers and fertilizer circulation enterprises, particularly the fertilizer production enterprises enjoying a tax rebate.

Future Prospects

The cycling economy proved to be an effective approach to reduce agricultural pollutants in China. During the chemical fertilizer substitution initiative, the organic fertilizers added in 100 counties were roughly the nutrients obtained from 20 million tons of animal manure. Take Jiangsu for example, a one-year substitution in 4 counties has increased the organic fertilizer usage by at least 30% and the reutilization rate by 5%.

At a news briefing in June 2020, MoARA spokesman revealed that the Ministry will continue to broaden the substitution initiative:

  • Yangtze River economic zone and Yellow River valley will be prioritized and the crop range will be expanded from apple, citrus, vegetable and tea to other cash and local-featured crops;
  • To carry out the reutilization campaign in 685 animal-farming counties;
  • 63 counties will be newly designated as the pilot sites of chemical-organic fertilizer substitution and the coverage increased will be at least 84,000 hectares, where the chemical fertilizer usage should be reduced by at least 15% and organic fertilizer input should be increased by at least 20%.

Another noticeable feature of China’s fertilizer market is the role of microbial fertilizers. According to a MoARA expert responsible of fertilizer registration, China’s microbial fertilizer market has doubled to over 30 billion Yuan in recent 5 years and is expected to grow at a compounded annual growth rate of 10% in the next decade, mainly focused on characteristic functioning products such as soil amendments and seed-coating stimulants.

Organic fertilizers are also an indispensable input for organic agriculture, which is strongly promoted and fast-growing in China. China is the fourth largest consumer of organic food in the world after the US, Germany and Japan while Japan, EU and the United States are the top 3 export designations of China’s organic food. The acreage of organic plantation in China has grown five-fold since 2005, covering an area of 3.1 million hectares. From the perspective of organic farmland, China is the third largest organic grower after Australia and Argentina. But there has been a profound mismatch between China’s organic farming and nutrient input: the utilization percentage of organic fertilizers is 46% in the United States, 60% in German, 37% in France, 55% in Australia, 60% in Canada, 48% in South Korea and as high as 76% in Japan. Organic farming can also offer attractive investment options to early movers.

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