China Warns on Food Security as Coal Crunch Hits Fertilizers

(Bloomberg) — China once again warned of the impact of skyrocketing energy prices on fertilizer supplies and signaled concern that food security could be affected.

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The National Development and Reform Commission said fertilizers are important for agricultural production and maintaining food security, and urged authorities to ensure stable prices and prioritize the supply of raw materials and energy to chemical fertilizer companies, according to a WeChat statement.

The global fertilizer market is on a tear due to extreme weather, plant shutdowns and government sanctions, hitting farmers already buckling under the strain of rising costs and stoking fears that food inflation could worsen. In China, the rally has caught the attention of regulators, adding to a range of commodities that Beijing is scrutinizing. The NDRC, China’s top economic planner, vowed in June to crack down on urea hoarding and price gouging.

Urea futures in Zhengzhou hit a new high Thursday, tracking a rally in coal prices. While natural gas is the primary feedstock for nitrogen producers around the world, most Chinese producers use coal, making them vulnerable to Beijing’s increasingly strict policies around air pollution and the environment more broadly.

Shares of Chinese fertilizer companies were mixed after the NDRC statement. Xinyangfeng Agricultural Technology Co. fell by the daily limit in Shenzhen, while Luxi Chemical Group lost as much as 7.1%. In contrast, Hong Kong-listed Sinofert Holdings Ltd., China’s top fertilizer supplier and a unit of state-owned Sinochem Group, gained as much as 5.7%.

(Updates with stock moves in final paragraph)

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