Report Industry Investment Rating - The short - term outlook for the urea market is that the upside space is limited; the medium - term view is bearish; the long - term view requires attention to policy changes. It is recommended to short the 2605 contract in the range of RMB 1,850 - 1,900 per ton, wait for the short - selling drive in the range of RMB 1,820 - 1,850 per ton, and focus on the support level of RMB 1,700 per ton and export policy changes [1][20]. Core View - The compound fertilizer industry has a high - inventory situation of both finished products and raw materials, which, combined with the marginal decline in demand, may become a market risk trigger. Based on the fundamentals and policy aspects of urea, it is expected that the upside space of urea is limited, and a bearish view is taken in the medium term [1][16]. Summary by Directory 1. Research Area Agricultural Background Analysis - **Lunan Plain Agricultural Area**: The core research areas such as Zaozhuang, Linyi, and Ningyang are in this area, covering 15,200 square kilometers, accounting for 9.7% of the province, with a high cultivated land rate of 53.5%. It has superior hydro - thermal conditions and is an important production base for grains, cotton, oil, and vegetables in Shandong [3]. - **Zaozhuang City**: By 2024, it had 2.535 million mu of high - standard farmland, a 24.6% increase from 2020. The grain output reached 1.893 million tons, with the output of wheat and corn ranking among the top in the province. The pomegranate and potato industries have significant advantages [4]. - **Linyi City**: It is an important supply base for grain, oil, fruits, vegetables, and livestock products in China. In 2024, the total output value of agriculture, forestry, animal husbandry, fishery, and related services reached RMB 103.76 billion. It has 24 characteristic industries with an output value of over RMB 1 billion, with a total output value of RMB 180 billion [4][5]. - **Ningyang, Dongping, and Jinan**: Ningyang has 16 rural revitalization demonstration areas; Dongping has 28 demonstration areas with rapid development of facility agriculture; Jinan's grain production has increased in area, yield per unit, and total output for six consecutive years, with a total output of 3.057 million tons in 2024 [5]. - **Dezhou City**: It is famous for the "one - and - a - half - ton grain" production capacity construction, with a core area meeting the standard of 1.58 million mu, and its yield per unit ranks first in the province. The "Technical Specifications for Annual Yield Increase of Wheat and Maize in the Huang - Huai - Hai Region" has become a national agricultural industry standard [6]. 2. Research Content Details - **Compound Fertilizer Industry Chain Inventory Status** - **Production Enterprises**: Most enterprises have a much higher finished - product inventory than the historical average, with some having a capacity utilization rate of over 90%. The average raw - material inventory days are over 30, and some reach 45 days, with a large amount of in - transit goods [7][9]. - **Mid - and - Downstream**: Dealers' inventories are generally high, with an average of 70% - 80% of warehouse capacity in Zaozhuang and Linyi. The inventory turnover days are significantly longer [9]. - **Agricultural Demand Tracking** - **Winter Wheat Top - Dressing Progress**: There is a north - south differentiation. In the Lunan area, top - dressing is basically completed, while in the Luzhong area, it is in progress and will end by mid - to - late March [10]. - **Approaching Agricultural Demand Gap**: From late March, the region will enter a demand gap period until mid - to - late April, adding pressure to the high - inventory market [10]. - **Analysis of Grass - Roots Farmers' Behavior** - **Full Awareness of Price - Limit Policy**: Farmers have a high awareness of the national fertilizer price - limit policy, which enhances their bargaining power [11]. - **Price Sensitivity and Purchasing Mentality**: Farmers are highly sensitive to fertilizer prices, preferring to wait for price drops before purchasing. Some farmers purchased winter wheat fertilizers before the Spring Festival, which overdrafted post - festival demand [12]. - **Stable Mentality and Clear Expectations**: Farmers' mentality is more stable this year, and they believe the price - limit policy will be implemented, waiting for prices to fall below RMB 1,800 per ton to buy [12]. 3. Problem Analysis and Logical Deduction - **Verification of Demand Front - Loading Effect**: Farmers' pre - festival purchases and dealers' early stocking have led to demand front - loading, reducing post - festival top - dressing demand and causing inventory backlog in the compound fertilizer industry [14]. - **Formation Mechanism of Compound Fertilizer "Pressure Minefield"**: High inventories of finished products and raw materials in the compound fertilizer industry are the result of multiple factors. The interaction between the production, channel, and demand sides forms a positive cycle of inventory pressure, which may become a market risk trigger [15][16]. - **Analysis of Urea Fundamentals** - **Supply Side**: The daily output of the urea industry has reached a record high of over 220,000 tons, which suppresses urea prices [16]. - **Demand Side**: Agricultural demand is entering a gap period, and industrial demand from compound fertilizer enterprises is weakening [16][17]. - **Policy Side**: The domestic urea spot price limit is around RMB 1,840 per ton, and the guiding price from March to June remains unchanged, which stabilizes market expectations [17]. - **International Factors**: Although international urea prices have risen due to the Iranian situation, the domestic urea futures market is less sensitive to international factors [17]. 4. Conclusion and Strategy Suggestions - **Market Judgment**: The short - term upside of urea prices is limited; the medium - term market is bearish; in the long - term, attention should be paid to policy changes, with RMB 1,700 per ton being an important support level [20]. - **Strategy Layout Suggestion**: Short the 05 contract in the range of RMB 1,850 - 1,900 per ton; wait for the driving force to short in the range of RMB 1,820 - 1,850 per ton; consider taking profit on short positions when the price approaches RMB 1,700 per ton if there are signals of export policy relaxation [21]. - **Subsequent Tracking Points**: Focus on changes in compound fertilizer enterprises' operating rates, finished - product sales progress, dealers' restocking intentions, actual agricultural demand release, and policy trends [21][22][23].