CJ Fertilizer's ammonia plant in Hunan
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CHINESE AGRICULTURAL-LINKED firms like Changjiang Fertiliser, Anchun, China XLX Fertiliser and China Farm Equipment (soon to be delisted) could reap a bountiful harvest from recent pronouncements from Beijing in strong support of the world’s biggest country’s farming sector.

China's newly sworn in government issued its first policy document for the new year which stresses the importance of developing modern agricultural techniques to boost livelihoods in rural areas, according to a state media report.

Authorities in Beijing said ensuring grain security and the supply of major farm products will always be a top priority in China's development of modern agriculture.

“China should never slacken agricultural production,” said the document, adding that works should be done to “accelerate the development of a modern agricultural industry and strengthen both material and technical support for agricultural development.”

Anchun executives guide Greater China fund managers around the firm's Hunan Province plant, with methanol and ammonia reactor casings in the background.  File photo: Andrew Vanburen

The PRC will also continue to “stabilize and increase grain output by keeping the area of land sown to grain crops stable, improving farm production structure and raising per-unit yields, “ the statement added.

In addition, it said efforts will be made to strengthen agricultural infrastructures and increase production efficiencies, and the government should implement while further improving "the strictest rules" on farmland protection.

“More work should be done to improve irrigation and water conservancy projects, encourage scientific innovation in the agricultural field and enhance intellectual property protection.”

CJ Fertilizer's SGX-listed shares have had a stellar performance of late

This certainly comes as welcome news to at least four Singapore-listed enterprises with heavy exposure to China’s agricultural sector: Changjiang Fertiliser, Anchun, China XLX Fertilizer and China Farm Equipment.

The emphasis on “increasing production efficiency” will be a boon to the three fertilizer plays.

Based in the heavily agricultural province of Hunan, CJ Fertiliser produces nitrogenous fertilizer for use in rice paddies, as well as liquid ammonia and methanol.

And to help meet anticipated demand growth, the firm has brought on-line three recent pickups: a production facility from DaDi Chemical Co Ltd, a 40,000-ton capacity plant in Xiangyin County, Hunan, and another plant from Handan Chemical Co Ltd.

Upstream equipment supplier Anchun International is also seen as a beneficiary of the newly-stated policy, in particular the government’s desire to “raise per-unit yields.”

Anchun's shares were recently trading at 0.07 sgd, or roughly midway between their 52-week range of 0.04-0.11

Also based in China’s agricultural heartland of Hunan Province, Anchun managed to boost its third quarter revenue by 4.3% to 40.3 million yuan despite China’s slower economic growth and what management called a “challenging business environment.”

The emphasis on agricultural productivity and the pledged support for the sector from Beijing will certainly be music to the ears of Anchun’s shareholders.

Singapore and Hong Kong-listed XLX Fertilizer has seen very strong share performance of late.

Its Hong Kong shares in particular have been on a tear recently, not only being buoyed higher by the bullish bourse performance in the Special Administrative Region this winter, but also by improving prospects for economic growth in its main market this year – Mainland China.

XLX’s Hong Kong-listed shares have been among the bourse's top performers since December, soaring from a low of 1.85 hkd late last year to over 2.42 not long ago.

And Chinese fertilizer plays listed in their home market are of course also looking forward to more policy support from Beijing.

While recently emphasizing its intent to remain a fertilizer-centric firm, Sinopec-held Sichuan Meifeng (SZA: 000731) is also branching into other high-growth areas like industrial gas, liquid CO2 projects and fuel additive operations – especially on the eve of the stricter Euro IV Emission Standards set to go into effect this summer.

While remaining a core fertilizer play, Sinopec-held Sichuan Meifeng (SZA: 000731) is also branching into other high-growth areas like industrial gas, liquid CO2 projects and fuel additive operations.  Photo: Sichuan Meifeng

China-listed Sichuan Meifeng is recently trading at 52-week highs
This should help Sichuan Meifeng to enhance its exposure to two increasingly policy-boosted sectors: fuels and fertilizers.

In Beijing’s recent document release, it was also announced the government aims to boost agricultural products circulation by building a modern distribution system and better agricultural retail markets.

“China will also accelerate the construction of the market of farm produce futures, and introduce new types of farm produce futures at appropriate times.”

Several commodities were named as direct beneficiaries of the national policy.

“To encourage farm production, China will continue to increase the minimum purchase price for wheat and rice and timely launch temporary purchase and storage of corn, soybeans, rape seed, cotton and sugar.

“Improvements are required in agricultural market supervision and early-warning systems to better regulate the domestic market, as well as the import and export of agricultural products.”

The announcement also said China will focus on building a better supervisory system over food-safety while preventing pollution in agricultural production and livestock and poultry farming.


See also:


ANCHUN Visit: Drought-Related Order Dryup, 1.98 P/E, 52-Week Lows... Better Days Ahead?

S-CHIPS: 'Ridiculously Valued' Ones Waiting To Be Discovered By Big-Name Investors

MEIFENG: Fertilizer-To-Fuel Shift After Euro IV 

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