According Research and Markets in the first half of 2005, the Chinese farm chemicals market maintained the growth levels of 2004. July saw the beginning of a gradual decline but was still better than the same period in 2004.

Profit margins in the farm chemicals industry increased sharply, and the sluggish situation continued to improve. The Government enhanced its strength in restructuring the farm chemicals industry and promoted the substitution of some high-toxicity pesticides. The production of farm chemicals kept a positive growth momentum; the key producers saw general improvement. There was a further growth in the export of farm chemicals. Stock of farm chemicals declined slightly, the oversupply situation continued to improve. Recently the market of farm chemicals was affected by the following factors:

First, there has always been an oversupply of farm chemicals with too high a proportion of high-toxic pesticides. On the other hand, there are too many producers of farm chemicals, and most of them are of low technical level, their products are of low quality and low price, not up to the environmental protection standard and directly leading to vicious market competition. The type of policy the Government will adopt to restructure composition of the farm chemicals industry will have a profound impact on the market.

Second, both production and distribution of farm chemicals are greatly affected by natural conditions, especially pesticides and germicides. In the past few years the occurrence of diseases, pests and weed has been frequent. So in 2006 the crop protection situation will again directly influence the demand of farm chemicals.

Thirdly, the price of triphen and carbinol has risen and the price of yellow phosphorus and liquid chlorine also increased with the persistent upsurge of crude oil price since the latter half year of 2005. On the other hand, because domestic producers kept appealing to Ministry of Commerce for Anti-dumping, the import of intermediary products of farm chemicals was heavily curtailed, and domestic sale price geared up due to the decrease in supply. In 2006 whether the growing supply of raw materials for farm chemicals can be controlled will have a fundamental impact on the farm chemicals price trend.

Fourth, in 2005 grain price saw little increase, far from farmers' expectation, so they were reluctant to sell. In addition, the price hike of agricultural means of production caused planting costs to increase along with it. Although there was a general exemption of agricultural tax, income increases for farmers were limited and thus they invested less in farm chemicals. The growth level of farmers' income will directly affect demand for farm chemicals.

Fifth, the export of farm chemicals witnessed increased in 2005 but the increase rate was obviously lower than 2004. More technical barriers to the import of farm chemicals and agricultural products in other countries set more blocks to China's export. Since exportation is an important way of easing domestic oversupply, the growth level of the export of farm chemicals in 2006 will also affect the domestic market.

The Research and Markets report has a detailed discussion on the above mentioned factors, and has a systematic analysis on market trends, Government policies, production, distribution, import and export in 2005, and based on this, there is a forecast for the industrial structural reform, market trend, production, distribution, import and export in 2006.