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UPDATE 1-China caps prices for fertiliser, ingredients-NDRC

(Adds comment from official, paragraphs 10-11)

BEIJING, May 8 (Reuters) - China’s central planner warned fertiliser companies on Thursday not to raise prices of important ingredients and set a maximum range for mark-ups on imported fertiliser, amid concerns about rising prices.

Soaring oil prices helped to boost fertiliser prices both internationally and in China, leading planners to worry that farmers might stint on fertiliser and stunt the grains harvest.

“Right now spring planting is under way across China, so in order to curb inappropriate price gains, protect farmers’ profits and promote agricultural productivity, we are strengthening control over potassium chloride and compound fertiliser prices,” the National Development and Reform Commission said on its website on Thursday.

Importers Sinochem and Sinoagri are only allowed to mark up prices to domestic fertiliser producers by 5 percent, or to trading companies by 3 percent. Prices at the point of sale could only be marked up 7 percent compared with the producers’ price, the NDRC said.

It added that it would set the import price for overseas shipments delivered to the port.

“Prices cannot rise any more, although they are allowed to fall,” it said.

China last month slapped an additional 100 percentage points on the export tariff on fertiliser, to prevent producers from profiteering from soaring international prices. Its move came after Chinese importers agreed to pay triple for potash and sharply reduce volumes purchased under term contracts.

Sinofert Holdings Ltd 0297.HK, the Sinochem unit that is China's largest distributor of imported fertilisers, expects a shortage of up to one-quarter of China's annual demand of 11 million to 12 million tonnes of potash, its vice president said this week.

Agricultural officials and economists have written that soaring prices, especially for agricultural imports such as fertilisers and diesel, could reduce farmers’ willingness to grow crops or stimulate further food inflation.

An official from the State Administration of Grain denied on Thursday that the official figure of grain reserves was inflated, saying that storage capacity outstripped output, so it was natural that China would have some empty granaries.

“The current reserve figure is true and reliable. There is no reason to believe otherwise from the information we have now,” Zeng Liying, deputy director of the administration, told the official Xinhua news agency.

Lower grains production would raise the cost of feed, extending a rise in meat prices that drove headline inflation last year.

“Minimum rice prices have only risen by 10 percent, but fertiliser prices are up 30 to 40 percent,” said Liao Xiyuan, researcher with China National Rice Research Institute.

China is targeting a grains harvest of more than 500 million tonnes this year, as it seeks a fifth consecutive year of rising harvests, the Ministry of Agriculture said this week. (Reporting by Lucy Hornby and Niu Shuping, additional reporting by Lindsay Beck; editing by James Jukwey)

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