Fertilizer Supply Demand And Prices

This bulletin is a collection of abstracts on Fertilizer Marketing selected from those appearing in Fertilizer Abstracts between July 1973 and June 1978. A similar collection was made of the material from January 1968 through June 1973, and is available in Bulletin Y-59. Together the two bulletins contain nearly 2000 abstracts and cover the majority of marketing publications over the past 10.5 years.

This paper focusses on the setting of ex-factory prices for the producers of fertilizers in the developing world. Regardless of whether prices are determined by the free market or by an official agency, to be economically optimal they should perform several objectives: (1) the provision of stimulus to mobilize and allocate adequate resources for fertilizer capacity expansion; (2) encouragement of the optimal choice of process, effective control of feedstock and other operating costs; (3) satisfactory levels of capacity utilization; and (3) where necessary, closure of obsolete, high cost plants. Most developing countries set prices by: (1) reference to the estimated costs of domestic producers; or (2) reference to international market prices. The strengths and weaknesses of alternative approaches are evaluated and practical recommendations made on improving incentives for efficiency in the sector.

Agriculture continues to play an important role in African economies. According to the African Development Bank, agricultural activities comprise around 15 percent of the continent’s gross domestic product (GDP) and agricultural employment represents around 58 percent of total employment in Sub-Saharan Africa. The region’s population is expected to double to 2 billion people by 2050. Along with expected income growth, the population increase will lead to a substantial rise in food requirements. To meet food demand, FAO estimates that agricultural production would have to increase 112 percent between 2013 and 2050. Meeting this demand will not be easy, as agricultural productivity in SSA remains low and shows slow growth. The vast majority of African smallholder farmers produce low-yield food crops using a minimal set of inputs. Inadequate access to improved inputs such as fertilizers presents a major constraint for smallholders. In the region, more nutrients are removed with harvested crops than are applied with fertilizer or manure, resulting in unsustainable soil nutrient depletion. Improved fertilizer use will help to counteract this trend while substantially improving food security.

The United Republic of Tanzania has a predominantly agricultural economy, with agriculture accounting for more than two-thirds of employment in rural areas and representing 30 percent of GDP. Yet, by global standards and even by the standards of Developing Countries, crop yields in the county are low. Using improved seeds and mineral fertilizers is therefore critical to promoting growth in crop productivity, food production and sustaining the natural resource base, especially among the smallholder farmers who subsist on nutrient-poor soils. In 2016, The Ministry of Agriculture, Livestock, and Fisheries (MALF) of the United Republic of Tanzania requested an assessment of the potential costs and benefits of a proposed Bulk Procurement System (BPS) for fertilizer imports that would consolidate international procurement to save costs, ultimately improving the affordability for farmers. This assessment was jointly carried out and submitted to MALF in 2017 by FAO and the International Fertilizer Development Centre (IFDC), and presents an analysis of the fertilizer market, the proposed BPS policy, and interviews with over one hundred public, private, and civil society stakeholders. The findings indicate that the proposed system would likely not reduce prices for farmers and could negatively affect availability and market competition – causing prices to increase in the long term. The authors therefore recommend against its implementation pending further consultations, or to pilot the system with careful review and evaluation. The report also presents alternative policy options for the short and medium term to improve overall efficiency in the value chain and ultimately make fertilizer more affordable for Tanzanian smallholder farmers.