A Dynamic Model to Forecast and Evaluate Changes and Trends in the Global Market for Fertilizers
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Date
2011-05
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Abstract
Fertilizers, improved seed and modernized crop management practices have contributed substantially to increases in agricultural productivity in recent decades, while helping to conserve ever-shrinking land resources and water supplies. Fertilizers will continue to play a key role in expanding agricultural productivity to meet the ever-increasing world demand for food, feed and bio-fuels. Forecasts of the trends that drive the rapidly expanding demand for these agricultural products and the associated supply of crop nutrients are critical for sound decision-making on a wide range of policy issues. Such trend forecasts are crucial to improving strategic planning and resource allocation; prioritizing investments in fertilizer production/supply expansion (based on expected impacts and risks); and reducing risks associated with the development of government policy and public/private sector investment. The objective of this paper is to illustrate the capability of FertTrade, a fertilizer trade model/algorithm created by IFDC as an analytical tool to address questions about development of the fertilizer and agricultural sectors around the world. Fert Trade estimates trends in the demand, production, supply and trade of nitrogen (N), phosphorus (P) and potassium (K) fertilizer nutrients through 2025. FertTrade also assesses "what if" scenarios to evaluate changes in national variables such as populations, incomes, crop areas and yields. Fert Trade is a tool that can be used to help understand the nature and concept of derived fertilizer demand and the variables that are primary reasons for changes in that demand. The following factors are taken into account in the FertTrade modeling process:
1. Nature of Fertilizer Demand.
2. Climate Change.
3. Population and Income Growth.
4. Demand for Bio-Fuels.
5. Fertilizer and Food Prices. 6. Improvements in Technology.
Fert Trade's analytics can be used to evaluate scenarios of changing demographic, economic, technological and agro-climatic circumstances that affect agricultural production and the global demand, production and trade of the major fertilizer nutrients (N, P and K). For demonstration purposes, Fert Trade was used to estimate and evaluate trends in the demand, production and trade of these fertilizer nutrients globally on the basis of estimates aggregated for the world as a whole, regionally and sub-regionally. Crop production outputs produced as simulation outcomes were used to estimate quantities of derived demand for the nutrients in each of the nations/sub-regions. The model included five major components:
1. Scenario design.
2. Estimation of crop production outputs by a commodity market model.
3. Estimation of the derived demand for the three fertilizer nutrients
4. Projections of production capacities and supplies of N, P and K.
5. Estimation of volumes and patterns of trade for N, P and K.
Trend modeling and projections of demand/supply of world fertilizer nutrients through 2025 are also vital compo- nents of Fert Trade. Trends in key countries, regions and sub-regions are also addressed. Results of national/sub- regional analyses of demand and supply projections for N, P and K nutrients in 2005, 2015 and 2025 will be detailed and summarized in this paper. Highlights of these trends include:
1. Exponential rates of growth of demand for N, P and K.
2. Projected fertilizer demand growth rates during 2005-2025
3. Increases in the demand and consumption of N, P and K fertilizers
4. Increases in the production and supply of N, P and K fertilizers
5. The supply-demand balance and trade of N, Pand K fertilizers
Currently, FertTrade is a useful tool for policy change and reclusology development decisions that she fertilizer performance and agriculture sectors globally, regionally and nationally in this context, the codel can be used to evaluate ex-ante changes induced by policies or technology innovations that affect these sectors using "what if scenarios. Thus, FertTrade can be used to assess such changes in teos of impacts an agricultural production productivity and the demand, supply and trade of fertilizers. A "what if scenario was designed to assess the primary economic and enviniamental impacts of cuccessfully increasing fertilizer N use efficiency in cereal production from 40 percent to 60 percent. Then, the potential emo feasibility for society as a whole to invest in such technology was assessed. Subjects of the evaluation include
1. The efficiency of fertilizer N applied to crops.
2. The context for assessment of impact of increased N-efficiency in cereal production
3. Impact on consumption of fertilizer N.
4. Impact on losses of fertilizer N to the environment
5. Economic impact in developing countries.
6. Impact on the environment.
Results will show that even if investments in this effort are substantial (175 $4 billion during five years), res on investment will justify such investments-if the N use efficiency goals are reached and the projected levels of adoption by cereal farmers are achieved within the proposed time horizon of 10-15 years. Fert Trade currently is utilized for analyses and evaluation of issues and evolving circumstances that affect fertil izer sectors and agricultural production and development globally, regionally and nationally. However, Feride's capabilities and applications can be significantly expanded through additional model development and refinement. For example, by expanding its capability to derive estimates of, and pollution associated with, livestock and emp production (as well as fertilizer production and use), environmental impacts could be estimated and assessed Sub- quently, FertTrade could be used to evaluate scenarios of changing circumstances in terms of potential enviromental impacts. The model's current capabilities, limitations and possibilities for further development will be described and detailed over the course of the paper.
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Keywords
Fertilizers, Crop management, Agricultural productivity