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Fertilizer profitability in East Africa: A Spatially Explicit Policy Analysis

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  • Guo, Zhe
  • Koo, Jawoo
  • Wood, Stanley

Abstract

Even though it is clear that Substantial growth in inorganic fertilizer use is a prerequisite for sustained agricultural growth in Africa, fertilizer use is still one of the factors explaining lagging agricultural productivity growth in SSA. High transport costs and less policy support pose a significant barrier to make fertilizer application profitable in Africa. This paper is aimed to identify organizational and institutional changes that could reduce fertilizer transport costs and their impacts on profitability of fertilizer application. A model is constructed to simulated transport costs from ports to farm-gate at pixel level based on the knowledge of road network condition, surface land cover type, slope, imported fertilizer price at the port, storing fee, handling fee and regulation fee. Furthermore, farm-gate fertilizer price, maize price and VCR (value cost ratio) are calculated. To test the impacts of different policies and strategies to fertilizer profitability, several scenario simulations are developed to visualize them. There are five scenarios considered in the paper including: a) Baseline scenario b) Reduce fertilizer price at port by 20 and 50% c) Transport cost reduce by 20% and 50% d) Reduce country crossing cost by 20% and 50% e) combination of b, c, and d. The research indicated that fertilizer price varies from space. Impacts of scenarios and their severity vary spatially also. There are opportunities to reduce domestic farm-gate fertilizer price if appropriate policy and strategies are made to lower fertilizer transport costs such as improving road condition, decrease handling fee and applying supporting policies and strategies are decreased. Price reduction would increase farmer’s effective demand for fertilizer and make fertilizer application profitable. With high incentives of fertilizer consumption, local farmers could increase agriculture production in the end.

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Bibliographic Info

Paper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 51710.

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Date of creation: 2009
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Handle: RePEc:ags:iaae09:51710

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Keywords: Fertilizer profitability; Value cost ratio; transport cost; East Africa; Agribusiness; Agricultural and Food Policy; International Development; Marketing;

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  1. Jayne, T. S. & Govereh, J. & Wanzala, M. & Demeke, M., 2003. "Fertilizer market development: a comparative analysis of Ethiopia, Kenya, and Zambia," Food Policy, Elsevier, vol. 28(4), pages 293-316, August.
  2. Yanggen, David & Kelly, Valerie A. & Reardon, Thomas & Naseem, Anwar, 1998. "Incentives for Fertilizer Use in Sub-Saharan Africa: A Review of Empirical Evidence on Fertilizer Response and Profitability," Food Security International Development Working Papers 54677, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  3. Wanzala, Maria N. & Jayne, Thomas S. & Staatz, John M. & Mugera, Amin W. & Kirimi, Justus & Owuor, Joseph, 2001. "Agricultural Production Incentives: Fertilizer Markets and Insights from Kenya," Food Security Collaborative Working Papers 55150, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  4. Anderson, Jock R. & Dillon, John L., 1989. "International agricultural research systems," Agricultural Economics, Blackwell, vol. 3(4), pages 257-260, December.
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