United States and Canadian Agricultural Herbicide Costs: 2003 Update

Herbicide prices differ between Canada and the United States. Price disparities may be symptoms of the different pesticide regulatory systems between the two countries. The price diferences may be due to the size of the respective pesticide markets or different business environments. Traditional economic theory states that price is determined by supply and demand. For the prices to remain different, the two markets must be segregated by some barrier. If not, arbitrage will occur and eliminate the price differences. An international border with trade restriction provides an excellent barrier. The price difference between the two countries costs North Dakota producers over $20 million annually. Higher herbicide costs in North Dakota raised total pesticide expenditures about 8.3% and total crop expenses by 2.3% in 2002. Differences in the economic structure of the two countries provide the incentive for different prices, but market segregation is required for successful price discrimination. Therefore, to eliminate price disparities, the U.S. and Canadian herbicides markets must be de-segmented.