IDEAS home Printed from https://ideas.repec.org/p/ags/nccc24/379008.html

Demand and Supply Functions for Nitrogen Fertilizers in the United States

Author

Listed:
  • Lee, Wonseok
  • Brorsen, B. Wade
  • Gillespie, Jeffrey
  • Boline, Amy
  • Vandeveer, Monte K.

Abstract

The recent high fluctuations in fertilizer prices raise the desirability of better understanding fertilizer markets and estimating elasticities to include in large structural models for policy analysis. This paper aims to estimate demand and supply functions for nitrogen fertilizer in the United States. However, it is widely recognized that specifying an annual structural demand and supply model to estimate elasticities is challenging. An annual structural model must address issues such as endogeneity from simultaneity, frequent structural change, limited observations and highly aggregated data. To address these issues, we use a graphical approach to select time periods for estimating econometric models. Additionally, two-stage least squares is employed in an attempt to overcome endogeneity. Our finding indicates that the demand and supply of nitrogen fertilizer are inelastic, which means price spikes are going to happen and difficult to predict. Furthermore, the result shows that the international market might be more elastic than the domestic market. If so, international markets can provide a moderating effect on prices during domestic market shocks. However, shocks to the international market could result in the high price spikes, as observed historically

Suggested Citation

  • Lee, Wonseok & Brorsen, B. Wade & Gillespie, Jeffrey & Boline, Amy & Vandeveer, Monte K., 2024. "Demand and Supply Functions for Nitrogen Fertilizers in the United States," 2024 Conference, April 22-23, 2024, St. Louis, Missouri 379008, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc24:379008
    DOI: 10.22004/ag.econ.379008
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/379008/files/Lee_Brorsen_Gillespie_Boline_Vandeveer_NCCC-134_2024.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.379008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Meyers, William H. & Westhoff, Patrick & Fabiosa, Jacinto F. & Hayes, Dermot J., 2010. "The FAPRI Global Modeling System and Outlook Process," Staff General Research Papers Archive 31534, Iowa State University, Department of Economics.
    2. Alston, Julian M. & Chalfant, James A., 1991. "Can We Take The Con Out Of Meat Demand Studies?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), pages 1-13, July.
    3. Sands, Ron & Westcott, Paul & Price, J. Michael & Beckman, Jayson & Leibtag, Ephraim & Lucier, Gary & McBride, William D. & McGranahan, David & Morehart, Mitch & Roeger, Edward & Schaible, Glenn & Woj, "undated". "Impacts of Higher Energy Prices on Agriculture and Rural Economies," Economic Research Report 262236, United States Department of Agriculture, Economic Research Service.
    4. Anton Bekkerman & Thomas Gumbley & Gary W. Brester, 2021. "The Impacts of Biofuel Policies on Spatial and Vertical Price Relationships in the US Fertilizer Industry," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 802-822, June.
    5. Joseph P. Janzen & Nicholas D. Paulson & Juo‐Han Tsay, 2024. "Commodity storage and the cost of capital: Evidence from Illinois grain farms," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 526-546, March.
    6. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    7. Earl O. Heady & Martin H. Yeh, 1959. "National and Regional Demand Functions for Fertilizer," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 41(2), pages 332-348.
    8. Roberto J. Garcia & Alan Randall, 1994. "A Cost Function Analysis to Estimate the Effects of Fertilizer Policy on the Supply of Wheat and Corn," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 16(2), pages 215-230.
    9. Gunjal, Kisan R. & Roberts, Roland K. & Heady, Earl O., 1980. "Fertilizer Demand Functions for Five Crops in the United States," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 12(2), pages 111-116, December.
    10. Gunjal, Kisan R. & Roberts, Roland K. & Heady, Earl O., 1980. "Fertilizer Demand Functions For Five Crops In The United States," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 12(2), pages 1-6, December.
    11. Roberts, Roland K. & Heady, Earl O., 1982. "Fertilizer Demand Functions For Specific Nutrients Applied To Three Major U.S. Crops," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-14, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Denbaly, Mark & Vroomen, Harry, 1991. "Elasticities of Fertilizer Demands for Corn in the Short and the Long Run: A Cointegrated and Error-Correcting System," Staff Reports 278575, United States Department of Agriculture, Economic Research Service.
    2. Rami Rawashdeh, 2023. "Estimating short-run (SR) and long-run (LR) demand elasticities of phosphate," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(2), pages 239-253, June.
    3. Acheampong, Kwame & Dicks, Michael R., 2012. "Fertilizer Demand for Biofuel and Cereal crop Production in the United States," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119798, Southern Agricultural Economics Association.
    4. Mahmuda Nasrin & Pooja Vortia & Shakila Salam & Md. Salauddin Palash, 2022. "Is fertilizer demand elastic to its own price? Assessing the consequences of fertilizer subsidy policy in Bangladesh," SN Business & Economics, Springer, vol. 2(8), pages 1-15, August.
    5. B. A. Larson & H. Vroomen, 1991. "Nitrogen, Phosphorus And Land Demands At The Us Regional Level: A Primal Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 42(3), pages 354-364, September.
    6. Roberts, Roland K., 1986. "Plant Nutrient Demand Functions For Tennessee With Prices Of Jointly Applied Nutrients," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 18(2), pages 1-6, December.
    7. Sohngen, Brent & King, Kevin W. & Howard, Gregory & Newton, John & Forster, D. Lynn, 2015. "Nutrient prices and concentrations in Midwestern agricultural watersheds," Ecological Economics, Elsevier, vol. 112(C), pages 141-149.
    8. Okrent, Abigail M. & Alston, Julian M., 2011. "Demand for Food in the United States: A Review of Literature, Evaluation of Previous Estimates, and Presentation of New Estimates of Demand," Monographs, University of California, Davis, Giannini Foundation, number 251908.
    9. Roberts, Roland K. & Garrod, Peter V., 1987. "Demand For Plant Nutrients In Tennessee Disaggregated By Mixed Fertilizers And Direct Application Materials," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(2), pages 1-7, December.
    10. Beckman, Jayson F. & Livingston, Michael J., 2012. "Effects of Manure Use and Use Restrictions on Variable Production Costs and Net Incomes for U.S. Corn Producers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(01), pages 1-15, February.
    11. Williamson, James M., 2011. "The Role of Information and Prices in the Nitrogen Fertilizer Management Decision: New Evidence from the Agricultural Resource Management Survey," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(3), pages 1-21.
    12. Mergos, G. J. & Stoforos, Ch. E., 1997. "Fertilizer demand in Greece," Agricultural Economics, Blackwell, vol. 16(3), pages 227-235, August.
    13. Debasish Roy, 2024. "An Exploration in Sustainability and Lifespan of Enterprise: A Cross–Country Empirical Study (2011–2020)," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 5307-5328, June.
    14. Levent, Korap, 2007. "Modeling purchasing power parity using co-integration: evidence from Turkey," MPRA Paper 19584, University Library of Munich, Germany.
    15. Goodall, Amanda H., 2009. "Highly cited leaders and the performance of research universities," Research Policy, Elsevier, vol. 38(7), pages 1079-1092, September.
    16. Shanchao Wang & Julian M. Alston & Philip G. Pardey, 2025. "R&D lags in economic models," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 34(6), pages 842-862, August.
    17. Yap, Wei Yim & Lam, Jasmine S.L., 2006. "Competition dynamics between container ports in East Asia," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(1), pages 35-51, January.
    18. Nicholas Taylor, 1998. "Precious metals and inflation," Applied Financial Economics, Taylor & Francis Journals, vol. 8(2), pages 201-210.
    19. Md. Sharif Hossain & Md. Thasinul Abedin, 2016. "Multivariate Dynamic Co-integration and Causality Analysis between Inflation and its Determinants," Journal of Economics and Behavioral Studies, AMH International, vol. 8(5), pages 240-250.
    20. Lego, Brian & Gebremedhin, Tesfa & Cushing, Brian, 2000. "A Multi-Sector Export Base Model of Long-Run Regional Employment Growth," Agricultural and Resource Economics Review, Cambridge University Press, vol. 29(2), pages 192-197, October.

    More about this item

    Keywords

    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:nccc24:379008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: http://www.farmdoc.illinois.edu/nccc134/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.