Projecting world fertilizer demand in 2015 and 2030

Frank A Tenkorang, Purdue University

Abstract

The Food and Agriculture Organization (FAO) of United Nations has made crop projections for the years 2015 and 2030. These projections, if met, will halve the incidence of undernourishment by 2015. Because of the significance of fertilizer in crop production, the amount of fertilizer to support such crop projections is of paramount interest to both public and private organizations with interest in the fertilizer industry. Past fertilizer demand studies have produced inconsistent fertilizer forecasts which have led to lack of confidence in their results. The main objective of the study is to identify methods for more accurate fertilizer demand forecasting. Three forecasting models were investigated. The models for the regional forecasts included vector autoregression with exogenous variables (VARX), a pure vector autoregression (VAR) and a simple structural econometric model (SEM) while for the country level forecasts VARX, SEM and a production economics and duality theory model (PEDT) were used. It was found that recategorization of countries improved forecast accuracy. The forecasting accuracy criteria showed VARX and PEDT as the most accurate regional and country fertilizer demand forecasting model, respectively. The forecast results showed that most regions would have slower annual fertilizer demand growth rate, especially between 2015 and 2030. The Rest of Asia region is expected to continue its dominance in total fertilizer consumption by accounting for 48 percent of the global forecast of 54 million Mt in 2015 and 177 million Mt in 2030. Sub-Saharan Africa is expected to remain the lowest fertilizer consumption region, accounting for only one percent of the 2030 forecast demand. In general, the results of the study show slower growth rates in fertilizer demand in 2015 and 2030 than recent rates. The slow rate is as expected in the developed regions. However, in Latin America and Sub Saharan Africa the slow growth is an issue of concern. To boost fertilizer use in these regions a cue can be taken from the superiority of the PEDT model by formulating policies aimed at increasing farmers' profit since economic factors have significant influence of fertilizer demand.

Degree

Ph.D.

Advisors

Lowenberg-DeBoer, Purdue University.

Subject Area

Agricultural economics

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