Grain Market Research Project 1997

Abstract:  This report assesses how the recent deregulation of fertilizer prices will affect the profitability of fertilizer use on various crops throughout Ethiopia. The report also identifies other policy measures that can increase the cost-effective use of fertilizer to promote productivity growth throughout the food system. Results are based mainly on the derivation of value-cost ratios (VCRs) for the use of DAP fertilizer on selected crops in 51 cereal production areas of Ethiopia. The VCR is an indicator of profitability of fertilizer use, measuring the value of additional crop output relative to the cost of a given application of fertilizer. The factors that affect the VCR are the agronomic response of crop yields to the application of fertilizer, the cost of fertilizer to the farmer, and the price of the crop to which fertilizer is applied. The information for this study came mainly from secondary sources and from field visits to selected production areas. In particular, the data on the response of yield ( by crop type and by region ) were obtained from the KUAWAB/DSA survey which was conducted in 1994. Producer output prices came from the Market Information System (MIS) of the Grain Market Research Project at the Ministry of Economic Development and Cooperation. The authors of this study also visited selected sites to collect information on fertilizer markets and reservation prices. The paper is organized as follows: Section 1 presents background information on fertilizer use in Ethiopia. Section 2 reviews the profitability of fertilizer use, by crop and by region; Sections 3 and 4 estimate the impact of improving the performance of input and output markets respectively on fertilizer profitability; Section 5 addresses the effects of improving the response of fertilizer ap...