Stepping in Fertilizer

I meant to note this earlier, but didn't and Felix beat me to it. After I posted a recent article about the use of fertilizer in Malawi with the lead in of "This is very Rodrikian. It's also Sachsian", I wondered, on second thought, if the either statement was true (Felix says it's 50% correct). I assumed that if it wasn't, Dani Rodrik would say so - he hasn't been shy about things like that - and today a response of sorts appeared on his blog. This isn't his post, it's by a guest blogger (Maggie McMillan), but since I made the assertion I thought I should also run this response to the NY Times article:

Ending famine, by ignoring the experts?, by Maggie McMillan: According to the NYT, the experts (aka the World Bank) have been pressing African governments to get rid of fertilizer subsidies. This, the article claims, has been a big mistake. The experience of Malawi proves it: farmers in Malawi experienced record harvests as a result of subsidized fertilizer use, and this could be replicated elsewhere to fight hunger across Africa. ...

Low fertilizer use is indeed one of the Africa’s most vexing challenges. But subsidizing is only a band-aid, masking its high cost and low productivity without sustaining growth. Such band-aids can be useful, but they can also be a distraction, drawing attention away from the interventions needed for large-scale improvements.

Much can be learned from looking across African countries. In a recent study, economists at Michigan State University found that between 1980 and 2000 fertilizer use increased in a number of African countries, and was stagnant or declined in others. Overall use is low, but variability in fertilizer use is driven by local factors more than blanket World Bank policy.

Will Masters explains fertilizer use in terms of both prices and productivity. His survey paper points to Africa’s relatively high cost of transport to farms, high cost of capital over the growing season, plus low and variable physical productivity due to poorly-adapted seed varieties in the context of low and variable rainfall.

Dr. Masters and his colleagues at Purdue University did one of the first studies of Malawi’s fertilizer subsidy program, when it was first introduced. They predicted the high payoff reported in the NYT article, but found that it had little to do with the fertilizer subsidy as such. Most of the effect comes from the improved seed that accompanied the fertilizer, and from overcoming Malawian farmers’ credit constraints.

Without underlying change, warns Dr. Dick Sserunkuuma, an economist at Makerere University in Kampala, farmers do not benefit enough from the fertilizer to make the subsidy an effective development strategy. The article makes it sound like farmers in Malawi can achieve international levels of competitiveness simply by applying fertilizer. This is simply not true. Adding fertilizer without improved seed may increase yields, but at a high cost.

The World Bank has given out lots of loans to African governments for fertilizer and it has good reason to be cautious. For example, in an effort to stave off famine and reduce Ethiopia’s dependence on food aid, in 1995 the World Bank gave two loans to the government of Ethiopia totaling $164 million to support fertilizer use. Fertilizer use increased quite a bit, and with good rains in 2000/2001 there was a record harvest and maize prices plummeted. I was there that year and the sad joke was that farmers had come all the way to Addis to beg on the streets for money to repay their fertilizer loans. Inputs can be productive without being profitable. In Ethiopia the government tried to force farmers to repay their loans, causing enormous hardship.

Fertilizer use would be more productive if infrastructure was better, and transport costs were lower. Improvements in infrastructure are very expensive, however, and there is already a high level of investment so marginal returns are low. The highest marginal returns are almost certainly to increased investment in crop genetic improvement, which raises the payoff to everything else.

More fertilizer use is clearly an important part of poverty-alleviation success stories around the world, driven by the spread of improved seed and favorable market conditions. Subsidized fertilizer can raise output only temporarily. So there is certainly scope for increased fertilizer use in Africa, but it is not the magic bullet that the NYT headline would have us believe.

Comments

[Anon]

Isn't Maggie McMillan just saying that you need to subsidize fertilizer and good seed at the same time?

Sounds like there is a magic bullet. The NYT just didn't describe it correctly.

[Random African]

she's also mentionning transportation, access to credit.. and didnt mention irrigation, diversification, mechanization, enginering, propriety rights and other things missing in the picture.

[Anon]

I was assuming that a well designed subsidy program does overcome the credit constraints -- as long as it includes seed in addition to fertilizer.

[Jean]

Improve the soil. Work on composting solutions. Fertilizer and seed are external commodities and thus are of interest to banks and business. Composting is a learning process and there is no profit, except to the farmer. But it is sustainable. Fertilizer will eventually kill the soil, as we are finding out in the United States.

[anne]

There is more to the program than just fertilizer:

http://www.irinnews.org/PrintReport.aspx?ReportId=74478

September 25, 2007

Cutting Edge Farming Methods Boost Production
By IRIN

JOHANNESBURG

Conservation agriculture aims to achieve sustainable and profitable agriculture.

The basics:

Minimal soil disturbance - Farmers either use a method called basin tillage in which they dig basins that capture water and plant nutrients or they use an ox-pulled plough-like "ripper". They can also use hand planters. The ripper opens just a very small furrow in the soil's surface instead of upturning an entire field which increases moisture loss and erosion.

Exact timing for planting and effective weeding - Generally, farmers are taught to dig their basins, fertilise them with manure or manufactured fertilizer, allow the first rains to fall and collect in the basin's soils and then plant. This is a shift from the conventional methods of rushing to plant when the rains begin.

Ground cover - Instead of burning off the previous year's crop residues, farmers are encouraged to keep the soil covered which preserves moisture and serves as a mulch that enriches the soil while decreasing presence of weeds.

Crop rotation and inter-cropping - Mixing and rotating crops even within one field so that one year's maize patch will be legumes the next. Other plants can be grown in between the maize rows to provide additional ground cover.

[Random African]

more to what program ? the Malawi government program ? (the article you linked is about a FAO experiment in southern africa)