Derek Byerlee (World Bank) 24th July 2009, International Food Policy Research Institute, Washington D.C.

1. Derek Byerlee
24th July, 2009

2.  “”While I had a fairly open mind about
fertilizer subsidies when I began this
g
review, I am now considerably more
skeptical about them….. it is my view that
y
subsidies should be used very cautiously
and very selectively”
 Dana Dalrymple, Evaluating Fertilizer Subsidies in
Developing Countries, USAID, 1975.

3. 1. A strong case for market smart subsidies
2.
2 But not easy to implement
3. Even when well implemented, they are
not a magic b ll t
t i bullet

4. 4.00 300
Cereal Yield ( )
(t/ha) Fertilizer use ( g p
(kg per
3.50
irrigated equiv ha)
250
3.00
200
2.50
Asia SS Africa
2.00 150
Lat Am Asia
SS Africa L America
1.50 MENA MENA
100
1.00
50
0.50
- 0
61
64
67
70
73
76
79
82
85
88
91
94
97
00
03
06
61
64
67
70
73
76
79
82
85
88
91
94
97
00
03
06
196
196
196
197
197
197
197
198
198
198
199
199
199
200
200
200
196
196
196
197
197
197
197
198
198
198
199
199
199
200
200
200
Adoption of improved varieties much greater than fertilizer

5.  Agreeon critical importance of improved seed
and soil fertility in sub-Saharan Africa.
 Fertilizer use extremely low in Africa
Africa.
 Prices double other regions
 There is a good theoretical case to subsidize
inputs in the early stages
 Market failures--many specific to fertilizer
 Economies of scale, learning, risk and credit
constraints
 Countries should own their food security policies

6.  Traditional “blanket” subsidies have not worked
blanket
in Africa
 Inefficiencies of parastatals
 Rent capture by large farmers
 Fiscally unsustainable
 “Market smart subsidies” could work?
 Help build markets vouchers for private dealers
markets—vouchers
 Well targeted to not displace commercial sales
 Exit strategy

7.  Often still state directed
 Not well targeted—larger farmers male etc
targeted larger farmers,
Displace commercial sales
E
Expensive
i as a share of budget
h fb d t
Crowd out investments in core public goods
 Political capture

8. Subsidy Some None
subsidy
(2 bag/hh) ( 1 bag/hh)
Value of assets (K/hh) 15,850 8,755 6,500
Land holding ( a)
a d o d g (ha) 1.22 09
0.91 08
0.81
Female head hh (%) 18 26 30

9.  Measures to strengthen private sector equally
important
 Kenya success story of reducing transactions costs
and no. input dealers from 8 km to 3 km
 Not
by fertilizer alone. Need for balanced
approaches—Kenya organic matter
 Need for manage price volatility
 Funding for long-run investments
 Irrigation, R&D

10. STEADY RISE IN DECLINING MARGINS FOR
FERTILIZER USE FERTILIZER DISTRIBUTION
500000 600
Nominal USD per metric ton DAP
400000 500
etric tons
300000
400
000 me
200000
300
100000
200
N
0
90 92 94 96 98 00 02 04 06 100
1990 1992 1994 1996 1998 2000 2002 2004 2006
Commercial imports
Total Consumption
c.i.f. Mombasa wholesale markets, Nakuru
Donor Imports

11. Source: Marenya and Barrett, 2008a

12. PRICE OF UREA ($US/T) SHORTAGE OF PHOSPHATE?
450 12
400
10
350
300 8
Gas ($/GJ)
Urea ($/t)
250
6
200 Urea
G
Nat gas
150 4
100
2
50
0 0
Source: Cline (2007)
Doubling of oil prices increases Peak extraction by 2034
grain prices by about 20%
12

14.  Can provide rapid gains (if it rains)
 Monitor
Monitor,
learn adjust for long run
learn,
sustainability
T
Target better, involve the private sector
t b tt i l th i t t
 Imbedas part of a wider agricultural
development strategy
d l t t t