The fertilizer industry is a highly concentrated global market with high and increasing levels of straight the high levels of concentration. In the industry typically result from economies of a scaling production come from higher requirements of raw materials like phosphate rock potash deposits and natural gas which are not available worldwide. However so far not much happiness said about the possibility that the high levels of concentration in it since the industry may also result into market power exertion market power exertion for example may. Allow global producers to take advantage of prices fights in grains or pricey spikes in raw materials to the detriment of farmers wealth so farmers may actually.
Be facing higher food prices not only because of the high marketing costs that they face at the country. And regional level but also due to the market power exertion and the global level given the increasing dependence of most developing regions on imported fertilizer examining the relationship between. Market structure and prices in international markets is crucial for a comprehensive study of this input market and for adequate policy making in.
History we have carried out understanding of market structure on pricing behavior in the fertilizer industry at the global level as an attempt to fill this gap in the literature. And to promote further research on the topic two important patterns emerge from the study first an overview of the industry structure reveals that a small number of. Countries control most of the fertilizer production capacity in particular the top five countries control more than half of the production capacity of the main nitrogen phosphate and potash fertilisers in the case of potash. This concentration ratio is close to 80 percent in the case of nitrogen and phosphate.
Fertilizer the same six trees control more than half of the production capacity this high levels of concentration. Are also seen at the country level among the major producing countries. Except for China the top four films control more than 50 percent of each country’s production capacity the.
Second main contribution of the study is a formal regression analysis using annual data on urea for a panel of countries Yuri the main nitrogen fertilizer which. Is typically applied worldwide our estimations indicate that fertilizer prices are generally higher in more. Concentrated markets so in addition to the observed high levels of concentration in this industry prices seem to be even higher in further concentrated markets we obtain similar results. Under different model specifications and using alternative measures of market concentration on average a 10 percentage point increase in the level of concentration in a market results in.
A 10 to 16 percentage increase in prices it appears in the market power effects away cost-efficiency effects. Of increased concentration in the industry the results of this study show the need for further research on the associated effects of higher market concentration of prices.
In particular future research should attempt to quantify the degree. Of market power exertion you may your fertilizer markets.