Analysis of Fertilizer Off-Take and Industry Dynamics in Pakistan

Topics: Supply and demand, Fertilizer, Statistical hypothesis testing Pages: 17 (4354 words) Published: October 8, 2010


1.1.Problem Statement1
1.1.3.Literature Review2





Appendix I – Data on Fertilizer Off-take13
Appendix II – Data on Fertilizer Prices14
Appendix III – Limitations of Study15


Abstract: This study has been conducted to formulate a model for forecasting fertilizer off-take in Pakistan and to develop a framework of the dynamics of the domestic fertilizer industry. The Trend Projection Method has been used to specify the forecasting model. The results are acceptable from both an economic and statistical point of view. Then this study has proceeded to analyse the structure of the fertilizer industry and to measure the price elasticity of fertilizer demand in Pakistan. The results suggest that the industry is oligopolistic in structure, demand for fertilizer is inelastic and various external factors are involved in influencing fertilizer demand. Lastly, the forecasting model has been used to project domestic fertilizer demand for the next five years.


1.1.Problem Statement
Fertilizers constitute a key component of the modern farm technology for achieving increased production through improving soil fertility. In this modern agricultural era, fertilizer is an important input to boost yield. Contribution of balanced fertilization towards increased yield is from 30 to 60 percent in different crop production regions of the country.

Pakistan’s Fertilizer Sector has shown steady growth over the past few years. The fertilizer sector constitutes around 3.4% of manufacturing in Pakistan. Pakistan ranks 46th in the world in terms of fertilizer consumption, and its fertilizer usage is 162.5kg per hectare. All of our soils are deficient in nitrogen (N), 80-90 percent are deficient in phosphorus (P) and 30 percent in potassium (K), Wide spread deficiency of micronutrients are also appearing in different areas. Application of commercial fertilizers in Pakistan began in 1952-53, and the off-take was only 1,000 nutrient tonnes of nitrogen. Phosphorus was introduced to farmers in 1959-60 with an initial usage of 100 nutrient tonnes. Potash fertilizer off-take started in 1966-67 with a volume of 120 nutrient tonnes. From then on domestic fertilizer demand is seen to have risen with each passing year. Fertilizer usage has played an important role in agricultural growth and hence, contributed greatly to the growth of our economy. This study is carried out to conduct an analysis of fertilizer demand in Pakistan and to analyze the structure of the domestic industry. 1.1.2.Contribution

This study aims to develop a model that can be used to forecast domestic fertilizer demand in future periods and to provide a framework for creating an understanding of the dynamics of the Pakistani fertilizer industry. Our motivation to analyse this particular industry arose from the fact that our economy derives 20% of its output from agriculture; as such, it is imperative for business students to understand the factors that lead to agricultural growth. Fertilizer being a key ingredient that can improve agricultural productivity and an industry that both provides, as well as derives input from agriculture makes for an interesting study, one which can generate great utility in terms of agriculture policy development.

1.1.3.Literature Review
The model, conclusions and findings in this report are supported by ample secondary research. In particular, we used the following articles for developing the theoretical framework and assumptions behind our model:

Forecasting Global Fertilizer Demand: This study forecasted fertilizer demand in relation to soil nutrient status in nine regions. The model used in this study was...

References: 2. F. Tenkorang and J. Lowenberg-DeBoer (2008), Forecasting Long-term Global Fertilizer Demand. Food and Agriculture Organization of the United Nations.
3. Habib A. Zuberi (1990), Institutional Credit and Agricultural Development within the Framework of Balanced Growth. Journal of Economic Development, Volume 15.
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