Video - Fertiliser

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From the course by University of Western Australia

Agriculture, Economics and Nature

150 ratings

University of Western Australia

Agriculture, Economics and Nature

150 ratings

Sound economic thinking is crucial for farmers because they depend on good economic decision making to survive. Governments depend on economic information to make good policy decisions on behalf of the community. This course will help you to contribute to better decision making by farmers, or by agencies servicing agriculture, and it will help you to understand why farmers respond to policies and economic opportunities in the ways they do. You can use this course to improve your skills and knowledge, and to assess whether this is a subject that you'd like to study further. The course includes high-quality video lectures, interviews with experts, demonstrations of how to build economic models in spreadsheets, practice quizzes, and a range of recommended readings and optional readings. Assessment is by a final exam. The key economic principles that we’ll learn about can help us understand changes that have occurred in agriculture, and support improved decision making about things like agricultural production methods, agricultural input levels, resource conservation, and the balance between agricultural production and its environmental impacts. There are literally thousands of agricultural economists around the world who work on these issues, so there is a wealth of knowledge to draw on for the course. Watch a brief video about our course here: https://www.youtube.com/watch?v=T_IeYGpeqV8

From the lesson

The economics of agricultural inputs

Week 3 looks at the relationship between inputs and outputs, the optimal level of an input, the question of pollution from inputs, and flat payoff functions.

Video - Fertiliser4:43

Meet the Instructors

Professor David Pannell, BSc(Agric), BEc, PhD
Head of School of Agricultural and Resource Economics
University of Western Australia
Jacob Hawkins, BA(Biol), MESM, PhD
School of Agricultural and Resource Economics
University of Western Australia

[MUSIC PLAYING]

So we're into week 3.

And this week, we're going to talk

about the economics of agricultural inputs.

Through the week, we'll cover a range

of issues that relate to this topic, including

the level of usage and the process of agricultural inputs,

the effect of agriculture inputs on yields,

the optimal input rates from an economic perspective.

I'll give a demonstration of building a spreadsheet

to help find the optimal rate of an agricultural input.

We'll look at the effect of changing prices and changing

yields on the optimal level of an agricultural input.

I'll look at, what if we allow for the fact

that an input may cause pollution

problems off the farm?

How should that influence our choice of input levels?

And then, finally, I'll talk about the idea

of a flat payoff function, which

you'll hear about towards the end of the week.

So let's start by talking about fertilizers.

So fertilizers are as old as farming itself.

And in ancient times, farmers used a whole variety

of different types of more natural fertilizers, manure,

guano, ashes, vegetable waste, and so on.

These days, agriculture relies prominently

on synthetic fertilizers, which the first of these

were invented about 200 years ago.

And there's a whole variety of these, including

ones you've probably heard of like superphosphate.

In Australia, these are some statistics for 2012-13.

So in that year, 76,000 farm businesses

reported using fertilizer to some degree.

And 58 million hectares of agricultural land

had fertilizer applied to it.

So it's a huge proportion of particularly the more intensive

end of agriculture or uses of fertilizers.

They used 6 and 1/2 million tons of fertilizer.

And the most applied fertilizer amongst the artificial

fertilizers was urea with 1.1 million tons.

But there's also quite high usage of animal manure,

not in the extensive agriculture such as what

is behind me, but in smaller-scaled agricultural

systems.

So fertilizer is one of the largest input

costs on most farms.

This graph shows the trend of increasing fertilizer

use over time, particularly a big increase

in the use of nitrogen fertilizers,

a smaller increase in phosphorus,

and not much of an increase in potassium.

But the increase in nitrogen has been really marked

and has made a big difference in many parts.

This is global fertilizer use.

We've seen this graph before, where global fertilizer use

increased very substantially from about 1950

up until 20 years ago or so and has been reasonably stable

since then, a little bit volatile.

This graph shows the price of one

of the fertilizer inputs, which is rock phosphate.

Rock phosphate is sometimes used as a fertilizer

in its own right, but usually it's

an input to fertilizer manufacturer.

And you can see that in the last few years,

since about 2006, the price of rock phosphate

has been very volatile.

Particularly in 2007, 2008, there

was a real spike in the price, had a big influence

on farmer's usage of inputs at about that time.

Prior to that time, the price of rock phosphate

was remarkably stable for quite a long time.

So it's really only the last five, six, seven

years that we've seen this marked volatility

in the price of fertilizers.

So in summary, fertilizers provide

nutrients to increase crop yields.

Global fertilizer use has increased steadily

since about 1950.

And global fertilizer prices have fluctuated markedly since

about 2006.

[MUSIC PLAYING]

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