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News:
August 23, 2024

New research shows fertilizer use and subsidies must deliver better returns to enable farmer resilience

Research by a consortium headed by Purdue University shows that fertilizer use is not consistently profitable for smallholder farmers in Sub-Saharan Africa. The research was commissioned by Sustain Africa  to advise on how to mitigate the impact of fertilizer price spikes. To ensure food security, we need more than just subsidies—yield-enhancing investments are crucial. Read the full report here and […]

Research by a consortium headed by Purdue University shows that fertilizer use is not consistently profitable for smallholder farmers in Sub-Saharan Africa. The research was commissioned by Sustain Africa  to advise on how to mitigate the impact of fertilizer price spikes. To ensure food security, we need more than just subsidies—yield-enhancing investments are crucial.

Read the full report here and see the key findings below

The study was conducted in Ghana, Kenya, Nigeria, Malawi, Tanzania and Zambia and looked at the extent profitability of fertilizer use for farmers, and the return on government subsidy programmes. It also analyzed how government fertilizer policy has evolved over the years studied (2010 – 2023).

Key findings:

Fertilizer use is not at all, or not consistently, profitable for farmers in the countries studied and is behind potential yields as observed on supervised plots

  • Fertilizer use is not widespread and the amount of fertilizer per ha falls well behind recommendations.
  • A key reason fertilizer use is not profitable is that farmers are not getting a high enough the maize-to-fertilizer response rate, (a measure of how many kilograms of maize are obtained from a kilogram of fertilizer). The percentage of farmers using fertilizer is low, ranging from 11 to 53% depending on farm size.

Input subsidies can be a useful short-term measure to ensure farmers have access to inputs, but accurate targeting of farmers is key to ensuring return on government budget spend 

  • Malawi and Zambia did not break even on their subsidy program in any of the years of the analysis. This was due to low maize-to-fertilizer response rates and the high costs of the government procuring fertilizer.
  • Kenya obtained a marginally positive return on its fertilizer subsidy program, but the subsidy program barely broke even during 2022/23 when the high costs of procuring huge quantities of fertilizer outweighed the benefits to the economy from incremental fertilizer use.
  • Ghana generated a positive return to its fertilizer subsidy program in the years analyzed because of a low cost of fertilizer relative to the price of maize and a relatively high maize-to-fertilizer use rate among Ghanaian farmers on average.

Subsidies deliver greater returns when directed to farmers who would not otherwise buy fertilizer (thereby reducing the impact on commercial sales)

  • Subsidized fertilizer crowded out (displaced) a significant amount of commercial fertilizer sales in five of the six focus countries over the past decade (Ghana, Kenya, Malawi, Nigeria, Zambia).
  • Subsidies displaced more commercial fertilizer sales among larger farms – which may be expected since these larger farms can generally afford fertilizer at commercial rates but will naturally replace purchases at commercial prices with subsidized fertilizer if this is available to them.

National multi-stakeholder fertilizer platforms therefore are highly recommended as a mechanism for bringing public and private sector together on a regular basis to review the state of the fertilizer market and potential changes to government policy

  • Governments were slow to react, and when they did, many reversed existing fertilizer policies to exert greater control over the supply chain and an expansion of existing subsidy programmes
  • It’s understandable governments want to step in: Sixty percent of the population in SSA depends on agriculture for livelihoods, and therefore incomes and social stability are at stake if production is disrupted. However, some of these hastily developed measures did not necessarily deliver optimal results
  • Suppliers and agrodealers face uncertainties in whether and what volume to stock when government policies are unclear or shift suddenly without pre-warning. This is particularly the case when these policy changes bring about market restructuring, for example if government decides to manage the bulk of procurement through tenders, vs. leaving suppliers to decide what stock to import. Obviously, if prices spike, swift action is needed, but it is important that private sector is involved in discussion, and notification, of what changes are coming.
  • National multi-stakeholder fertilizer platforms therefore are highly recommended as a mechanism for bringing public and private sector together on a regular basis to review the state of the fertilizer market and potential changes to government policy.

 

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