Modelling global demand for fertilizer

For Staff Use Only cwc-g7o G Modelling Global Demand for Fertilizer Moshe Buchinsky Division Working Paper No. 1987-6 June 1987 Commodity Studies and Projections Division Economic Analysis and Projections Department Economics and Research Staff The World Bank Division Working Papers report on work in progress and are circulated to stimulate discussion and comment.  Modelling Global Demand for Fertilizer June 1987 Prepared by: Moshe Buchinsky Commodity Studies and Projections Division Economic Analysis and Projections Department  - 1/ - 1 Z - IHIS PAGE ISBLNK  TABLE OJF CONTENTS I. SUMMARY AND INTRODUCTION ............................................... 1 II. DEMAND FOR FERTILIZER .......................................... 3 III. FERTILIZER SUPPLY SPECIFICATION............................. 9 IV. SPECIFICATION OF PRICEFORMATION..S *...................,..,.,,...17 World Price Specification........................ .......17 Domestic Price Linkages .............................................. 20 V. ESTIMATED EQUATIONS .............................................. 23 Consumption Equations..................................................23 Variables and Country Codes for Demand Equations......................33 Capacity and Production Equations .................................... 34 Codes for the Capacity and Production Equations ...............40 Price Equations...................................................... 40 VI. AN EX-POST MODEL SIMULATION....................... ..... 43 VII. MODEL PROJECTIONS FOR THE PERIOD 1985-2000.......................... 73 VIII. CONCLUSIONS AND SUGGESTIONS FOR FURTHER WORK .......................... 81 APPENDIX A ....................*. 0........................................ 83 AP PENDIX B ....................... ....................... O..87 REFERENCES .................................... o .................... .. . . o88 TABLE NO. PAGE NO. TABLE 2.1: MODEL REGIONS................ ................................. 7 TABLE 6.1: SUMMARY STATISTICS FOR EX-POST SIMULATION OF NITROGEN CONSUMPTION...................................... *e *Q * ** ** C *e ** 4 TABLE 6.2: SUMMARY STATISTICS FOR EX-POST SIMULATION OF PHOSPHATE CONSUMPTION--..- ................................... 47 TABLE 6.3: SUMMARY STATISTICS FOR EX-POST SIMULATION OF POTASH CONSUMPTION ............................................. 48 TABLE 6.4: SUMMARY STATISTICS FOR EXPOST SIMULATION OF NITROGEN CAPACITY AND PRODUCTION............... . . .49 TABLE 6.5: SUMMARY STATISTICS FOR EX-POST SIMULATION OF PHOSPHATE CAPACITY AND PRODUCTION ........................... . . . . . . . . . . . . e50  i v - TABLE 6.6: SUMMARY STATI STICS FOR EX-POST SIMULATION OF POTASH CAPACITY AND PRODUCTION ......................................... 51 TABLE 6.7: SUMMARY STATISTICS FOR EX-POSNT SIMULATION OR WORLD FERTILIZER PRICES ..........................................................51 FIGURE NO. PAGE NO. 6.1 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, BRAZIL...........e...52 6.2 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, MEXICO . 52 6.3 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, LATIN AMERICA AND 6.4 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, NORTH AFRICA AN] MIDDLE EAST .................................... . ..........0.0........ 52 6.5 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, EAST ASIA ............ 53 6.6 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, INDIA ................ 53 6.7 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, CHINA ................ 53 6.8 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, EEC-10.............o 53 6.9 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, JAPANe............ ..54 6.10 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, UNITED STATES ....o... 54 6.11 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, OTHER INDUSTRIAL COUNTRIES ........................................ ................... 54 6.12 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, USSR...........e.. o54 6.13 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, DEVELOPING COUNTRIES.55 6.14 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, INDUSTRIAL COUNTRIES .55 6.15 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, CENTRALLY PLANNED ECONOMIES .................................................*o * ........ 55 6.16 NITROGEN CONSUMPTION: DYNAMIC SOLUTION TRACKING, WORLD ................ 55 6.17 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, BRAZIL ............. 56 6.18 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, MEXICO.............. 56 6.19 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, LATIN AMERICA AND CARIBBEAN .......................... ..... * . . e . e . e . a..... . . . . . . . .56  6.20 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, EAST ASIA ........... 56 6.21 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, INDIA ............... 57 6.22 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, CHINA ............... 57 6.23 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, NORTH AFRICA & MIDDLE EAST ..........................................................5 7 6.24 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, SOUTH AFRICA ........ 57 6.25 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, AUSTRALIA..4........58 6.26 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, EEC-10............. . 8 6.27 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, JAPANee...........,.58 6.28 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, UNITED STATES ....... 58 6.29 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, USSR ................ 59 6.30 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, DEVELOPING COUNTRIES ........................... *. o ................. o..........60 6.31 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, INDUSTRIAL C ONTR ES.................................................6 6.32 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, CENTRALLY PLANNED ECONOMIES ............................................................. 60 6.33 PHOSPHATE CONSUMPTION: DYNAMIC SOLUTION TRACKING, WORLD......... .60 6.34 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, BRAZIL ................. 61 6.35 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, LATIN AMERICA AND CAIBBEAN....*.................o ............ . * .... ............ O..61 6.36 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, EAST ASIA .............. 61 6.37 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, INDIA ................ 61 6.38 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, CHINA ................. 62 6.39 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, SOUTH AFRICA..........62 6.40 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, EEC-10e................62 6.41 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, JAPAN................62 6.42 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, UNITED STATES....e.h...63  - vi - 6.43 POTASH CONSUMPTION: DYNAfMIC SOLUTION TRACKING, OTHER INDUSTRIAL COUNTRIES .............................................................. 63 6.44 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, USSR ................... 63 6.45 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, DEVELOPING COUNTRIES...64 6.46 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, INDUSTRIAL COUNTRIES...64 6.47 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, CE1TRALLY CENTRALLY PLANNED ECONOMIES .......................................... 64 6.48 POTASH CONSUMPTION: DYNAMIC SOLUTION TRACKING, WORLD .................64 6.49 NITROGEN PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKING, EUROPE & JAPAN ....................................................... 65 6.50 NITROGEN PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKING, NORTH AMERICA ................. 6 .................... 65 6.51 NITROGEN PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKING, DEVELOPING COUNTRIES .................................................. .65 6.52 NITROGEN PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKING, CENTRALLY PLANNED ECONOMIES ............................. . ......... . 65 6.53 PHOSPHATE PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKINC, EUROPE & JAPAN........... ........... . . . . . . . . . . ......... . 66 6.54 PHOSPHATE PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKING, NORTH AMERICA ......................................................... 66 6.55 PHOSPHATE PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKING, DEVELOPING COUNTRIES ..................................... . . . . . . . . . . . .66 6.56 PHOSPHATE PRODUCTION CAPACITY: DYNAMIC SOLUTION TRACKING, CENTRALLY PLANNED ECONOMIES ....................... .. . . ........ * .66 6.57 WORLD NITROGEN PRODUCTION CAPACITY.................................... .67 6.58 WORLD PHOSPHATE PRODUCTION CAPACITY....................... 67 6.59 WORLD POTASH PRODUCTIONCAPACITY..............................67 6.60 NITROGEN PRODUCTION: DYNAMIC SOLUTION TRACKING, EUROPE & JAPAN........68 6.61 NITROGEN PRODUCTION. DYNAMIC SOLUTION TRACKING, NORTH AMERICA......... 68 6.62 NITROGEN PRODUCTION: DYNAMIC SOLUTION TRACKING, DEVELOPING COUNTRIES.68  - vii - 6.63 NITROGEN PRODUCTION: DYNAMIC SOLUTION TRACKING, CENTRALLY PLANNED ECONOMIES ...................................... ....................... 68 6.64 PHOSPHATE PRODUCTION: DYNAMIC SOLUTION TRACKING, EUROPE & JAPAN.......69 6.65 PHOSPHATE PRODUCTION: DYNAMIC SOLUTION TRACKING, NORTH AMERICA........69 6.66 PHOSPHATE PRODUCTION: DYNAMIC SOLUTION TRACKING, DEVELOPING COUNTRI ES ..............5.*.....*...-.- #.......69 6.67 PHOSPHATE PRODUCTION: DYNAMIC SOLUTION TRACKING, CENTRALLY PLANNED ECONOMIES ......................................................... *...69 6o68 WORLD NITROGEN PRODUCTION.*.* .*O............... . ...... 6.69 WORLD PHOSPHATE PRODUCTION ......................................... 70 6.70 WORLD POTASH PRODUCTION ............................. .70 6.71 NITROGEN WORLD PRICE, DYNAMIC SOLUTION TRACKING.......................71 6.72 PHOSPHATE WORLD PRICE, DYNAMIC SOLUTION TRACKING............. .......71 6.73 POTASH WORLD PRICE, DYNAMIC SOLUTION TRACKING ......................... 72 7.1 NITROGEN CONSUMPTION SHARE OF WORLD TOTAL BY MAIN ECONOMIC REGIONS, 1962-2000 ........................................... O.. ........ 75 7.22 PHOSPHATE CONSUMPTION SHARE OF WORLD TOTAL BY MAIN ECONOMIC REGIONS, 1962-2000 ........................................0.................... 75 7.3 POTASH CONSUMPTION SHARE OF WORLD TOTAL BY MAIN ECONOMIC REGIONS, 1962-2000 .....................................................76 7.4 NITROGEN PRODUCTION SHARE OF WORLD TOTAL BY MAIN ECONOMIC RECIONS 196 2-20 00................................................................77 ** ** *e e* *Z Z Z * * 7 7.5 PHOSPHATE PRODUCTION SHARE OF WORLD TOTAL BY MAIN ECONOMIC REGIONS, 1962-2000 ....................................................... * . 77 7.6 NITROGEN PRICE FORECAST (ACTUAL: 1960-85; FORECAST: 1986-2000)........78 7.7 PHOSPHATE PRICE FORECAST (ACTUAL: 1960-85; FORECAST: 1986-2000)......e78 7.8 POTitSH PRICE FORECAST (ACTUAL: 1960-85; FORECAST: 1986-2000) ..........79  I. SUMMARY AND INTRODUCTION 1. This paper describes the recently-completed fertilizer model which is used by the Commodity Studies and Projections Division. The fertilizers included in the model are nitrogen, phosphate and potash. The model is a partial equilibrium model of production and consumption. A separate module was built for each of the three fertilizers, but cross linkages between the different types of fertilizers within a country or a region were established. On the demand side 24 regions are distinguished; 16 of these are individual countries while the remaining countries are modeled as 8 regions based on the geographic location of the countries. 2. The fertilizer supply model was built in a more aggregated way. For nitrogen and phosphate there are four country groups--Europe and Japan, North America, Developing Countries and Centrally Planned Economies (CPEs). The production of potash is specified only on a world basis. 3. The fertilizer demand model is linked to the Division's grains and soybean model in the sense that the two models are solved iterative