Fertilizer prices

[liberty]

Today's National Post has an interesting article which offers some clues as to what's going on with fertilizer prices. As anyone with an elementary knowledge of economics should know, if you make a commodity cheaper that what the free market would charge, you will both boost demand for it and eliminate incentives to economize on its usage. It turns out that India massively subsidizes the cost of fertilizer. As the paper notes, the cost of that subsidy is mushrooming:

"The impact on India's finances has been shocking: the size of the subsidy forecast for the 2008-09 budget year is US$22.5-billion, almost two-and-a-half times higher than last year and up eight-fold from six years ago. At this year's forecast level, spending on fertilizers is approaching the size of India's defence budget, and equal to 2.5% of GDP."

Obviously, policies like this have an impact on what North American farmers will pay for crop inputs. It would also not surprise me if these policies are quite widespread in the third world, especially in countries which, like India, have a history of dalliances with socialism and central planning.

[jensend]

i'm sure the potash producers will just gouge china and india and keep prices low here in north america! i think you can throw your econ 100 theories out the window because there are very few areas of the economy where there is a free market and canpotex was formed to thwart competition, not encourage it. you're right - prices will find their own level but n. american farmers will demand more subsidies if inputs continue to rise. farmers are the only ones in the value chain brainwashed into believing in the free market.

[Burbert]

On and on it goes, where it stops nobody knows/cares! Farmers can always again, start whinning and sniveling to government for more and more aid. Inflation heck no, its the red, red, red hot Ab economy that is in the drivers seat. Make no mistake, Ab's are the dumbest people on the planet, the sky is the limit. Gotta spend to make it!

[agstar77]

Head of Potash corp says prices must double for them to start new mines. But there will be no inflation and interest rates won't rise. Oil at 131 a barrel. Again this won't cause inputs to skyrocket.

[Fransisco]

No, left leaning farmers are among the few people who have been brainwashed into believing free markets don't work or exist.

[jensend]

thanks for proving my point!

[FarmRanger]

Look under your hat.
Our market economy may not be perfect, but it beats the heck out of any command economy. Compare any free market economy to any command economy and the standard of living and personal freedoms available in each.

There's nobody trying to escape from Florida to get to Cuba.

[jensend]

so there used to be more free enterprise. would you say the structure of agricultural markets is more or less free than they were thirty years ago? farmers are competing with each other and the cooperatives are the people buying from and selling to farmers as large operators who can be price makers not price takers. my point is that things have changed and not for the better or farms wouldn't have to be 10,000 acres or 1,000 cows or sows to be viable.

[Hopperbin]

As for structure 30 years ago we didn't have computors or agriville. 30 years ago most farmers had no idea what was going on in the world markets. That has changed.

[Hopperbin]

Better than a command economy, you got that right. Look at China now asking the rest of the world for tents that are made in China, so the world is supposed to supply tents to China that are made in China meanwhile they have the biggest trade surplus in the world.

[jensend]

we've gone from free enterprise to capitalism. think about the differences and how they affect you. it's a natural progression but as a business person you must deal with the change. so far i see farmers being brainwashed into acting against their own best interests.

[jensend]

should have said manipulated instead of brainwashed because we know propaganda and brainwashing is only done by evil communists, right?

[FarmRanger]

free enterprise = capitalism
no?

Can you give an example of how we are acting against our own best interests?

[jensend]

free enterprise - many buyers, many sellers, no barriers to entry, all the econ 100 conditions.

capitalism - capital gives power in the marketplace, size matters, market influence is rewarded not innovation or creativity. all the mergers and acquisitions are capitalism, not free enterprise because they just concentrate influence which is the opposite of free enterprise.

in free enterprise everyone on both sides is a price taker as determined by many transactions, not set by one or two or three big players working together. the two sides of the market are balanced.

farmers are working against their own best interests by being convinced to enter into 'partnerships' or alliances with businesses on the other side of the transaction. how does a four thousand acre farmer become a partner of cargill? the only competition is between farmers.

[TOM4CWB]

Jensend,

"how does a four thousand acre farmer become a partner of cargill?"

By providing services Cargill needs... at fair prices and provide value and integrity.

Relationships are built on trust and integrity... working with Cargill is no different than being a service provider for CN, John Deere, the Gov. of Alberta... or any other number of companies that must compete... to make a living by providing a service!

There is almost always an accountability point... which will discipline an organisation!