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Purchase power, price and mineral fertilizers consumption: an analysis for central Brazil

Abstract:

Mineral fertilizers are among the major contributors to the increase in agricultural productivity in Brazil since the 1980s. However, the dependence on scarce natural resources and the extensive use of energy for their synthesis have made agricultural production sensitive to fluctuations in the supply and demand for this type of fertilizers. In this sense, this paper analyzed the dynamics between fertilizers consume, price and producers’ purchasing power weighted by productivity in Brazil’s Central-East region. This region is responsible for the highest consumption of mineral fertilizers and the largest agricultural production in the country. Using the structural vector autoregressive model (SVAR), three equations for each of the major groups of mineral fertilizers were estimated: nitrogen, phosphate and potassium. Estimates of the impulse-response functions showed that potassium fertilizers had greater sensitivity of both the quantity consumed and the purchasing power in response to a price shock. On the other hand, nitrogen fertilizers had the highest sensitivity of the quantity consumed in response to a purchasing power shock.

Keywords:
mineral fertilizer; agricultural productivity; SVAR

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