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American Journal
of Agricultural Economics
Volume 85, Number
5,
Proceedings 2003American Agricultural Economics Association,
Ames, Iowa
“Allocative
Efficiency in Russian Agriculture: The Case of Fertilizer
and Grain”
Pages 1,228-1,233
by William M.
Liefert,
Bruce Gardner, and
Eugenia Serova
For more information,
contact:
William M. Liefert
http://www.ers.usda.gov
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 During
Russia’s economic transition, the amount of fertilizer
used in agricultural production has fallen substantially, while
Russia’s fertilizer exports have grown. Fertilizer use
in 2000 was about 85 percent lower than in 1990, while, since
the mid-1990s, Russia has exported more than 80 percent of its
fertilizer output. This article examines whether Russia’s
exporting of its fertilizer, rather than using more of it to
produce crops, has been economically rational. The analysis
depends on the relationship between the domestic and trade prices
of fertilizer and how effectively Russian farms use fertilizer
in growing crops.
The results show that in both 1990 and 2000, Russian farms
should have used more fertilizer to produce grain. Russia’s
fertilizer prices were low enough that the value of additional
grain output generated by more fertilizer use would have more
than covered the cost farmers would have paid for the fertilizer,
thereby earning the farms a profit. The analysis also shows,
however, that the prices Russian fertilizer producers received
when exporting their output greatly exceeded the prices they
could get on the domestic market. This is mainly because government
authorities help keep the prices Russian farmers pay for fertilizer
below trade prices. The consequence is that it has been rational
for Russian fertilizer producers to export most of their output
rather than sell more to domestic users. These results help
explain why Russian use of fertilizer has plummeted, while
the country has exported the bulk of its fertilizer output.
Increased fertilizer use in Russia would increase crop output
and exports, thereby affecting U.S. agricultural trade and
world markets. But such a development is unlikely, at least
in the near future.
EEJS-04-05
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