The Impact of Phosphate Fertilizer Industry Consolidation on Future Phosphorus Supply for World Agriculture

TL;DR

This study analyzes how industry consolidation affects future global phosphorus supply for agriculture, highlighting increased market concentration and regional supply challenges through simulation of ammonium phosphate markets.

Contribution

It introduces a simulation model of global phosphate markets considering industry consolidation and regional demand growth, providing insights into future supply dynamics.

Findings

Market concentration is expected to increase for small-scale markets.

Large-scale markets will remain relatively stable in concentration.

Regional supply may require additional local investment.

Abstract

The addition of phosphorus, in the form of mineral fertilizer, becomes necessary in most agricultural soils in order to achieve consistent high yield levels of intensive farming and maintain soil fertility. Recent consolidation of phosphate fertilizer industry has transformed fragmented trade into a single integrated global network, where a small group of large-scale companies dominates the international market for phosphate commodity fertilizers. To assess the impact of new trade structure on future region-level phosphorus supply, we simulate behavior of markets for ammonium phosphates in the FAO scenarios of global intensive farming evolution. Details of market microstructure are represented here by a many-to-many matching market. Current spatial distribution of global demand in ammonium phosphates is projected to strengthen by 2030. Bootstrap simulations produce similar network structures for both scenarios showing reduction in the density of the distributed market. In response to the non-uniform demand growth across regions, market concentration is expected to increase for small-scale markets, and to remain predominantly stable for large-scale markets; on the supply side, simulated equilibria point out large-scale multi-market suppliers concentrating on fewer markets than before. A high rate of import substitution by local suppliers in some markets indicate the need of additional region-level capital investment.