Will the subsidy encourage fertilizer use?

Today I sit in front of a group of farmers. They tell me honestly that last year they didn’t use fertilizer because it was too expensive.

Paul - a farmer who honestly didn't use fertilizer last year.

The Ghanaian government recently announced that it will subsidize fertilizer to lower the price and help out farmers during this food crisis. Currently a bag of fertilizer cost $42, the subsidy promises to lower the price to match last years: $25. But is it enough? Or is the link between policy and benefits for those on the ground too ellusive? It all hinges on the behaviours of farmers this farming season to determine if the subsidy will encourage fertilizer use.

For the past few months, I’ve been very focused on profitability analysis of farming. With all businesses, there are many ways to maximize profits. There are four broad areas to analyze: inputs, outputs, finances and markets. With farming this analysis can help reveal some interesting things, such as – it is profitable to use fertilizer.

Crop Profitability for Rice, Maize, Groundnuts, Soyabeans and Cowpea.

With fertilizer, it makes good business sense to not only use it but to use the correct amounts. If a farmer uses the recommended amount of fertilizer, they should get average yields and depending on the time of year they sell they should make around $200 - $300. However, if farmers don’t use the correct amount of fertilizer, their yield is severely lower and profit can range between $80 - $180*.

A rare sight from last season - this farmer used the correct amounts of fertilizer.

For one acre of maize, MoFA recommends 150 kilograms of a combination of nitrogen-fixed fertilizer and ammonia sulphate as top dressing. The average fertilizer application rate across Africa is 3.2 kg/acre. From what I’ve seen, this is true, most farmers I have met don’t use any fertilizer on crops other than maize. And with maize they skimp on fertilizer using way less than the recommended amount. So why aren’t farmers using fertilizer?

For the maize calculation I did above, the fertilizer expense eats up 24% of income. So using fertilizer is a big investment in the farm. However, profit is not the whole picture. For a farmer in Northern Ghana their business is more closely connected to their family’s well-being than business owners in Canada. Bankruptcy is not an option. Insurance is not available. The difference between not having enough to eat and being able to send kids to school is too slim.

Sometimes agriculture companies such as the Ghana Cotton Company provide fertilizer to farmers on a loan that is paid back once the farmers sell their produce to the company. This arrangement ensures farmers use the fertilizer. Otherwise, farmers don't often have the money to buy fertilizer so they take the profit loss. And even if farmers have the money, things like ploughing and school fees are prioritized as was the case for the farmers I'm meeting with.

Sometimes development projects work with farmers to introduce new varieties of crops. Seeds and fertilizers are provided to the farmers for free to encourage them to try the new technology. Normally, after the trial period completes and project support terminates farmers continue to use the improved seed but the habit of using fertilizer declines.

The application of fertilizer didn’t used to be an important part of farming. However, with increasing populations resulting in more intensive land use in combination with improved seeds that have higher yields, fertilizer is a necessary part of the equation of farming for profit.
So how can we encourage farmers that using fertilizer has more benefits than cost that the risk is worth it? MoFA field staff Francis Oppong and I have just helped some farmers calculate the profit they made from farming maize last year. We sit and watch the group contemplate the results. The group sees that the profit was slim. We ask them what they can do to increase profits. The group comes up with several ideas, one being to use the recommended amount of fertilizer. The group agrees to give it a try this year. We’ll see if they follow through on their promise and I’ll see if helping farmers do the math themselves is a necessary component to link policy with results.

*Profit calculations based on 2007 market information available from MoFA in Damongo.