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Will increasing scarcity of phosphate fertilizer lead to starvation, conflict, and population collapse later in the century? This slideshow says probably not. The market magic of supply and demand will help us manage any shortages we do face.
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Economics for your Classroom fromEd Dolan’s Econ Blog
Does Peak Phosphate Spell Doom for Humanity or will
Supply and Demand Save Us?July 20, 2013
Terms of Use: These slides are provided under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics, from BVT Publishing.
Phosphorus is Essential
The element phosphorus forms part of the structural backbone of DNA, cell walls, and fulfills other essential functions
No plant or animal life is possible without phosphorus
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Phosphate fertilizer in traditional farming
Farmer have added phosphates to their fields since the dawn of agriculture
Humans and animals get more phosphorus than they need from their diets. The rest ends up in manure
Manure is the traditional form of phosphate fertilizer, and still accounts for about 15 percent of all phosphate fertilizer used in world agriculture
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Modern farming uses fertilizer from phosphate rock
Today, about 85 percent of phosphate fertilizer used in modern farming comes from phosphate rock
Phosphate rock is mined in many parts of the world, including the United States, China, and North Africa
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Rising Phosphate Prices
In recent years, the price of phosphate fertilizers has risen sharply
Prices dipped during the recent recession, but as the global economy recovers, they are headed up again
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Diet and Population Growth
Population growth is one factor behind rising phosphate prices
Rising incomes in emerging market countries are also a factor, as new middle classes increase their consumption of meat
One recent study suggests that growing meat consumption accounts for 72 percent of the global increase in phosphate fertilizer use
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Question: Effects of population and diet
How would population growth and increasing meat consumption affect the market for phosphate fertilizers?
Does the demand curve shift? If so, show the new demand curve
Does the supply curve shift? If so, show the new supply curve
Show the new equilibrium price
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Answer: Effects population and diet
How would population growth and increasing meat consumption affect the market for phosphate fertilizers?
Population growth and increasing meat consumption would shift the demand curve to the right from D0 to D1
Other things being equal, the supply curve would not shift
The market would move up along the supply curve from E0 to E1 and the price would rise
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
The Peak Phosphorus Hypothesis
Some observers think that we are running out of high-grade phosphate rock
The “peak phosphate” hypothesis predicts the production will begin to decrease after about 2035
Pessimists think that falling supplies of phosphate fertilizers will bring famine, wars, and population collapse later in this century
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Question: Effects of depletion of phosphate rock reserves
How would the depletion of supplies of high-quality phosphate rock affect the market for phosphate fertilizer?
Does the demand curve shift? If so, show the new demand curve
Does the supply curve shift? If so, show the new supply curve
Show the new equilibrium price
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Answer: Effects of depletion of phosphate rock reserves
Other things being equal, the depletion of high-quality phosphate rock reserves would cause the supply curve to shift upward from S1 to S2
The demand curve does not shift As the supply curve shifts, the market
moves up along the demand curve from E1 to E2
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Alternative: A Phosphate Plateau
More optimistic observers think market forces will prevent a collapse of phosphate production
Prices will rise as supply conditions tighten. In response to higher prices: farmers will use phosphates
more carefully Producers will find it profitable to
use lower-grade phosphate rock deposits
It will also become profitable to recycle phosphates from wastes like urban sewage
As a result, output will reach a plateau instead of collapsing
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Question: Effects of new technologies
How would the effects of new technologies like the ability to use lower-grade phosphates and recycling phosphates from waste affect the market?
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Answer: Effects of new technologies
How would new technologies of production and recycling affect the market?
Other things being equal, new production technologies would tend to shift the supply curve downward
If new technologies approximately counterbalance the effects of further depletion of phosphate rock reserves, production could reach a plateau for the rest of the century or beyond
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
The Bottom Line
July 20, 2013 Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
Depletion of supplies of phosphate rock are unlikely to bring on doomsday scenarios of mass starvation
Higher prices will create efforts to improve farm management for more effective use of phosphates
Higher prices will also stimulate new technologies, including recycling
It is quite possible that these effects will roughly balance out, leading to a plateau in production for the medium-term future
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