Most shipped bulk commodities

One other factoid I found interesting in Prime Movers of Globalization was the relative volumes of the most shipped bulk commodities (besides crude and petroleum products, which dwarf them).

• iron ore, ~800 million tons


• coal, ~800 million tons


• grain (I think including oilseeds as well), ~300 million tons


• bauxite and alumina, ~80 million tons


• phosphates, ~30 million tons
  

This might only be interesting for commodity nerds, but I thought the drop-off was impressive.

Peak phosphorus: look underwater?

Speaking of Peak Phosphorus, one of Tyler Cowen’s “Julian Simon savvy” commenters (who “descended from farmers”) is also not impressed.

Oh, and peak phosphate? Please. There are deposits on the contintental shelves sufficient for 1,000 years or more. Some are in quite shallow water. The Onslow Bay formation in North Carolina contains about 5x the current proven world reserves, all lying in water less than 20 feet deep.

I have heard about these types of underwater phosphate deposits but don’t know enough about them to verify their size, or how much it costs to extract them (or if anyone is actually extracting at commercial scale yet). Perhaps they will become the oil sands of phosphates: almost unlimited resources but at a fairly high position on the cost curve. In theory this would function as a long-term price ceiling on phosphates (although not short-term, as 2008’s oil price run-up showed us).

Peak phosphorus? Meh...

Two FP Passport writers have a dire take on the world's supply of phosphates:

Our dwindling supply of phosphorus, a primary component underlying the growth of global agricultural production, threatens to disrupt food security across the planet during the coming century. This is the gravest natural resource shortage you've never heard of.

Yes, phosphorus is an essential agricultural nutrient, and yes mined phosphates are critical for phosphate fertilizer, and yes 90% of proven reserves are in five countries, and yes the U.S. is an importer (despite being one of those five countries), and yes the current mines are running out of the easiest reserves to mine. And yes there is the requisite group of scientists forecasting that we won't have enough in 30-40 years. Where I struggle with this Peak Oil type of static reasoning is that it doesn't take into account the dynamic economic dimension. Prices may (probably will) rise, but this will encourage more exploration, more marginal mines to be brought back online, and even more marginal reserves in current mines being produced. I can assure you from first-hand experience that even profitable phosphate mines have ample physical reserves they don't declare for economic reasons, and that when the world price rises, a lot more of your physical reserves become commercially viable.

While I disagree with their alarmism, I do find their ultimate appeal compelling.

We need to dramatically reduce the demand for phosphate rock by eliminating our wasteful practices. This will require a combination of low-tech and high-tech solutions, including efforts to prevent soil erosion, development of more-targeted methods of fertilizer application, and the creation of new, phosphorus-efficient crops, which produce a larger yield per phosphorus unit applied. Fortunately, unlike fossil fuels, phosphorus can be used over and over -- this is what occurs in natural ecosystems, where it is recycled innumerable times from its first mobilization from the Earth's crust to its eventual deposition into lake and ocean sediments.

(And right, I forgot that higher prices will incentivize, among other things, higher efficiency in use.)

India's invincible fertilizer subsidies

Long but fascinating WSJ article on the history of fertilizer subsidies in India. A few choice quotes (and apologies for the lack of synthesis and commentary):

In 1967, then-Prime Minister Indira Gandhi imported 18,000 tons of hybrid wheat seeds from Mexico. The effect was miraculous. The wheat harvest that year was so bountiful that grain overflowed storage facilities. Those seeds required chemical fertilizers to maximize yield. The challenge was to make fertilizers affordable to farmers who lacked the cash to pay for even the basics—food, clothing and shelter. Back then, giving cash or vouchers to millions of farmers living all over India seemed like an impossible task fraught with the potential for corruption. So the government paid subsidies to fertilizer companies, who agreed to sell for less than the cost of production, at prices set by the government.

In budget crunches, subsidies on those fertilizers have been reduced or cut, but urea's subsidy has survived. That's because urea manufacturers form a powerful lobby, and farmers are most heavily reliant on this fertilizer, making it a political hot potato to raise the price.

With urea selling for a fraction of the price of other fertilizers, farmers began using substantially more of the nitrogen-rich material than more expensive potassium and phosphorus products.

In the state of Haryana, farmers used 32 times more nitrogen than potassium in the fiscal year ended March 2009, much more than the recommended 4-to-1 ratio, according to the Indian Journal of Fertilizers, a trade publication. In Punjab state, they used 24 times more nitrogen than potassium, the figures show.

Under the new plan, the government will offer subsidies to fertilizer companies on the nutrients, such as sulphur, phosphorus and potassium, from which their products are made, rather than the fertilizer products themselves. The idea is to provide incentives for farmers to apply a better mix of nutrients. But in a major compromise, the government left in place the old subsidy on urea—meaning farmers will still have a big incentive to use too much of it.

Hat tip to a colleague who first passed this on to me.

More commentary on "The Phosphate Dilemma"

Over at U.S. Food Policy, Parke:

A reader asks by email how the train wreck can be avoided.

Some tentative thoughts: Best thing is to eat with lower environmental impact (especially less meat). Also, good environmental regulation of phosphate mining and remediation worldwide is wise, even if it then makes phosphate fertilizer more expensive. That higher price of fertilizer then feeds a response from farmers who can weigh the production advantages and cost disadvantages of increased application more wisely.

R:

Parke, is there any applicable thinking in academia on how to overcome the "race to the bottom"-type disincentives for country-level environmental regulation? (e.g., if everywhere else has strict environmental regulation, a given poor country has an incentive to avoid it if the lower costs mean they can produce more fertilizer and thus generate more revenue and employment)

Obviously this applies widely to extractive industries in general, not just phosphate fertilizer... maybe there are parallels from international labor standards?

Parke:

The most common U.S. center left answer to that question is to include labor and environmental standards as part of trade negotiations.

That's fine with me, but my attention is elsewhere.

The long-term solution to the "race to the bottom" is truly to lift the bottom. Good environmental regulation is a product of middle class democratic politics. There is an anti-trade and isolationist strand in progressive American politics, based on a deep pessimism that things will ever be any better in poor countries. That's not my strand. I hold out more hope for robust middle classes in India and China and Mexico, who can demand good environmental rules.

Recently, I loved reading about the modern Tata apartment design in Mumbia, India. Realistically or not, it generated a daydream about a million young people in Mumbia, wearing hip clothes, eating good (mostly vegetarian) food, living in tiny but fashionable apartments, flirting, watching cool shows and listening to cool music on small electronic devices, enjoying nightclubs, though being too poor to afford a car.

If that is the future we hope for Indian and Chinese youth, it would be just to try to envision something similar for our own children. I really am not sure our grandchildren will have a good world to live in, but if they do, it will probably look like that.

I like this vision in the long term. But that said, bringing about economic prosperity and vibrant democracy takes place on the timescale of decades, and it's possible to do a lot of environmental damage in a few decades. Indeed, some countries see some environmental degradation as central to developing their economies, and rich-country environmental regulations as a plot to stop them from doing just that. So there's still a need for innovative thinking and pragmatic solutions in the shorter term.

Comment on the "phosphate dilemma"

My comment on Parke Wilde's post at U.S. Food Policy on phosphate fertilizer production and its environmental impact.

Agree that the environmental footprint of phosphate mining is terrible, and the existing legacy in the U.S. is terrible whether or not current production is expanded (or even continued at current levels).

On the price side, phosphate fertilizer prices have fallen back to 2006 levels (see Figure 3):

http://cropwatch.unl.edu/archives/2009/crop7/fertilizer_prices.htm

Higher prices (past and future) will likely spur incremental supply coming from other parts of the world with lower cash costs of production and environmental restrictions (e.g. North Africa). Overall, the FAO predicts phosphate fertilizers will have surplus capacity by 2011/2012 (see first link and p15, 17 of second link):

http://www.fao.org/newsroom/en/news/2008/1000792/index.html
ftp://ftp.fao.org/agl/agll/docs/cwfto11.pdf

Unfortunately, the environmental problems from new mines will likely be similar, but receive even less attention than they would here in the U.S. Outsourcing our environmental footprint is obviously not a good solution at a planetary level.

Parke, I agree that using fewer environmental resources per person is critical; I think the key practical question here is how to incentivize that in the specific case of the global fertilizer market.

Parke:

Thanks, R, for the better data and the thoughtful comments. I've added another update to the original post, acknowledging the recent price data. Despite the embarrassment of encumbering the post with three updates (argh), perhaps the revised post shows off the efficiently collaborative nature of web-based writing.

Me:

That's the beauty of blogging - no shame in updating!