Economic Impact of the Fertilizer Price On Farmers.

Florida is a major producer of vegetables, and competes with Mexico, and to a lesser extent California, for the U.S. fresh winter vegetable market. In 2007, Florida ranked second nationally in the value of its vegetable crops, which accounted for 18% of the state’s total value of agricultural products sold that year. Due to a combination of economic and non-economic factors, the state of Florida has managed to maintain market shares and favorable national ranking for several of its vegetables, including bell peppers, cucumbers, squashes, and tomatoes. However, the high fertilizer prices beginning in 2004 and escalating between mid-2007 and mid-2008 have led to concerns about the kind of impact this would have on the competitiveness of Florida vegetable production. In the short run, it could result in unanticipated shifts in the production of major crops, with subsequent effects on farm incomes. In the long run, a sustained rise in fertilizer costs may have serious consequences by reducing profitability and driving resources away from the sector. In order to better assess the likely impact of a sustained rise in fertilizer costs on the competitiveness and profitability of the industry, this study applies a spatial equilibrium model to evaluate price changes, production quantities, and revenues for each important Florida vegetable, including bell peppers, cucumbers, squashes, and tomatoes. The results suggest that although the high fertilizer costs would adversely affect production in all regions, Florida growers would fare worse and would experience a considerable decline in revenue. Florida growers would also lose market shares to Mexico and other suppliers with respect to the crops considered.