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Fertilizer Fuels Food Prices: Identification Through the Oil-Gas Spread

14 Pages Posted: 14 Jul 2016 Last revised: 30 Sep 2016

Hinnerk Gnutzmann

Leibniz Universit├Ąt Hannover - Faculty of Economics and Management

Piotr Spiewanowski

Vistula University; Polish Academy of Sciences - Institute of Economics (INE PAN)

Date Written: September 29, 2016

Abstract

Since the 2008 Food Crisis, the link between agriculture and energy has become contentious. Agriculture consumes energy both directly, through oil products, and indirectly, through fertilizer. Since fertilizer cost depends on natural gas prices, we exploit variations in the oil/gas spread to estimate the causal cost contribution of fertilizer to agricultural commodity prices. Fertilizer accounts for 44% of food commodity cost, far exceeding the importance of direct energy, making it essential for understanding food markets. Shocks to fertilizer markets may thus have a far wider economic and social impact than so far acknowledged.

Keywords: food-energy link, commodity markets, fertilizer

JEL Classification: F10, L40, Q02

Suggested Citation

Gnutzmann, Hinnerk and Spiewanowski, Piotr, Fertilizer Fuels Food Prices: Identification Through the Oil-Gas Spread (September 29, 2016). Available at SSRN: https://ssrn.com/abstract=2808381 or http://dx.doi.org/10.2139/ssrn.2808381

Hinnerk Gnutzmann (Contact Author)

Leibniz Universit├Ąt Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

HOME PAGE: http://www.gnutzmann.info

Piotr Spiewanowski

Vistula University ( email )

Stoklosy 3
Warsaw, 02-787
Poland

Polish Academy of Sciences - Institute of Economics (INE PAN) ( email )

Palace of Culture and Science
Pl. Defilad 1
Warsaw, 00-901
Poland

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