Questions

8
Title: Supply & Demand Model of a Market
Introduction
Ans 1    
It has been witnessed the Fertilizers prices skyrocketing majorily in attributable especially Phosphates and urea , driven by bullish demand from PRC China as they increased their purchase of variety of US crop products and higher input cost due to supply chain disruption Covid-19. The overhang of the logistics will play out during 2021 as Fertilizer prices are projected.
In 2021 we see the following factor playing out which has it changes in market equili
ium price and quantity:
a) Biggest consumer of US crop products is china and When the PRC increases their demand for US Crop Products, the total demand (domestic plus foreign) for US-grown crops also increases .Thus it can influence the demand and prices for US grown crops. Which further impacts the equili
ium price of fertilizer.
) In Feb 2021 perfect snowstorm
ought down the temperature across the United States and caused massive power outages in the Southern US, impacting high crop producing states in US . This causes supply to drop of fertilizer and inward shift of supply curve being non-price determinant of supply factor. Hence demand will continue increasing from world causing demand curve to shift outward. Thus new equili
ium will be set at intersection of demand and supply curve.
c) Due to onset of Hu
icane Ida hit the Gulf Coast region in Aug-Sep causing great damage to production of fertilizer .Hence unusually bad weather decreases fertilizer output. Hence shrink in fertilizer production will cause supply curve inward and upward, whereas demand is rising from countries and price will eventually. Now fertilizer being highly price elastic product .Due to outward shift of demand curve a new equili
ium price is formed.
d) With a rise in commodity prices, a rise in fertilizer prices should be expected.
e) The U.S. International Trade Commission (USITC) imposed countervailing duties of 9% to 47% on imports from Russia and Mexico which will make imports expensive and thus hitting domestic demand and supply.
Analysts believe that higher prices could continue well into half of 2022 and later with domestic production starting, prices could decline around the second half of 2022.
Ans The Demand curve during the entire 2021 was affected due to factor listed above and which cause prices to significantly jump. The following factor are expected to play out in 2022:
a) Expectations are for income to be lower in 2022 than in 2021.
) Urea factories could be asked to suspend or cut output to limit air pollution in china.
c) Demand for fertilizer is expected to pause to 0.9% in 2021-2022.
d) Potash prices could elevate due to sanctions on Russia and Belarus.     
e) Additional production was added in Canada, Israel and China thus boosting supply.
f) Russia is a significant producer of nitrogen, phosphorus and potash exporting 50% to world. If Russia invades Ukraine and sanction are placed, fertilizer industry world over will be badly affected and so will global supply of fertilizer.
g) European Union (EU) imposed sanctions on the Belarus (i.e. World’s 3rd largest producer of Potash about 20%), specifically on potash.
h) Analyst predict that some normalcy will return to the fertilizer markets, especially on the supply side.
i) With supply chain issues sorted, fertilizer prices in the world market are actually declining    .
j) Us fertilizer industry is composed of 3 basic nutrients nitrogen, phosphate and potash.90% of potash imported from Canada.
Since price is the main cause of movements along the aggregate demand curve. I see the price rising through the entire half of 2022 due to stated global factors and cooling during second half of 2022. Thus there will be downward and right side movement of the US Fertilizer Demand Curve implying...