The Role of Active Soil Carbon in Influencing the Profitability of
Fertilizer Use: Empirical Evidence from Smallholder Maize Plots in
Tanzania
Abstract
We use recent plot-level panel data from Tanzanian smallholder farmers
to investigate maize yield responses to inorganic fertilizer under
variable production conditions. We find that that the marginal product
of nitrogen is strongly conditioned by soil organic carbon and rainfall
levels. These results highlight important sources of variation in the
returns to fertilizer investments across plots and smallholder farmers
in the region. When farmgate prices for maize and fertilizer are
incorporated into calculations of economic returns, we find that the
profitability of fertilizer use is strongly dependent upon farmgate
price ratio assumptions: under our most optimistic agronomic response
estimates, while 71% of our sample has an AVCR greater than 1.5 at a
maize-nitrogen price ratio of 0.15, that share drops to 30% at a price
ratio of 0.12 and 2% at a price ratio of 0.09. Our findings provide
insights into the low levels of commercial fertilizer use in Tanzania
and elsewhere in the region, and suggest that raising active carbon
stocks in smallholder systems should be a strategic priority for
sustainable development.