The economics of nitrogen in agriculture and in the environment

David J Pannell

University of Western Australia,,



The economics of nitrogen in farming systems are complex, multifaceted, fascinating and sometimes surprising. Economic insights are crucial for making sound decisions about farm-level management of nitrogen, and also about regional or national policy, such as for water pollution. In this paper I present key insights from a large and diverse literature. Issues covered include: the economics of nitrogen as an input to production; nitrogen and economic risk at the farm level; the economics of nitrogen fixation by legumes; the existence of flat payoff functions, which often allow wide flexibility in decisions about nitrogen fertilizer rates; explanations for over application of nitrogen fertilizers by some farmers; and the economics of nitrogen pollution, at both the farm-level and the policy level.

Insights, evidence and principles from economics are of central relevance to management, policy and research related to nitrogen. Important results that have been known to economists for decades, such as flat payoff functions, remain unknown to most agronomists and scientists. Accounting for these economic issues has the potential to substantially increase the benefits to farmers and to society as a whole.

Key words

Economics, policy, optimisation, profit, risk, pollution

Nitrogen use efficiency and nitrogen balance in Australian farmlands

J.F. Angus1 and P. R. Grace2

1CSIRO Agriculture and Food, GPO Box 1600, Canberra 2601, ACT, Australia and EH Graham Centre, Charles Sturt University, Locked Bag 588, Wagga Wagga, NSW 2678, Australia

2Queensland University of Technology, 2 George St, Brisbane, Queensland 4000, Australia


Farms producing crops and animal products occupy 14% of the Australian land mass. Within this agricultural land, 7% consists of intensive industries (dairy, horticulture and viticulture, sugar cane, cotton, irrigated cereals and feedlots) for which the input of fertiliser nitrogen (N) is typical of such industries worldwide. The sugar and dairy industries are adjacent to populated and environmentally fragile water bodies where nitrate (and phosphate) runoff and leaching contributes to water pollution. The nitrogen use efficiency (NUE) of these industries is low but NUE for the inland irrigated rice and cotton industries are relatively high. The remaining 93% of agricultural land grows dryland crops and animal products (wheat, coarse grains, canola, grain legumes, cattle meat, sheep meat, and wool) partly from continuous crops, partly permanent pasture and partly from phased crop-pasture systems. Until the mid-1990s the source of most of the N in dryland crops was from mining the soil organic matter and increasingly, since the 1950s, from N built up from biological N-fixation by pastures grown in phased rotation. Export of N in products from dryland farms exceeded the input from N fertiliser. Since the mid 1990s N fertiliser input increased to an average of about 45 kg N ha-1, only about half of which is taken up by crops. Of the rest, most is retained in the soil after harvest and about one quarter is lost from denitrification, ammonia volatilisation and leaching. Overuse of N fertiliser in dryland farming is rare because neither products nor fertiliser are subsidised. Arid and semi-arid land occupies 86% of the continent, half of which is not used for production and the other half produces cattle meat, sheep meat and wool with no fertiliser input. The source of N is rain, biological N fixation and redistribution from dust, the amounts of which are greater than the controlled N inputs in the agricultural regions. The feature of N cycling in Australia that distinguishes it from other developed countries is the importance of natural N sources, reflecting the extensive and relatively young agricultural system.

Economic perspectives on nitrogen in farming systems: managing trade-offs between production, risk and the environment

David J Pannell

University of Western Australia,,


The economics of nitrogen in farming systems are complex, multifaceted, fascinating and sometimes surprising. Economic insights are crucial for making sound decisions about farm-level management of nitrogen, and also about regional or national policy, such as for water pollution. In this paper I present key insights from a large and diverse literature that is often neglected by technical scientists. Issues covered include: the economics of nitrogen as an input to production; nitrogen and economic risk at the farm level; the economics of nitrogen fixation by legumes; the existence of flat payoff functions, which often allow wide flexibility in decisions about nitrogen fertilizer rates; explanations for over application of nitrogen fertilizers by some farmers; and the economics of nitrogen pollution, at both the farm-level and the policy level. Economics helps to explain farmer behaviour, and to design strategies and policies that are more beneficial and more likely to be adopted and successfully implemented.

Animal production and Nitrogen: Global trends in growth and efficiency

Qian Liu1, Jingmeng Wang1, Zhaohai Bai2, Lin Ma2, Oene Oenema1,#

1 Wageningen University, Environmental Sciences, PO Box 47, NL-6700 Wageningen, Netherlands

2 Center for Agricultural Resources Research, Chinese Academy of Sciences, 286 Huaizhong Road, Shijiazhuang 050021, China

# Email:


This paper briefly reviews the changes in global animal production during the last 50 years, when total production has roughly tripled. Cattle dominate the world in terms of animal biomass but pigs and poultry increase faster in number and production. Animal production systems are highly diverse across the world, and have a relatively large impact on the environment through emissions of greenhouse gases and ammonia to the atmosphere and nutrients (mainly nitrogen and phosphorus) to water bodies. Losses greatly depend on system, management and regulations. The total amounts of nitrogen and phosphorus in manure produced annually are larger than the global use of synthetic fertilizer annually, but manure nutrients are often not used efficiently. Nitrogen use efficiency (NUE) at animal level ranges from 5 to 45%, depending on animal category, feeding and management. NUE at crop-animal system level may range from 5 to 65% depending on NUE at animal level and the utilization of manure nitrogen and new nitrogen inputs. It is a huge challenge to increase NUE at animal and system levels globally and to diminish the environmental impacts.

Global nitrogen fertiliser demand and supply: trend, current level and outlook

Patrick Heffer1 and Michel Prud’homme1

1 International Fertilizer Association (IFA), Paris 75116, France,,


In the perspective of a world reaching more than 9 billion people by 2050, and the need to alleviate persistent hunger, which still affects more than 800 million people, nutrient management shall ensure continuous increase of agricultural production. The latest projections by the Food and Agriculture Organization of the United Nations (FAO) show that feeding that many people would require raising overall food production by some 60% between 2005/07 and 2050 (FAO, 2012) in the absence of changes to current biofuel mandates. This shall be done while mitigating environmental impacts of farming in general, and improving plant nutrient management in particular. Agricultural intensification using fertilizer best management practices is a desirable and necessary goal. The alternative –agricultural extensification– means increased conversion of natural habitats to farmland, biodiversity loss, and a significant increase in global greenhouse gas emissions.

The need to improve food security strongly influenced world fertilizer demand over the past decades. Future demand is likely to be driven by a broader set of considerations, including the need to reduce environmental impacts from nutrient losses. The paper analyzes global nitrogen (N) fertilizer demand and supply trends and outlook under this changing operating environment.

Moving from nitrogen ignorance to knowledge over time

James N. Galloway1, Allison M. Leach2, Jan Willem Erisman3 and Albert Bleeker4

1Department of Environmental Sciences, University of Virginia, 291 McCormick Rd, Charlottesville, VA 22904, USA,

2Department of Natural Resources and the Environment, University of New Hampshire, Durham, New Hampshire 03824, USA.

3Louis Bolk Institute, Hoofdstraat 24, 3972 LA Driebergen, The Netherlands Department of Earth Sciences, Earth and Climate cluster, VU University Amsterdam, Amsterdam, The Netherlands

4Department of Water, Agriculture and Food, The Netherlands Environmental Assessment Agency, Bezuidenhoutseweg 30, The Hague, The Netherlands.


Once upon a time there was enough naturally occurring nitrogen (N) to provide food for the world’s peoples.  Then there was not in the western regions.  Now there is due to the Haber-Bosch process.  But this transition from plenty, to scarcity, to plenty has come with a tremendous environmental cost.   The first step in actual knowledge attainment for N, was its discovery in 1772.  Basic and applied knowledge about N has been accumulating ever since.  We now know what needs to be done to maximize the benefits of N (feeding the world) while minimizing its impacts (the nitrogen cascade).  On the food production side, we know how to increase nitrogen use efficiency and decrease food waste. The challenge is to get this information to producers together with the mechanisms to implement the needed changes.  On the food consumption side, people have it in their power to stabilize the amount of N needed to grow food at current levels by eating to nutritional guidelines for protein.  The challenge is to educate those involved in food production and consumption.


<For the full paper, please contact James Galloway;>

Nitrogen management for future food security: Sub-Saharan African case-study

Cargele Masso, Peter Ebanyat, Fredrick Baijukya, Mateete Bekunda, Sifi Bouaziz, John Wendt, Bernard Vanlauwe


One of the definitions for food security is having sufficient, safe, and nutritious food to meet dietary needs. There is an overdue need to optimize nitrogen use for food and nutrition security in developing countries particularly in sub-Saharan Africa, while minimizing environmental risks. In the past, nitrogen related environmental issues have often been associated with excessive use; however, of recently, challenges related to ‘too little’ nitrogen use has been recognized. In sub-Saharan Africa, nitrogen management must address the ‘too little’ and ‘too much’ paradox. Too little nitrogen is used in food production, which has led to chronic food insecurity and malnutrition. Conversely, too much nitrogen load in water bodies due mainly to excessive soil erosion, leaching, limited nitrogen recovery from wastewater, and atmospheric deposition still contributes to eutrophication in some areas. Significant research has been conducted to improve N use for food production, whereas little has been done to effectively address the ‘too much’ issues. The current research gaps must be addressed, and supportive policies operationalized, to maximize on nitrogen benefits, while reducing its negative impacts on the environment. Innovation platforms involving key stakeholders are required to address the nitrogen use efficiency along the full food supply chain in sub-Saharan Africa, as well as other World regions with similar challenges.

Nitrogen budget: a tool to validate information on nitrogen fluxes

Wilfried Winiwarter1

1 IIASA, Schlossplatz 1, A-2361 Laxenburg, Austria,,


Reactive nitrogen compounds, released by anthropogenic activities, may take different pathways in the environment, not all of which are easily traceable. Nitrogen budgets allow using surrogate information for fluxes that otherwise cannot easily be measured or validation of flux quantities for which an independent second set of data can be made available. In order to reliably assess nitrogen budgets and to make them comparable, the harmonization of approaches is required. Such a harmonizing effort has been performed under the European “air quality” convention, the Convention on Long-Range Transboundary Air Pollution. Based on existing efforts to collect data on fluxes of nitrogen compounds, specifically in the framework of the convention, from national greenhouse gas inventories mandatory under UNFCCC, or in connection with European activities of EUROSTAT or OECD, a guidance document has been developed to allow assessing national nitrogen budgets. Eight individual “pools” have been identified that are considered the start- and endpoints of environmental fluxes. The guidance document allows fluxes between pools to be properly assigned and quantified and provides a framework for consistent nomenclature. This paper shows complete and partial applications of the concept, and demonstrates the advantages of harmonizing approaches. It takes available published budgets for several European and non-European countries, analyzes them for compatibility, and evaluates nitrogen budgets for their potential contribution to a sustainable development of agriculture and beyond agriculture. From the few available examples is can be shown that nitrogen budgets allow to identify missing information as well as to define areas of intervention into the nitrogen regime. Comparing over time shows trends, e.g. as a result of environmental legislation, comparing between countries displays national characteristics useful for benchmarking. Linking towards specific abatement, nitrogen budgets may help in attaining “planetary boundaries” for nitrogen.

Tracking nitrogen from the paddock to the reef- a case study from the Great Barrier Reef

Michael Bell1, Britta Schaffelke2, Philip Moody3, David Waters4 and Mark Silburn4

1 School of Agriculture and Food Science, University of Queensland, Gatton, Qld 4343, Australia.

2Australian Institute of Marine Science, Townsville Qld 4810, Australia,

3 Landscape Sciences, Department of Science, Information Technology and Innovation, Dutton Park Qld 4102, Australia,

4 Department of Natural Resources and Mines (DNRM), Toowoomba Qld 4350 Australia


The water discharged from rivers draining into the Great Barrier Reef (GBR) lagoon carries land-derived suspended sediments, nutrients and pesticides. Total nitrogen (N) loads have more than doubled since development, with the extensive grazing and intensive sugarcane industries the largest contributors. Runoff and soil erosion are the main sources of riverine particulate nitrogen (PN) while fertilizer application has contributed to the increase in dissolved inorganic nitrogen (DIN). Dissolved organic N (DON) loads have increased less and it is unclear if DON has changed with development. DIN is rapidly taken up by marine plants and cycled through the marine food web, resulting in typically low concentrations of DIN in GBR waters, and an N-pool dominated by DON and PN of marine origin. The productivity of marine plants is sustained by rapid recycling of organic nutrients. Additional available N, as occurs from land runoff, can result in adverse effects on coral reefs by increasing coral vulnerability to temperature stress, and by benefitting coral competitors and predators.

Ambitious targets to reduce N loads from key catchments have been set and a combination of changes to land use and nutrient management practices will be required to achieve the necessary water quality improvement. Prioritization of actions that maximize water quality benefits will require new fertilizer technology for cropping industries and greater certainty around underlying processes contributing to bioavailable N loads from all land uses. Uncertainties include the relative importance of DIN compared to total bioavailable N, and of the contribution of runoff compared to other N loss pathways like subsurface lateral flow and deep drainage.

Nitrogen cycling and its environmental impacts on terrestrial ecosystems in China

Xiaoyuan Yan1, Xuejun Liu2

1 Institute of Soil Science, Chinese Academy of Sciences, Nanjing, 210008, China

2 College of Resources and Environmental Sciences, China Agricultural University, Beijing 100193, China


China now creates more Nitrogen (N) than any other country in the world. Total N input to the terrestrial ecosystem of mainland China increased from 25.2 Tg in 1980 to 61.0 Tg in 2010, while the amount of natural N2 fixation changed little during this period (9.3–11.0 Tg). Though large amount of N input plays a vital role in ensuring food security, it has contributed to low nitrogen use efficiency in crop production systems. Much of the remainder N can be considered an expensive and environmentally damaging waste such as emissions of greenhouse gases, degradation of soil and freshwater. Average bulk N deposition, plant foliar N and crop N uptake from long-term unfertilized croplands all significantly (p<0.05) increased from 1980 to 2010, in agreement with rapidly increased NH3 and NOx emissions. As a consequence, significant soil acidification was reported in major Chinese croplands, grasslands and forestlands. Clear evidence showed that plant species richness and soil bacterial diversity declined with increased N deposition in temperate grasslands. Meanwhile, large amounts of soil nitrate N accumulation were observed in major upland soils in China, threatening groundwater quality. Surface water eutrophication, air quality deterioration, both closely linked with reactive N, are increasingly being witnessed. China is facing a huge challenge to realize food security and protect the environment through maximizing N use efficiency and minimizing N negative effects.