IN F O R M A T IO N T O USERS

This dissertation was produced from a m ic ro film copy o f the original docum ent.
W hile the most advanced technological means to photograph and reproduce this
docum ent have been used, the quality is heavily dependent upon the qu ality o f
the original subm itted.
The fo llo w in g explanation o f techniques is provided to help
markings or patterns w hich may appear on this reproduction.

you

understand

1.

T h e sign or "ta rg e t" fo r pages apparently lacking fro m the docum ent
photographed is "Missing Page(s)". If it was possible to obtain the
missing page(s) or section, they are spliced into the film along w ith
adjacent pages. This may have necessitated cuttin g thru an image and
duplicating adjacent pages to insure you com plete c o n tin u ity .

2.

When an image on the film is o b literated w ith a large round black
m ark, it is an indication th a t the photographer suspected th at the
copy may have moved during exposure and thus cause a blurred
image. You w ill fin d a good image o f the page in the adjacent fram e.

3.

When a map, draw ing or chart, etc., was part o f the m aterial being
p h o to g ra p h e d th e photographer fo llo w ed a d e fin ite m ethod in
"sectioning" th e m aterial. It is custom ary to begin photoing at the
upper left hand corner o f a large sheet and to continue photoing from
le ft to right in equal sections w ith a small overlap. If necessary,
sectioning is continued again — beginning below the first row and
continuing on u n til com plete.

4.

T h e m ajority o f users indicate th a t the textu al content is of greatest
value, however, a som ewhat higher qu ality reproduction could be
m ade from "photographs" if essential to the understanding o f the
dissertation. Silver prints o f "photographs" may be ordered at
additional charge by w ritin g the O rder D ep artm ent, giving the catalog
num ber, title , a u th o r and specific pages you wish reproduced.

University M icrofilm s
300 N o rth Z e e b R oad
Ann A rbo r, M ichigan 48106
A Xerox Education Com pany

72 22,269
-

PERKINS, George Russell, 1943ATTAINING THE LONG RUN MINIMUM COST
REORGANIZATION OF THE MICHIGAN FERTILIZER
INDUSTRY.
Michigan State University* Ph.D., 1972
Economics, agricultural

U n iv ersity M icrofilm s, A XEROX C o m p an y , A n n A rb o r, M ic h ig a n

A TT A IN IN G THE LONG RUN
MINIMUM COST REORGANIZATION
OF THE MICHIGAN F E R T I L I Z E R

INDUSTRY

By
G e or ge R u s s e l l

Perkins

A THE SIS
Subm itted to
M ichigan S t a t e U n i v e r s i t y
in p a r t i a l f u l f i l l m e n t o f t h e r e q u ir e m e n ts
f o r the degree o f

DOCTOR OF PHILOSOPHY

Departm ent o f A g r i c u l t u r a l

1972

Ec onomi cs

PLEASE NOTE:

Some pag e s may hav e
i nd i s t i n e t
Film ed

U n iv e rs ity

as

M ic ro film s ,

p rin t.
re c e iv e d .

A Xerox Education

Company

ABSTRACT

A TT A IN IN G THE LONG RUN
MINIHUH COST REORGANIZATION
OF THE MICHIGAN F E R T I L IZ E R INDUSTRY
By
G e or ge R.

For th r e e

c o nsecutive years

total

assets

These

low r e t u r n s w e r e

m arketin g
Over
in

in

four b i l l i o n

the decade o f

la rg e ly

that

1 9 6 0 's.

u s i n g many o f

a v a ila b le

several

fe rtiliz e r

the

r u n minimum c o s t

problems

could

be s t u d i e d

on t h e

impact o f

the

from t h e

The

lin e a r

content:

retu rn s

to

per c e n t.

p r o d u c t i o n and

fe rtiliz e r

in d u stry

p lace.

in d u s try

in M ic h ig a n

advances

th at

p r o g ra m m in g model

is

ha v e been

In

th is

study

rates

of

the M ichigan

fe rtiliz e r

so t h a t a v a r i e t y

of

s p e c ific a tio n o f c o n s tra in ts ,
t h e model was used

to e v a l­

and c h a n g i n g c a p i t a l

to

the

t o d e t e r m i n e and a n a l y z e

fle x ib le

by a p p r o p r i a t e

current o rg a n izatio n

the
the

in d u stry.

Th e

retu rn s
tra n s itio n

l o n g - r u n minimum c o s t

studied .

l o n g - r u n minimum c o s t

d u c t i o n and use o f

the

re o rg a n iza tio n o f

c h a n g i n g wage

o r g a n i z a t i o n was a l s o

the

the m arketin g

technological

l o n g - r u n optimum o r g a n i z a t i o n o f

process

in

Th e f e r t i l i z e r

was s u f f i c i e n t l y

param eters o r a c t i v i t i e s .
u a te the

in

i n d u s t r y was d e v e l o p e d

The model

1960's

years.

M ichigan

in d u s try .

cha os

invested

A comprehensive c o m p u te rize d

long

la te

r e s u l t o f excess

ha v e c r e a t e d

not c u r r e n t l y
for

the

d o lla r s were
the

in the

i n d u s t r y were below 2 .0

the f e r t i l i z e r

cap acity

Perkins

three

in d u s try o r g a n iz a tio n

products,

a n h y d r o u s ammonia,

each o f w h ic h

re s u lts

is high

in

pro­

in n u t r i e n t

monoammonium p h o s p h a t e and g r a n u l a r

potas-

George R.

sium c h l o r i d e .
three
3 2 .4

p r o d u c t s c o u l d be d e l i v e r e d
per c e n t

1970.
N,

U s i n g t h e minimum c o s t

T h is

less cost

cost

s u lte d

in

p rim a rily

tiliz e r

produced;

storage

retu rn

determ ine
tio n .

the

Th e

fe rtiliz e r

however,

in vested

i m p a c t on t h e

producers.

to

A s ix -y e a r

tra n s itio n

from

in

per c e n t

to

the g r e a te s t
m a te ria ls

the c u r r e n t

m illio n
and

the

d o lla rs ,
its

s h o u l d be d i s c a r d e d

le v e ls

about 4 7 .5

q u ired , w h ile

to tal
as

fe lt

th e mix o f

fe r­

i n how

o f N,

m illio n
cost

compared

a sso ciated

to tal

p 2 °5 * anc*
d o lla rs

processing,

and

2 0 .0 per c e n t t o

in d u stry o rg a n iza ­
sm all;

e xten t,

d r y blended

w h ile

there

produced.

in d u s try o rg a n iz a tio n

l o n g - r u n minimum c o s t o r g a n i z a t i o n was a n a l y z e d

tra n s itio n ,

are

Throughout the

was s u r p r i s i n g l y

fe rtiliz e r

1 970

re­

in d u s try

t h e wage r a t e

l o n g - r u n minimum c o s t

th e mix o f

the

1970.

r u n minimum c o s t
in

in

same l e v e l s o f

p e r man h o u r

in m a n u f a c t u r in g ,

in

to supply

in

about

farm ers

t h e r e were m in o r changes

from - 2 .0

such v a r i a t i o n

p r o d u c t s and p r o c e s s e s

tio n

farm ers

t h e r e was no change

producers a re a f f e c t e d

no c h a ng e

the

fe rtiliz e r

was v a r i e d

im pact o f

long

the

these

p r o c e s s e d and h a n d l e d .

on c a p i t a ]

fa c ilitie s

the

farm f o r

by M i c h i g a n

to $6 .5 0

such cha ng e s

r a t e s exam ined,

these m a t e r i a l s were
The

from $ 3 .0 0
in

Th e e f f e c t o f

m a te ria ls

paid

bas e d upon s u p p l y i n g

t h e wage r a t e

by t h e d r y b l e n d e d

r a n g e o f wage

and a p p l i e d on t h e

used by M i c h i g a n

in o n l y m in o r changes

o rg an izatio n .

is

is

P 2 &5 * a n d K 2 O t h a t w e r e
Changes

in d u s try o r g a n iz a tio n ,

t h a n was a c t u a l l y

red u ctio n

Perkins

to

to d e t e r m in e w hich

i n f a v o r o f new i n v e s t m e n t
to M ich ig an .

D uring

the

o f new i n v e s t m e n t w o u l d be r e ­

s a v i n g s w o u l d amount t o
to m a in ta in in g

the

n e a rly

139.4

1970 i n d u s t r y o r g a n i z a ­

c o st throughout the

tra n s itio n .

ACKNOWLEDGMENTS

I w ish
R.

to extend

Henderson,

my c o l l e a g u e s

s u g g e s t i o n s on t h e
D r.

David

search,

a p p re c ia tio n

in

provided s t im u la t in g

t o D a v i d M.

B ell

r e s e a r c h , whose c o o p e r a t i o n

numerous d r a f t s

L. A r m s t r o n g a n d D r .

S in ce re
m ajor

sin cere

im pr ov e d t h i s

James D.

guidance

thanks a r e extended

to D r.

th is

Lester

and h e l p f u l

study m e as u ra b ly.

S haffer,

for

and D e n n i s

co -d ire c to rs

of

re­

study.
V.

M anderscheid,

p r o f e s s o r , whose e n c o u r a g e m e n t and g u i d a n c e made g r a d u a t e

my
study

re w a rd i ng.
Dr.

D ale E.

p a rtic u la rly

fo r

To my w i f e ,
provided

moral

H at h aw a y and h i s d e p a r t m e n t a r e
the a s s is ta n ts h ip

and r e s e a r c h

M arcia,

the

support,

who t y p e d
I give

in itia l

my h e a r t f e l t

g i v e n my t h a n k s ,
funds.

d ra ft

and c o n t i n u a l l y

a p p re c ia tio n .

TABLE OF CONTENTS
Page
ACKNOWLEDGMENTS............................................................................................................

i i

L I S T OF T A B L E S ............................................................................................................

V

L I S T OF

I L L U S T R A T I O N S .............................................................................................

vi

L I S T OF A P P E N D I C E S ..................................................................................................

v it

CHAPTER
I.

I I.

III.

I N T R O D U C T I O N ..............................................................................................

1

The P r o b l e m S e t t i n g
...................................................................
The B a c k g r o u n d ..................................................................
O b j e c t i v e s ........................................................
R e v i e w o f L i t e r a t u r e ........................................................
Th e R e s e a r c h A p p r o a c h ...................................................
O r g a n i z a t i o n o f the Study
......................................

1
14
17
18
20
25

IMPACT OF WAGE RATES AND RATES OF RETURN ON
INVESTMENT ON THE OPTIMUM SHORT RUN INDUSTRY
O R G A N I Z A T I O N ........................................................................................

27

THE

THE

The I m p a c t o f A l t e r n a t i v e Wage R a t e s .............................
R e t u r n on I n v e s t m e n t i n t h e S h o r t Run
. . . . .
I m p l i c a t i o n s o f t h e O p t i m a l S h o r t Run
O rg an izatio n
..............................................................................
Summary
. . . . . . . . . .
............................... . . .

53
57

IMPACT OF WAGE RATES AND RATES OF RETURN ON
INVESTMENT ON THE OPTIMUMLONG RUN
INDUSTRY
O R G A N I Z A T I O N ........................................................................................

59

I m p a c t o f A l t e r n a t i v e Wage R a t e s i n t h e
Long Run
.........................
R e t u r n on I n v e s t m e n t in t h e Long R u n ..............................
I m p l i c a t i o n s o f t h e Long Run Optimum
O rg an izatio n
........................................................................
Summary
.........................

27
33

The

i i i

59
68
77
82

CHAPTER
IV .

V.

Page
THE TRANSITION FROM THECURRENTINDUSTRY ORGANIZA­
TI O N TO THE LONG RUNO P T I M A L .................................................

84

The P r o b l e m ........................................................................................
The A s s u m p t i o n s
..............................................................
P r o c e d u r e .............................................................................................
Th e T r a n s i t i o n ...................................................................................
Year 0
to Year1
.....................................................................
Im p lic a tio n s o f the F i r s t T r a n s it io n S tep . .
Year 1
to Year 2
Year 2
to Year3
.....................................................................
Year 3
to Year4
.....................................................................
Year 4
to Year5
.....................................................................
Year 5
to Year 6
I m p l i c a t i o n s f o r Y ears 2 Through 6
. . . . .
C o s t s , I n v e s t m e n t , and P o t e n t i a l S a v i n g s . . . .
........................................
C o s t s and P o t e n t i a l S a v i n g s
Investm ents
..............................................................................
Summary
..............................................................................

84
85
89
91
92
96
99
108
Ill
114
117
118
122
122
124
126

SUMMARY, CONCLUSIONS, ANDRECOMMENDATIONS ........................

128

Summary
.......................... . . . . . . . . . . . . . .
C o n c l u s i o n s ............................................................................
R ec o m m e n d a t io n s
. . . . .
..................... . . . . . .
BIBLIOGRAPHY

.............................................................................................

iv

128
132
135
137

L IS T OF TABLES
T a b le
1-1.

1-2.

Page
N o r t h A m e r i c a n p r o d u c t i o n c a p a b i l i t y compared
w i t h use and M i c h i g a n u s e , 1965 and 1970 . . . .

2

C o m p a ri s o n o f s e l e c t e d r e t u r n s on i n v e s t m e n t
1 9 6 5 - 6 7 ( p e r c e n t , a n n u a l ) ....................................................

12

V a l u e added p e r m a n - h o u r f o r s e l e c t e d
i n d u s t r i e s 1 9 6 5 -6 7 .........................................................................

13

11-1.

Th e

30

i 1-2.

Th e e f f e c t o f r e t u r n s on i n v e s t m e n t i n t h e
s h o r t r u n ( i n d o l l a r s ) ...................................................

hj

111- 1 .

The

60

111-2.

Em ployment

M l-3.

L a b o r u t i l i z a t i o n and t h r o u g h - p u t volume i n
b u l k b l e n d i n g and cus tom b l e n d i n g ( o p t i m u m )

1-3.

lll-if.

i m p a c t o f wages

i m p a c t o f wages

in

in

in d i f f e r e n t

the

short

the

long

run

. . . . . . .

r u n .....................

in d u stry o rg a n izatio n s

Th e e f f e c t o f r e t u r n s on i n v e s t m e n t i n t h e
lo n g r u n ( i n d o l l a r s ) ....................................................

I V —1.

Cost d a ta

fo r

the

IV -2 .

Investm ent d a ta

tra n s itio n

fo r

y e a r s ..........................

the t r a n s i t i o n

v

y e a r s ............

,

.

63

.

.

6**

73
123
125

L IS T OF ILLUSTRATIONS

F ig u r e
1-1.

1-2.

J-3.

1-4.

I 1-1.

11-2.

lll-l.

Page
1 970 p r o d u c t i o n c a p a b i l i t y compared t o e s t i m a t e d
f e r t i l i z e r use g r o w t h i n N o r t h A m e r i c a ..........................

4

N itro g e n :
du ction

7

prod uction c a p a c it y , f e r t i l i z e r pro­
c a p a b i l i t y and usa ge ( N o r t h A m e r i c a ) . . .

Phosphate:
pro d u ctio n c a p a c it y , f e r t i l i z e r pro­
d u c t i o n c a p a b i l i t y , and us a ge ( N o r t h A m e r i c a )

.

.

8

Potash:
p ro d u c tio n c a p a c i t y , f e r t i l i z e r pro­
d u c t i o n c a p a b i l i t y , and us a ge ( N o r t h A m e r i c a )

.

.

9

A n h y d r o u s ammonia f l o w w i t h i n t e r e s t on i n v e s t ­
ment b e t w e e n 2 0 . 0 and 1 2 . 1 p e r c e n t , i n c l u s i v e
( c o n s t r a i n e d o p tim um )
...................................................................

38

A n h y d r o u s ammonia f l o w w i t h i n t e r e s t on i n v e s t ­
ment b e t w e e n 1 2 . 0 and 4 . 4 p e r c e n t , i n c l u s i v e
( c o n s t r a i n e d o p ti m u m )
....................................................................

39

L a b o r us a g e

in

the

l o n g and s h o r t r u n ......................

vi

67

L IS T OF APPENDICES

A p p e n d ix
A.

Page
1970 a c t u a l , c o n s t r a i n e d o p t i m u m ,
and o p ti m u m :
d a t a .................................................................................................................

140

B.

R e t u r n s on

182

C.

The

D.

R e t u r n s on

investm ent

E.

T ra n s itio n

c o n s tra in ts

F.

The t r a n s i t i o n

investm en t

in th e

l a b o r m a r k e t and t h e

years

s h o r t r u n .................................

l o n g r u n ................................... .

.

2)8

l o n g r u n ....................................

224

.........................................................................

230

..........................

283

in th e

vi i

CHAPTER 1

INTRODUCTION

The P r o b l e m S e t t i n g

In

1970,

fe rtiliz e r
estim ated

the e s tim ate d m an u factu rin g c a p a b il i t y

companies
dom estic

i n N o r t h A m e r i c a was 61

use.

At

the

same t i m e ,

was more t h a n d o u b l e d o m e s t i c u s e . '
tio n

c a p a b ility

recent years.
c a p a b ility
ents.
tons.

and c o n s u m p t i o n
In

3

cent.

Th is

th is

represents

M eanw hile,

m illio n

tons

in

p.

23 ) .

I 965

Thus,

has been o v e r 3 7

gross

T h is d i s p a r i t y

an a n n u a l

m illio n

in

tons

N orth Am erica

compound g r o w t h

7

of

growth

in

per cent g re a te r

fe rtiliz e r

8.1

the

p ro d u ctio n

p lan t

n u tri­

27.^5 m i l l i o n
of

11.1

per

in creased

from

1 1 .59

17.06 m i l l i o n
rate o f

tren d o f

fe rtiliz e r

compound g r o w t h r a t e

t o an e s t i m a t e d

the

between p ro d u c ­

p a rt o f a c o n tin u in g

16.21

than

pro d u ctio n c a p a c ity

had grow n t o an e s t i m a t e d

d o m e s t i c use

r e s e n t i n g an a n n u a l
a j..,

fig u re

commercial

per cent g re a te r

1965, f o r exam ple, e s tim a te d

i n N o r t h A m e r i c a was

By 1 9 7 0 ,

is

of

tons

per cent

in

1970 r e p ­

(H arre,

et.

pro d u ctio n c a p a b i l i t y

than t h a t o f

use

in

recent years.

Gross p r o d u c t i o n c a p a c i t y i s e q u a l t o e s t i m a t e d f e r t i l i z e r p r o ­
d u c tio n c a p a b i l i t y plus the t o t a l p ro d u c tio n f o r a l l o th e r i n d u s t r i a l
uses.
F o r e x a m p l e , b e s i d e s t h e use o f p h o s p h a t e s f o r f e r t i l i z e r ,
t h e y ha v e been commonly used i n d e t e r g e n t s .
^Throughout t h i s
^See T a b l e

study,

"to ns" w i l l

|- |.

I

be used t o mean " s h o r t

to n s."

Table 1-1.

North American production c a p a b ility compared with use and Michigan use 19 6 5 and 1970

Ni trogen

Phosphate

Potassi urn

PRODUCTION CAPABILITY
North America ( m illio n tons)
1965
1970
Annual Growth

5.82
10.89
13.18%

4.98
7.46
8,42%

5.41
9.18
11.16%

16.21
27.45
1 1 . 10 %

USE
North America ( m illio n tons)
1965
1970
Annual Growth

A. 83
7.84
10.17%

3.79
5.05
5.90%

2.97
4.18
7 .0 7%

11.59
17.06
8.10%

92,243
141,932
9.00%

120,649
140,650
3.12%

112,604
155,441
6.65%

325,496
438,023
6.12%

Michigan (tons)
1965
1970
Annual Growth
PRODUCTION CAPABP ITY
AS PER CENT OF USE
North America
1965
1970

Sources:

120
138

131
148

182
220

Total

140
161

Compiled from Harre, e t a t . , Estimated World F e r t i l i z e r Production Capacity as Related to
Future Needs 1970 to 1975. p. 23, Table A-3; and Michigan Department of A g ric u ltu re ,
'Tonnage o f F e r t i l i z e r Sold in Michigan from January 1 Through December 31, 1970."

The s i t u a t i o n
To tal

i n M i c h i g a n was q u i t e

n u trie n t

to **38,023
an a n n u a l

s i m i l a r during

use gr ew f r o m 3 2 5 , * * 9 6

tons

in

b a s is ,

1970

th is

growth corresponds

in N orth A m erica w i l l

annual

rate

between

be 2 8 . 2 7 m i l l i o n
Given th e
n e ith e r

in g p r o d u c t i o n
g ra p h ic a lly
W h ile
1 1 .1

tons o f

1965 t o

nor

th is

13.18

1970.

n u trien ts

n e a rly

doubled t o

same p e r i o d
et a l..

p.

c a p a b ility

e stim ated

10.81

the

was t h e f a s t e s t o f

the

and p o t a s s i u m ) ,

was s t i l l

c a p a b ility .

grew a t a 9 . 0

three

D uring

the

per cent annual

f a r m e r s was 9 2 , 2 * * 3
use had grown t o

tons

1**1 , 9 3 2

in

et

per c e n t .

fe rtiliz e r
per c e n t

p.

23).

1970 and a s s u m i n g

fin a lly
p rio r

On

1980 use t o

a l..

fe rtiliz e r

equal

to

use

current e x is t­

I 9 8 O.

Figure

1-1

in

i n N o r t h A m e r i c a was g r o w in g

n itro g e n pro d u ctio n
du ring

tons.

Use o f n i t r o g e n

d u ring

the

per cent a n n u a l l y
of n itro g en

nitrogen

(H arre,

u tiliz a tio n

(n itro g e n ,

the o v e ra ll

same p e r i o d ,
ra te .

prod uction
had

ra te

than

p e r i o d fr om

fig u re

basic n u tr ie n t s
less

year

fe rtiliz e r

by 1 9 7 0 ,

c a p a b ility

th is

10.17

growth

1965

tons

the f i v e

n itro g en

a rate of

A lthou gh

it

that

than a 5 * 2

(H arre,

tons y e a r l y ;

m illio n

increased a t
23).

p. 5 6 )

re la tio n s h ip .

per c e n t a n n u a l l y ,
1965,

6 .1 2

T h e y have e s t i m a t e d

sometime j u s t

p ro d u c tiv e

In

less

loss from d e p r e c i a t i o n ,

c a p a b i l i t y was 5 . 8 2 m i l l i o n

tiv e

1980.

plan t

c a p a b ility

to tal

(H arg ett,

estim ates

s lig h tly

p e r c e n t compounded a n n u a l l y ,

in creased

(T V A )

per c e n t a n n u a l l y would

d epicts

1965

to a r a te o f

p ro d u ctio n c a p a b i l i t y

new i n v e s t m e n t

growing a t 5 . 1 8

grow a t

1 9 70 and

in d u s try 's

in

period .

(M ichigan Departm ent o f A g r i c u l t u r e ) .

The T e n n e s s e e V a l l e y A u t h o r i t y
use

tons

th is

phosphate,

growth o f
us e

produc­

in M ichigan

N i t r o g e n usage by M i c h i g a n

(H arg ett,

p.

56 ) .

By

1970,

nitrogen

(M ic h ig a n Department o f A g r i c u l t u r e ) .

tons)

t\
29.0

1970 P r o d u c t i o n C a p a b i l i t y
27.0
26.0

25.0

23.0
E s t i m a te d
Consumpt i on
% Annual Growth)

22.0
21.0

20.0

19.0

Estimated

Production

Capability

and Consumption

(million

28.0

0.0
19 72

T970

Year

F ig u re

1-1.

1970 P r o d u c t i o n C a p a b i l i t y Compared W i t h
E s t i m a t e d F e r t i l i z e r Use Growth I n N o r t h
Amer i c a .

5

N itro g en

use

phosphate o r
’ 0 .1 7

in M ic h ig a n

potassium , y e t

per c e n t annual
Phosphate

5 .9

increased c o n s id e ra b ly

use

N orth A m erica d u rin g

b ility
in

fo r

same f i v e

in

centage
fiv e

phosphate

in crease;

year

M ichigan

p e rio d .

can t r e n d ,
the t h r e e

Potash

annual

per

phosphate
basic

tons

In t h i s

grew 3 . 1 2

in

1 970

usa ge

during

the

growth r a t e

of

cent

p eriod

1965 t o

p rod uction

North A m e ric a .

U

th is

1970.

At

in

An

had t h e

p.

capa­

23).

purchases
to

the

lo w e s t

in Canada,
capacity

o f K 2O was 5 * 4 )

tons
S im ila r
per­
the

in

North A m eri­

growth

rate

of

had an a n n u a l
d u ring

gr ew a t
fact

the

fiv e

year

p e rio d ,

m illio n

tons

in

c a p a b i l i t y was 9 . 1 8

in te re s tin g

the 3 .7 9

cent during

b e g in n in g o f the

pro d u ctio n

in

lo w est annual

per

of

pentade.

prod uction

in N o r t h A m e r i c a

p e rio d .

had t h e

phosphate

la rg e ly

the

c a p a b ility

By 1 9 7 0 ,

Farm us a ge o f 1 ^ 0
during

per

tons

p ro d u c tiv e

et a l..

C o m p a r a b le

in M ic h ig a n

rate

from 4 . 9 8 m i l l i o n

(H arre,

same p e r i o d ,

the

s lo w e s t annual

5 .0 5 m i l l i o n

i n c r e a s e was 8 . 4 2

produced

estim ated

growth

had t h e

same t i m e ,

c a p a b ility

(p o ta s s iu m ),

from

the

cent an n u ally .

n u trien ts

11.16

p e rio d ,

n e a r l y 50 p e r c e n t

p ro d u c tiv e

the

At

than

in N o rth A m e r ic a .

purchases o f

1965.

increased

1965 t o 7 . 4 6 m i l l i o n

to usage,

less

w i t h an a n n u a l

year

b asis;

use

than e i t h e r

1 9 70 w e r e onTy o n e - t h i r d more t h a n

purchased

P2^5

n itro g e n

in N o r th A m e r ic a ,

i n c r e a s e on a p e r c e n t a g e

tons

g r o w t h was somewhat

growth o f

per cent over the

m illio n

its

fa s te r

m illio n

tons.

7.07

per

cent a n n u ally

about

the

potash

in d u stry

D u r i n g 1 9 7 0 , Canada p r o d u c e d 3 * 4 9 7 , 9 0 1 t o n s o f p o t a s h and e x ­
p o r t e d 6 7 9 , 1 2 8 t o n s ( O i l , P a i n t , and D ru g R e p o r t e r , M a r c h 2 9 , 1 9 7 1 )
from N o rth A m e ric a .
I n 1968 ( l a t e s t a v a i l a b l e f i g u r e s ) , t h e U . S .
p r o d u c t i o n o f p o t a s s i u m was 1 , 5 7 5 , 8 3 4 t o n s ( H a r r e , 1 9 7 0 ) , most o f

6

is

the

d is p a rity

beginning o f
cent of

between p r o d u c t io n

the f i v e

usage.

year

By 1 9 7 0 ,

p e rio d ,

th is

p o t a s s i u m usage

in M ichigan

tons

155,441

the

in

19&5 t o

N o rth American
Gr ow th

the

b illio n
th is

that

d o lla rs

T u rb e rv tlle ,
C onference
"Excess

in

in vested

d o lla rs

prod uction

in

5

per cent a n n u a lly ,

1970.

re q u ire s

Figures

of

high

the

1-2

At
was

the
182 p e r

M eanw hile,
from

through

112,604

1-4 d e p ic t

m agnitude e x p e rie n c e d

le v e ls

th e decade o f

in t h e

s u c c in c tly

phrased

in vestm en t.
th ere

in d u stry.

c a p a b ility ,

f o r m a r k e t i n g and

the F e r t i l i z e r

of

the 6 0 * s,

fe rtiliz e r

new p r o d u c t i o n

went

speaking to
1969,

c a p a b ility

f i g u r e was 220 p e r c e n t .

c a p a b ility

during

i n v e s t m e n t was f o r

ing 2 b i l l i o n

and u s a g e .

s itu a tio n .^

in d u s try

been e s t i m a t e d

pro d u ctio n

gr ew 6 . 6 5

tons

in p r o d u c t iv e

fe rtiliz e r

c a p a b ility

It

in

has

was 4

About h a l f o f

w h ile

d is trib u tio n

the

rem ain­

fa c ilitie s .

P r o d u c t i o n and M a r k e t i n g
the

p lig h t o f

the

indus t r y :

c a p a c i t y and e x c e s s m a r k e t i n g c a p a c i t y o p e r a t i n g

w h i c h was used w i t h i n t h e U . S .
T h i s makes a t o t a l o f 5 * 0 7 3 , 7 3 5 t o n s
produced w i t h ab o u t 4 , 3 9 4 , 6 0 7 re m a in in g in N o rth A m e r ic a .
The i m p l i ­
c a t i o n i s t h a t p r o d u c t i o n c a p a b i l i t y was u t i l i z e d t o o n l y 55 p e r c e n t
w h i l e 8 6 . 6 per c e n t o f t h e t o t a l p r o d u c t io n remained w i t h i n N o r th
A m erica.
F u r t h e r m o r e , o n l y 9 5 . 1 p e r c e n t o f t o t a l p r o d u c t i o n was
u s e d ; t h e r e m a i n i n g was p r o b a b l y s t o c k p i l e d .
^The s i m i l a r f i g u r e s f o r n i t r o g e n and p h o s p h o r o u s a t t h e b e g i n ­
n i n g o f t h e p e r i o d a r e 120 p e r c e n t and 131 p e r c e n t , r e s p e c t i v e l y .
Th e p e r i o d e n d i n g f i g u r e s a r e 1 38 p e r c e n t and 148 p e r c e n t , r e s p e c ­
tiv e ly .
^ F ig u r e s 1-2 thro u g h 1 -4 a ls o in c lu d e th e growth o f t o t a l p ro ­
d u c t i v e c a p a c i t y , which is d i s t i n g u i s h e d from f e r t i l i z e r p r o d u c tio n
c a p a b ility .
The d i f f e r e n c e b e t w e e n t h e two i s t h e t o t a l p r o d u c t i o n
c a p a b i l i t y f o r a l l o t h e r uses o f t h e p r o d u c t i n q u e s t i o n .
So, p r o ­
d u c tio n c a p a c i t y is th e gross p r o d u c tio n c a p a c i t y f o r a l l purposes;
w hereas, f e r t i l i z e r p ro d u c tio n c a p a b i l i t y is t h a t p ro d u c tio n d e s ig ­
nated f o r f e r t i l i z e r purposes.

7

17.0

1 6 .0

Tons)

15.0

Nutrient

12 . 0

(Million

10.0

Nitrogen

Ni trogen
Production C ap acity

8.0

Ni trogen
F e rt i 1i zer
P r o d u c t i on
Capab i 1 i t y

9 .0

7 .0

6.0

Ni t r o g e n
F e rt i 1i zer
Usage

5 .0

0.0

966

1965

1968

1967

1 969

1970

Year

F igare

(-2 .

N itro g e n :
Production C a p a c ity , F e r t i l i z e r
P r o d u c t i o n C a p a b i l i t y and Usage ( N o r t h
Amer i c a ) .

S o u rc e :

H a rre , e t a l . .

p.

23.

8

Nutrient

Tons)

11.0
10.0
Phosphate
Production C ap acity

9 .0

8.0
Phosphate F e r t i l i z e r
P roduction C a p a b ilit y

Phosphate

(Million

7 .0

6.0
5 .0
4 .0
Phosphate F e r t i l i z e r

Usage

3 .0

0.0 1

1
1967

I
igbb

I.

iyt>9

1968

1969

1970

Year

F ig u re

f-3.

Phosphate:
P roduction
Amer i c a ) .

S o u rc e :

Production C a p a c ity , F e r t i l i z e r
C a p a b i l i t y and Usage ( N o r t h

H a rre . e t a l . .

p.

23.

9

Potash

(Million

Nutrient

Tons)

10.0
9 .0
Potash
P r o d u c t i on
C ap a ci t y

8.0
7.0

Potash
F e r t i 1i zer
Production C a p a b ilit y

6.0

3 .0
Potash F e r t i l i z e r

Usage

2.0
0.0

1966

1965

1968

967

1 969

1970

Year

Figure

1-4.

Potash:
Production C a p a c ity , F e r t i l i z e r
P r o d u c t i o n C a p a b i l i t y and Usage ( N o r t h
Ame r i ca ) .

S o u rc e :

H a rre , e t a l . .

p.

23.

to
w i t h o u t management c o n s t r a i n t

ha v e c r e a t e d

and have made us a s i c k and u n p r o f i t a b l e

cha os

in

the m arket

in d u s try ,"

place

(T u r b e r v i1l e ,

1969).
In

1970,

the

the f e r t i l i z e r
d o lla rs .

level

of

n u trien ts

in vestm en t u t i l i z e d

used

On t h e o t h e r h a n d ,

organized,

the

level

d o lla rs .^

T h is

of

to

produce and m a rk e t

in M ic h ig a n exceeded 7 5 . 4 m i l l i o n
had t h e

in d u s try

been more e f f i c i e n t l y

i n v e s t m e n t c o u l d h a v e been a b o u t 3 7 . 6

is a r e d u c t i o n o f o v e r 50 p e r c e n t .

were e a r n i n g o n l y 5 P®r c e n t on t h e i r

in vestm en t,

If

the

the

m illio n

in d u s try

re d u c tio n

in

g
cost

b r o u g h t a b o u t by t h e

d o lla rs .

T h is

in M i c h i g a n .
in d u s try.
n ific a n t

lower

is e q u iv a le n t
C le a rly ,

Furtherm ore,

to

i n v e s t m e n t w o u l d be
$4.31

per n u t r i e n t

o verin vestm en t
changes

is e v id e n t

in the

i m p l i c a t i o n s on t h e c o s t o f

level

of

1 ,8 9 m i l l i o n

ton o f

in

the

consumption

fe rtiliz e r

investm ent

su p p lyin g f e r t i l i z e r

ha v e s i g ­
to

the

M ichigan fa rm e r s .
For th r e e
total

assets

1965,

the

m illio n

consecutive y e ars

in th e f e r t i l i z e r

in d u s try

d o lla rs

in th e

and n e t

in the

6 0 's,

the

retu rn s

i n d u s t r y were below 2 per c e n t .

U n ited

S t a t e s had t o t a l

income a f t e r

This correspo nds to a 0 .7 9 2

la te

per cent

^See A p p e n d i x A , T a b l e A - 3 2 ,
tiv e ly .

assets o f

taxes o f 9 .1 5 4 m i l l i o n
r e t u r n on

1970 A c t u a l

in vestm en t,

and Op tim um ,

to
In

1,156
d o lla rs .
if

to tal

respec­

^ R e t u r n on i n v e s t m e n t i s g e n e r a l l y n o t c o n s i d e r e d t o be a c o s t .
H ow e v e r, i f management p r i c e s h i s f i r m ' s p r o d u c t such t h a t i t r e f l e c t s
a p o s i t i v e r e t u r n on i n v e s t m e n t , t h e d i f f e r e n c e i n p r i c e f r o m t h a t
c o r r e s p o n d i n g t o a z e r o r e t u r n on i n v e s t m e n t i s a c o s t i n c u r r e d by
the p u r c h a s e r o f th e p r o d u c t .
T h u s , r e t u r n on i n v e s t m e n t c a n be
thought o f as a c o s t t o th e p u r c h a s e r .

11

assets

are

d u s trie s

c o n s i d e r e d as

co m bi n ed had a 6 . 1 3

(In te rn a l

Rev enu e S e r v i c e ,

had s u b s t a n t i a l
A ss e ts were

gains

up 21

l*+7 p e r c e n t

about a

1.612

per cen t

fa c tu r e r s ob tained

Net

The

d o lla rs ,

A lthough

to tal

(5-11

presents

w h ile

to tal

than

p a p e r w o u ld
the

c a llin g

the

fe rtiliz e r

in d u s try

1-2 g iv e s

q u ite

the

(a s se ts ),

(In te rn a l

c om p a n ie s

increased
1965

to

w h ile

be a s s o c i a t e d w i t h

in d u stry

to

manu­

in ve s to rs .

s lu m pe d t o

5.123
d o lla rs .
in n e t

per c e n t.

n e a rly

the
a

low est

15 f o l d

r e t u r n s on

in ­

t h e abo v e d i s c u s s i o n and
prime commercial

paper.

i n v e s t m e n t , on t h e

Furtherm ore,

prim e

commercial

a much l o w e r r i s k .

has been r e c e i v i n g

very

low r e t u r n s

One can a p p r e c i a t e T u r b e r v i 1 l e 1s s t a t e m e n t ,
fe rtiliz e r

a ll

re c e iv in g

a ttain e d

p a p e r has been a more p r o f i t a b l e
in d u stry.

in ­

Revenue S e r v i c e ,

0.3**7

i n d u s t r y on a b a s i s o f

comparison w i t h

w h ile

the decrease

to drop t o

three y e a rs ,

income

1,** 76 m i l l i o n

le v e l,

combined,

w h ile

taxes.

These changes b ro u g h t

d isco u rag in g

a summary o f

the f e r t i l i z e r

income a f t e r

d o lla rs ,

d o lla rs .

retu rn

investm ent

the

the

a s s e t s and n e t

assets

fe rtiliz e r

g e n e ra lly

fe rtiliz e r

vestm ent.

of

in te re s tin g

1966,

fe rtiliz e r

m anufacturers

per c e n t)

Prime com m ercial
average,

a ll

r e t u r n on

a ll

Table
an

1967 a r e

in ­

(assets)

investm ent

per cent

fo r

advantage ov er the
vestm ent.

on

m anufacturing

in vestm en t

1 ,**02 m i l l i o n

a s s e ts were above

same y e a r ,

retu rn

to

taxes

income c a u s e d t h e
That

to tal

retu rn

fo r

In

a ll

r e t u r n on

22.603 m i l l i o n

a 6 .2 6

fig u re s

income a f t e r

m illio n

in bo th

to

M eanw hile,

P®r c e n t

1965).

per cent

creased

1966).

in vestm en t.

c ite d

C le a rly ,
on

in ­

e a rlie r,

i n d u s t r y " s i c k a nd u n p r o f i t a b l e . " 9

9|Jnfo r t u n a t e l y , more r e c e n t d a t a on i n v e s t m e n t r e t u r n s in t h e
in d u stry are u n a v a ila b le .
S o u r c e s i n t h e i n d u s t r y c l a i m t h a t 1 968
and 1969 w e r e t h e w o r s t i n v e s t m e n t y e a r s f o r f e r t i l i z e r a > m p a n i e s .

12

Table

1-2.

Year

Comparison o f s e l e c t e d
(p e r c e n t , annual)

F e rtiliz e r

a

A ll

Sources:

aA f t e r

**.38
5 .55
5 .1 0

1970,

o v e r 6*f5 t h o u s a n d m a n - h o u r s o f
in d u stry

t o m eet M i c h i g a n ' s

in d u s trie s

averaged

$3.36

F ive years e a r l i e r ,

t h e a v e r a g e h o u r l y wage

g ro u p .**

in crease

in

The $ 0 . 7 5

cent.

In a d d i t i o n ,

technology,

the

1966;

1967;

and U . S .

taxes.

the m a n u fa c tu rin g

stant

Prime
^
C o m m e r c ia l Pa pe r

a

6.131
6 .2 5 9
5 .1 1 0

I n t e r n a l Rev en ue S e r v i c e , 1 9 6 5 ;
Government, F e b r u a r y , 1971.

fe rtiliz e r

30 per

1965-7

taxes.

^Before

In

investm ent

M an u factu rin g

0.7 9 2
1.612
0.3^ 7

1965
1966
1967

the

In d u stry

r e t u r n s on

cost o f

under o p tim a l

in d ic a te

fe rtiliz e r
c o n d itio n s ,

IfOO t h o u s a n d m a n - h o u r s ,

12

in

th is
an

the

rate

$ 0 .75

consum ption,*0
per hour

fo r

th is
ne a rly

a s s u m i n g con­

i n c r e a s e o f o v e r *f80 t h o u s a n d d o l l a r s

where

lab o r

$ 0 .7 5

farm ers

u tiliz a tio n

ch an ge

in

drops

1970.
to

i n t h e wage r a t e

Even

less

than

am ounts

* °See A ppendix A , T a b le A -3 2 .

of

in

same y e a r .

a ju m p o f

in cre a s e w o uld ,

in

Workers

in th e

r a t e was $ 2 . 6 1

represents

going t o M ic h ig a n

the

la b o r were expended

* * "E mp lo y m e nt and E a r n i n g s , "
L a b o r S t a t i s t i c s , V o l . 1 7 , No.
* ^See A p p e n d i x A , T a b l e A - 3 2 .

U .S . D ep a rtm e n t o f L a b o r, Bureau
I I , May 1 9 7 1 , T a b l e C - l , p . 8 9 .

13
to

n e a r l y 300 thousand d o l l a r s .

i m p l y a need t o a n a l y z e
n o logies
ic a lly

to determ ine

if

various

s h ifts

in

th e s e m agnitudes

p r o d u c t i o n and p r o c e s s i n g
the

lab o r

tech­

i n p u t w o u l d be econom­

desi r a b l e .

A lthough
recent
In

the

C ost changes o f

past,

1965,

tiliz e r

the
the

retu rn s

on

i n v e s t m e n t ha v e been v e r y

s itu a tio n w ith

respect

to

lab o r

t h e v a l u e a dd e d p e r m a n - h o u r e x p e n d e d
in

the U .S .

was $ 1 1 . 7 5 ;

f i g u r e was $ 1 0 . 2 8 .
added p e r m a n - h o u r

T h e s e com pare q u i t e
in

1965

$ 1 0 . 3 3 added p a r m a n - h o u r
1967

(Table

I - 3) .

Table

1-3.

Value

f o r m ixing

in a l l
in a l l

Source;

fa v o rab ly w ith

a d de d p e r m a n - h o u r f o r

in

the

d iffe re n t.

in m a n u fa c tu rin g

m anufacturing

F e r t i l i z e r m an u fa c tu rin g
F e r t i l i z e r , m ixing o n ly
A l l m a n u fa c tu rin g , U .S.
A ll m a n u fa c tu rin g , M ichigan

is q u it e

fe rtiliz e r

m anufacturing

po o r

in

o n ly ,

the

the

$ 8 .5 4

the U .S .

and t h e

in M ic h ig a n d u r in g

sele c te d

in d u s trie s

1 9 6 5 “ 67

1965

1966

1967

$11.75
1 0 .28
8 .5 4
NA

$12.43
11.07
8 .9 3
NA

$13.49
10.97
9.41
10.33

Cens us o f M a n u f a c t u r e r s ,

fe r­

1967.

a Not a v a i 1a b l e .

In

1966,

iz e rs

t h e v a l u e a dd ed p e r m a n - h o u r

r o s e by n e a r l y 6

fe rtiliz e r
tu rin g

per cent

to

sponding f i g u r e s

in creased o n ly 4 .5

fo r

M ichigan

are

the m an u factu rin g o f

$12.43.

r o s e more t h a n 7 p e r c e n t

in the U .S .

in

to

The f i g u r e

$11.07, w h ile

per

cent

u n av a ilab le

to
fo r

fe rtil­

f o r m ixing
a ll

$ 8 .9 3 .
19&5 and

manufac­
The c o r r e ­
1966.

In

1967,

the v a lu e

a dd ed p e r m a n - h o u r

increased over 8 .5
decreased

to

in crease a t
Labor,

$10.97

the

per m an-hour.

n e a rly a constant

produced

same p e r i o d

low.

At

same t i m e ,

A ll

ra te

It

resp ectable

a p p e a r s as t h o u g h t h e

u tiliz in g

la b o r,

but

m ix in g f e r t i l i z e r

m a n u fa c tu rin g continued

in

the

fe rtiliz e r

v a l u e a dd ed d a t a ,

in which r e t u r n s

on

fe rtiliz e rs

to

to a th re e y e a r high o f $ 9 .^ 1 ,

a l t h o u g h n o t used e x t e n s i v e l y

c e rta in ly
the

per c e n t.

in m a n u f a c t u r i n g

in d u stry,

has

e s p e c ia lly d u rin g

i n v e s t m e n t h a v e been d i s m a l l y

fe rtiliz e r

in d u s try

is

e ffic ie n tly

in vestm en t d e c is io n s

have n o t

proved

t o be v e r y

prof i ta b le .
Before d e lin e a t in g
and b a c k g r o u n d o f

it

the o b j e c t i v e s

of th is

study,

the p e r s p e c t iv e

ne e d s t o be o u t l i n e d .

The B a c k g r o u n d

T h is

study

in M ic h ig a n .
model

of

the

a c tiv itie s

is

part of a la rg e r

fe rtiliz e r

in d u stry w ith

c o n tain s

in d u s try .

model

The e n t i r e

storage,

Each o f

the

in a m a t r i x )

process

in d u stry

c r e a t e a systems

p a r t i c u l a r e m p h a s i s on

about 30 d i f f e r e n t

fe rtiliz e r

or

fe rtiliz e r

its

in M ic h ig a n .

represents a s p e c ific

(columns

the

A b u i l d i n g - b l o c k a p p r o a c h was used t o

T h e model

fram ework.

study o f

represented

that

are

by t h e

is

p e rtin e n t
"b lo c k ."

"b lo c k ."

in a

lin e a r

a c o lle c tio n
to

the

of

segment o f
pr og ra m m in g

a c tiv itie s

p a rtic u la r

M a n u fa c tu rin g ,

and d i s t r i b u t i o n

a ty p ic a l

each o f w hich

product or processing

fo rm u la te d

"blocks"

tra n s p o rta tio n ,

con tain ed w ith in

is

"b lo c k s ,"

product

re ta ilin g ,

a r e among t h e a c t i v i t i e s

the

15
Th e " b l o c k s 11 a r e
s tra in ts

(rows

in

and c o n t r o l s .

a ll

tie d

the m a tr ix )

For exam ple,

together w ith
re p res e n tin g

each

m arketed,
c a p ita l,
by t h e

the

In a d d i t i o n ,

and r a w m a t e r i a l s )

controls

or

rows

Th e "d e m a n d " f o r

stra in e d

m inim ize
a ll

the

the t o t a l

fo r

to

For

represented

basic

in t h i s

M oreover,

W ith the

the

included

fa c ilitie s

model

n itro g en ,

the U n ite d

States

In a d d i t i o n

are

a ll

of

la b o r,

th is

i s done

is

ap p ro p riate

con­

le v e ls of

req u ired

to

subject

to

it

be ­

in M ic h ig a n .

re g io n al

phosphate,

is

c o n tro ls,

in d u stry

are

separate

The model

pro d u ctio n

fa c il­

and p o t a s s i u m

a n h y d r o u s ammonia a l o n g

nitrogenous

fe rtiliz e rs

s im u la t e d as o r i g i n a t i n g

assumed t o f l o w

in g e n e r a l ,
to

(such as

at

the

in F l o r i d a

and

th e m odel.

in Saskatechewan,

is

to

tran sp o rted ,

the f e r t i l i z e r ,

the m anufacture o f

in

a c tiv itie s

re sp ec tiv e

t h e model

fe rtiliz e r

sim u la tio n

in s ta n c e ,

fe rtiliz e r

by t h r e e

n u trie n ts .

cost o f "su pplying"

potassium prod ucts

w e ll

is

rows t o " s u p p l y " t h e i r

farm s.

Phosphate m a t e r i a l s

itie s

be a c t i v a t e d ;

p r o d u c tio n o f m a jo r forms o f

G u lf Coast a re

these

th ree

s im u late

re la tio n s h ip s

stored,

in p u ts

con­

the m a trix .

the m anufacture o f

products.
the

the

necessary

need t o

imposed c o n s t r a i n t s .

In clu d ed

w ith

in

the

fe rtiliz e r

three

to M ichig an

comes p o s s i b l e

itie s

each o f

by t h e s e

n u trien ts

the a p p r o p r ia te

f e r t i l i z e r was m a n u f a c t u r e d ,

etc.

r o w s , one f o r

te c h n ic a l

ton o f a p a r t i c u l a r

a p p l i e d on t h e f a r m must a c t i v a t e
in su re t h a t

the a p p ro p ria te

in to

as w e ll

the th re e

and t h e m a n u f a c t u r e o f

Canada.

reg io n al

as

The p r o d u c t o u t p u t o f

the d i s t r i b u t i o n
fo r M ich ig an .

lo c a tio n s ,

g ra n u latio n

n i t r o g e n and p h o s p h a t e

as t e r m i n a t i n g o p e r a t io n s

are

system f o r

s im u la te d

fa c il­

fe rtiliz e rs

in t h e M id w e s t.

as

The

16

M idwest
that

fa c ilitie s

i n c l u d e d as a means o f

s e rv e th e M idwest

tio n o f

fe rtiliz e rs

C entral
c o n d itio n s
use.

of

in g e n e ra l

fa c ilitie s

in v a r io u s

fa c ilitie s

farm er d i r e c t l y .
and 771

ou tstate

and r e t a i l i n g

In t o t a l ,

c o n s tra in ts

An e x a m p l e w i l l

h elp

can

d ire c tly

from M ic h ig a n m a n u f a c t u r e r s ,

its

p ro d u ctio n .

in p u t

su p p lie rs are a l l

the

a s a te llite

the

numerous a l t e r n a t i v e
cesses

th at

It

to

fin a l

lo c a tio n s

are a l l

fu n ctio n s

fo r
the

the

s m alle r-

that ty p ic a lly

co n tain s

serve

2,65** a c t i v i t i e s

understanding o f

bu lk b le n d e r

from a te rm in a l

fro m a Midwest
lo c a te d

in

the

term inal
three

product

warehouse o r d i r e c t l y

to

the

The model

in dustry

arrangem ents o f

or

reg io n s o f
p o te n tia l

t r a n s p o r t a t i o n modes t h a t

as

it

in b u lk o r

fa rm v i a

not on ly
e x is ts

fa c ilitie s

are

in q u e s t i o n .

p r o d u c t can be t r a n s p o r t e d

fe rtiliz e r

in

in M i c h i g a n ,

b u l k b l e n d e r and h i s

the p a r t i c u l a r

modes.

the

an y o f

in clu d es

today,

bags

the

but a ls o

and t e c h n i c a l

pro­

c o u l d be e c o n o m i c a l l y d e s i r a b l e .

can be seen t h a t

c o u l d be q u i t e

fle x ib le .

p r o b l e m s can be a n a l y z e d .
n u trien t

in p r o x im ity

the p o s s ib le

tran s p o rta tio n

org an izatio n o f

perform ed

input m a te r ia ls

of

a p p ro p riate

p o te n tia l

re fle c t

Between th e M ic h ig a n

From t h e b u l k b l e n d e r ,
to e it h e r

to

A central ly -lo c a te d

o r from m a n u fa c tu re rs

basic

in o r d e r

to give a b e t t e r

M ichigan

p o te n tia lly

d is trib u ­

(row s).

te c h n iq u e em ployed.
receive

included

t h e model

modeling

m anufacturers,

im po rtan t to the

are a ls o

la r g e -s c a le o p eratio n s

F a c ilitie s

(columns)

and a r e

s im u la tin g a c t i v i t i e s

in M ic h ig a n .

M ichigan

scale m ixin g
the

are

ra tio

of

t h e model
W ith in

c o n t a i n s many a l t e r n a t i v e s

the

f r a m e w o r k o f t h e m o d e l , many

For example,

fe rtiliz e r

and

use and t h e

the

im pacts o f s h i f t s

consequences o f

using

in

the

sub-

17
optim al
and

products

can be d e t e r m i n e d ;

im p lic a tio n s o f

various

fe rtiliz e r

s u l f u r o x id e em issions
m a te ria ls

W ith a g e n e ra l
the a n a l y t i c a l

a lte rn a tiv e ly ,

m odel,

le t's

th a t are

can a l s o be a n a l y z e d .

understanding o f
exam ine

^he c o n s e q u e n c e s
converted

to

I3

t h e c o n t e n t a nd s t r u c t u r e
the o b je c tiv e s

of

th is

of

study.

O b j e c t i ves

The o b j e c t i v e
optimum ( f r o m
fr o m t h e
to tal

the

current

cost)

in

to determ ine

to

three

the M ichigan

D eterm ine

the

in

A scertain

farm er.

the

t h e wage

of

the

in d u stry

path

r u n op tim um (minimum

a tte n tio n w ill

be

cost product m ix,

the

and t h e d i s t r i b u t i o n

l o n g and s h o r t

to changes,

in d u s try

o rg an izatio n s.

cha ng e s

in

the

run o p t i m a l

e s p e c ia lly

ha v e on t h e s h o r t a n d

tra n s itio n

w ith

respect

to

r e q u i r e d e a c h y e a r and t h e

rate

of

in ­

retu rn

on

l o n g run o p tim um

t h e amount o f
p o ten tial

of

in c lu d e :

ra te .

c a p ita l

in ve s tm en t

tra n s itio n

More s p e c i f i c o b j e c t i v e s

s e n s itiv ity

to what e x t e n t

the

le a s t

b a s ic n u tr ie n ts ,

in vested

A n alyze

to a long

the

and a n a l y z e an

cost)

P a rtic u la r

the o r g a n i z a t i o n ,
the

creases,

3.

is

in d u s try o r g a n iz a tio n

o rg a n izatio n s o f

2.

study

s t a n d p o i n t o f minimum t o t a l

cost o f s u p p ly in g

1.

th is

in d u s try o r g a n iz a tio n .

given to s h i f t s

fe rtiliz e r

of

new

red u ctio n

13The se two p r o b l e m a r e a s a r e b e i n g a n a l y z e d by D e n n i s R.
Hen der son a nd D a v i d M. B e l l , r e s p e c t i v e l y .
T h e i r f i n d i n g s and t h e
f i n d i n g s o f t h i s s t u d y w i l l be c om bin ed i n a r e p o r t t h a t d i s c u s s e s
the in d u s tr y in g r e a t e r d e t a i l .

13

in th e

to ta l

cost o f

l e v e l s o f N,

s u p p ly in g M ichigan

Pj Oj *

use<* i n

fanners w ith

the

1970.

Review o f L i t e r a t u r e

Th e

lite ra tu re

cussion o f

d iffe re n t

making c a p i t a l
w idespread
ments

of c a p ita l

rates o f

I9 6 0 ).

t i c a t e d " measures o f
retu rn

and n e t

retu rn

m easures,

take

cash

retu rn ,

retu rn ,

tic a te d

re a lize d .

I n an
technology,

in d u s try

re fle c t

fo r a d d itio n al

as a means f o r

valu e

that

has e x p e r i e n c e d
fe rtiliz e r

im m ediate y e a rs

rate

W ith

o f an

la te r

the

of

these

investm ent

in

its

life .

p o s s ib ilitie s

c a sh

flo w s

before

of
the

on t h e

sophis­

im proving c a p i t a l

in ve s t­

c o n s id e ra b le

in d u s try ,

such t h a t

these

Heavy w e ig h t s
in vestm en ts

as q u i c k as p o s s i b l e m i g h t be s e l e c t e d .
fu tu re

sim ple

195*0.

such as t h e

a p ro je c tio n o f

of

those measures o f

life

th a t occur

m e a s u r e s m i g h t be v e r y a p p r o p r i a t e .
on t h e most

to

Dean has f o c u s e d a t t e n t i o n

retu rn

(D ean,

those

used t o

c a sh f l o w s

measures o f

ment d e c i s i o n s

than
is

and

t h e t i m e v a l u e o f money.
the

rate

used a s " u n s o p h i s t i ­

such as p a y o u t p e r i o d

in

in v e s t­

th a t "so p h is-

c a sh f l o w

n o t as w i d e l y

in

in d ic a te s

p ro sp ective

in d ic a te s

here

u sefuln ess

by M i l l e r

in e v a lu a t in g

th a t occur e a rly

procedure

re in v e s tin g e a rly
l a t e r on es a r e

are

c o n s id e ra b le d i s ­

and t h e i r

A survey

is a term a p p lie d

a r e w e i g h t e d more h e a v i l y
T h is w e ig h tin g

retu rn

such a s d i s c o u n t e d

in to account

flo w s

con tain s

The same s u r v e y a l s o

S o p h is tic a te d
th at

retu rn

present v a lu e ,

c a t e d 11 m e a s u r e s o f
re tu rn .

rates o f

investm ent d e c is io n s .

use o f

(M ille r,

types o f

budgeting

in d u stry o rg a n iz a tio n

change

in

s o p h is tic a te d
c o u l d be p l a c e d
that

retu rn ed

th e ir

On t h e o t h e r h a n d ,
c a n be u t i l i z e d ,

if

in v e s t-

19
merits w i t h

s l o w e r p a y - b a c k m i g h t be p r e f e r r e d

the f u t u r e

in d u s try o r g a n iz a t io n ,

were not p a r t o f
short

liv e d

ad ju sted

the

long

in vestm en t,

ra tes

of

run o p t i m a l

the

ad ju sted

between

p ip e lin e

O n l y when t h e

y e a r s o r more.
the

fa c ilitie s ,

On t h e o t h e r

life

of

same r e s u l t s

which

s p r e a d e r w h i c h has an e x p e c t e d

life

fo r

to e v a lu a te

an

in vestm en t,

to ,

of

life

there

a divergence o f a c q u is it io n

is

more

may become " f i x e d . "

im p o rta n tly,

tween

its

value

product o f

the

a c q u is itio n

value o f
and

say,

cost

t o p u r c h a s e more o f

than

t h e amount f o r w h i c h

p ro fita b le
is

amount o f

m arginal
greater

than

asset

is

less

value

(revenue)

of

than the m a rg in a l

asset"

at

its

rate

life

of

use

is ,

is

the

if

it

the a s s e t

product o f
s e llin g

20
approx­

use

than

to

Thus,

from th e

it

is

and

be­

t h e most
a ll,

th at

p ric e )

the
is

S im u ltan e o u s ly ,

the a s se t
in

would

greater

fact

(a c q u is itio n

asset

is

be used a t

the a s s e t.

the

(p ric e s )

same t i m e ,

is

retu rn

the m arg inal

less

one u n i t o f

value o f

of

i s on e f o r w h i c h

current

That

T h is a ris e s

more o f

The t im e

any a p p r e c i a b l e

c o u l d be s o l d .

to use,

on h a n d .

the m arginal
value

current

asset and,

long

a b u lk f e r t i l i z e r

sim ple

in

v alu es.

its

is q u i t e

in v e s tm e n ts as

and s a l v a g e v a l u e s

the as se t

the as se t

cost o f o b ta in in g

th e m arginal
p ric e )

the

the

t h e amount c u r r e n t l y

in

rates

perhaps 5 y e a r s .

A "fix e d

salvage

the a s s e t

such

most a s s e t s w i t h

expected

the

two m eth ods wo ul d y i e l d

R egardless o f w hether tim e a d ju s te d o r
used

For a

two m e th o d s .

h a v e an e x p e c t e d

the

when a p p l i e d

since

the a s s e t

between th e

hand,

in vestm en ts

s i m p l e and t i m e

im po rtance,

p r o c e s s w o u l d be v e r y a p p r o p r i a t e

in te r-s ta te

im ately

q u i c k pay b a c k

little

t h e r e an a p p r e c i a b l e d i f f e r e n c e

th e y were a p a r t o f

in d u stry o rg a n iz a tio n .

d iffe re n c e

r e t u r n may be o f

w o u l d be n e a r l y e q u a l .
is

and t h e

if

its

(salvag e

current

use.

20

Edwards has d e l i n e a t e d
under c o n d itio n s o f
(Edwards,

1958).

fix e d

a set o f

ru le s

a s s e t s when c r e d i t

fo r a c q u is itio n

the be st co m b in atio n o f

fix e d

d ivergent a c q u is itio n

to dem onstrate

cognizance o f

m a r k e t can h a v e a s u b s t a n t i a l
p ro fits

In C h a p t e r
fo r e x is tin g

IV o f

fa c ilitie s ,

dustry o rg a n iz a tio n
tra n s itio n ,

study,

t o a lo ng

fa c ilitie s

v a ria b le

less

than

fa c to rs ,

to o f f -

to determ ine

lin e a r

program­

co s ts and s a lv a g e v a lu e s

two v a l u e s

in

the

on t h e o r g a n i z a t i o n

zero

the

fac to r
of a c tiv itie s

salvage v a lu e s w i l l

tra n s itio n

run o p t i m a l

w ill

c o s t s and e x i s t i n g

lim ite d

1955).

during

new f a c i l i t i e s

costs a re

e ffec t

(S m ith ,

th is

these

are

re la tiv e

S m it h used a

m in g f r a m e w o r k w i t h
th a t

costs,

and s a l v a g e

fa c to rs .

adjustm ents

fa c ilitie s

He used o n - f a r m o p p o r t u n i t y

farm o p p o r t u n i t i e s

and t h e f l o w o f

fo r optim al

from

w ill
the

be u t i l i z e d

to ta l

the c u rre n t

o rg an izatio n .

be " p u r c h a s e d " a t

if

in ­

D uring t h i s

th e ir

on ly

be assumed

a c q u is itio n
th e ir

to tal

c o s t o f new f a c i l i t i e s .

The R e s e a r c h A p p r o a c h

Three b a s ic
assum ptions.
to a ll
P^Oj,

These

three

1970 and w e r e

is

supply

represent

were o b ta in e d w i t h

s o lu tio n s

s o lu tio n s

and K^O t o

s tra in ts

s o lu tio n s

s u m m a r iz e d

to th e M ic h ig an farm s.

H*0,650

use o f
and

n u trie n ts

1 5 5 ,^ 1

under v a r y i n g

in A p p e n d i x A .

the assum ption concerning

the a c tu a l

l*+l , 9 3 2 ,

are

t h e model

the

These

Common

le v e ls

o f N,

"d emand" c on­

in M ic h i g a n d u rin g

to n s o f N,

P2 ° 5 ' and K2 0 ,

resp ecti v e ly .
The f i r s t
t h e mode]

s o lu tio n ,

to d u p l i c a t e ,

processing,

and u s e o f

"1970 A c t u a l ,"
as c lo s e

fe rtiliz e r

was made w h i l e

as p o s s i b l e ,
th at

co n strain in g

the a c tu a l

tran s p ire d

to

p rod uction,

s e r v ic e M ichigan

21

farm ers'
fin in g ,

demand i n
t h e model

1970.

was s t i l l

tio n

modes fr o m t h o s e

that

it

represents

fe rtiliz e r

W hile

these

free

th at e x is t.

the a c t i v i t i e s

in d u stry

during

re s tric tio n s

t o choose t h e
T h is

le a s t

s o lu tio n

in vo lv e d

became v e r y

is

cost

c on­

tran sporta­

a b e nc hm a rk

and c o s t s

in cu rred

1970 w h i l e m e e t i n g M i c h i g a n ' s

in

in

the

demands f o r

Pi a n t n u t r i e n t s .
Very
the

rig id

c o n tro ls

1970 A c tu a l

(c o n s tra in ts )

s o l u t i o n w o u ld

i n M i c h i g a n as a c c u r a t e l y
m odel.

N early a l l

to o p era te
in v o lv e d
the

at

as p o s s i b l e ,

le v e ls .

the t r a n s p o r t a t io n
of

by t h e

le v e ls

ria l
and

re la tiv e
p le ,

to

s ta n d p o in t,

in n u t r i t i v e
im p lie s

m a te ria l

t o NH3 .

the

scheduled

d a ta precluded

tran s p o rta tio n
1 9 70 A c t u a l

content.

o r w ater

in

Th e

a c tiv itie s .

so lu tio n

is

a n h y d r o u s ammonia w o u l d
h an d lin g

8 2 .2

low n u t r i t i v e

tons o f
the

products o f h ig h e r n u t r i t i v e

f o r each

per cent

t o n s o f a qu e o u s ammonia w e r e used f o r
in over

the

were

in d u s try

t h a t was a l l o w e d

i n e r t m ate­

cases o f d ry

content.

a qu e o u s ammonia as a s o u r c e o f d i r e c t

ammonia c o n t a i n s

s u lte d

t h e model

in s u ffic ie n t
fo r

th at

w o u l d h a v e t o be p r o c e s s e d and t r a n s p o r t e d

b e c a u s e a qu eou s ammonia c o n t a i n s o n l y
drous

fram ework o f

th a t a d d itio n a l

lim e s to n e f i l l e r

s u b s titu te

in ste a d o f

a d d itio n a l

in

the

in su re

fe rtiliz e r

The o n l y o p t i m i z i n g

of o p e ra tio n

mixed f e r t i l i z e r s )

t h e use o f

n itro g en

low

products

(u s u a lly e it h e r
liq u id

given

current

to

p r o d u c t i o n and p r o c e s s i n g o f numerous p r o d u c t s ,

some o f w h i c h a r e v e r y
c o n te n t o f these

the

a c tiv itie s ;

From an o r g a n i z a t i o n a l
c h a ra c te rize d

sim u late

p r o d u c t s and p r o c e s s e s

p rescrib e d

s p e c ific a tio n

w e r e e m p lo y e d

1 1 ,000 a d d it io n a l

ton o f

re s u lt

in

n itro g e n .

F o r exam ­

a p p lic a tio n
2,91

tons o f

Th is occurs

2 * t , 2 p e r c e n t N; w h e r e a s ,
N,

In

d ire c t

1970,

f o r exam ple,

a p p lic a tio n ,

tons o f m a te r ia l

which

h a n d lin g ,

anhy­
3.897
re­

compared

22

Th is

ad d itio n al

n o t be p a r t i a l l y
lo w er c o s t*
of

It

n u trien t

is

product h a n d lin g

o ffset

by t h e

depends

are

a v a ila b le

re a d ily

low n u t r i t i v e

the

From an a g r o n o m i c s t a n d p o i n t ,
of

h a n d lin g
there

is

com parable n u t r i t i v e

that

tonnage o f

ta b le

to

the

to

the

In

the

in p a r t i c u l a r ,
w hich

th a t

lim estone

the

products
the

fille r

s e llin g

the

cost

and t r a n s p o r t a t i o n
v irtu a lly

at a

per

assuming t h e

u n it

costs a re .

no d i f f e r e n c e

the average a n a ly s is

s o lu tio n s .

It

can be

same a p p e n d i x t h a t

1 9 70 A c t u a l

the high a n a ly s is

and may o r may

among

n u trien ts

p lan t.

three

and T a b l e A - 1 o f

p r o d u c t used

c o s tly
product

content,

T a b le A -3 2 o f A ppendix A l i s t s
m a te ria l

very

t o a l a r g e e x t e n t on w h a t

and on w h a t

fe rtiliz e rs

is

and t o t a l

In ferre d
the

low a n a l y s i s

s o lu t io n were e c o n o m ic a lly

used

in the

1 9 70 A c t u a l
was us ed

from

in fe rio r

o t h e r tw o s o l u t i o n s .

s o l u t i o n was t h e o n l y one

in d r y mixed p ro d u c ts

N ote,
in

(A ppendix A,

Table A - 3 2 ) .
From t h e
tio n ,

the

s p e c ific

1970 A c t u a l
products

represents
which
real

stan d p o in t o f

the

in d u s try .

(or

good;

the tr u e

on t h e

There a r e ,

in d u s try o rg a n iz a ­

basis o f

te ch n o lo g ies,

t h e m o d e l)

p ro d u ctio n o f

t h e model

however,

very

c lo s e ly

some p o i n t s on

do es n o t a c c u r a t e l y

represent

the

in d u stry.
T h e most n o t a b l e o f

ual

q u ite

by p a r t i c u l a r

tru e

1 9 70 A c t u a l

is

re p res e n tin g

firm s .

Like

n e a rly a l l

model

lacks

firm s

in to a sin g le or

re la te d

to

represent

these

re alis m

due t o

real

cost

curves.

is

that of

s im u la t i o n m odels,
the

small

the a g g re g a tio n

po in ts

rep resen tin g

the

fe rtiliz e r

necessary a g g re g a tio n o f

number o f

problem ,

is

in a b ility

i n any s i m u l a t i o n model

of

in d u stry

in d iv id u a l

" t y p i c a l 11 f i r m s .
the

in d iv id ­

C lo s e ly
t h e model

that

in vo lv e s

to

23
a g g r e g a t i o n o f e c o n o m ic u n i t s ,

th e cost curve o f

approxim ates

aggregated u n it s

the e f f e c t o f

the a g g r e g a te

cost

curve

is

o n l y an a p p r o x i m a t i o n o f
lin e a r

lin e a r,

lin e a r

curve;

p r o g ra m m in g assumes a c o n s t a n t m a r g i n a l
im plying a l i n e a r

cost o f

1 9 70 A c t u a l

farm ers.
c a p ita l

is

M oreover,
b u ilt

in to

1970 A c t u a l

the

it;

in

1970.

pri or

to

its

checking

an a p p r o x i m a t i o n o f

In d u s try

in clu s io n

tio n .

the

in

t h e m odel

o rg a n izatio n

o th e r words,
current

th is

the

v a lid a te d

and e n d l e s s
and t h e

c o n s tra in ts
is

That

imposed d u r i n g

to
is ,

every

is

the

the

schedule
spent
In a d d i t i o n ,

re s u lt

of

1970 A c t u a l

fe rtiliz e r

in c u rrin g
answer t o
in dustry

any
the

in d u s try

solu­

w ill

1970

q u estio n :

be o r g a n i z e d

le v e ls

be a n a l y z e d

in essence,

the

could

new i n v e s t m e n t .

its

is ,

ex­

s h ift

s u p p ly in g M ichigan w it h

Th e " O p ti m u m " s o l u t i o n

it

the

the

s o lu tio n

th e m odel,

lo g ic e r r o r s .

the c o s t o f

Th is

in v e s te d

op tim al

the

how s h o u l d

cost

hours were

how t r a n s p o r t e d ,

P2°5 * ant* ^ 2 ^ "

by

be l o o k e d upon a s a s h o r t - r u n

today w i t h o u t
is

of

in d u s try as

how and w h e r e p r o c e s s e d and s t o r e d ,

N,

to ta l

probably d id

in cluded data.

" C o n s tr a in e d O ptim um ,"

so lu tio n

fa c ilitie s ,

r e t u r n on

lim ita tio n s

w e r e made t o e l i m i n a t e

C o n s t r a i n e d Optimum

th is

the

expenditu res

in d u s try

s h o r t - c o m i n g s and

t h e model

tria ls

industry o rg a n iz a tio n .

f o r each a c t i v i t y ,

to ta l

per c e n t

in th e

p a rtic ip a n ts

the accuracy o f

some o f

cost

the

allo w

more s p e c i f i c a l l y ,

C onsequently,

close a p p ro x im a tio n o f

Th e se co nd s o l u t i o n ,
re la x in g

firm s

U nless

high.

preceeding

numerous v a l i d a t i o n

has a 7 ,5

whereas,

th at

is a v e ry

is te d

cost curve.

1970 A c t u a l

not o b t a i n a r e t u r n
D esp ite

to tal

cost curves.

p r o g r a m m in g t e c h n i q u e s

the ag gregate cost

thereby

to

the

the ag gregate o n ly

In

"G iven
(what

e tc .)

products,

to m inim ize

o f consumption o f
in the n e x t c h a p t e r .

C onstrained

Optimum

24

problem ,

except

that

t i e s was r e m o v e d .
optim al
s e le c t

Optimum c a n ,

o rg an izatio n

of

those a c t i v i t i e s

not the

fa c ilitie s

a s how t h e
o b je c tiv e

and a l l

in v e s tig a te

then,

in d u s try ,

T h is

fa c ilitie s

to

three

since
cost

s o lu tio n
if

the

t h e model

is

lo n g -ru n

is

reg ard less

fa c ili­

allo w ed

to

o f whether or

perhaps b es t

in te rp re te d

minimum c o s t w e r e

the

had t o be p u r c h a s e d .

s o lu tio n s

s e n s itiv ity

o f e x is tin g

be r e g a r d e d a s

t h a t m inim ize

e x is t.

these

the

respect

tra n s itio n

the

re s tric tio n

i n d u s t r y w o u ld be o r g a n i z e d

U tiliz in g

w ith

the q u a l i f y i n g

or

t h e wage r a t e

as a b a c k g ro u n d ,

s ta b ility
and

of

r e t u r n on

f r o m C o n s t r a i n e d Optimum w i l l

the

th is

la tte r

study w i l l

tw o s o l u t i o n s

in vestm en t.

Then,

a

be made t o Optimum u n d e r

v a rio u s assum ptions.
L a b o r was d e l i n e a t e d
Those a c t i v i t i e s ,
than

ing
cost

f o r which

10 p e r c e n t o f t h e

had t h e
it

lab o r

cost

in

lab o r

to tal

lumped

as a s p e c i f i c

t h e model

in p u t.

a c tiv ity

t o “ p u r c h a s e 11 l a b o r a t

than s p e c if y in g

such an a c t i v i t y ' s

changes.
in g

is ,

i s assumed t o be u n i m p o r t a n t and
rath er

im p a c t

tio n s w i ll

D i f f e r e n t wage r a t e s

years,

it

cost o f

fo r
is

the a c t i v i t i e s .

p e r m a n - h o u r was
th at

costs

a c tiv ity ,

ra th e r

included

in

lab o r c o e f f i c i e n t

the s p e c ifie d

be s p e c i f i e d

be a n a l y z e d .
owing t o

retu rn
is

on

Of p a rtic u la r
the

recent

to exam ine

the

labo r

cost o f

correspond­

in d u stry o rg a n iz a ­

in te re s t w ill

s h o r t and

the

im p lie s

be

in cre a s es

tr e n d o f wages.

the

the

t h e wage r a t e

and t h e i r

i n v e s t m e n t ha s been e x t r e m e l y

d e s ira b le

the

T h is

c o s t does n o t v a r y a s
w ill

ha v e

and f o r c i n g

cost.

less

than s p e c if y ­

such a c t i v i t i e s ,

upon t h e C o n s t r a i n e d Optimum and Optimum

t h e wage r a t e ,
S ince

to tal

a

$4.00

the o th e r

That

a c tiv ity

th at

cost a t

v a ria b le

in w i t h

f o r m os t o f

lo w

lo n g

in

recent

r u n o p tim um

in

25
in d u s try o rg a n iza tio n s
retu rn
ly in g

T h e o r e t i c a T 1y ,

the

it

w ill

firm

form er,

the

y ie ld s
rath er

in vested

in vo lved here

firm

receive

Id e a lly ,

th e highest

greater
than

retu rn

the

in vestm en t,

in v e s tig a te
a range

m anagement's w i l l i n g n e s s
retu rn s.

Th is w i l l

s tra in ts

and v a r y i n g

p re s crib e d

range,

the

a

the

tra n s itio n

tio n ,

retu rn

fa c to rs .

lik e

to

to

rate of

the

on

in ve s tm en t,

then

to

the

a v e ry high

r e t u r n on

various

rates o f

re tu rn

be used t o

lo s s e s and o b t a i n

in vested

re fle c t

handsome

o t h e r con­

c a p ita l

over

the

C o n s t r a i n e d Optimum and Optimum

d iffe re n c e

in t h e

to ta l

d e r i v e d by t h e model

assum ptions w i l l
c a p ita l

be c o n c e r n e d w i t h

c o s t among

(A ppendix A ) ,

t o t h e Optimum i s w e l l

worth

be made c o n c e r n i n g d e p r e c i a ­
ra tio n in g

be e x p o u n d e d upon

O rg an izatio n o f

retu rn

of

1970 A c t u a l

on new i n v e s t m e n t ,

w ill

money such

in vestm en t e x t e r n a l

20 p e r c e n t w i l l

s o lu tio n s

from the

F e a s ib le

II

a v a ila b le

cost.

20 p e r c e n t w o u l d be q u i t e

r e t u r n on

both

Th es e a s s u m p t i o n s w i l l

Chapter

If

receive

15 t o

s u b stan tial

three o rg a n iza tio n a l

d e lin e a tin g .

The u n d e r­

departure.

the

path

its

in tern a l

to accept m ino r

u tiliz in g

is

in vest

be a c c o m p l i s h e d b y m a i n t a i n i n g a l l

s o l u t i o n s as p o i n t s o f
S in ce th e re

in d u s try.

ra tes o f

th a t of o p p o rtu n ity

the e f f e c t s

from - 2

various

s h o u l d be u n d e r t a k e n .

management w o u ld

To

the

re tu rn .

than

la tte r,

of

is

can ( s h o u l d )

funds--som ew here around

a ttra c tiv e .
on

t o what e x t e n t

change t h e o p t i m u m o r g a n i z a t i o n
e c o n o m ic t h e o r y

th at

to determ ine

and o t h e r

c ru c ia l

la te r.

t h e Study

the

impact o f

various

rates

of

i n v e s t m e n t on t h e C o n s t r a i n e d Optimum i n d u s t r y o r g a n i z a t i o n .

In a d d i t i o n ,

that o rg a n iza tio n w ill

be a n a l y z e d

to

determ ine

if

c h a ng e s

26

in

t h e wage r a t e

tran s p o rta tio n ,
Chapter

affec t

t h e op ti m u m m i x o f

w ill

be d e v o t e d

to

lo n g

r u n Optimum o r g a n i z a t i o n when

rate

of

trac e

m arize

on

an o p t i m a l

o rg a n izatio n

to

fa c ilitie s ,

etc.

III

retu rn

products,

i n v e s t m e n t and
path o f

the

the e n t i r e

long

in

an a ly zin g
it

is

the

subjected

t h e wage r a t e .

tran s fo rm a tio n o f
run o p t i m a l .

the

F in a lly ,

s t u d y and d r a w c o n c l u s i o n s

s ta b ility
to

changes

Chapter

current

of

the
in

the

IV w i l l

in d u stry

C hapter V w i l l

from th e a n a ly s e s .

sum­

CHAPTER

II

THE IMPACT OF WAGE RATES AND RATES OF RETURN ON
INVESTMENT ON THE OPTIMUM SHORT RUN INDUSTRY ORGANIZATION

T h is

chapter w i l l

exam ine th e

Optimum o r g a n i z a t i o n o f
wage

rate

and t h e

of a lte rn a tiv e
The a n a l y s i s

rate

the
of

wage r a t e s

then tu rn s

to

s e n s itiv ity

fe rtiliz e r

r e t u r n on

in dustry

the

to

C onstrained

cha ng e s

investm ent c a p i t a l . ^

on t h a t o r g a n i z a t i o n
the

of

im p lic a tio n s o f

in
The

the
impact

is examined

firs t.

a lte rn a tiv e

in tere s t

rates.

The

Labor

i s an

Some p r o d u c t s
do o t h e r

lab o r

per

im portant

re q u ire

products.

by a l t e r n a t i v e

I m p a c t o f A l t e r n a t i v e Wage R a t e s

a higher

product.

c o u ld cause a s h i f t

the

prod uction

in p u t

c e rta in

in

of

th e ir

products

fe rtiliz e r.

p ro d u ctio n

C onsequently,

the

total

to

v a riatio n s
another or

cost o f

than

c a n be m a n u f a c t u r e d

e a c h o f w h i c h uses a d i f f e r e n t

f r o m on e p r o c e s s

t o a n o t h e r when m i n i m i z i n g
le v e ls o f

in

la b o r

In a d d i t i o n ,

processes,

ton o f

input

in

level

of

t h e wage r a t e

f r o m one p r o d u c t

su p p lying

the d e s ire d

n u trien ts.

Changes i n t h e s e v a r i a b l e s w e r e n o t a n a l y z e d u n d e r t h e c o n ­
s t r a i n t s o f t h e 1970 A c t u a l o r g a n i z a t i o n , owing t o i t s suboptim al
nature.
H o w e v e r , c o m p a r i s o n s a r e made w i t h t h e l e v e l s o f u t i l i z a ­
t i o n o f th e v a r i o u s f a c t o r s in t h a t o r g a n i z a t i o n .

27

28

In o r d e r t o d is c o v e r
o rg a n izatio n ,

where o n l y e x i s t i n g

r a t e was v a r i e d
r a n g e was
fu tu re,

fr o m $ 3 . 0 0

id e n tifie d

although

as

the

U tiliz in g

the

t h e most

th is

were a v a i l a b l e
ogies

c u rre n tly

there

is

c a lly

d e s ira b le

lize d

in

is

the

fo r

in c lu s iv e .

re a lize d

i n wages s u g g e s t s

in

that

This

the

near

th e m iddle

be t h e most p r o b a b l e .

o f Control

Data C o r p o r a tio n 's

t h e wage r a t e was changed

tech n o lo g ies

s e le c tio n

the

in cluded

short

and b e i n g used

no c o m b i n a t i o n o f
(in

in

in

lin e a r
$ 0 .25

run

(v iz .,

terms o f m i n i m i z i n g

m entioned

modes o f

range.

to ta l

tio n

exam ined.

d e s p ite

the fa c t

2

cost)

th at

Th e wage r a t e assumed
was $ * * . 0 0 p e r m a n - h o u r .

e tc.

com prisin g the

the

in

3

Th is

to tal

those

th at

te c h n o l­

fa c ilitie s ),

than those

provided

C onsequently,

tra n s p o rta tio n ,

those

f o r e a c h wage r a t e

the

t h a t w o u l d be more e c o n o m i ­

t h e C o n s t r a i n e d Op tim um o r g a n i z a t i o n ,
p re v io u s ly

i n t h e model

in e x i s t i n g

tech n o lo g ies

C o n s t r a i n e d Optimum a r e

2

t o be

t h e wage

in d u stry o rg a n iz a tio n .

fe a s ib le

processes,

s ta b le

can be u s e d ,

Each r e s u l t i n g wage r a t e was t h e n used t o d e t e r m i n e

Given the a l t e r n a t i v e

ucts,

C o n s t r a i n e d Optimum

per m an -h o u r,

range w i l l

"O ptim a,"

c o n s e q u e n t minimum c o s t

in

the

lik e ly

tren d

fle x ib ility

p r o g ra m m in g r o u t i n e ,

in

fa c ilitie s

$6 . 5 0

to

recent

and u p p e r p o r t i o n s o f

increm ents.

such s h i f t s

the

the

s p e c ifie d

wage r a t e

same p r o d ­
in

most e f f i c i e n t

the
organiza-

in d u s try arrangem ent

cost

u ti­

i n c r e a s e d more

is

than

1.5

t h e C o n s t r a i n e d Optimum o r g a n i z a t i o n

^ S i n c e A p p e n d i x A o u t l i n e s i n d e t a i l t h e com po n en ts o f t h e
C o n s t r a i n e d Optimum o r g a n i z a t i o n , r e f e r t o i t f o r t h e o p t i m a l
o r g a n i z a t i o n o f t h e i n d u s t r y f o r a n y wage r a t e i n t h e r a n g e i n v e s t i ­
gated.

29
m illio n

d o lla rs

and t h e wage b i l l

i n c r e a s e d more t h a n
(Table

as a p e r c e n t a g e o f

c o n s tra in t

"O ptim a" r o u tin e

(O ptim a,

p.

33).

p u t e d and p r i n t e d ,

corresponding

are e s s e n tia lly

amount by w h i c h t h e
s o lu tio n

by one u n i t

a t hand,

if

(O ptim a,

to e ith e r

costs"

p.

le v e l.

3 3 ).

"m arg in al" o r

These

s in c e each
over

the corresponding
n u trie n t)

P2 O5 * ar)d

N,

e a ch h a s a s h a d o w - p r i c e

c o s t w o u ld c h a n g e ,

(tons o f p la n t

held c o n s t a n t
a le n t

to tal

the

t o e a ch wage

"in c rem e n ta l

1' s h a d o w - p r i c e s ' '

c a lc u la te s

Since

" d e m a n d s " w e r e m od e le d as c o n s t r a i n t s ,

the

cost

li-1 ).

f o r each

of

to tal

110 p e r c e n t o v e r t h e r a n g e o f wages e x a m in e d

The a f o r e m e n t i o n e d

p rices

the

and a l l

Th ey s h o u l d

com­

sha dow -

represents

the

the narrow range

c o n s t r a i n t w e r e c ha ng e d
other

co n s tra in ts

are

n o t be c o n s i d e r e d e q u i v ­

" a v e r a g e " c o s t as

the

la tte r

are d e fin ed

in economic t h e o r y .
T ab le
of

I 1-1

presents

some

i n c r e a s i n g wages on t h e

increm ental

and p o t a s s i u m .

The c o s t o f

t h e wage

An

mental
an

ra te .

cost of

in crease o f

cost o f

in cre a s e o f

$0.25

t o n o f 1^ 0 anc* o n l y

ton o f

t h e most

s e n s itiv e

n itro g e n .
to

t o p r od uc e
rate

to

lab o r
it

P2° 5 *

A lthough

costs,

were not

cause

n itro g en ,

the e f f e c t
phosphate,

p e r m a n - h o u r ca us ed an i n c r e ­

$0.2 5 8 0

per

concerning

1*2®$ was a f f e c t e d t h e mos t by cha ng e s i n

ton o f

per

c h a n g i n g wage

data

$ 0 . 36^7 p e r

the cost

can be u s e d

in te re s tin g

ch an ge

" ^ e same wa 9 e s h i f t

the

$0.0 53 0

s u ffic ie n tly
in

in crease
P2 O5

pro d u ctio n o f

the a l t e r n a t i v e

caused

processes

affected

by

in
is

th at
the

t h e C o n s t r a i n e d Optimum o r g a -

ni z a t i o n .
Two p o s s i b l e

reasons

ca n be g i v e n as t o why no change

in

the

Table 11-1.

The impact o f wages in the short run

Wage Rate
(Dollars/man-hour)

Total
Cost
(D o lla rs )

ManHours
Labor

3.00

52,103,065

452,182

108.12

3.25

5 2 , 216,111

452,182

3.50

52,329,156

3.75

a
Cost
k 2o

Cost/
N u trie n t
Ton

Wage
Sill
(D o lla rs )

Wage as
% o f To t.
Cost

152.77

101.33

118.90

1,356,546

2.60

108.18

153.13

101.59

119.16

1,469,592

2.81

452,182

108,23

153.50

101.84

119.42

1,582,637

3.02

52,442,202

452,182

108.28

153.86

102.10

119.67

1,695,683

3.23

4.00

52,555,247

452,182

108.33

154.23

102.36

119.93

1,808,728

3 .4 4

4.25

52,668,293

452,182

108.39

154.59

102.62

120.19

1 ,921 ,774

3.65

4.50

52,781,338

452,182

108.44

154.96

102.88

120.45

2,034,819

3.86

4.75

52,894,384

452,182

108.49

155.32

103.13

120.70

2,147,865

4.06

5.00

53,007,429

452,182

108.55

155.69

103.39

120.96

2,260,910

4.27

5.25

53,120,475

452,182

108.60

156.05

103.65

121.22

2,373,956

4.47

5.50

53,233,520

452,182

108.65

156.42

103.91

121.48

2,487,001

4.67

5.75

53,346,566

452,182

108.71

156.78

104.17

121.74

2,600,047

4.87

6.00

53,459,611

452,182

108.76

157.14

104.42

121.99

2,713,092

5.0 8

Cost
N

a

Cost

a

P2°5

Table 11- 1 .

( c o n t 'd .)

Wage Rate
(Dollars/man-hour)

Total
Cost
(D o lla rs )

ManHours
Labor

Cost3
N

Cost

a

P2°S

Cost3
k 2°

Cost/
N utrient
Tonb

Wage
Bi l l
(D o lla rs )

Wage as
% of Tot.
Cost

6.25

53,572,657

452,182

108.81

157.51

104.68

122.25

2,826,138

5.28

6.50

53,685,702

452,182

108.86

157.87

104.94

122.51

2,939,183

5.47

0.0530

0.3647

0.2580

Change in n u trie n t
c o s t/$ 0 .2 5 change
in wage rate

a lncremental cost per n u trie n t ton ( d o lla r s ) .
bTotal cost divided by t o t a l n u trie n t tonnage (438,023 tons).

32

op tim al

short

run

i n d u s t r y o r g a n i z a t i o n was e x p e r i e n c e d

p a ra m e te riza tio n o f
do n o t a p p e a r

in

than

re la tiv e

lab o r

that

the te c h n o lo g ie s

n iza tio n .

Secondly,

those

of

in terms o f

t h e wage r a t e

included

of

w ould,

at

the excluded

ve s tig a te d ,

$ 3 .0 0 ,

th is

th a t

the

s h o u l d be n o t e d t h a t

less o f

the

at

same amount o f

of

hand,

low ering

t h e wage

advantage

in f a v o r

t h e minimum wage r a t e

in ­

in

it

is

terms o f

not

po ssib le

lab o r

to

u tiliz a tio n ,

can o n l y be c o n c l u d e d
it

is

run o p t i m a l
the

u tiliz a tio n

lab o r w i l l

in cre a s in g

not o c c u r.

lin e a r

not s u f f i c i e n t

of

nature o f
Th is

a p a rtic u la r

be r e q u i r e d

th a t,

if

a

enough t o

in d u s try o r g a n iz a tio n .

embodies c o n s t a n t c o e f f i c i e n t s .
le v e l

then

It

d i s a d v a n t a g e do es e x i s t ,
short

tru e,

t h e C o n s t r a i n e d Optimum may h a v e

re la tiv e

m i n g model

is

tech­

in

to

the

t h e y may

th e excluded

the a b s o lu te

d isadvantage,

the a l t e r n a t i v e s .

t e c h n o l o g i e s more

t e c h n o l o g i e s e v e n more d e s i r a b l e

swing

re la tiv e

It

th is

However,

in cluded

is ,

i n t h e C o n s t r a i n e d Optimum

r a n g e o f wages e x a m i n e d ,

technologies

in

If

That

t h e C o n s t r a i n e d Optimum o r g a ­

phenomenon d i d

an y a d v a n t a g e o r

i n d u c e a change

in

th at

may ha v e c o s t

labor u t i l i z a t i o n

On t h e o t h e r

le v e l,

technologies.

Thus, over the
d iscern

technologies

advantage o v e r

included

stan d p o in t.

some wage

in

te chnologies

la b o r usage.

makes t h o s e

f r o m a minimum c o s t
ra te

those

th e excluded

advantage

o r g a n i z a t i o n may ha v e an a b s o l u t e
n o lo g ies

F irs t,

make them s u b - o p t i m a l .

in e ffic ie n c y

t h a n o u t w e i g h s an y r e l a t i v e
hold o v e r

ra te .

t h e C o n s t r a i n e d Optimum o r g a n i z a t i o n

components o t h e r
the o v e ra ll

t h e wage

during

the

lin e a r

im p lie s

th a t,

technology,

f o r e a ch n u t r i e n t

program­
regard­

the

ton o f

product,

33
given a p a r t i c u l a r
p a rtic u la r
costs
and

i±

Thus,

ra te ,

i s riot,

Th is

i n t h e amount o f
n o lo g ie s,

input

th e re fo re ,

technology.

costs,

e tc .)

a fun ctio n

im p lie s

th at

the

real

from h ig h e r wages, w i t h

liz a tio n

of

changing

the

of

labor

per n u tr ie n t

in

the

rate

is

of

advantage a

a fun ctio n

of

of

u tiliz a tio n

cannot represen t
ton w ith o u t

c a se o f

continued

reduced
use o f

th e model.
in

of

th at

a c h a ng e

changing te c h ­
lab o r

the

usage,

same c a p i t a l

Changes

in

t h e model

The a n a l y s i s w i l l
r e t u r n on

fac to r

constant c o e f f ic ie n t s

le v e l

t o n can o c c u r

te c h n o lo g y em ployed.

changes

the

n u trien t
w o rld

re la tiv e

and t h e

t h e model

l a b o r used p e r

Th erefore,

of

e q u i p m e n t c a n n o t be s i m u l a t e d w i t h i n

effect

the

t e c h n o l o g y may h o l d o v e r o t h e r s

( w a ge

re s u ltin g

technology.

the

u ti­

o n l y by

now t u r n

i n v e s t m e n t on t h e

to

the

Con­

s t r a i n e d Optimum i n d u s t r y o r g a n i z a t i o n .

R e t u r n on

A lthough
on

In ve s tm en t

in

t h e S h o r t Run

new i n v e s t m e n t was n o t a l l o w e d

5
i n v e s t m e n t c a p i t a l " ^ was v a r i e d

to

re fle c t

in

the

changes

short
in

run,

to tal

retu rn
cost

**The p r o b l em o f i n d i v i s i b i l i t i e s i s n o t s e r i o u s i n t h i s s t u d y .
I t i s assumed t h a t t h o s e a c t i v i t i e s ( p r o d u c t i o n , p r o c e s s i n g , e t c . )
t h a t a r e r e p r e s e n t e d i n t h e model a s b e i n g l o c a t e d o u t s i d e M i c h i g a n
( i . e . , in th e M id w e s t, G u lf C o a s t, F l o r i d a , o r S a s k a tc h e w a n ), o p e r a t e
a t t h e i r most e f f i c i e n t r a t e s .
Any p r o d u c t o f such o p e r a t i o n s t h a t
do e s n o t f l o w t o M i c h i g a n i s assumed t o be consumed i n t h e r e m a i n d e r
o f the U .S .
T h o s e a c t i v i t i e s l o c a t e d i n M i c h i g a n a r e , f o r t h e most
p a r t , o f r e l a t i v e l y small c a p a c i t y .
C o n s e q u e n t l y , a l a r g e number o f
them a r e g e n e r a l l y n e e de d t o m e e t t h e d e s i r e d l e v e l o f t o t a l p r o d u c t .
T h u s , t h e y a r e assumed t o o p e r a t e r e l a t i v e l y c l o s e t o t h e i r most
e f f i c i e n t l e v e l , a n y v a r i a t i o n i n t o t a l vo lu me b e i n g s p r e a d among
t h e a p p r o p r i a t e number o f f a c i l i t i e s t o m a i n t a i n t h i s r e l a t i o n s h i p .
"*Not a l l a c t i v i t i e s had i n v e s t m e n t c a p i t a l
m odel.
I t was n o t s p e c i f i e d f o r t r a n s p o r t a t i o n

d e l i n e a t e d in th e
a c t i v i t i e s , except

34
t h a t w o u l d be
th e ir

imposed

if

investm ent equal

to

c a p ita l.

That

is ,

loans

is ,

say,

10.0

re c e iv in g

th is

same r a t e

would c h arg e

1 0.0

c o s t and p r i c e
The c o s t o f

if

entrepreneurs

the o p p o r t u n it y

the

in te re s t

percent

on t h e i r

product

fe rtiliz e r

to

rate

th e ir

by w h i c h

succeeding.
a c tiv itie s

is

to

that

retu rn

r e t u r n on

in ve s te d

in ve s tm en t-typ e

they

s h o u l d be

in c a p i t a l ,

then

re fle c t
cost

they

as an o p e r a t i n g

r e tu rn s a re equated

receive

external

if
or

in d u s try ,

if

ty p ic a lly

th is

to

costs.

charge

in th e

since

form o f

is

a firm
highest

its

go al.

an

f u n d s had been
the

p o s itiv e ,

is

its

In a d d i t i o n ,

funds

is

in

to

those

given

a f i r m would

comparable

in vested

p ro fit

investm en t

in ve s tm en t,

C onsequently,

the

these

in ve s t

r e t u r n on

in vestm en t t h a t

to

in d iv id u a l

should

its

in te rn a l

used as a m e a s u r e o f

schemes may be c o m p a r e d .

the

As m e n t i o n e d e a r l i e r ,
ize r

feel

c a p ita l

in te re s t

how w e l l

T h e o re tic a lly ,

a r e t u r n on

could

e ith e r

th e ir

long term

th e fa rm e r would

in vestm en t

guide as

m axim ization

receive
it

in vestm en t

two o r more

is a u s e fu l

p ro fit

a

p ric e s .

R e t u r n on

it

on

in v e s te d

such t h a t

re a liz e

cost o f

investm en t

t h e e n t r e p r e n e u r has p a s s e d on t h e
higher

to

and e n t r e p r e n e u r s

percent o f

the

trie d

th at

lik e

to

t h a t which

in a l t e r n a t i v e

pro jects

firm .

r e t u r n s on

i n some s e n s e

investm en t

in

the

im ply a d d i t i o n a l

fe rtil­

costs

th at

g
must be p a i d by t h e

farm er.

Th e e x t e n t o f

these

c o s t s and

t h e c h a ng e s

fo r p ip e -lin e f a c i l i t i e s .
However, a l l m a n u f a c t u r in g , p ro c e s s in g
and s t o r a g e f a c i l i t i e s h a d i n v e s t m e n t c a p i t a l b r o k e n o u t a s a s e p a r a t e
c o s t i tern.
^ This

discu ssio n

p reclu d es

th e problem o f

low r e t u r n s

causing

35
in

the

in d u s try o rg a n iz a tio n

re s u ltin g

r e t u r n on

in vestm en t a r e d isc u s s e d

short

s itu a tio n

tio n

run
and

its

Using
rate

of

as

im p lied

in

p a ra m e te riza tio n

retu rn

w ill

controls

ing r a t e

retu rn

The r a n g e o f
re fle c ts

in d u s try.

rates

the

to earn

re tu rn s
of

l o s s on

upper

associated

ra te

sele c te d

10 t i m e s

Th is

c e rta in

Th e

r e t u r n was

steps o f

from 6 . 0

t o k.O p e r c e n t ,

At

in

range
the

the

range.

Changes
the

in

correspond

from - 2 . 0

per cent

to 2 0 .0

per c e n t,

repre­

c u rre n tly

on t h e
farm ers

steps o f 0 .1

to d e ta il

highest

rate

the
of

b ein g e x p erien ced

range w i l l
if

set a t

20.0

fe rtiliz e r

was d i s c o v e r e d

In

percentage

the

that

c o m p a n ie s w e r e

c o rp o ra tio n s.^

p e r c e n t and

p o in ts .

in

e n a b l e us t o a s ­

t h e most p r o f i t a b l e

percentage
it

runs

in d u s tr y o r g a n i z a t i o n were bein g

c rem entation
th is

2 .0

to

to

fo r a n a ly s is

retu rn

lim it

com parable

in

in

fo r

in '' O p t i m a / ' the

be a n a l y z e d and

in ve s tm en t,

the

costs

downward

the optim al

pages

noted.

a m inor

s e n t i n g more t h a n

embodied

be c ha ng e d o v e r a p r e s c r i b e d

in d u s try o r g a n iz a tio n w i l l

the

fo llo w in g

by t h e C o n s t r a i n e d Optimum o r g a n i z a ­

the o p tim al

w hich

the

rates o f

c o n s tra in ts .

the

of

from d i f f e r e n t

in crem en ted
range o f

rates

numerous cha ng e s

made;

consequen tly,

in
in ­

p o i n t s was s u b s e q u e n t l y made

a n a ly s is .
retu rn

firm s to drop out o f the in d u s try
p r ic e s owing t o decreased s u p p ly .

exam ined,

and t h e r e b y

20.0

per c e n t,

p o ssib ly

the

causing h ig h e r

^ In 1965, f o r exam ple, ten o f the l a r g e s t 500 fir m s earn ed over
25 p e r c e n t , a f t e r t a x e s , on t h e i r i n v e s t m e n t ( E c o n o m i c C o n c e n t r a t i o n ,
P a rt 5A, p. 2 1 8 5 ).

36

p r o d u c t m i x was un ch ang ed f r o m t h a t o f
A p p e n d i x T a b l e s A - 1 and B - l ) .
to

produce

that

investm ent

is

However,

p ro d u c t mix were

at

20.0

per c e n t,
and

in

T h is

process

used u n t i l

the

retu rn

1 4.0

per c e n t,

it.

The

la tte r

re la tiv e

to

r e t u r n on
cost

process

the

retu rn

u tiliz a tio n

of

u tiliz e d

higher

shipment o f

on

s lu rry

14.0

savings,

am moniation

produced v i a

is

low ered

process

B—1 1 ) .

to

re p laces

in ten sive

C onsequently,

g ivin g

rate s

NH^ f r o m t h e

of

12.0

re ta ile rs ,

retu rn .

the

investm ent

t h e TVA p r o c e s s a

the

and t r u c k

12.0

more t h a n o f f s e t

to ta l

tran s p o rta tio n

ra il

re tu rn s equal

us e

made t h e

d iffe re n c e

consequen tly,

in t r a n s p o r t a t i o n

of

per cent)
the

to

less

than

the

replaces

12.0

farm .

ra il

T h is

d ire c t

the
ch an ge

tran sp o rtatio n

The h ig h r e t u r n on

NH^ r e t a i l i n g

between th e

in

w h i c h had n o t b e e n

low c o s t

t h e NH^ r e t a i l i n g

to o r

re su lte d

G u l f C o a s t m a n u f a c t u r e r by b a r g e t o

and t r u c k ) .

to

per cent

The NH^ r e t a i l e r

(re la tiv e

W ith

a l.).

thereby

to

schemes;

is

per c e n t causes

on i n v e s t m e n t t o

a n h y d r o u s ammonia

term inal

(above

When r e t u r n on

l a b o r and more c a p i t a l

than

used

( A p p e n d i x B, T a b l e

in ve s tm en t

i s b r o u g h t a b o u t by t h e d e s i r e

ment

fa c ilitie s

cost.

Lowering the

at

lab o r

th e H idw est

(H enderson, e t

investm ent g r e a t e r

to tal

H idw est

the

less

t h e TVA p r o c e s s

t o outw eigh

lower

is

types o f

diammonium p h o s p h a t e

in F l o r i d a

a t w hich r a t e

the

somewhat d i f f e r e n t .

t h e TVA p r o c e s s
is

C o n s t r a i n e d Optimum ( c o m p a r e

fa c ility 's

in ve s t­

cost

two t r a n s p o r t a t i o n

f u n c t i o n was e l i m i n a t e d .
per c e n t,

c o s t more t h a n o u t w e i g h s

the

however,

cost o f

the

savings

u tiliz in g

the

NH^ r e t a i l e r .
Another
was

lo w ered

ch an ge o c c u r r i n g when t h e
from 12.1

per cent

to

12.0

rate o f

r e t u r n on

p e r c e n t was t h e

investm ent
sw itch

in

37
source o f

supply o f

NH^ f o r

n itro g e n m anufacturing
phosphate

producers.

Coast

these

for

went d i r e c t l y
on

to

the M ichigan

and 3 6 , 3 8 7

farms

the

ra tio

tio n s

to p ro v id e

nitro gen

a ll

t h e NH^ p r o d u c e d

farm ers

(Figure

the

sim u la te

11-1).

however,

the e x i s t i n g

n itro g en

NH3 p r o d u c e d t h e r e

(between

in

the M idw est

Th is

1 2 . 0 and 6 . 0

somewhere;

per c e n t,
at

from

the G u l f

neously,

in crease

the M idw est

creases h is

in

in c lu s iv e ,

(u tiliz in g

re ta ilin g

to

of

the

the farms

i n v e s t m e n t was somewhat

in c lu s iv e ),

the pro d u ctio n o f

the G u lf Coast

forced

on i n v e s t m e n t

shipm ent

is econom ically d e s ira b le
in

in a

C onsequently,

M o r e o v e r , when t h e

is between 5 - 9 and k . k p e r c e n t ,

a l l o w i n g an

to

two l o c a ­

the

p re v io u s ly

t h e G u l f C o a s t moves t o

ment

t h e r e was a d e c r e a s e

these

c o n s tra in t

When r e t u r n on

p rod uction

re ta ile rs .

Coast

of

t o be

t h e G u l f C o a s t when r e t u r n

had t o be used

m e n t i o n e d NH^ f o r c e d

s o lu tio n s a t

retu rn

a n h y d r o u s ammonia

producer went d i r e c t l y

c a p a b ility

to M ichigan.

cost op tio n .

a n h y d r o u s ammonia

When t h e

t h e M i d w e s t NH^ m a n u f a c ­

was h i g h a nd t h e NH^ r e t a i l e r was s u b - o p t i m a l .

lower

the

the M idwest

i n C o n s t r a i n e d Optimum f o r c e s a n h y d r o u s

G u l f C o a s t and

t o be p r o d u c e d a t

was t h e m i n i m a l

in

1 1 - 2 and A p p e n d i x B, T a b l e B - 2 ) .

c o n s tra in ts

fix e d

ammonium n i t r a t e ,

NH^ came f r o m t h e G u l f

producers o r ig in a t e d w ith

ammonia p r o d u c e d a t
to

th e change,

12.0 per c e n t ,

to

a c id ,

and diammonium a n d monoammonium

t o n s o f NH^ f r o m t h a t

(F ig u re

One o f

to

producers w h ile

used by t h e M i d w e s t

the

s o lu tio n s ,
P rio r

in vestm ent dropped

tu re r,

the Midwest n i t r i c

the

to

the

r e t u r n on

in v e s t­

re ta ilin g

NH^ coming

such a d e g r e e

n itro g e n

th at

m anufacturing

G u l f C o a s t NH^ ) * t h e r e b y ,

NH^ p r o d u c e d

n itro g e n m anufacturing

th e re .

s o lu tio n s

vo lu me t o m a tc h t h e d e c r e a s e o b s e r v e d a t

S im u lta­

producer
the

in ­

G ulf C oast.

38

G u l f Coast
Anhydrous
Ammon i a
M anufacturer

Hi ch i gan
Anhydrous
Ammon i a
M anufacturer

idwest
Termi nal

GULF COAST
PRODUCERS

M i dwe s t
An hy dr ou s
Ammon i a
M anufacturer

)
MI DWES T

PRODUCERS

DI ammonium and
Monoammon i urn
Phosphate
(F lo rid a )

D i ammoniurn and
Monoammon i urn
Phosphate

Farms
Ni t r i e
Aci d

N i trogen
M an u factu rin g
S o l u t i ons

Fig u re

I 1-1.

Nitric

Ac i d

Ni t r o g e n
M a n u f a c t u r i ng
S o lu tio n s

A n h y d r o u s Ammonia F l o w W i t h I n t e r e s t On I n v e s t m e n t
B e t w e e n 2 0 . 0 and 1 2 .1 P e r C e n t . I n c l u s i v e (C on­
s t r a i n e d Optimum).

39

G u lf Coast
Anhydrous
Ammon t a
M anufacturer

M i ch i gan
Anhydrous
Ammon i a
M anufacturer

Mi d w e s t
Anhydrous
Ammoni a
M anufacturer

dwest
T e r m i na

GULF COAST
PRODUCERS

MIDWEST
PRODUCERS
R e ta ile r

Diammonium and
Monoammon tum
Phosphate

Daimmonium and
Monoammon i um
Ph o sp h a t e
(F lo rid a )
Farms

N itric
Acid

Ni t r o g e n
M anufactur!ng
S o l u t io ns

Figure

11-2.

Ni t r i e
Aci d

N itro g en
M a n u f a c t u r ! ng
S o l u t i ons

A n h y d r o u s Ammonia F l o w W i t h I n t e r e s t On I n v e s t m e n t
B e t w e e n 1 2 . 0 and k . k P e r C e n t , I n c l u s i v e ( C o n s t r a i n e d
O p t i mum).

*+0

The

re s u lt

is

that

is e s s e n t i a l l y
w h ile

d ire c t

the

to tal

le v e l

c o n s t a n t and t h e

shipments o f

to the

range

cha ng e

in

of

NH^ t o t h e

from 5 . 9

rate o f

the

farm s

form er

in
is

s e gm en t a s w e l l .

used by t h e

a ll

the

ra tio ,

caused

the M id w est

com pleted
of

a ll,

n itro g e n m a nufacturing
of

re tu rn ,

the M id w est.

r e t u r n s on

trends
a ll

to

the

a n h y d r o u s ammonia

to

f a r m e r s d e c r e a s e d by t h e

in ve s tm en t o f

the p re v io u s

U.2 p e r c e n t ,

a s ig n ific a n t e ffe c t

in

lo w e rin g

in

in a

t o be

S in ce

m anufactur­

at

the G u lf

shipped

That

is ,

to

G u lf

Coast

to

produced

Midwest

retu rn
the

fo r

t o *t. I

in

the
s o lu tio n s

routed

increase

( A p p e n d i x B,

was c o n s t a n t

la tte r

produced a t

NH^ f r o m t h e

numerous s e g m e n t s o f

the

m anufacturing

continued

the

at

s o lu tio n s are

same amount

s itu a tio n

constant

f r o m h . h t o *f. 3 p e r c e n t

from th e

shipments o f

seg­

producer.

nitro gen

re ta ile r

tons,

A lthou gh

w h ile d ir e c t

o f NHj

change

s o lu tio n s

la tte r

there

s o lu tio n s

th e M idw est

by 6 2 2
the

produced

the

t h e ammonium n i t r a t e

D ire c t a p p lic a tio n

th is

used t o make n i t r o g e n

in vestm en t

a ll

A c tu a lly ,

G u l f C o a s t and M i d w e s t .

n itro g e n m an u factu rin g

S im ila rly ,

per cent

brought about a

A ra tio

p re v io u s ly e s ta b lis h e d .

G u l f C o a s t was s h i p p e d

through

is

M -2),

t o be p r o d u c e d

in p r o d u c tio n o f

t h e ammonium n i t r a t e

the

producer.

produced

in creases

from 6 . 0

m anufacturing

la tte r.

between t h e

the d e c rea s e

A d e c lin e

rate

at

ammonium n i t r a t e

in g s o l u t i o n s ,
Coast

if

and

investm ent

C o n s t r a i n e d Optimum f o r c e s ammonium n i t r a t e
constant

H -l

in c lu s iv e ,

the n itr o g e n

s o lu tio n s

from th e M idw est d e c re a s e

and F i g u r e s

r e t u r n on

t h e ammonium n i t r a t e

s in c e

o f NH^ r e t a i l i n g

t o *t.*t p e r c e n t ,

i s c a u s e d by t h e ch an ge
m ent,

n itro g e n m an u fa c tu rin g

le v e l

( A p p e n d ix B, T a b l e s B - 2 and B-5»
The t r a n s i t i o n

of

s lig h tly
producer

Table B - 2 ) .

a retu rn

on

p e r c e n t had

in d u s try .

Lowering o f

the

rate o f

retu rn

on

investm ent

to

4.1

made p r o d u c t i o n o f diammonium p h o s p h a t e

in M ic h ig a n

c a tio n

i n a g r a n u l a t e d d r y m ix e d

eco n o m ically

fe rtiliz e r.
in itia te d

Thus,

fe rtiliz e r

of

fe rtiliz e r

t h e one a f f e c t e d
central

le v e l

its

use
of

gran u lated

( A p p e n d i x B, T a b l e s

g r a n u l a r m ixed

at

to

d ire c t a p p lic a tio n

and t h e

was r e d u c e d

s u p e rio r

B -ll

producer

producer"

unless o th e r w is e

in

the

lo cated

the

p h o ric a c id

rath er

in p u t

4.1

than

less e x p e n s iv e

to

T a b le B -2)

(Henderson,

per cent

tran sport

the

h ig h ly

process,

re la tiv e

to t r a n s p o r t e i t h e r
p rod uction o f

to

lo c a te d

" g r a n u l a r m ix e d
the

small

and c a u s e d w h i t e

one,

a cid

u tiliz e s

Consequently,

B -l,

to M ichigan

diammonium p h o s p h a t e

from F l o r i d a

and s u b s e q u e n t l y

to M ichigan

is ,

elem en tal
these

on

in v e s t­

B - 6 , and B - 7 ) .
because

t o be used

p ro d u ctio n ,

(29 per cent

green p h o s p h o ric a c i d ,
That

phos­

co n c e n tra ted elem en tal

green a c id

rock phosphate

fr o m t h e M i d w e s t o r F l o r i d a .

acid

s c a l e one

g r e e n p h o s p h o r i c a c i d was u t i l i z e d

in e ffic ie n t

phosphorus

scale

M i c h i g a n was

im ply

( A p p e n d i x B, T a b l e s

F*2®5 e q u i v a l e n t )

s u p p lyin g

small

t h e o r g a n i z a t i o n when r e t u r n

par cent

fo r

prod uction

in M i c h i g a n used NH^

w h ite

et a l.).

phorus (2 2 9

fo r

to

pages w i l l

in M ic h ig a n ;

two p r o d u c t s e n t e r e d

ment was s e t a t
W hite

( A p p e n d i x B,

be p r o d u c e d

p h o s p h o r u s a s an
la tte r

a p p li­

s p e c ifie d .

Coast

to

larg e

Reference

fo llo w in g

Th e

in o u t s t a t e

The p r o d u c t i o n o f diammonium p h o s p h a t e
from th e G u l f

fe rtiliz e r

a nd B—15 ) -

M i c h i g a n was u n a f f e c t e d .

d ire c t

diammonium p h o s p h a t e was

d ry mixed

by t h e c h a n g e ; w h e r e a s ,

for

per cent

p2°5^

than

it

is

ph os ­
i n an
it

is

f rom F l o r i d a

o r dI ammonium p h o s p h a t e

there

are

to M ichigan:

three
(1)

basic

s h ip elem ental

t o be made i n t o w h i t e

diammonium p h o s p h a t e ;

(2)

sh ip

schemes

phosphoric

ro c k phosphate

i*2

from F l o r i d a

t o M ichigan

t o be made

s u b s e q u e n t l y diammonium p h o s p h a t e ;
phate

in e i t h e r

model

co n tain s a fo u r th

green a c id

F lo rid a or

in e i t h e r

diammonium p h o s p h a t e
n a tiv e

a lte rn a tiv e ,

F lo rid a

or

the

producer

f o u r methods,

on ly

19,800

in M ic h ig a n

in c re a s e s a r e
fe rtiliz e rs

had

re s p e c tiv e ly ,

monium p h o s p h a t e ;
phosphate
rate

of

136,925

t o m eet

r e s u l t o f a change

I - 3 -6

a

to n s o f

were s u p p lie d

the

rates

the

a lte r­

rates

the
However,

in

the

re la tiv e

is

two o p t i o n s

r * 9 u ' rement

both

in creased

between

ra tio

F lo rid a

a nd M i d ­

s lig h tly .
le v e ls

These

o f d r y blended

2 0 . 0 and U . 2 p e r c e n t ,

cu s to m b l e n d

1 8 ,3 .

and 3 6 - 0 5

phosphate b e in g

the b u lk blend

i n v e s t m e n t was

lo w ered

Table B - l ) .

fe rtiliz e r
fe rtiliz e r.
per

c e n t N,

d e rived

fe rtiliz e r

(H enderson,

et

ob tained
a l .) .

fe rtiliz e rs ,

C onsequently,

and
Th is

82 ^ 5 *

from diam­

to U . 1 p er c e n t,

t h e b u l k and c u s t o m b l e n d

(Appendix 8 ,

the

p ro p e rtie s .

to tal

In f a c t ,

f r o m monoammonium p h o s p h a t e

r e t u r n on

to

B -l),

n u trien t

whereas,

la s t

of

tons o f 7 - 2 8 - 2 8 b u lk blended

w ith

th is

as b e i n g

c o n tin u a tio n

diammonium p h o s p h a t e

185,535

it

t o p r o d u c e diammonium p h o s p h a t e

b l e n d was composed o f 6 . 0 5 ,

and K jO .

was s e l e c t e d

Th erefore,

in vestm en t a t

s hip

i n v e s t m e n t was k , 1 p e r c e n t .

in M ic h ig a n

( A p p e n d i x B, T a b l e

8 6 ,*165 t o n s o f
la tte r

of

the

R e t u r n on
in c lu s iv e ,

high c o rro s iv e

firs t

The

produce e i t h e r w h it e o r

tran s p o rta tio n

( A p p e n d i x B, T a b l e B - l l ) .

west pro d u ctio n

to M ichigan,

owing t o high

( 3 ) w e r e ne ed ed

under a l t e r n a t i v e

it

However,

on

tons a n n u a lly .

nam ely,

its

and

make t h e diammonium pho s­

in M ic h ig a n .

the

when r e t u r n

current cap acity

(3)

t h e M i d w e s t and t h e n

imposed on p h o s p h o r i c a c i d due t o

most e c o n o m i c a l

and

t h e M i d w e s t and s h i p

is not v e r y econom ical

Of these

in t o green phosphoric a c id

its

When t h e
1 3 5 . 0 7 5 and

re s p e c tiv e ly ,
th is

re la tiv e

43
c ha ng e

in

le v e ls o f blend

fe rtiliz e rs

monium p h o s p h a t e used t o

in c re a s e ,

creases

it

as

in

the

recorded

le v e ls

in T a b le

of
B -lI

the

as w i t n e s s e d

ch an ge

in creased

in t h e

flo w in g

fo r

in T a b le

re la tiv e

the

amount o f d i a m ­

s u b s ta n tia tin g

to o u ts t a t e
T h is

th e decrease

M ichigan
re la tiv e

o f the blended

potassium c h l o r i d e

b o th o f which a r e

used

in

the

in ­

producers,
ch an ge b e ­

i n monoammonium p h o s p h a t e

B - 1 2 o f A p p e n d i x B.

le v e ls

usage o f g r a n u l a r

superphosphate,

thereby

o f A p p e n d i x B.

tween blen ds a l s o acco unts
su p p lied

caused

the

Other e f f e c t s

fe rtiliz e rs

and g r a n u l a r
custom b le n d

of

in clu d e
trip le

fe rtiliz e r

( A p p e n d i x B, T a b l e B - l ) .
The d e c l i n e o f
s ib le

fo r

several

iz e r

is

a ls o

dropped

was

the

sole
in

g r a n u l a r mixed

o rg an izatio n al
user o f

le v e l

lo w ered from 4 . 2

of

nitrogen

to 4.1

s o lu tio n s ,

changes.

S in ce

when t h e

per c e n t.

used a s a n
also

in p u t

had a d r o p

do mi no e f f e c t ,

in vo lv in g

and n i t r i c

o f g r a n u l a r mix e d
Two o t h e r
mixed

B-13)

fe rtiliz e r
trip le
state

p ro d u c ts were a f f e c t e d
F irs t,

ru n -o f-m in e

had d e c r e a s e d

producer

is used t o

level

of

pro d u ctio n

s o lu tio n s ,

Thus,

a

ammonium

as a r e s u l t o f d e c r e a s e d

(the

shipm ents

by t h e

S im ila r

re d u c tio n o f

potassium c h l o r i d e
to

the

one w h i c h d e c r e a s e d ) .

s u p e r p h o s p h a t e a l s o had a r e d u c t i o n
producer.

which

usage

fe rtiliz e rs .

fe rtiliz e rs .

B, T a b l e

was c r e a t e d

la tte r

investm ent

fe rtiliz e rs .

n itr o g e n m a nufacturing

a c id ,

the

fe rtil­

prod ucing n i t r o g e n

its

t h e d e c l i n e o f g r a n u l a r m ix e d

type o f

s o lu tio n s ,

a c id ,

in

in

th is

r e t u r n on

N itric

as a r e s u l t o f

n itra te ,

p r o d u c t i o n was r e s p o n ­

m an u fa c tu rin g

u tiliz a tio n

make t h e ammonium n i t r a t e
m anufacturing

fe rtiliz e r

to

in

potassium c h l o r i d e

o u tstate

that

(Appendix

g r a n u l a r mix ed

Secondly,
shipments

gran u lar

to

ru n -o f-p ile
the o u t­

had c o n s t a n t

flow

44

to c e n tra l
stant

M ic h ig a n ,

shipments

change

in

the

to

central

re la tiv e

( A p p e n d i x B, T a b l e
granular

trip le

c a us ed an

C onsequently,

trip le

M ichigan.

le v e ls

B -9).

The r e a s o n

the

re la tiv e

in crease
th is

in

t h e us a g e o f

in crease

ca us ed an

wh e r e g r a n u l a r

tonnage o f

ru n -o f-p ile

trip le

s lig h tly

superphosphate

i n c r e a s e d by 3 , 1 3 9

C onsequently,

fo r

tons,

ru n -o f-p ile

to

the

M ichigan

which

tons,

ducers

(the

g r a n u l a r m ixed

la r g e r decrease
g r a n u l a r m ix e d

in

in Midwest

se e

fiv e

phosphate

the

in d u stry.

s u b s ta n tia l
rep laced

w h ile

total

115.303

to

increased
However,

t r ■P i e

8 ,5 1 9

f r om 3 8 , 8 5 4

to

to n s p e r

shipped
to 36,547

M ichigan

producer)

pro­

was,

fr o m t h e M i d w e s t ; w h e r e a s ,

p ro d u ctio n o f

in

B rie fly

changes;

some o f

ru n -o f-p ile

in t h e t o n n a g e

fe rtiliz e r

in crease

the

p e r c e n t has numerous e f f e c t s

n iza tio n o f

superphosphate.

to

ru n -o f-p ile

the o u t s t a t e

and an e v e n

M ichigan

producers.

T h u s , we see t h a t a change
to 4.1

fe rtil­

in F l o r i d a

us a ge by c e n t r a l

shipments from t h e r e

fe rtiliz e r

blended

from

from 5 ,3 8 0

that

Pre­

trip le

Thus,

is

in p u t.

is o n ly 832 to n s .

processors,

constant

s u p p l i e d by a s l i g h t

le v e ls

p ro d uctio n o f g r a n u la r

the

t h e r e was a d e c r e a s e

le v e ls o f

prod uction

Th e r e m a i n d e r o f
scale

in

as an

g ranular

t h e r e was a r e d u c t i o n

central

large

in

i s made.

tons.

th e re fo re ,

change

t h e M id w e s t

i n c r e a s e need f o r

( A p p e n d i x B, T a b l e B - l ) ,

f r o m **4,23*+ t o 4 5 , 0 6 6

from F l o r i d a

the

a l s o had c on­

t h e r e wa s a s l i g h t

superphosphate f e l l

t h e demand f o r

year.

fo r

change

in F l o r i d a ,

tons

However,

c om ing f r o m F l o r i d a and

pro d u ctio n

112,087

superphosphate

s u p e r p h o s p h a t e used r u n - o f - p i l e

v i o u s l y , we saw t h a t
iz e r

ru n -o f-p ile

the

(l)

r e t u r n on

upon t h e

i n v e s t m e n t f r om 4 . 2

short

run o p tim al

recapp ing the m ajor e f f e c t s ,
d ire c t

phosphate

a p p lic a tio n

of

fo rm erly bein g

orga­
we

diammonium
s u p p l i e d by

45
t h e g r a n u l a r m ix e d

fe rtiliz e rs ;

p r o d u c e d I ammonium p h o s p h a t e
seq u en tly,

green

phosphoric

o f g r a n u l a r mix e d
tio n o f
acid ;

ru n -o f-m ln e
change

acid

fe rtiliz e rs

ru n -o f-p ile

in

trip le

Further

re la tiv e

i n d u c e a ch an ge

in

the

s o lu tio n s ,

of

p e r c e n t was r e a c h e d .

and

of

retu rn

on

t h e a n h y d r o u s ammonia r e t a i l e r

At

th is

NHj f r o m t h e m a n u f a c t u r e r

rates o f

retu rn

on

ra te

became
in

NH^ m a n u f a c t u r e r .

investm ent)

in M ic h ig a n
amount

is

uses 4 , 3 4 6

r e t u r n on

c lu s iv e .

When t h e

that q u a n tity o f
C onsequently,

r e t u r n on

frees

the

produc­

and n i t r i c

of

re tu rn ,

the

is ,

from th e

t h e r e was a
fe rtiliz e rs .

the

a retu rn

than

tran s­

to

the

NH^ r e t a i l e r ,
flo w in g

G u lf Coast

i s now b e i n g

not

i n c r e a s e d usa ge

le s s expensive

usa ge o f

and

to

(a t
the

s u p p l i e d by t h e

t h e diammonium p h o s p h a t e p r o d u c e r

NH^ ( A p p e n d i x B, T a b l e

B -2),

and t h i s

G u l f C o a s t a n h y d r o u s ammonia m a n u f a c t u r e r

investm en t

NH^ i s

th is

the G u lf C oast,

p

tons o f

s u p p l i e d by t h e

when t h e

producer

That

(5)

th e M idwest d i r e c t l y

in crease

M i c h i g a n diammonium p h o s p h a t e
Midwest

in

u n til

t h e q u a n t i t y o f a n h y d r o u s ammonia t h a t was p r e v i o u s l y
higher

c on­

the d e c lin e

in ve stm en t d id

in d u stry o rg a n iz a tio n

of

to

(3)

b u l k and cus tom b l e n d e d

rate

the o p tim al

In o r d e r

a p p lic a tio n ;

ammonium n i t r a t e ,

had r e d u c e d u s a g e ;

2 .0

f a r m s by t r u c k .

d ire c t

p ro d u c tio n decreased;

of

p o rting

fo r

s u p e r p h o s p h a t e , monoammonium p h o s p h a t e ,

le v e ls

lo w ering o f

p h o s p h o r i c a c i d was used t o

brought about a re d u c tio n

potassium c h l o r i d e

the

w h ite

in M ic h ig a n

n itro g e n m an u factu rin g

(4)

(2)

is between 4 .1
in vestm en t drops

su p p lied

and 2 . 1
to

2 .0

per c e n t,

in ­

per

however,

cent,

by t h e M i d w e s t NH^ m a n u f a c t u r e r .

4 ,3 4 6

t o be r o u t e d

t o n s o f a n h y d r o u s am mo ni a, p r o d u c e d on
g
t h r o u g h t h e NH^ r e t a i l e r .
T h is is

K ee p i n mind t h a t C o n s t r a i n e d Optim um f o r c e s a c o n s t a n t
NH^ p r o d u c t i o n b e t w e e n t h e G u l f C o a s t and t h e M i d w e s t .

ra tio

of

U6
e x a c tly

what happened,

shipm ents o f

NH^ t o

the

45,7 3 9

to 5 0 ,085

d ire c t

was c o n s t a n t a t

occurred a t
The

th is

im p lies

p r o g r a m m in g
or

e q u a l.

changes

in

treats
usin g

If

to tal

re s u lt

in

the

are

fact

Tt

fac to rs

e ffic ie n t
the

those

given o th e r

any a d van tag e

the

th at

in

lin e a r

item s
th in g s

retu rn s

on

fa c ilitie s

in ve s tm en t,

by t h o s e

th at

i n v e s t m e n t as a

C onsequently,

larg e

im p lie s

th at

was n o t c ha ng e d when

th e ir

T h is

same o p t i m a l

q u ite

r e t u r n s on

s ta n d p o in t,

high

retu rn s

When r e t u r n s on

not

was o u t w e i g h e d

fa c ilitie s

ant* *^2® ' s $ 5 7 , 6 3 4 , 4 4 5 .
it,

or

$7,9 7 1,17 8

in d u stry

sponding to

2 .0

th a t experienced

s h ifte d
per c e n t
in the

are

to

the

Of

retu rn s
short

r e t u r n on
in d u s try

to

on

investm en t are

investm ent a re

co s t o f s u p p ly in g M ichigan w i t h

N,

the

per cent w ith o u t

o rg a n izatio n .

from th e

in ve s tm en t.

usage o f o t h e r

to the M ichigan fa rm e r.

cent o f

to - 2 . 0

Furtherm ore,

n egative

per cent,

c h a ng e s

in

the

o rg a n izatio n .

From a c o s t

of

fo llo w s

m i g h t have b e c a u s e o f

by t h e e f f i c i e n t

the

retu rn s.

the

from

NH^ b e i n g a p p l i e d

No o t h e r

i n v e s t m e n t w o u l d be more d e s i r a b l e ,

in ve s tm en t went to - 2 . 0

optim al

lo w ered

investm ent

T h is

tons,

in vestm en t.

in th e o p tim a l

S in ce the o r g a n i z a t i o n

se le c te d

tonnage o f

the observed o r g a n i z a t i o n

fa c to rs .

ro u tin e

on

B -2 o f A ppendix B t h a t

tons p e r y e a r .

r e t u r n on

p o s itiv e

reward f o r

la rg e

to tal

125,867
of

In Table

i n c r e a s e d by 4 , 3 4 6

whereas,

lo ss e s

a s do s m a l l

n o n -in vestm en t

re ta ile r

i n v e s t m e n t was

any f u r t h e r

those a c t i v i t i e s

using

rate

t h a t minor

in dustry

p ro fit

tons;

r e t u r n on

in c u rrin g

s i n c e we see

1970

th is

le v e ls

fig u re ,

invested

run o p tim a l

in vestm en t

serious

20.0

per c e n t,

o f consumption
n e a rly

c a p ita l

14 p e r

(Table

org an izatio n

(s lig h tly

in re c e n t y e a r s ) ,

then

higher
the

11-2).

corre­
than

to tal

cost

Table 11-2.

The e f f e c t o f returns on investment in the short run ( in d o lla rs )

Return on Investment
(per cent)

Total
Cost

20.0

,

Cost3
K20

Cost3

Investment

Cost3
N

57 6 3 ^ 5

39,855.889

118.96

168.75

110.*4*4

7,971,178

18.0

56,837,333

39.855,889

117.*4*4

166.35

109.17

7,17*4,060

16.0

56,01*0,215

39,855,889

115.92

163.9*4

107.89

6,376,9*42

1*4.0

55,261,216

39,970,270

ll*4.*4l

161.57

106.56

5,595,838

12.0

5 6 , 6 2 6 ,8 5 6

*41 , 5 *1 6 , 85*4

112.63

159.29

105.26

*4,985,622

10.0

53,593,919

*41 , 5 *4 6 , 85*4

110.72

157.0*4

103.97

*4,15*4,685

8 .0

52,762,981

*41 , 5 *16 , 85*4

108.81

15*4.79

102.68

3,323,7*48

6 .0

51,932,066

*41 ,5*46,85*4

106.90

152.5*4

101.39

2,* 4 9 2 ,811

5.9

51,890,656

*41 ,639, 1*42

106.81

152.43

101.33

2**456,709

*4. *4

51,265,869

*41 ,639,1*42

105.37

150.7*4

100.36

1,832,122

*4.3

51,226,209

*41 ,660,69*4

105.28

150.62

100.29

1,791 ,*410

*4.2

51,182,568

*41 ,660,69*4

105.18

150.51

100.23

1,7*49,7*49

*4.1

51,160,633

*42,*453,730

105.09

150. *40

100.16

1 ,7*40,603

P2°5

Returns

Table 11-2,

(c o n t 'd .)

Return on Investment
(per cent)

Total
Cost

4 .0

Costa

Investment

Costa
N

51,098,180

1*2,1+53,730

104.99

150.28

100.10

1,698,149

2.0

50,21+7,079

1+2,604,192

103.08

148,02

98.79

852,084

0.0

1*9,394,995

1+2,604,192

101.17

11*5.75

97.48

-2 .0

1+8,542,911

42,604,192

99.26

143.48

96.17

a Incremental cost per ton.

P2°5

Costa

V

Returns

-0 -852,084

49

of

s u p p l y i n g M i c h i g a n w o u l d be o n l y

to

a savings o f n e a r ly

run o p tim a l

o rg a n izatio n

in vested c a p i t a l .

More

curren t o rg a n izatio n
to tal

cost o f

retu rn

on

m illio n

7 .4 m illio n

the

is

short

investm ent.

d o lla rs

if

$ 50,247,079.
d o lla rs

associated w ith

as compared

20.0

per

cent

$ 2 1 ,1 9 8 ,5 8 8 ,

o r more t h a n 4 2 p e r

Thus, M ichigan
fe rtiliz e r

savings over

o rg a n izatio n

w ith

farm ers could

i n d u s t r y wo ul d

to

th at

c u rre n tly

A retu rn
very

a ttra c tiv e .

a ttra c tiv e
short
on

vid e

B ut,

run o p tim a l

current

a fiv e

fo ld

p e r c e n t on

is

s till

s h ift

crem ental

the

short

i n v e s t m e n t compa­

is

d e fin ite ly

the c o s t

a more

savings o f

10 .0 per cent

d o lla rs

not

the

retu rn

when compared t o

in crease

r e t u r n on i n v e s t m e n t

to

I 1-1
cost

in

the

impetus

if
on

to

of

the

in d u stry
At

p a rtic ip a n ts

t h e same t i m e ,

a re d u c tio n o f

n e a rly

to

than

should p r o ­
s h ift

to

th e M ichigan

25 p e r c e n t

in

i n d u s t r y was o r g a n i z e d o p t i m a l l y w i t h

th e ir

10 . 0

investm ent.
s e n s itiv ity

th at
per

rate

o rg a n izatio n .

the

the

When r e t u r n s w e r e
was $ 1 1 0 . 4 4 ;

21

The p r o s p e c t o f m a k i n g more

retu rn

from T a b le

to

the

per cen t

save o v e r

i s made w i t h

(w ith

18 m i l l i o n

cent o f

in d u s try .

investm ent

per c e n t ,

2 .0

the

in d u s try o r g a n iz a t io n .

b ill,

Turning

10.0

n e a rly

f a r m e r s w o u l d be r e c e i v i n g

per cen t

the

e v e n when c o m p a r i s o n
say,

run o p tim a l

fe rtiliz e r

in

in d u s try o rg a n iz a tio n

consid erable
short

2 .0

retu rn o f,

investm ent)

the

the

o f o n ly

bein g earned

short

r e t u r n on

the cost

r u n o p ti m u m i n d u s t r y o r g a n i z a t i o n w i t h a r e t u r n on
ra b le

to the

im p o rta n tly,

run o p t i m a l

the

T h i s w o u ld amount

of

three

potassium e x p e rie n c e d

ton throughout
2 0.0

whereas,

the

per c e n t,
it

fe ll

the
the

basic

the

range o f

le a s t

ch an ge

retu rn s

in crem en tal

by $ 1 4 . 2 7

n u trien ts,

cost

in

we see
in­

in v e s tig a te d .
per

ton o f 1^0

t o $ 9 6 . 1 7 when r e t u r n s

on

in ­

50

vestment went t o - 2 . 0
cha ng e s

in

the

of

$168,75

of

^ 2^5 w*i e n

cremental
re tu rn ,

retu rn s

cost

per

n itro g en

ton

the

ch an ge

from

the

products,
in the
that

it

Let

that

in

the

in d u s try,

T h is

in the

the

change

11-2).

in

in ­

rates

$19.70

per

ro le

of

n itro gen

most cha ng e s

n itro gen

in d u stry.
n e a rly

cost o f

phosphate,

se gm en t o f

n itro g en

and,

of
ton,

im p o rta n t

in

the

us now e x a m i n e

inth e

the

in

id le d

in

the sh o rt

the

in d u s try .

is d i r e c t l y

short

run,

product

in th e m odel.

prim ary

phosphate

T h is

re s u lt o f

the

cha nge s

the e f f e c t s

fa c ilitie s .

of

the

rangin g
the

in ve s te d

short

from *f2.6
le v e l

of

in

the s h o rt

fa c ilitie s .

upon t h e

1970 A c tu a l

d o l l a r s were
the

effect

were

cha ng e s

a f f e c t on ly e x is t in g

W ith

th at

fa c ilitie s

preceeding

i n v e s t m e n t ha v e a d i r e c t

im p lie s

Thus,

im p e t u s o u t s i d e

im p lic a tio n s o f

o n ly e x is t in g

C onsequently,

investm ent

or

in vestm en t.

o v e r 75 m i l l i o n

had

was w i t h ­

in p a r t i c u l a r ,

A n h y d r o u s ammonia

every n itro g en

(Appendix A , T a b le A - 3 2 ) ; w h e re a s ,
o rg a n izatio n

cost

and $ l * t 3 . i*8 p e r t o n

cost o f

increm ental

in d u stry o rg a n iz a tio n

and v a l u e o f

to

increm ental

same r a n g e o f

increm ental

in vo lv e

r e t u r n on

t o be u s e d .

So, any changes

(Table

per c e n t.

segment ca n o c c u r a s t h e

rates o f

r u n op ti m u m

the

retu rn s

Over the

in

is r e l a t i v e l y

n itrogen

R ec a ll
a llo w ed

$25.27.

had an

such as monoammonium and diammonium p h o s p h a t e .

segment.

various

to - 2 . 0

im po rtant

in vo lved w ith

In a d d i t i o n ,

per cent

s e t by p o t a s h and

a n h y d r o u s am mo ni a,
in d ire c tly

is

in ve s tm en t,

20.0

dropped

o rg an izatio n

re s u lts

to

t h e most s e n s i t i v e

$99.26.

the extrem es

run o p ti m a l

Phosphate,

r e t u r n on

had a chang e

to

A lthou gh

T h is

of

corresponding

from $ 1 1 8 . 9 6

in

rate

per c e n t.

number

o rg a n izatio n
in the

r u n op ti m u m
to 3 9 .8

in d u s try

in d u s try

m illio n

investm en t

of

in

d o lla rs

the

short

51
run w o u l d be o n l y 53 t o
p e n d i n g upon t h e
r e t u r n on

in

To tal

its

rate o f

retu rn

i n v e s t m e n t had v e r y

investm ent

cost o r

57 p e r c e n t o f

the s h o rt

investm ent

r e t u r n s on

on

in ve s tm en t.

little

run o p tim a l

l o w e s t when r e t u r n on

little ,

that

r a t e was o n l y

$42,6 04 ,1 9 2

invested

-2 .0

per

by o v e r 8 . 8 m i l l i o n
on

d o lla rs

de­

rate of
of

to tal

cent

per c e n t.

11-2).

r e t u r n s on

throughout

the

to tal

i n v e s t m e n t was a t

$ 2 ,7 4 8 ,3 0 3

(Table

and

to e ith e r

to tal

20.0

in ve s te d a t

d o lla rs

the

le v e l

re la tiv e

As e x p e c t e d ,

i n v e s t m e n t was

changed by o v e r 9 m i l l i o n

Thus,

e f f e c t on t h e

$39*855,889

at

fa c ilitie s ,

in d u s try o r g a n iz a t io n .

c ha ng e d v e r y

in vestm en t.

the e x is t in g

The

less

than

T o tal

cost

the

i n v e s t m e n t changed

range o f

ra tes o f

retu rn

i nves t m e n t exam i n e d .
These

change

in

la s t
to tal

two f i g u r e s
cost

can be d i r e c t l y

r e t u r n s on

in ve s tm en t.

retu rn s

very

is

c o n trib u tin g
low r e t u r n s .
as t h a t
little

to

Thus,

s lig h tly
to tal

cost

corresponding to

in g t h e

cost

used f o r

rates o f

per cent

the

to the

cent o f
ch an ge

investm en t a s s o c ia te d w it h

is

the

the
per

in

the

use o f o t h e r

in d u s try o rg a n iz a tio n
cent

the
in the
high

facto rs

in vestm en t c o rres p o n d in g

r e t u r n on

to

was m a i n t a i n e d

in ve s tm en t,

retu rn s,

to

change.

If,

f o r exam ple,

2 0 .0

per cent

retu rn ,

then

t h e o n l y change

the

$ 7 ,9 7 1 ,1 7 8

we g e t $ 4 9 , 6 6 3 , 2 6 7 .

a ttrib u te d

to

associated w ith

we s u b s t r a c t

o v e r 97 p e r

then v e r y

s a v i n g s w o u l d be f o r e g o n e as com pa re d t o a l l o w ­

corresponding

2 0 .0

if

20.0

o rg a n izatio n

be t h a t

than

in d u s try o rg a n iz a tio n

a ll

the

th at

less e f f i c i e n t

C onsequently,

p o te n tia l

in d ic a te

from

change
re tu rn s
its

r e t u r n on

in t o t a l
to

T h i s w o u l d be t h e

retu rn s.

in vestm en t,

a sso ciated

in

total

to tal

the optim al

in vestm en t were
to tal

c o s t w o u ld

C onsequently,

if

a s so cia ted w ith

cost o f

$57,6 34 ,4 4 5 ,

cost corresponding

to

52

the optim al

in d u stry o rg a n iz a tio n

asso ciated w ith

t u r n on

in vestm en t,

but w ith a zero

that of

the optim al

in d u stry o rg a n iz a tio n

cent

r e t u r n on

in vestm en t,

we see

by c h a n g i n g t h e o r g a n i z a t i o n o f
amount t o

less

than

s ix -te n th s

Even

less

d iffe re n c e

ing t h e o r g a n i z a t i o n
that o rg a n izatio n
ing fr o m 6 . 0
Table

a sso ciated w ith
12 .0

By m a i n t a i n i n g

c e n t on i n v e s t m e n t w o u l d
on ly

$44,238,

which

cent o f t o t a l

cost.

is

th is

im ply a

which

is o n ly

$ 1 1 4 , 1 5 9 more t h a n

per cen t
o f on e

retu rn

on

per cent o f

to tal

in vestm en t.

in c lu s iv e .

of

th e ir

current

run,

is e x a c t ly

in vestm en t rang­

( A p p e n d i x B and

a retu rn o f

to

retu rn

range o f
the

cost o f

in d u stry

per

T h is

2 0 .0

per

$ 5 7 ,7 4 8 ,6 0 4 ,

o rg a n izatio n

correspond­

a m ou nt s t o

less

T h u s , we s e e t h a t

it

range o f

i s the o p tim a l
per cent

r e t u r n on

p a rtic ip a n ts ,

to

than

the

is e x tre m e ly e f f i c i e n t

from 6 . 0

rates o f

zero

o f one p e r

over a con sid erab le

im p o rta n tly ,

ra tes o f

(in

rates o f

organiza­
1 2.0

per

i n v e s t m e n t w o u ld
e s p e c ia lly

in view

retu rn s.

We have s e en t h a t
in th e s h o r t

cost)

More

T h is

s u r e l y be a c c e p t a b l e

by m a i n t a i n ­

than o n e - t e n t h

cost.

terms o f m i n i m i z in g

cent,

It

cost.

savings o f

in ve s tm en t.
to tal

per

cost

the o p tim al

in d u s try o r g a n iz a tio n

t i o n o v e r a range o f

r e t u r n on

have a t o t a l

C o n s t r a i n e d Optimum

r e t u r n on

to tal

C o n s t r a i n e d Optimum o r g a n i z a t i o n w i t h

in v e s tm e n t would

tw o -tenth s

the

p o te n tia l

le s s

to

s a v i n g s w o u ld

Optimum.

o rg a n izatio n ,

c o n s id e ra b ly

r e t u r n on

20.0

Th is

in c lu s iv e

loss o f

cost

zero

c o u l d be o b t a i n e d

rates o f

per c e n t,

cent

in g t o

in d u s try .

cost

re­

$ 2 6 8 , 2 7 2 w o u l d be s a ve d

o f on e p e r c e n t o f

to tal

to tal

asso ciated w ith

th a t o n ly

the

per cent

Comparing

d e n o t e d by C o n s t r a i n e d

per c e n t to

I 1-1).

in

re tu rn .

20 .0

over

t o ha v e t h e minimum c o s t
various

ra tes

of

retu rn

in d u s try o rg a n iz a tio n
on

in ve s tm en t,

im p lies

c o n s id e ra b le
At

the

changing

same t i m e ,
is

the

ra tes

o rg a n izatio n
cost
of

in

the o r g a n iz a t io n

very

n e a rly

of

the

the

retu rn

short

m inimal

on

run

s a v i n g s as compa r e d t o

rate s

to m a in ta in

h o w e v e r , we ha v e seen t h a t

o rg a n izatio n
range o f

in

the

cost o rg a n iza tio n

very

the o p tim al

cost.

C o n s t r a i n e d Optimum

in vestm en t exam ined.

im p lies

minima!

small

throughout

T h e use o f

lo ss e s o f

th at

p o te n tia l

o rg a n izatio n s over

the

range

in v e s tig a te d .

Im p lic a tio n s

Th e q u a n t i t y o f

of

N,

cost

th is

savings,

cost

savings

S h o r t Run O r g a n i z a t i o n

P2 ^ 5 ' ane* ^2 ^ usec* ' n M i c h i g a n

ha v e be en s u p p l i e d w i t h
s id e ra b le

th e O ptim al

the e x i s t i n g
to

in d u s try

the M ichigan

a number o f

fa c ilitie s

farm ers.

changes would

in

In o r d e r

1 9 70 c o u l d
at
to

need t o be made

a c on­
re a liz e
in

the

s u p p l y and use p a t t e r n s .
Th e f o l l o w i n g
essary

to b rin g

1.

is a

about

In creased

fa c ilitie s

lis t

of

t h e m a j o r cha ng e s

the afo rem entio ned

use o f

the e x is t in g

in M ic h i g a n , w i t h

d ire c t

cost

t h a t w o u l d be n e c ­

savings:

a n h y d r o u s ammonia p r o d u c t i o n

a p p lic a tio n

u tiliz in g

th is

produc

t io n;
2.

D e c r e a s e d NH^ r e t a i l i n g

f u n c t io n being
3.
g ranular

itie s

performed p r i m a r i l y

In creased

pro d u ctio n

potassium

tf.

E lim in a tio n

5.

A s h ift

from

the

fa c ilitie s ,

in

ard

w ith

the

re ta ilin g

by NH^ p r o d u c e r s ;
use o f monoammonium

p h o s p h a t e and

c h lo rid e ;
of
the

re ta ile r

d r y ba gg ed and

liq u id

perform ance o f dry
to

the

processor;

fe rtiliz e rs ;

fe rtiliz e r

r e ta ilin g a c tiv

54
6.

A decrease

sponding

increase

7.

in

the

in t h e

An e l i m i n a t i o n

in

the

in d u stry.

some o f t h e

The

small

la rg e blen ders;

im p lic a tio n s

fo r

and,

groups

p a rtic ip a tin g

disc u s s io n s o f

im p lic a tio n s .

c a p acity

t o p r o d u c e a n h y d r o u s ammonia i n M i c h i g a n
The t o t a l

to

a p p lic a tio n ;

p r o d u c e NH^ f o r d i r e c t

the

several

paragraphs c o n ta in

is b e in g u n d e r - u t i l i z e d .

supply o f

d r y b l e n d e r s and a c o r r e ­

sub op timu m p r o d u c t s .

fo llo w in g

im p o rtan t

Th e e x i s t i n g

number o f
of

T h e s e changes h a v e

number o f

NHg coming f r o m t h e

e x is tin g

capacity

whereas,

G u lf Coast

c o u l d be used

a re d u c tio n

producer

is

in

the

in d icated

in

a n a ly s is .
From a t e c h n o l o g i c a l

appears

t o be i n e f f i c i e n t

T h is

i n d i c a t e d by t h e

is

in

th e M idwest w h i l e

at

n e a rly

constant

v ie w p o in t,
re la tiv e
com plete

the

the

to

level

t y p e NH^ t e c h n o l o g y

the c e n t r if u g a l

shut-down o f

c e n trifu g a l

p ro d u ctio n

pisto n

the

technology.

pisto n

compressor o u t p u t
when c o m p a r i n g

compressor

is m a in ta in e d

1970 A c t u a l

and

C o n s t r a i n e d Optimum.
O ther n itro g e n
g re a tly

reduced

o n ly exception
producers;
higher

producers a re e i t h e r

le v e ls
to

th is

t h e i r o u tp ut

in

the

C o n s t r a i n e d Optimum o r g a n i z a t i o n .

is

the

case o f

in th e

than under e x i s t i n g

o rg an izatio n o f

the

numerous n i t r o g e n o u s
investm en t

in th e s e

Th erefore,

if

producing

short

n itro g e n m a nufacturing
r u n op tim um s i t u a t i o n

c o n d itio n s .

in d u stry

Hence,

in

th e

is

short

suboptim al

producers.
fa c ilitie s

such a r e o r g a n i z a t i o n w e r e

It

Th e

s o lu tio n s
s lig h tly

run,

i n a minimum c o s t f r a m e w o r k w o u l d

fe rtiliz e r

such p r o d u c t s

shut-down o r produce a t

re­

id le

can be c o n c l u d e d t h a t

w o u l d be no l o n g e r d e s i r e d .
t o be ma de ,

firm s

as a q u e o u s ammonia and u r e a m i g h t

c u rre n tly
seek to

55
e ith e r

scrap t h e i r

fa c ilitie s

o t h e r optimum p r o d u c t s .

Th is

very

p ra c tic a l,

the

tio n

technology.
In the

owing to

phosphate

or

more e f f i c i e n t
normal

is

the

fa c ilitie s

c lo s e r

to

phosphate
to

fa c ilitie s

th e M ichigan

u tiliz e d

in

G r a n u l a r and
econom ical

Accompanying t h i s

fo r

the

standard

and

r u n o f m in e

be made i n

re ta ile rs
potash
given

ro c k phosphate o r
s h ift

trip le

t o am mo ni a te d

phosphate p ro c e s s in g

normal

in o r d e r

and/or

trip le

to m inim ize

capacity

total

in F l o r id a

potassium c h l o r i d e appear
and c o a r s e
the

grades o f

super­
cost

c o u l d be

t o be more

potash.

potassium producers

produce th e a p p r o p r i a t e

the

quest

in

q u a n titie s

the m arketin g o f

f o r minimum t o t a l

are e lim in a te d

I t would

to a l t e r

th e ir

o f granular

in

the s h o rt

other f e r t i l i z e r

cost.

potash products

Th e t r a d i t i o n a l

r u n op ti m u m o r g a n i z a t i o n .
products

needs

p rio r

potash
A ll

to a p p lic a tio n ,

C o n s t r a i n e d Optimum o r g a n i z a t i o n .

tn t h e

tran s p o rta tio n

im p lic a tio n s a r is e
cost.

and Con­

p r o d u c t i o n o f monoammonium p h o s p h a t e .

fo r

a ch an ge

i s m ix e d w i t h
the

produc­

potassium .

Furtherm ore,
to

to

fe rtiliz e r

1 9 70 A c t u a l

of

th e ir

The e x i s t i n g

n o t be e x t r e m e l y d i f f i c u l t
s c re e n in g process

is n o t

ro c k m ines.

the Midwest

ru n -o f-m in e

than the

re lo c a tio n

could c lo s e

farm er.

more h e a v i l y

phosphate than

F lo rid a

Phosphate p r o d u c e r s

pro d u ctio n o f

however,

nature o f

a com parison o f

towards

the

in to the

a lte rn a tiv e ,

s p e c ia lize d

sources o f

tren d

them

t h a t monoammonium and diammonium p h o s p h a t e

superphosphate.

phosphates

convert

la tte r

sector,

s t r a i n e d Optimum s u g g e s t s
are

or

as th e

sector o f
re s u lt o f

the

in d u s try ,

re o rg a n iza tio n

several

im portant

to m inim ize

to ta l

56
Th e

in cre a s e

a d d itio n a l

ra il

to M ich ig an .

in

phosphate

cars

In

fo r

tra n s p o rtin g

1 9 70 A c t u a l ,

t h e M i d w e s t and M i c h i g a n
Under th e

short

going from th e
and d i r e c t

phate

Coast

fo r

G u lf

Coast

be p a r t i a l l y

a m m o ni a te d p h o s p h a t e

of

im p lie s

th at

re d ire c te d
products.

the

under

and

there w ill

n iza tio n

of

there w i l l
can r e a d i l y

T h erefore,

the

be a d e c r e a s e d n e e d f o r

However, a t

p ip e lin e

farm

the

fa c ilitie s

for
ad d i­
phos­

same t i m e

to b rin g

the s h o rt

the

current o rg a n izatio n

usa ge o f

in d u s try .

sw itch

to

is

fo r

be an

gas f r o m t h e

t r u c k i n g o f NH^

s u b s ta n tia l

from th e Midwest

NH3 i s

in d u s try ,

th e M ichigan

imply a d e c re a s e d
of

t h e mo st f r o m a s h o r t

A lthou gh

c o s t savings f o r

processors.
usage o f

NH^.
r u n op timum o r g a ­

few er products w i l l

t h e op timum p r o d u c t s .

increased

in d u s try o rg a n iz a tio n ;

o f the

producer to

and t h e

trucked

tru ck tran s p o rta tio n

to b e n e fit

be a v e r y

natural

f o r more

r u n op timum

C o n s t r a i n e d Optimum w o u l d

stand

ta n k cars

there w ill

a n h y d r o u s ammonia r e t a i l e r

A n h y d r o u s ammonia

in

G u lf

f o r NHj p r o d u c t i o n .

from th e M idwest

in creased

Farmers

to F lo rid a

the

of

the

s h i p p e d by r a i l

ra il

processing

away f r o m

lo n g er d is ta n c e s .

C onsequently,

fo r

a n h y d r o u s ammonia p r o d u c t i o n

usage o f d i r e c t a p p l i c a t i o n o f NH^ c a l l s

w hereas,

was p r e v i o u s l y

these

in t o M ichigan

producer to

to

fe rtiliz e rs .

transport

NHj n o r t h .

E lim in a tio n

over

ph osphatic

be n e c e s s a r y t o

i n c r e a s e d us a g e o f
G u lf Coast

shipped

to M ich ig an .

The s h i f t

tra n s p o rtin g

pro d u ctio n o f

t h e M i d w e s t and M i c h i g a n

hopper-bottom cars w i l l

re q u ire

a m m o ni a te d p h o s p h a t e p r o d u c t s

p h o s p h o r i c a c i d was b e i n g
the

to

a p p lic a tio n w ill

products

in F l o r i d a w i l l

r u n op timum o r g a n ! z a t i o n , ammonia t h a t

th e m anufacture o f
tio n a l

pro d u ctio n

those

be a v a i l a b l e ,
farm ers

th at

57
There a r e ,
c u rre n tly

using

be p r o d u c e d ,
to dry

however,
liq u id

it

Liq u id s

equipment than t h a t

Th is

fe rtiliz e rs .

o

using

costs f o r

Since

w o u ld become n e c e s s a r y

products.

c u rre n tly

some a d d i t i o n a l

liq u id s w ill

it

c o s tly

c o s t has n o t been a c c o u n t e d f o r

in

In p r a c t i c a l i t y ,

that

shut-down o f a l l
using

liq u id s

it

liq u id

could

is

doubtful

p lan ts.

(and

As t h e i r

equipment d e p r e c i a t e s

make t h e

conversion

to dry

farm ers

to dry prod ucts.

t h e m odel.
t h e r e w o u l d be an

continue

and

Consequently

to convert

Th erefo re,

should)

t o be made

h a n d l i n g and a p p l i c a t i o n

fe rtiliz e rs .

fin d

farm ers

l i q u i d s w o u l d no l o n g e r

f o r a conversion

ha v e d i f f e r e n t

used f o r d r y

those

farm ers

th a t are

t o do so i n

liq u id

p lan ts

im m ediate

the

c lo s e ,

c u rre n tly

short

they

run.

should

product h a n d lin g equipm ent.

Summary

The C o n s t r a i n e d
ch an ge
short
to

in

t h e wage r a t e

over the

r u n op ti m u m o r g a n i z a t i o n

12.0

per

cent,

cent,

it

to ta l

cost o f

Of the
te r m s o f

in c lu s iv e .

was s u b o p t i m a l

r e t u r n on

c om pletely

For

rates o f

in

phosphate

increm ental

in ve s tm en t.

retu rn
retu rn

d e s p ite

cost

Potassium

per
is

is

less

to

was

per

the

cent

than 6 . 0

per

cent o f

the

the m u ltitu d e o f

o p tim a lity .
t h e most s e n s i t i v e ,

ton,
the

It

from 6 . 0

t h a n o n e - t e n t h o f one p e r

o rg a n izatio n ,

n u trie n ts ,

in s e n s itiv e

r a te s exam ined.

rates o f

cha ng e s n e c e s s a r y t o o b t a i n

three

charge

is

range o f

fo r

by l e s s

the o p tim al

org a n izatio n a l

of

Optimum s o l u t i o n

to

least

changes

in

the

in
rate

s e n s itiv e .

See H e n d e r s o n , D e n n i s R . , " F e r t i l i z e r C o n s u m p t i o n and I n d u s t r y
A d j u s t m e n t , " u n p u b lis h e d Ph.D. t h e s i s , M ic h ig a n S t a t e U n i v e r s i t y ,
pp. 9 5 - 1 0 5 , f o r a d e t a i l e d a n a l y s i s o f t h e s e a d d i t i o n a l c o s t s .

58

The a n h y d r o u s a r m o n i a
c hanges

in

the

r e t u r n on

re ta ilin g

fu n ctio n

is

rath er

a d e s ira b le

is

that o f

go al

s u b s ta n tia l

some p r o d u c e r s
immediate

fo r

those fa rm e rs

in d u s try
p o te n tia l

and r e t a i l e r s

sw itch

h a n d lin g and a p p l i c a t i o n
c h a ra c te ris tic s

p a rtic ip a n ts .

Its

cost

At

savings.

usin g

liq u id

co sts,

liq u id

s ta n d p o in t,

new i n v e s t m e n t

s o lu tio n ,
tim e,

products

change t o

that

are

suboptim al

c u rre n tly

th e optim al

u sin g

ones.

In a d d i t i o n ,

in p h y s ic a l

fe rtiliz e rs .

is

not

in

im m e d i a t e

d e s ira b le .

sw itch
New and

f o r h a n d l i n g and

t h e C o n s t r a i n e d Optimum

they are d e p r e c ia te d .
these

b y an

in cu r a d d i t i o n a l

d ifferen ces

i n e q u i p m e n t and f a c i l i t i e s

s h o u l d be used u n t i l

farm ers

the

a c o m p le te and

t o t h e C o n s t r a i n e d Optimum o r g a n i z a t i o n

processing

t h e same t i m e ,

p ro d u c ts would

ow in g t o

in d u stry

p rim a ry advantage

w o u l d be c o m p l e t e l y e l i m i n a t e d

b e tw e e n d r y and

From a p r a c t i c a l

n e a rly

o f the

t o t h e C o n s t r a i n e d Optimum o r g a n i z a t i o n .

c u rre n tly

to

in vestm en t.

In g e n e r a l , t h e C o n s t r a i n e d Optimum o r g a n i z a t i o n
is

s e n s itiv e

suboptim al

A t the

same

p r o d u c t s can b e g i n

to

CHAPTER

I II

THE IMPACT OF WAGE RATES AND RATES OF RETURN ON
INVESTMENT ON THE OPTIMUM LONG RUN INDUSTRY ORGANIZATION

Th e

I m p a c t o f A l t e r n a t i v e Wage R a t e s

The a n a l y s i s
o rg a n izatio n

of

the

i m p a c t o f wage r a t e s

fo llo w s

the

f o r m a t used f o r

o rg a n izatio n .
both the

s h o r t and

Optimum and
m odel,

S in ce

t h e N,

long ru n s ,

1970 A c t u a l

t h a t w o u ld m i n i m i z e

cost,

c u rre n tly e x is t.

c u rre n t capacity

as

in t h e

optim al

short

49 ,2 5 8,67 3

Th is

Th e

(T ab le

Thus,

cost

industry

c o n s t r a i n e d o p ti m u m

U n like

are

the

same i n

C onstrained

t h e C o n s t r a i n e d Optimum

purchase o f those f a c i l i t i e s

re g a rd le s s o f whether o r
fa c ilitie s

in the

were n o t

short

from $ 3 . 0 0

to

However,

th is

not

the

re s tric te d

to

run a n a l y s i s .

$6.50
tim e

per m an-hou r, j u s t
changes

in

t o wage r a t e s

the

$ 3 .7 5 end $ 5 . 0 0

ranged from 4 7 , 8 8 6 , 6 8 9 d o l l a r s

corresponding

o f $ 3 . 0 0 and

to
$6 . 5 0 ,

lll-l).

in cre a s e o f

less than

on t h e Optimum

o c c u r r e d a t wage r a t e s o f

to tal

d o lla rs ,

re s p e c tiv e ly

d o lla rs

run a n a l y s i s .

o rg an izatio n

(Appendix C ) .

the

a s was t h e c a s e

Th e wage r a t e was r a n g e d

Long Run

a c o m p a r i s o n o f Op tim um ,

allo w ed

to tal

the

and K 2 O c o n s t r a i n t s

can be made.

t h e Optimum model

fa c ilitie s

P2 0 ^ ,

the

in

the

n e a rly

1 .4 m illio n

d o l l a r s was o v e r

200 thousand

in crease experienced d u rin g exam in atio n o f

C o n s t r a i n e d O p tim um .
The number o f m a n - h o u r s u t i l i z e d

59

at

a wage o f $ 3 . 0 0 was 4 1 6 , 1 0 2

Table 111-1.

The impact of wages in the long run

Wage Rate
(Dollars/man-hour)

Total
Cost
(D o lla rs )

ManHours
Labor

Cost3
N

Cost3

Cost0

P2°5

K2°

Cost/
N u trie n t
Tonb

Wage
B ill
(D o lla rs )

Wage as
of Tot.
Cost

3,00

47,886.689

416,102

87.74

146,28

91.41

109.28

1,248,306

2.61

3.25

47,990.714

416,102

87.79

146.84

91.54

109.51

1,352,332

2.82

3.50

48,094.739

416,102

87.83

147.39

91.66

109.75

1,456,357

3.03

3.75

48,198,377

397,545

87.88

147.94

91.79

109.99

1,490,794

3.09

if .00

48,297,764

397,545

87.92

148.36

91.91

110.22

1,590,180

3.29

if. 25

48,397,150

397,545

87.97

148.79

92.04

110.44

1,689,566

3.49

4.50

48,496,536

397,545

88.02

149.21

92.16

110.67

1,788,953

3.69

4.75

48,595,922

397,545

8 8 .0 6

149.64

92.29

110.90

1,888,339

3.89

5.00

48,695,129

375,697

88.11

150.06

92.41

111.12

1,878,485

3.86

5.25

48,789,053

375,697

88.15

150.34

92.54

111.34

1,972,409

4 ,0 4

5.50

48,882,977

375,697

88.20

150.61

92.66

111.55

2,066,334

4.23

5.75

48,976,901

375,697

88.24

150.88

92.79

111.77

2,160,258

4.41

%

Table l l l - l .

(cont'd,)

Wage Rate
(Dollars/man-hour)

Total
Cost
(D o lla rs )

ManHours
Labor

Cost3
N

Cost3
P2°5

Cost3
k 2o

Cost/
N u trie n t
Ton*3

Wage
B ill
(D o lla rs )

Wage as %
of Tot.
Cost

6.0 0

69,070,825

375.697

88,29

15U 6

92.91

111.98

2,254,182

4.59

6.25

i+9,16'*,71+9

375.697

88,34

151,43

93.04

112.19

2,348,106

4,78

6.5 0

**9,258,673

375.697

88.38

151.70

93*16

112.41

2,442,031

4.96

in c re m e n ta l cost per n u trie n t ton ( d o l l a r s ) .
io ta l

cost divided by to ta l n u tr ie n t tonnage (438,023 to n s).

62

an n u a lly ;
to

whereas,

397,545

and a t

s u b s ta n tia lly

at

$3.7 5

$5.0 0

lower

the

than

r a n g e o f wage r a t e s

in

per man-hour

are

t h e 4 5 2 , 1 8 2 m a n - h o u r s used t h r o u g h o u t

the

short

w ith

Optimum ( a g a i n a t
97 employees
m e nt

u tiliz a tio n
$ 4 .0 0

(T ab le

from

w i t h e n d i n g wage r a t e

sw itch in g

of

f r o m 1 9 70 A c t u a l

would

Th e m os t s e r i o u s

1970 A c t u a l

to

the

of

produce M i c h i g a n 's

W hile

in d u s try ,

the

th is

n atio n a l

affecte d .

Even

undertaken

in

if

the

i m p l i c a t i o n s on e m p l o y ­
long run o r g a n i z a t i o n

135 e m p l o y e e s ,

sum ption.

w h ic h

r e d u c t i o n may be s e r i o u s
e m p lo y m e n t s i t u a t i o n

com parab le changes
fe rtiliz e r

in d u stry

p r o b a b l y w o u l d be no n o t i c e a b l e

$ 4 .00

a re d u c tio n o f

$ 5 . 0 0 o r more p e r m a n - h o u r .

e m p l o y e e s ne ed ed t o

(at

to C onstrained

in vo lve

r e d u c e e m p lo y m e n t needs by
a ll

A s s u m i n g a w o r k we e k

o f 6 4 5 , 4 0 5 m an-hours

per man-hour)

I I 1-2).

in vo lve a s h i f t

run a n a l y s i s .

These

dr o p p e d

fig u re s

the

f i g u r e was 3 7 5 * 6 9 7 .

o f 4 0 h o u r s and a 5 0 w e e k y e a r ,
per man-hour)

lab o r u t i l i z a t i o n

is

T h is

n e a rly

s h i f t would
42 p e r c e n t

1970 f e r t i l i z e r
fo r

the

c on­

fe rtiliz e r

w o ul d be r e l a t i v e l y

un­

i n e m pl oy m e nt p r a c t i c e s w e r e
throughout the

U .S .,

there

i m p a c t on unem pl oym en t and r e l i e f

program s.^
The
is

th at

Th e 9 7

larg est
in vo lved

red u c tio n

in em ployees

i n a change f r o m

p o te n tia lly

re s u ltin g

1 9 70 A c t u a l

d i s p l a c e d employees were

du c e s u b o pt im um p r o d u c t s o r w e r e e m p l o y e d

*This

a ris e s

from t h e

low l a b o r

usage

from a s i n g l e

t o C o n s t r a i n e d Op timu m.

la rg e ly

u tiliz e d

in su b -o p tim a l

in

chang e

the

to

pro-

processes.

fe rtiliz e r

in d u s try.

^A c o m p a r i s o n o f 1 9 7 0 A c t u a l and C o n s t r a i n e d Optim um ( A p p e n d i x A)
w i l l r e a d i l y show w h i c h p r o d u c t s and f a c i l i t i e s w o u l d be e x c l u d e d
d u r i n g such a s h i f t .

63
Table

I I 1-2.

Employment

in d i f f e r e n t

Wage R a t e

Man-Hours

$ 4.00
$ 3 .0 0 -$ 6 .5 0
$ 3 .0 0 -$ 3 .5 0
$ 3 . 7 5 - $ 4 . 75
$ 5 .0 0 -$ 6 .5 0

645,405
452,182
416,102
397,545
375,697

O r g a n i z a t i on

1970 A c t u a l
C o n s t r a i n e d optimum
O p t i mum
O p t i mum
O p t i mum

Sources:

industry org a n iza tio n s

Employees®

323
226
208
199
188

A p p e n d i c e s A and C.

a Based on 4 0 h o u r w ee k and 5 0 w e e k y e a r .

The e f f e c t s
p rim a rily
rate

of

changes

by b u l k b l e n d e r s

c ha nge d f r o m $ 3 . 5 0

1 8 ,5 5 7 man-hours
and t h e

associated

red u c tio n o f
c ha ng e

(T ab le

in

in

in

to $3.75

p e r man-hour

111-2).

D uring t h i s

re ta ilin g

u tiliz a tio n

the

long run a r e

( A p p e n d i x C, T a b l e C - 6 ) .

fu n ctio n

1 8 , 6 2 4 man-hours

lab o r

t h e wage r a t e

(T ab le

of a ll

fe lt

When t h e wage

t h e r e was a d e c r e a s e o f
change,

accounted
111-3).

fo r

T h is

b u lk b len d in g
a to ta l

lab o r

in d ic a te s

that

other a c t iv it ie s

the

c o m b in ed was an

i n c r e a s e o f 67 m a n - h o u r s .
The o n l y o t h e r m a j o r e f f e c t
t h e wage r a t e was a n
g ranular

potassium c h l o r i d e

a p p lic a tio n
tons;

at

86 ,3 1 9

in crease

le v e l,

$3.75

tons.

p ro d u c t mix

f o r wage

th a t occurred d u rin g

in

the

le v e l

per man-hour f o r
Accompanying t h i s

between

la b o r,

in

The d i r e c t

$ 3 - 0 0 and $ 3 . 5 0 was 2 7 , 1 6 3

a p p lic a tio n

c h a ng e was a c h a ng e

( A p p e n d i x C, T a b l e C - 6 ) .

change

of d ire c t a p p lic a tio n of

(Appendix C, T a b le C - 5 ) .
rates

th is

P rio r

to

increased
in

the

in c re a s in g

to

b u lk blend
t h e wage

3
rate

to

3

$ 3 .75

per m an-hour,

502,321

tons o f a 7 - 2 8 - 2 8

grade

product

7 - 2 8 - 2 8 denotes t h a t the p rod uct c o n ta in s 7 per c e n t n i t r o g e n ,
28 p e r c e n t P2 O5 , a n d 28 p e r c e n t K 2 O.

Table 111-3.

Labor u t i l i z a t i o n and through-put volume in bulk blending and custom blending (optimum)

Wage rate
(D o llars per man-hour)
Man-hours
per ton

$3.00 to
$3.50

$3.75 to
$4.75

$5.00 to
$6.50

Buik blending

0.1905

95,962

62,806

71,293

Custom blendi ng

0.1905

-0 -

21,641

-0 -

62,790

55,411

46,780

158,482

139,858

118,073

38,09

35.18

31.43

R e ta i1ing

Total

a
0.25

(blending and r e t a i l i n g )

Per cent o f a l 1 labor

Sources:

Compiled from Appendix C, Table C-6, and Henderson, e t a l .

aS a t e l1i t e warehouse product hand)ing.

65
were b u lk b le n d e d .
in c lu s iv e ,
113,601
it

the

F o r w a ge s b e t w e e n $ 3 * 7 5 and $ 4 . 7 5

tons o f a 1 0 .6 - 4 2 . 5 5 - 1 0 . 8 5

was e c o n o m i c a l l y

c h lo rid e ,

th e m ix o f

m a i n t a i n N,

replaced

d e s ira b le

la b o r

w ith

cha ng e s

in

cost o f d i r e c t
the

costs,
the

in

the decrease
(Table

111 - 2 ) ,

in

11 1 -3 ).
which

u tiliz a tio n

to
cus tom

in

potassium ,

as t o t a l

b u lk blen din g
wage r a t e ;

is based

the

prim ary

fo r

a p p lic a tio n

assumption

bu lk

is

the

vary d i r e c t ly

whereas,

the

do es n o t v a r y w i t h
la rg e ly

upon an

s o u r c e o f an y

a n d t h e i r wages a r e

th e de­

labor

independent o f

in d u s try.

changing

from $ 4 .7 5
it

The t o t a l

to

from $ 3 .50

lab o r u t i l i z a t i o n

im p lie s a l l

for

in d u s tria l

farm w o rkers a r e

to

in d i r e c t

T h is

t h e wage r a t e

s im ila r

ra tio

im p e t u s

m a te ria ls

d ir e c t a p p lic a tio n

effect

ra tio ,

fe rtiliz e r

needed f o r

Changing

1-4-1

in p h o s p h a t e and lo w

of

th at

fe rtiliz e r

the

the probable

th e m odel,

a p p lic a tio n

Thus,

has a 1 - 4 - 4

in crease

assum ption

in t h e

th at

fe rtiliz e r

i n d u s t r y wage r a t e .

those

potassium

tons.

i n b u l k b l e n d i n g and

that

high

t h e 7- 2 8 - 2 8 w h i c h

s h o u l d be p o i n t e d o u t

fact

S in ce

t h e t w o b u l k b l e n d p r o d u c t s was n e c e s s a r y

b le n d in g dropped t o 4 4 3 ,2 9 0

crease

fe rtiliz e r.

to d i r e c t apply g ra n u la r

being r e l a t i v e l y

some o f

7 - 2 8 - 2 8 and

tons o f

custom b l e n d

1*2^5* anc* *^2® c o n s t r a i n t s .

blend m a t e r i a l ,

It

produced 3 2 9 ,6 8 9

b u lk blenders

per m an-hour,

decrease
other

$ 5 .00
to

p e r m a n - h o u r had an

$ 3 .7 5 .

T h is

by b u l k b l e n d i n g was
in

tim e ,

2 1 ,7 8 5 man-hours

l a b o r us a g e was 2 1 , 8 4 8

a c tiv itie s

decreased

however,

th e ir

(Table

la b o r

by 63 m a n - h o u r s .

A Custom b l e n d f e r t i l i z e r i s made s p e c i f i c a l l y t o
g e n e r a l l y i n a n u t r i e n t r a t i o , such a s 1- 3 - 2 , n o t t o be
t h e d e s i g n a t i o n f o r grades as e x p l a i n e d in f o o t n o t e 3 .
4 2 . 5 5 - 1 0 . 8 5 a p p r o x i m a t e s a 1 - 4 - 1 r a t i o o f N t o P 2 O5 t o *

o r d e r and i s
confused w i t h
Thus, 1 0 .6 2^ '

66

D ire c t
86,2 9 3

a p p lic a tio n

tons.

At

t i o n was used a t
two p r o d u c ts
to a sin g le

a

same t i m e ,

level

product,

I I 1-1
the

t o 3 7 ^,2 ^* 3

l o n g and s h o r t

graphs

show t h e amount o f

t h e v a r i o u s wage r a t e s ,

t h e C o n s t r a i n e d Optimum
the

the

continuous

la b o r

v e rtic a l

u tiliz a tio n

Thus,

between

these
revert

o f b l e n d in g dropped
7-28-28

to m inim ize

the c o n s t r a in t s

p re v io u s ly ,

blended

lab o r

in ­

the

Th is

in F ig u r e

le v e l

These

to tal

of
is

phoenomenon
II 1-1.

5

"demand"

cost

asso ciated w ith

in d u s try o rg a n iz a tio n

lin e

for

each

lab o r u t i l i z a t i o n
constant

is

through­

r e p r e s e n t e d by

N o n -ze ro changes

two c o n s e c u t i v e wage r a t e s

are

in

represented

lin e s .
we have

seen t h a t

by d i r e c t

a p p lic a tio n of

creases.

N ea rly a m ill io n

re o rg a n izin g

the

cost

re fle c ts

savings

red u c tio n

t h e amount o f

re q u ire d

r a n g e o f wages e x a m i n e d .

by da sh ed

le v e l

to

a p p lic a ­

tons.

lab o r

As m e n t i o n e d

out

The

r u n o p tim um o r g a n i z a t i o n s .

g iven

26 t o n s t o

b u lk b len d in g

p r e s e n t s w h a t c o u l d be c o n s i d e r e d as

fo r

by

The co m b in atio n o f

allo w e d

7-28-28.

whereas,

curves

o rg a n izatio n .

tons.

d ire c tly

nam ely,

d e c lin e d

monoammonium p h o s p h a t e d i r e c t

o f 6 8 ,9 6 5

to 3 7 ^ 2 ^ 3 ;

from 3 2 9 ,6 8 9

Figure

in

potassium c h l o r i d e

being a p p lie d

fro m M*3»290
creased

the

of

in

s e c t i o n , we w i l l

fe rtiliz e r

in d u stry

lab o r

b u lk b len d in g

d o lla rs
in to

on ly

5 T he s e , o f c o u r s e ,
o f f e r t i l i z e r n u trien ts
r a t e was v a r i e d .

m a te ria ls
in

total

at

rep laced
as

cost

to

t h e wage
could

some e x t e n t
rate

d ire c tly

co nstan t wages.

in v e s tig a te

in ­

be a v o i d e d by

l o n g r u n op ti m u m scheme.

the d i f f e r e n c e

u tiliz a tio n

fu rth er

the

is

a ttrib u te d
In the

T h is
to a

fo llo w in g

t h e Optimum i n d u s t r y o r g a n i z a t i o n .

a r e n o t t r u e demand c u r v e s , s i n c e t h e q u a n t i t y
p r o d u c e d was h e l d c o n s t a n t w h i l e t h e wage

67

6 .5 0
6.2 5

6.00
Long Run

5 .5 0
5 .25

Short
Run

5.00

Wage

Rate

(Dollars

Per Man-Hour)

5-75

3 .7 5
3 .5 0
3 .2 5

3.00
0.0
360

380

400

Annual

Figure

111-1.

Labor

420

Man-Hours

Usage

In

440

(Thousands)

the

Long and S h o r t R u n .

68

R e t u r n on

S im ila r

to

the

short

v e s t m e n t was e x a m i n e d
the

short

itie s

re q u ired

those

fa c ilitie s

the e f f e c t s

various

b le ,

total

rates o f

c o s t w o u l d be s e l e c t e d
but not

n e c e ss a rily

R e t u r n on
down by 2 . 0
upper

per

cent

cost,
Th is

that

to

in

Throughout

the e n t i r e

range o f

in

the

( A p p e n d i x D, T a b l e

0 -1 ).

the d ry b le n d in g

iz e rs are
m ent.

n o t used

Th is w i l l
When r e t u r n

on

in ve s te d

c a tio n o f
D ire c t

dry

granular

a p p lic a tio n

( A p p e n d i x D, T a b l e
n e a rly

constant

the

the

d esired

per c e n t.

to m inim ize
fe a s i­

scaled

In a d d i t i o n ,

the

range.

r a t e s exam ined,
in

t h e r e was v e r y

the op tim al

in d u stry;

c a p ita l
were

chang e

o rg an izatio n s
is

th at

custom b le n d e d

low r a t e s o f

retu rn

o c c u rrin g
fe rtil­

on

in v e s t­

was s e t a t
produced

20.0

per c e n t,

374,243

( A p p e n d i x D, T a b l e

D -6).

b e i n g consumed was composed o f d i r e c t a p p l i ­

potassium c h l o r i d e
of

in v e s tig a te s

in g r e a t e r d e t a i l .

fe rtiliz e r

fe rtiliz e r

then,

p e r c e n t and t h e n

a p p ro p riate

high o r

be e x p l a i n e d

those a c t i v ­

i n v e s t m e n t on t h e o p t i m a l

T h e m os t n o t i c e a b l e

fo r e ith e r

U n like

known t o be c u r r e n t l y

20.0

produced

segment o f

tons o f b u lk blen ded
A dd itio n al

the

products

to s e le c t

in­

Optimum o r g a n i z a t i o n was d e t e r m i n e d

increm ents

change

on

use.

-2 .0

per cent

little

retu rn

per c e n t.

fa c ilitie s

among t h o s e

the

to - 2 . 0

a n a ly s is ,

those

in c u r r e n t

of

ra te o f

re g a rd le s s o f whether or not

r e t u r n on

increm ents

v a lid ity

the

Long Run

was a l l o w e d

i n v e s t m e n t was s e t a t

lim it o f

by 0 . 1

in

t h e model

given

the

from 2 0 .0

c u rre n tly e x is t.

in dustry o r g a n iz a t io n ,
to tal

rates

to m inim ize

of

In

run a n a l y s i s ,

fo r

run a n a l y s i s ,

Investm ent

la tte r

D - 4 ) ; whereas,

throughout the

and monoammonium p h o s p h a t e .

p r o d u c t amounted t o 6 8 , 9 6 5
to tal

range o f

p rod uction o f
rates o f

th is

r e t u r n on

tons
p r o d u c t was
in ves tm en t

69
a n a ly ze d .

The o b s e r v e d v a r i a t i o n

p l e t e l y e x p l a i n e d by t h e
tio n s ,

sin ce

th is

P2 O5 r e q u i r e d
le v e l

of

is

granular

ap p lie d dry f e r t i l i z e r )
errors;
due
of

whereas,

la rg e ly
granular

20.0

potassium

per c e n t,

A n h y d r o u s ammonia was
R e t u r n on
of

Lowering
did

not

u n til

the

percentage

2 0.0

ra te

of

rate

greater

than o r equal
to

a t which

that

2 0.0

per cen t.

long

run o p tim a l

reached.
th at

the o p tim a l
to

W ith

on

o rg a n izatio n

10.7

per cen t

r e t u r n on

fe rtiliz e r

the o p tim a l

d ire c tly .

129,890

tons

2 .0

percentage
the

p o in ts

in d u s try

i n c r e m e n t a t i o n by 0 . 1

10.7 per cent

r e t u r n on

the

changed.

th e optim al

a retu rn

on

in d u stry

is

investm en t
For

rates

o rg a n izatio n

in ve s te d

set at

10.7

c a p ita l

of

per c e n t,

id e n tic a l

to

is

the

th at o f

per c e n t.

in vestm en t,

the d i r e c t

a p p lic a tio n

consequently,

in d u s try o r g a n iz a tio n .

becomes more e c o n o m i c a l

were

D -2).

o rg a n izatio n o f

monoammonium p h o s p h a t e becomes s u b - o p t i m a l ;
longer a p a rt o f

is

a p p lic a tio n

asso ciated w ith

investm ent
of

a p p lic a tio n

S ubsequently,

10.8 per c e n t ,

retu rn

same r o u n d i n g

in vested c a p i t a l

increm en ts o f

O p ti m u m , w h i c h assumed a r a t e o f 7 . 5
At

is

o rg an izatio n

a sso ciated w ith

by t h e

d ire c tly

( A p p e n d i x D, T a b l e D - 5 ) .

the o p tim a l

determ ined

was t h e

id e n tic a l

in

in

the

other

D ire c t

( A p p e n d i x D, T a b l e

retu rn

in

p r o d u c t t o be a p p l i e d

per c e n t

d ire c tly

p e r c e n t was
p o in ts

tons

(the

of d ire c t

when r e t u r n s on

com­

fo rm u la­

the v a r i a t i o n

segment.

is

used and t o t a l

e n tire ly

le v e l

b len d in g

the o n ly o t h e r

p r o d u c e a ch an ge

10.0

the

the

to 8 6 ,2 93

investm en t o f

NH^ b e i n g a p p l i e d

S im ila rly ,

in

c h lo rid e ,

am ounted

p ro d u ctio n

in the d ry blend

can be e x p l a i n e d

in

of

potassium c h lo r i d e

the v a r i a t i o n

t o changes

le v e l

phosphatic m a te r ia l

constant.

p rod uction o f

its

rounding e r r o r s

the o n ly

remained

in

it

is

of

no

Dry b le n d in g o f

than d i r e c t a p p l i c a t i o n

o f mono-

70

ammonium p h o s p h a t e .
w ith
to

the

I n an

T h i s amount

is n e a r l y

id e n tic a l
(at

( A p p e n d i x D, T a b l e s
Th e c a u s a l

investm ent
is

of

d ire c t

is

(above

of

the

ta in s

a ll

re q u ire s

are

th ree.
th at

10.7

the

charge

the

charge

investm ent o f

retu rn )

per c e n t ) ,

high

th at

d ire c t

Furtherm ore,

d ire c tly

a p p lie d .

remained

a n h y d r o u s ammonia

10.7

r e m a in e d

a p p l i c a t i o n o f mono­

in ve s tm en t.

the

d ire c t

o f monoammonium

d esp ite

fact

a p p lic a tio n

the

whereas,

per cent but a t

that

on ly

13 p e r c e n t N and 5 2

the blended m a t e r ia l

con­

o f monoammonium p h o s p h a t e

c h a r g e be m e t ,

as we w i l l

the dry

a p p lic a tio n

whereas,

sub-optim al

A t high re tu rn s

cost o f o p era tin g

s u p e rio r,

a p p lic a tio n

A c tu a lly ,

-2 .0

the

fe rtiliz e rs .

potassium c h l o r i d e

w ith
le a s t

c o s t o f b l e n d i n g makes t h a t

rem ainder o f

lo w e rin g o f

cent.

to

su b -o p tim al.

The

of

in d i r e c t

r e t u r n s on

m us t be a p p l i e d ;

decreased

a p p lic a tio n
on

Thus,

than o r equal

cent,

g ran u lar

being a p p lie d ;

an e x t r a

blended m a t e r i a l
less

rates

(monoammonium p h o s p h a t e c o n t a i n s

^ 2^ 5 )

D -1)

t o n n a g e o f monoammonium ph os­

decrease

p h o s p h a t e becomes e c o n o m i c a l l y

per cen t

augmented

( A p p e n d i x D, T a b l e

a p p lic a tio n o f

that o f

s u ffic ie n tly

two n u t r i e n t s

tie

is

D - 2 and D - 5 ) .

facto r

ammonium p h o s p h a t e

to

hig h er

d ir e c t a p p lic a tio n

n e a r l y c o n s t a n t as d i d

blender

in b u l k b le n d in g

i n c r e a s e o f 69,01+7 t o n s o f d r y b l e n d e d

t h a t was p r e v i o u s l y

H ean w hile,

on

decrease

im p le m e n t a t io n o f custom b l e n d in g

re s u lt

phate

A s lig h t

since

it

and t h e

retu rn s

on

investm en t

as g r e a t

as 8 p e r

a d d itio n a l

see m o m e n t a r i l y ,

t h r o u g h and

a p p lic a tio n
the e x t r a

in cluding

retu rn s

per c e n t .
t h e o r g a n i z a t i o n was e s s e n t i a l l y

rate of

r e t u r n on

in vested c a p it a l

th is o rg a n iza tio n a l

scheme, w h i c h

un cha ng ed by
to
is

10.7

P«r

id e n tic a l

71
to

that

u n til

of

the

the

ra te

W ith

of

r u n Optimum o r g a n i z a t i o n ,

retu rn

fe rtiliz e r

to 502,321

tons,

(Appendix D, T a b le s
d ire c t a p p lic a tio n
an n u ally ,

w hich

of

on

retu rn

reduced

reached 6 . 0

retu rn s a t 6 .0

b len din g o f
tons

long

continued.
o f which a l l

D -l
of

and D - 6 ) .

granular

is 5 9 ,1 5 6

invested

rate

per c e n t,

of

retu rn

per c e n t.

the

trend

toward

Total

blen din g

of

was b u l k b l e n d e d

it

Given

lower

th is

than a t

(Appendix 0 ,

has c a u s e d

Table

some o f

D -5).

the d i r e c t

t o be r e p l a c e d by d r y

In o r d e r

to accom plish

ch an ge and c o n t i n u e

and cus tom b l e n d

the observed

fe rtiliz e r

to

When t h e cus tom b l e n d e d
tio n o f

it

and I O . 8 5

had a n u t r i e n t
per c e n t

fe rtiliz e r

N,

ra tio

Thus,

e a s ily

59 ,156

tons o f

ap p lied .

Th e

fe rtiliz e r,
tio n

to

re la tiv e

to

r e s P® ct

blended

the
of

fe rtiliz e r.
^2^5’
b u lk

ra tes

t h a t were

allo w ed

thus,

of

no d i r e c t

the

fo rm u la ­

1 0 .6 ,

4 2 .5 5 ,

The b u l k b l e n d
e x a m i n e d was

and 28 p e r c e n t o f e a c h

t h e cu s to m b l e n d ,

the

contain ed

and p h o s p h a t e c o n t e n t o f

s p e c ific a tio n ;

rates

t o m e et t h e N,

i ve 1y .

range o f

r e m a i n n e a r l y c o n s t a n t and used a l l

t o meet t h e

tons

Thus,

was b e i n g m a de ,

potassium c h l o r i d e

low n i t r o g e n

re tu rn ,

a p p lic a tio n

s e en how t h e b u l k b l e n d f e r t i l i z e r

granular

fe rtiliz e rs

from a c o m b in a tio n o f

1 - 4 - 1 , which

the e n t i r e

7 per cen t n itro g e n

is

of

f * 2 ° 5 » an<* ^ 2 0 ,

used t h r o u g h o u t

by 5 9 , 0 3 1

s o l e l y b u l k b l e n d i n g was n e c e s s a r y .

fe rtiliz e r

composed o f
it

sw itch

dry

p re v io u s ly h ig h e r

potassium c h l o r i d e

and K 2 O c o n s t r a i n t s ,

in creased

same r a t e o f

g ranular

th is

in creased

p o t a s s i u m c h l o r i d e was 2 7 , 1 6 3

tons

c a p ita l

r e m a i n e d un cha ng ed

P2 ^5 an<* ^ 2 ^*

used up t h e
p re v io u s ly

d ire c tly

the b u lk blend

NH^ d i r e c t a p p l i c a ­
phosphate

a p p lic a tio n

req u ired
of

was r e q u i r e d .
As m e n t i o n e d e a r l i e r ,

the d i r e c t

a p p l i c a t i o n o f monoammoniurn

72

p h o s p h a t e becomes s u b - o p t i m a l
are

im po sed ,

v iz .,

C onsequently,
m in im izin g
10.7

to tal

d ire c t

cost,
W ith

r e t u r n b e lo w a n d
P 2 O5 becomes an

blen din g a l l

per c e n t.

cent,

rates o f

when s u f f i c i e n t l y

given

rates o f

ra tes o f

a p p lic a tio n

the decrease o f 59*156

retu rn

tons o f d i r e c t

we can now r e a d i l y

b u lk blend

fe rtiliz e r

was used a t

bined;

whereas,

to ta l

the

p re v io u s ly

o f 5 3 *4 per cent o f

fo rm u la tio n

exhausted

needs

fo llo w s

(th is

K 2O i s

s till

fe rtiliz e r
q u ired

been u s e d ,
la rg e r

d ire c tly ,

The c o s t
viewed

in th e

the

111-4).

fig u re
If

o rg a n izatio n
w hich

the

4

to

in

run.

the

to

number o f

to tal

le v e l.

o f 5b per c e n t o f

M oreover,

the

I

ra tio

whereas,

use o f

is

i n d u s t r y would

corresponding
greater

to

some

have

re­

potassium c h l o r i d e

is

the

the

than t h a t

s im ila r
c a p ita l

1970

le v e ls

Just

under

to the $ 7 , 3 8 6 , 5 6 0

2.0 per cent

rate

b l e n d e d and

in v e s te d

$ 5 2 ,9 36 ,0 3 2 .

to

7-28-28

be

7-28-28.

supp lying

sw itch

supply a

ha d t h e c us t o m b l e n d

long run a n a l y s i s

cost o f

each

had met t h e K 2 O

it

is

tons o f g r a n u l a r
the

7-28-28

the

P 2 O5 t o ^ 2° wou^

of

When r e t u r n s on

long run

P 2 O5

potassium

anc* ^ 2 *^ com“

ant^ K 2^ P®1” t o n -

th at a ll

by

In a t t e m p t i n g

could o n ly

c a n be a t t r i b u t e d

is a s l i g h t l y

u n d e r s t a n d why t h e

used custom b l e n d

fact

per

as w i t n e s s e d

producing excess o f e i t h e r ,

d ire c tly );

re la tiv e

short

per c e n t ,

th is

its

s itu a tio n

P 2 O5 , and K 2 O i n
of

from th e

to

to 6 .0

o f granular

P 2 O5 r e q u i r e m e n t b e f o r e

the

b ein g a p p lie d

that a

a p p lie d

2 0 .0

a to tal

fo r

than o r equal

than o r equal

such a h i g h

ant* ^ 0 , w ' t h o u t

7 -2 8 -2 8 contain ed

less

a p p lic a tio n

Th erefore,

ton o f

c o n s tra in t

o f K^O becomes s u b - o p t i m a l ,

c h lo rid e .

to blend a l l

im p lie d

retu rn

10.7 per c e n t .

in cluding

retu rn
less

low r a t e s o f

in

to
are

set a t

o f N,
14 p e r c e n t

retu rn s

lo n g run o p tim a l

re tu rn

th at

(Table
in d u s try

on i n v e s t e d c a p i t a l ,

received

in r e c e n t y e a r s

in

Table 111-4.

The e f f e c t of returns on investment in the long run ( in d o lla r s )

Return on Investment
(per cent)

Total
Cost

Costa

Investment

Cost9
N

P2°5

Cost9
K20

Returns

20.0

52,936,032

36,932,798

95.98

162.04

96.34

7,386,560

18.0

52,197,376

36,932,798

94.69

159.95

95.63

6,647,904

16.0

51,458,720

36,932,798

93.40

157.86

94,92

5,909,248

14.0

50,720,064

36,932,798

92.11

155.76

94.21

5,170,592

12.0

49,981,408

36,932,798

90.82

153.67

93.51

4,431,936

10.7

49,501,018

37.601,696

89.99

152.31

93.05

4,023,381

10.0

49,237,806

37,601,696

89.53

151.44

92.80

3,760,170

8.0

48,485,772

37,601,696

88.25

148.98

92.09

3,008,136

6 .0

47,726,487

38,420,188

86.96

146.31

91.38

2,305,211

4 .0

46,958,084

38,420,188

85.67

143.39

90.67

1,536,808

2.0

46,189,680

38,420,188

84.38

140.47

89.96

768,404

0.0

45,421,276

38,420,188

83.09

137.54

89.25

-0 -

- 2 .0

44,652,872

38,420,188

81.81

134.63

88.55

-768,404

a Incremental cost per ton.

74

the

in d u s try,

the

to ta l

cost o f

s u p p lyin g

fe rtiliz e r

w o u l d be o n l y

m e nt w o u ld

save M ic h ig a n fa rm e rs

to a retu rn

of

compared t o

the

tio n
of

to tal

r e t u r n on
If,
long

n e a rly

cost o f

the

investm ent

run o p tim al
c a p ita l

f a r m e r s would
current

c e rta in ly

is

red u c tio n

p erien ced

retu rn o f

1 0.0

ra te

of

2 0 .0

was $ 1 3 4 . 6 3 ,
ents.
was

22 m i l l i o n

the

re s u lts
change

in

for

d o lla rs ,

Th e

the
its

short

the

in

per

1 0.0

fig u re

cost
an

ton,

the

a retu rn

on

per c e n t would

31

rate of

increm ental

g reatest
in

Its

per

the

P«r c e n t

ton.

A rate

$7.79

per cen t

lowest

fig u re

change among t h e t h r e e

increm ental
h i g h and

re s p e c tiv e ly .

low

cost

per

p h o s p h a t e had a

The 2 0 . 0
the

cost o f

p e r t o n when

to o n ly

re tu rn ,
ton.

potassium e x ­

in crem en tal

was $ 8 8 . 5 5

P2®5 was $ 1 6 2 . 0 4 w h i l e

two.

to

to M ichigan

run a n a l y s i s ,

c h a ng e amounts

the

h a v i n g a ch an ge

per

th at

when compared w i t h

retu rn o f

increm ental

T h is

P2®5 t *ie

the o t h e r

cent

on f e r t i l i z e r .

whereas,

in cost

per

given

sw itched

savings

is a s s o c i a t e d w i t h

per cent.

give

$ 9 5 . 9 8 and $ 8 1 . 8 1

i s o v e r 55

o rg a n izatio n ,

as

organiza­

in d u s try e n tre p re n e u rs , w h ile a t

in

same change

N itro g e n ,

in between

to

savings

current

w hich

p a rtic ip a n ts

the

o rg a n izatio n .

fig u re

to

per c e n t ,

per cent

o f $27.41
retu rn

in d u s try

expenditu res

le a s t

r e t u r n s were - 2 . 0

decrease

$ 2 5 ,2 55 *9 8/,

the

as compared

cost

f a r m e r s w o u l d o b t a i n an e f f e c t i v e

the

D uring the

of

in v e s t­

per c e n t.

be o v e r

$ 9 6 . 3 4 p e r t o n o f K 20 ;

ton.

d o lla rs

the

cost

th e ir

the

im p o rta n tly ,

d o lla rs

of

s till

to

r e t u r n on

associated w ith

M ichigan

S im ila r

low er

in d u stry o rg a n iz a tio n

in d u s try

in

same q u a n t i t y o f

m illio n

Tong r u n o p t i m a l
2 .0

be a t t r a c t i v e

same t i m e ,

M or e

is

T h is

over 6 .7

71.5 m i l l i o n

on t h e o t h e r h a n d ,

in ve s te d

of

per c e n t.

( A p p e n d i x A , T a b l e A—1)

the

the

2 0 .0

$ 4 6 ,1 89 ,6 8 0 .

th at

n u tri­

per ton o f

in crem en tal

$ 14.17,

c o s ts were

75
T o tal
the

range o f

r e t u r n on
of

investm en t
rates o f

o b je c tiv e .
drops

change

in

cost

Thus,

e ffic ie n t

The

(Table

in ve s te d

long

users o f

re la tiv e ly

small

ch an ge

in d u s try

the

change
s iv e

in

of

retu rn

that

m ix.

nature o f

n a tiv e

the

o n ly

on

increases
if

in th e

an a l t e r n a t i v e

is

lin e a r

ra th e r

product o r

technology

in

in d ire c tly

connected w i t h

per

change

cent o f
in

the

r e t u r n on
are

re l­

the

not

is e s t a b l i s h e d ,
lik e ly

re la tiv e ly

cost

a

to

high

lim ite d

p ro d u c t mix

of

r e t u r n would
technology

in ter-d e p e n d en c e
would

complex;
the

le a s t

several

ca us e

tend

re s u lt

s o lu tio n

in a

number o f

a lte r­

rath er

it

s ta b le .

a s b e i n g mimimum
t o be r e p l a c e d
in a lower

t o make c h a n g e s

cost

c h a ng e s

in ten ­

among t h e v a r i o u s

a ris e s

con­

c a p ita l

re s u lte d

th is

is

On t h e o t h e r

technology o r ie n te d ;

p ro d u c t mix

le a s t

p r og ra m m in g model

product to anoth er

98.5

r a te s exam ined.

la rg e ly

product o r

in

c o s t c ha nge d by

t e c h n o l o g y has been s e l e c t e d

rate

Th e h i g h d e g r e e o f

of

i n v e s t m e n t n o t e d a bo v e

i n d u s t r y co m b in ed w i t h

cost.
the

range o f

Furtherm ore,

in te n s iv e

the

ra te

in d u s try a c t i v i t i e s

to tal

in vestm en t a r e

t e c h n o l o g i e s make t h e

Once a c a p i t a l
co st,

the

in

on c e t h e minimum c o s t

rate

le v e l

no n-investm ent f a c t o r s .

hand,

in

the

is

of

c ha nge d $ 8 , 1 5 4 , 9 6 4 o v e r

by t h e

run o p tim a l

given

s eq u en tly,

t o an o p t i m a l

To tal

C onsequently,

somewhat s u r p r i s i n g ,
the f e r t i l i z e r

c a p ita l

given

A rate

cost m in im izatio n

111-4).

fo r

d o lla rs ,

exam ined.

t o $ 3 8 , 4 2 0 , 1 8 8 when

is accounted

the

1.5 m i l l i o n

in vested c a p it a l

in cre a s es

on

th a n

given t h a t

r a t e s exam ined.

to tal

less

per cent corresponds

per cent

and r e t u r n s

in vestm en t.
a tiv e ly

2 0 .0

fig u re

to 6 . 0

range o f

to

$ 3 6 ,9 32 ,7 9 8 ,

T h is

$8 ,2 8 3,16 0
the

retu rn

investm en t o f

in vestm en t o f

retu rn

c ha nge d by

to tal

a c tiv itie s

fr o m one

because a p a r t i c u l a r
is d i r e c t l y

other a c t i v i t i e s

f o r m i n g an

or
in te r­

76

woven g r o u p .
a m ajor

In o r d e r

p o rtio n o f

fo r

one a c t i v i t y

t h e g r o u p w o u l d ha v e t o

suppose t h a t monoammoniurn p h o s p h a t e
fo rm u latio n
trip le

w ith

Among t h o s e

fo rm u la tio n ;
other

the

products

nitrogenous
and t h e i r
cost

some o t h e r

superphosphate

change.

(TSP)

s o lu tio n

composing t h e

in

the

is

in a d r y b u lk blend
In o r d e r

need t o c h a n g e a r e :
a c tiv itie s

etc.

Thus,

s o lu tio n

fo r,

a c tiv itie s

must

and

the

MAP and TSP s t o r a g e ;
co n tain

we see

cost

say,

the b u l k b len d

f o r MAP, T S P ,

N,

other

b u t MAP d o es )

t h a t once

an a l t e r n a t i v e

t o have a c o n s i d e r a b l e
cost

used

several

( s i n c e TSP does n o t

least

For e x a m p le ,

products.

fo rm u la tio n s ;

a c tiv itie s ;

g r ou p t o be r e p l a c e d ,

change.

r e p l a c e MAP,

has been e s t a b l i s h e d ,

n o l o g y w o u l d need
an a c t i v i t y

to

t h a t would

fe rtiliz e rs

(MAP)

un sp ecified

tran s p o rta tio n

re la te d

in t h a t

t h e minimum

product or

tech­

saving advantage over

before

the

s o l u t i o n would

change.
If
the

t h e Optimum o r g a n i z a t i o n

range o f

rate s o f

( A p p e n d i x A)

r e t u r n exam ined,

then o n ly

c o u l d be made t o w a r d s c o s t m i n i m i z a t i o n
investm ent
ra tes o f
Optimum
If

f o r which

retu rn

between and

in cluding 6 .0
re s u lts

re s u lt

in a c o s t equal

more t h a n t h e o p t i m a l

is

imposed t h r o u g h o u t

small

those

and

im p r o v e m e n t s

rates o f

r e t u r n on

s u b -o p tim a l.

10.7

per c e n t ,

For
the

i n minimum c o s t .

r e t u r n on i n v e s t m e n t was 2 0 . 0

n i z a t i o n w o u ld
$ 6 1 ,9 ^

fo r

t h e Optimum o r g a n i z a t i o n

in d u s try o rg a n iz a tio n
the

were

to

per c e n t,

t h e Optimum o r g a ­

$ 5 2 , 9 9 7 , 9 7 6 , which

o rg a n izatio n

fo r

that

rate o f

is o n ly
retu rn .

The minimum c o s t o r g a n i z a t i o n w o u l d ,

thus,

o f one p e r c e n t o f

the

t h e Optimum o r g a n i z a t i o n .

other

rate o f

use o f

hand,

if

the

to tal

cost o f

retu rn

t h e Optimum o r g a n i z a t i o n

on

would

save j u s t o v e r o n e - t e n t h
On t h e

i n v e s t m e n t was z e r o p e r c e n t ,
re s u lt

i n an

in crease o f

$5 6 , 3 6 0

77
in t o t a l
the

co st,

total

which

cost o f
is ,

the

retu rn s

th erefo re,
to

Im p licatio n s

The s t a b i l i t y

of

r e t u r n on

suggest

it

Optimum h a s

investm ent

of

d ire

the

use o f

the optim al

the

s p e c ific

w ith
of

of

o rg an izatio n

u n d e r v a r i o u s wage
p o te n tia l

long te rm goal
fo r

the

L e t's

cost

for

to

suboptlm al

hand,

it

NHj d i r e c t l y
2.

to

In cre a s ed

sm all-s c ale
3.

the

4.

the

p r o d u c t man­

im plies

growth

e x a m i n e more c l o s e l y

in

some o f

are:

compressor

in M ic h ig a n alo n g

t e c h n o l o g y and t o d i s t r i b u t i o n

la rg e -s c a le

and a l l

blenders

and e l i m i n a t i o n

of

g ran u lato rs;

C o n s t r u c t i o n and o p e r a t i o n

M ichigan f o r

in d u s try.

farms;

usage o f

blenders

rates

t h e Optimum s o l u t i o n .

run a d ju s t m e n t s

c e n trifu g a l

over

savings

the

I n c r e a s e d use o f a n h y d r o u s ammonia p r o d u c e d

a s h ift

phate;

its

On t h e o t h e r

products.

im p lic a tio n s
lo n g

the op tim al

in d u stry

Long Run Optimum O r g a n i z a t i o n

im p lic a tio n s

and p r o c e s s o r s .

The Optimum

in v e s tig a te d .

i n v e s t m e n t and

ufactu rers

1.

the

i s an a p p r o p r i a t e

rath er

The m a j o r

very n e a rly

t h e Optimum s o l u t i o n

and r a t e s o f
that

o f one p e r c e n t o f

t h e minimum c o s t o r g a n i z a t i o n .

o rg a n izatio n
range o f

i s j u s t more t h a n o n e - t e n t h

d is trib u tio n

of

of

larg e

term in a tin g

potassium c h l o r i d e

U sag e o f monoammonium p h o s p h a t e

as

fa c ilitie s

d ire c tly

the o n ly

to

source o f

in

farm s;
phos­

and,

5.
fu n ctio n

E lim in a tio n o f a ll
being

L e t's

lo cal

re ta ilin g

p e r f o r m e d by m a n u f a c t u r e r ,

examine

these a d ju s tm e n ts

The Optim um s o l u t i o n

im p lie s

to

th at

o u tle ts

b len d ers,

see what
it

w ith

the

re ta ilin g

and t e r m i n a l s .

they

im ply.

i s more e c o n o m i c a l

to

produce

78

a n h y d r o u s ammonia
C oast.

in M ichigan

C u rre n tly ,

Coast because o f
ammonia

i s made.

to

the

pipe

most o f

the

fo r

the

a v a ila b ility

gas t o M i c h i g a n

G u lf Coast to M ic h ig a n .

Coast

s till

phates

im po rtant f o r

produced

o f natural

The Optimum s o l u t i o n

natural

in

t h e ammonia

the

nitro gen

G u lf

Coast

ated

phosphate

long

run.

im po rtant

in F l o r i d a .

C onsequently,

normal

Furtherm ore,

and t r i p l e

the e x i s t i n g
mines

on new i n v e s t m e n t

w ill

U n til

such

producer

is

since

the

o rd in a tio n

is o b ta in e d ,

fa c ilitie s

to

to

s h i p NHg
the

G u lf

t h e Optimum s o l u ­

p r o d u c t i o n o f ammoni­
product

is

used

s triv e

fa c ilitie s

to

in

the

phase

in th e M id w e s t .

p r o d u c e a m m o ni a te d p h o s p h a t e

pro d u ctio n

in F l o r i d a ,

the n itro g e n

lo cal

secto r,

re ta ile r

is

is

if

s h o u l d be p l a c e d
t h e Optimum o r g a n i z a ­

improved c o o r d i n a t i o n

in s ta lle d

from the

is e l i m i n a t e d

re a lize d ,

M ichigan

in M ichigan

in

Thus,

and t h e

d ire c t

producer

the

NH^ f r o m t h e

prod u ctio n .

G u l f C o a s t NH^ f o r

s h o u l d be ph ase d o u t w i t h

re a liz e

is

cheaper

The NH^ p r o d u c t i o n on t h e

phosphate

in phosphate

c o m p e titiv e w ith
technology

fu lly

No o t h e r

imp ro v e d c o o r d i n a t i o n

compressor

M ichigan

is

in s ta lle d .

rem ainder o f

farm er,

it

under

be n e e de d t o move a n h y d r o u s ammonia d i r e c t l y

to the

it

c o u l d be used t o p r o d u c e monoammonium p h o s p h a t e .

on a m m o n ia te d p h o s p h a t e

In th e

G u lf

i n a m m o ni a te d ph os ­

th e econom ical

cap acity

P rio rity

t o be

fo r

superphosphate

F lo rid a

is

th at

phosphate producers m ig h t

near the

tio n

input

G u lf

f r om w h i c h a n h y d r o u s

NH^ p r o d u c t i o n a t

s upp lied

comes f r o m monoammonium p h o s p h a t e .

the

gas

t o make NH^ t h a n

However,

the

i s done on t h e

in d ic a te s

tio n

out

than a t

F lo rid a .

About o n e - f o u r t h o f

is v e ry

a p p lic a tio n

NH^ m a n u f a c t u r i n g

from th e
is

d ire c t

lo n g r u n .

G u lf Coast

as c e n t r i f u g a l

necessary

a p p lic a tio n

in

t h e a n h y d r o u s ammonia r e t a i l e r

t h e Optimum o r g a n i z a t i o n .

co­

to

79
F a c ilitie s

for

the p ro d u c tio n o f o th e r

w o u l d n o t be r e p l a c e d as t h e y d e p r e c i a t e .
tio n

in d ic a te s

sources o f

th at

In

the

granular

grade

Thus,

in c e n t r i f u g a l

potassium c h l o r i d e
fo r

the

re fin in g

q u a n titie s

of

is

processes

g ran u lar

bu lk b len d in g

sector o f

and d e t e r i o r a t i o n

them t o

th at

o f b len d in g
28 such

blenders w i l l
op tim al

fa c ilitie s

c a p ita l

in g /m ix in g s e cto r o f
a d d itio n ,

in

the

in d u stry w i l l

w o u ld

fo ld .

large

n o t be r e p l a c e d

In a l l ,

e x is t;

be d o m i n a t e d

liq u id

a b o u t 50

th e re fo re ,

m ixers

as a t t r i t i o n
larg e

re q u ire d

t h e Optimum s o l u t i o n .

c u rre n tly

of

the

It

blenders

t o meet the
is e s tim a te d

22 new 9 * 0 0 0

l o n g r u n b l e n d i n g vo lu me o f

la r g e r blenders

o u tla y w i l l
the

in d u stry

im p r o v e d m a r k e t i n g

the

The
several

to d e v e lo p

ton
the

in d u s try o r g a n iz a tio n .

greater

handle

supply o f g r a n u l a r

G ranular m ix e rs ,

be needed t o m e e t t h e

The o p t i m a l i t y
run,

m ight

s u ffic ie n tly

t o n s a n n u a l l y w o u l d be

in d ic a te d

It

may be n e e d e d

to produce

th at

potassium c h l o r i d e .

fa c ilitie s .

b len d in g 9 ,0 0 0

in d ic a te s

t o make a s u f f i c i e n t

fa c ilitie s

le v e l

s o lu ­

fa c ilitie s .

t h e op timum s o u r c e o f

and s m a l 1 b u l k b l e n d i n g

capable o f

run o p t i m a l

i n M i c h i g a n w o u l d make

NH^ p r o d u c t i o n

in o r d e r

grade

cause

producers

Thus, e f f o r t s

The p r o c e s s i n g / m i x i n g
larg e

long

t h e Optimum s o l u t i o n

producers

potassium c h l o r i d e .

im p r o v e d

by

n itro g e n

potassium s e c t o r ,

be d i f f i c u l t

The

products

NH^ and monoammonium p h o s p h a t e w o u l d be t h e o n l y

n itro g en .

new i n v e s t m e n t o n l y

nitro genous

l a r g e r v o lu m e

lo n g

the

that

in

be needed f o r e n t r y

in to

the

as compared t o

programs w i l l

throug h-pu t o f

r u n Optimum

s e gm ent s o f

in d ic a te s

long

process­

recent years.

ne e d t o be

In

implemented

to

t h e new b l e n d e r s .

in d u s try o r g a n iz a tio n

tran s p o rta tio n

the

sector o f

has
the

im p lic a tio n s
in d u stry.

for

so
The s h i f t
M i c h i g a n has
tio n ,

o f a n h y d r o u s ammonia p r o d u c t i o n

im p lic a tio n s

C u rre n tly ,

by r a i l

from t h e

a

for

larg e

ra il

tio n w ill
of

decrease.

p ip e lin e

C oast.

L im ited

facto rs

a ttrib u tin g
Thus,

fo r

itie s

in th e

itie s

i s an

by t h e

the

w ill

to

short

a v a ila b ility

the

s h ift

in d ic a te d
s u ita b le

in

run.

In t h e

investm ent

long

item t h a t

tran sp o rta­

in M ic h ig a n

is

shipped

in d u s try evo lves

use o f

ra il

in creased

fo r

natural

gas

as o u t ­

NH^ t r a n s p o r t a ­

us a g e w i l l

be made

from t h e

has be e n one o f

shortage o f

a v a ila b ility

G u lf

the e x p ressed

in

the M ichigan

the

nitro gen

sector

of

p ip e lin e

tran s p o rta tio n

run,

a d d itio n a l

s h o u l d be g i v e n

c o u l d be

p ip e lin e

fa c il­

fa c il­

con sid erab le

thought

secto r.

fle e t.
s h ift

in

s h ifts

a d d itio n a l

to M ic h ig a n .

ra il

the

If

G u lf Coast to

modes o f

gas s h i p m e n t t o M i c h i g a n

phosphate p r o d u c t io n

phosphate

then

same t i m e ,

natural

suggested

be a need f o r

taxed

th e

lim ite d

n itro gen

If

At

p ip e lin e

hampered by t h e

NH^ used

G u lf Coast t o M ic h ig a n .

the

area.

and p i p e l i n e

po rtion o f

l i n e d by t h e Optimum s o l u t i o n ,

from th e

ra il

T h is w i l l

p rim a rily
c a p acity

in cre a s e

T h erefo re,

in o r d e r

phosphate

p ro d u c tio n ,

f o r h a u l i n g a m m o n ia t e d

to

to

F lo rid a ,

to haul
the

phosphate

there

monoammonium

b u r d e n on an a l r e a d y

s u c c es s fu lly
the

then

com plete

supply o f

ra il

products w i l l

the

cars

need t o be

augmented.
It
phate

is q u i t e

products a r e

im p lem en tatio n o f
needed

p o ssib le

ra il

cars.

used p r i m a r i l y
la tio n of

the

that

c u rre n tly
te rm in a ls

t o meet

the

te rm in a ls ,

bein g
fo r

Th is w i l l

some o f

the

ra il

used by t h e

potash w i l l

come a b o u t

peak season

cars

some o f

some o f

rush p e r io d .

the e f f e c t w i l l

fo r

potash s e c t o r .

free

since

ne ed ed

be t h a t o f

the

these
W ith

Th e
p revio u sly

c a rs were

the

reducing

pho s­

in s ta l­
some o f

81

the

s e a s o n a lity ,

fe rtiliz e r;
hauls

s in c e one f u n c t i o n o f

consequen tly,

s h o u l d be a b l e

system

in which

to

to

a s m aller

term inal

number o f

k e ep up w i t h

s to c k -p ile

the

during

demand,

ra il
if

a very

short

p erio d o f

to

c a r s m a k i n g more

they

ha v e t h e

current
th at

d ire c tly

a v a ila b le

the supply

C u rre n tly ,
sm all

tim e d u rin g

is

the y e a r .

since

fa c ilitie s

rath er

the

number o f

than being
larg e

t h e most

in

the

farm ers

using

to

D is trib u tio n

is

unknown,

the

the e f f e c t

of

concentrated

work.

but

it

numerous

Th e
is

the

re ta ile rs

state

in a c e n t r a l

lik e ly

demand.

s e as o n a lity

spread o u t ov er

of

and p r o d u c e r ,

pe a k s e a s o n a l
the

and

on t r a n s ­

in

these

term inal

and

b len ders.

in d ic a te s

in vo lves

that

used by f a r m e r s .

s h ift

products o th e r

necessary

step

in

the

the

there w i l l

products

is a v e ry

seasonal

fo r m s and

im p o r t a n t changes

to

is

t o meet

product

product

t h e Optimum s o l u t i o n

cha ng e
of

of

is h i g h l y

such t r u c k s

tend to d im in is h

p o rta tio n ,

of

farm

in s u ffic ie n t

the v a r i e t y

One o f

the

supply o f

processors

a small

to

term inal

come u n d e r h e a v y use

p o t a s h and a n h y d r o u s ammonia f r o m t h e M i c h i g a n t e r m i n a l
re s p e c tiv e ly ,

s to c k -p ile

the o ff-s e a s o n .

Truck t r a n s p o r t a t i o n w i t h i n M ichigan w i l l
fo r

is

farm er.

be a s i g n i f i c a n t

Th e a b i l i t y

than

those

sw itch

to

A n a ly s is

and w i l l i n g n e s s

they are

c u rre n tly

t h e Optim um

in d u stry

organ i z a t i on.
The most s e r i o u s
using
lo n g

liq u id
run,

is

fe rtiliz e rs .

farm ers

fe rtiliz e rs

if

the

t o be r e a l i z e d .

taken

im p lic a tio n s

c u rre n tly
cost

S in ce

these

usin g

savings

cost o f

those

products

them w i l l

p o te n tia l

As p o i n t e d o u t

in to account the

in vo lv e

are

need t o

of

in C h a p te r

s w itc h in g

farm ers c u r r e n t ly

from

suboptim al
sw itch

in

the

to other

t h e Optim um o r g a n i z a t i o n
II,

the

liq u id

model
to dry

has n o t
fe rtiliz e r

82

h a n d lin g equipm ent.
phase-out o f
c u rre n tly
th e ir

In th e

liq u id

using

products,

liq u id s

associated

short

run,

there

is

d u r in g w hich tim e

should s w itc h

lik e ly

t o be a g r a d u a l

farm ers

to dry blended

th a t are

fe rtiliz e rs

and

h a n d lin g equipm ent.

Summary

T h e Optimum s o l u t i o n
subjected

has p r o v e d

t o v a r i o u s wage

Changes
s o lu tio n ;

in

rates

t h e wage r a t e

d ire c t

a p p lic a tio n

potassium c h l o r i d e

rep laced

i n c r e a s e d wages w e r e

fo r

cent,
s u lt

rates o f

1 9 70

could

t o an

For

A ctual

some o f

the

on

in M ic h ig a n .

s o lu tio n .

impact

in vestm en t.

upon t h e Optimum
granular

the dry b le n d in g a c t i v i t y

lo ng

run o p t i m a l

in ve s tm en t

rates

less
in

in crease o f

save M ic h ig a n

had a m i n i m a l

r e t u r n on

o f monoammonium p h o s p h a t e and

is

i n a maximum i n c r e a s e

e q u iva len t
in

retu rn

in c lu s iv e .

rates o f

when

as

imposed upon t h e m o d e l .

Th e Optimum s o l u t i o n
tio n

and

t o be v e r y n e a r l y o p t i m a l

from 6 . 0

than 6 . 0

to tal
$0,129

in d u stry o rg a n iza ­

per cent

per c e n t ,

On t h e o t h e r h a n d ,

T h is

savings

P®r

fig u re

is

to n o f consumption

i m p l e m e n t a t i o n o f Optimum

f a r m e r s $ 2 5 , 2 5 5 * 9 8 7 when com par ed t o

T h is

10.7

Optimum would r e ­

cost o f $56,360.
P®r n u t r i e n t

to

is e q u i v a l e n t

to $57.66

the

1970

per n u tr ie n t

ton.
D ire c t a p p lic a tio n
sium c h l o r i d e
take

place

are

affected

in a t t e m p t i n g

over vario u s

rates

of

Im plem entation o f
impact

o f monoammonium p h o s p h a t e and g r a n u l a r
as c h a n g e s

to m inim ize

in

the d r y b l e n d i n g

total

cost

to

potas­

segment

th e M ichigan

farm ers

retu rn .
t h e Optimum s o l u t i o n w o u l d h a v e a s i g n i f i c a n t

upon t h e o r g a n i z a t i o n

and o p e r a t i o n o f t h e

fe rtiliz e r

in d u s try

83
in M ic h ig a n ,
e lim in a tio n

Most
of

n o tab le

suboptim al

network a s s o c ia te d w ith
For
two v e r y
to

the

im p o rtan t

re ce iv e

cent of

farm er,

p r o d u c t s and t h e

im p lic a tio n s .
in

t h e amount t h e y
liq u id s

in

i m p a c t s w o u l d be t h e

p r o d u c e r s and m a r k e t i n g

them.

F irs t,

fe rtiliz e r
spent

in

in

1970.

not a l l

farm ers could

fe rtiliz e r

exp en d itu res.

of

re ce iv e

to

in d u s try o r g a n iz a tio n

M ichigan

farm ers could

exp en d itu res e q u iv a le n t

p a rtic u la r,

c o s t o f h a n d l i n g and a p p l i c a t i o n
Thus,

numerous

t h e Optim um s o l u t i o n

a decrease

some p r o d u c t s ,

among t h e

Secondly,
w ill

mean an

fe rtiliz e r
the

fu ll

fo r

stand

t o 32 p e r

the e l i m i n a t i o n
in cre a s e

in th e

some f a r m e r s .

32 per cent

has

red u ctio n

of

CHAPTER

IV

THE TR ANS ITIO N FROM THE CURRENT
INDUSTRY ORGANIZATION TO THE LONG RUN OPTIMAL

The P r o b l e m

In v i e w o f

the

p o te n tia l

in creased

retu rn s

chapters,

an o p t i m a l

tio n

(as

to

optim al

in d u s try

o rg a n izatio n

in d u s try o r g a n iz a tio n
it

to

current

tra n s fo rm the

is

In m a k i n g such a t r a n s i t i o n ,
In d u s try

duce and t h e

a p p ro p riate

Moreover,
c lo s e ly

the

coordinated w ith

questions here
replace
vestment
would

current
in

is

are

the

in

in to

several
need t o

and w h i c h

supply answers

to

the

lo n g run
long run

w h i c h do n o t

investm ent

re q u ire d

o rg a n izatio n .

im po rtant qu estio n s
know w h i c h

t o e m p lo y

fo r

th at

must be
The c r u c i a l

and t e c h n o l o g i e s w o u l d
what

le v e l

of

annual

these q u e s t io n s .

in­

s c r a p p e d and w h i c h

i n v e s t m e n t w o u l d be made f i r s t .

8k

pro­

p ro d u c tio n .

fa c ilitie s .

im m ediately

qu estio ns

need t o

products to

i n new f a c i l i t i e s

p r o d u c t s and t e c h n o l o g i e s ;
w o u l d be

the

th a t optim al

scrapp ing o f o ld

devoted to answ ering

chapter w i l l

to ana ly ze

previous

in d u stry o rg a n iza ­

some f a c i l i t i e s

those o f which p ro d u c ts

use;

the

S ince t h i s

investm en t

the

in

is d e s i r a b l e .

technology

new f a c i l i t i e s

rem ain

chapter

in v e s to rs

tim in g o f

discussed

to

u tiliz e s

in d u s try

farm ers a n d /o r

i n A p p e n d i x A)

ap p ro p riate

be a n s w e r e d .

to

from th e c u r r e n t

1 9 70 A c t u a l

c u rre n tly e x is t ,

in c o s t

p a rtic ip a n ts

tra n s itio n

s i m u l a t e d by

Optimum ( A p p e n d i x A)

red u ctio n

In a d d i t i o n ,

T h is
th is

concernin g the necessary

85
le v e ls o f s e rv ic e s ,
by t h e

such as t r a n s p o r t a t i o n ,

proposed t r a n s f o r m a t i o n

qu estio ns

the t r a n s i t i o n

of

the

was made

t h a t w o u ld be r e q u i r e d

in d u s try.

To a n s w e r t h e s e

in acco rd an ce w i t h

c e rta in

assump­

tio n s .

Th e A s s u m p t i o n s

Th e
s itio n

fo llo w in g

from

1.

Sin ce

th is

tra n s itio n ,

the

to

o f a s s u m p t i o n s made c o n c e r n i n g t h e

the

fa c ilitie s ,

it

o rg a n izatio n w ith in
that

as w e l t

as

re d u c tio n

to

in c o s t t o

E x is tin g

the tim e

is c lo s e ly
the

rem ainder o f
purchase

the

fa c ilitie s

fiv e

to

s ix years ago.

p ro d u c tiv ity .

Th erefore,

and w o u l d

Normal

rate

of d e te rio ra tio n

the e x i s t i n g

in
of

fa c ilitie s

in g f a c i l i t i e s

are

the

firs t

could

be

An

year o f

tra n s itio n

years,

s u p p lie d ,

that

are
it

po o r e c o n o m i c c o n d i t i o n s

in

the

forces

caused

in

the

th e ir

in d u s try

the

is

given

the

m id life .

that

fa c ilitie s

in th e d e c l i n i n g

plus

ph ysical

not used,

that

th is

products

most o f

recen t years

c a p a c i t y w o u l d be e l i m i n a t e d .

(and o t h e r s )

be

a ttritio n

investm ent e x p e rie n c e d

to

w e r e assumed t o be a t

bas e d on t h e t r e m e n d o u s g r o w t h

years o ld

tra n s itio n

th em .

is

fiv e

the

i s composed o f

p e r i o d o f one y e a r .

re la ted

T h is

le a s t

tran ­

r u n Optim um i n d u s t r y o r g a n i z a t i o n :

i s assumed t h a t

f a r m e r s w o u ld w i l l i n g l y

2.

lo n g

t h e C o n s t r a i n e d Optimum o r g a n i z a t i o n

im p lie d assumption

th at

lis t

1970 A c t u a l

on ly e x is t in g
made t o

is a

w o u l d be a t

poor

retu rn s

used e a ch y e a r .
i s assumed t h a t
is

If,

however,

f+0 p e r c e n t o f

ba s e d on normal

i n d u s t r y and t h e
the

fa c ilitie s

on

t h a t a 20 p e r c e n t

c a p a c i t y w o u l d be a p p r o p r i a t e

Th is

place

years o f t h e i r

re la tiv e ly

suggests

took

b e lie f

t o be

fo r
e x is t­
th e ir

a ttritio n
that

and

these

i d l e d would

con-

86

tln u e

to harass

ag ain

be o p e r a t e d .

maximum o f f i v e
would
at

them,

such t h a t o n l y h a l f o f

Thus,

years

current

if

fa c ilitie s

th e y were

no l o n g e r be a v a i l a b l e

those

a fter

c o u l d be used f o r a

used e v e r y y e a r ;
three

years

if

s itio n

New f a c i l i t i e s

they

t h e y w e r e n o t used

was c o m p l e t e d

from the

c o u l d n o t be " p u r c h a s e d " u n t i l
1970 A c t u a l

C o n s t r a i n e d Optimum o r g a n i z a t i o n
not allo w ed

to purchase

not

Since

s im u ltan eo u sly d eterm in e

tio n

and t h e o p t i m a l

C onsequently,
each

to

s t e p o f the

prevent

Optimum o r g a n i z a t i o n ,

the

that

re s tric tio n ,

model

that

are

not

long
path

t h e model

tra n s itio n ,

I).

t h a t w e r e n o t used
is

not

fa c ilitie s

p o ss ib ly

n o rm a lly

T h is

l o s e some o f

record o f
a nd c o u l d ,
the

new f a c i l i t i e s

thereby,

tra n s itio n .

at

the

are

th a t o rg a n izatio n .
s e le c tin g ,

du ring

s elected

in th e
W ith out

fa c ilitie s

short

run t o t a l
the

long

the

rate

o rig in a l
in d u s try .

re s u lt

c o s t and
run o p t i m a l

assumed t o h a v e a t e n y e a r

of

i s based on t h e

its

the f e r t i l i z e r

could

in d u s try o rg a n iz a ­

t h o s e " p u r c h a s e d " by t h e m o d e l ,

d e te rio ra te

c a p a c ity an n u ally.

long

Such s e l e c t i o n w o u l d ha v e c a us ed a d d i t i o n a l

com plete a t t a i n m e n t o f

p h y s ic a lly

it

im p o s e d .

prolonged

New f a c i l i t i e s ,

the

was

would have

U.

in

re s tric tio n

to m inim ize

since

was

used

in a t t e m p t i n g

o rg a n izatio n ,

t h e model

not

investm en t

the

the

th a t are

could have

the

to

re cu rs iv e ,

run o p tim a l
to ach ieve

a fter

(Y e a r 0)

In a d d i t i o n ,

from p o s s ib ly

purchasing

in Op tim um .

o rg a n izatio n

t h e model

the

tra n s itio n

the

(Year

new f a c i l i t i e s

r u n Optimum o r g a n i z a t i o n .

of

whereas,

a ll.
3.

to

s h u t down w o u ld

10 p e r c e n t o f
fact

c a p acity
T h is

i n upward b i a s

that

fig u re
of

we re assumed
th e ir o rig in a l

a fa c ility

and on t h e

life .

would

r e c e n t economic

may be somewhat h i g h

t h e new i n v e s t m e n t c o s t s

tran ­

87
5.

R e t u r n on

investm ent o f

e x is tin g

fa c ilitie s

l e a s t one y e a r o l d was assumed t o be z e r o .
the

c la s s ic a l

th at
if

econom ic

a p ro d u ctive

its

retu rn s

fa c ility

process

are

at

(in vestm en t)

m et.

In o t h e r w o r d s ,

its

in

the

v a ria b le

were

short

costs

z e r o , which
6.

d u rin g

the c u r r e n t

equal

the

short

o n c e an
run

are

to

th is

on

7.
S in ce

Salvage

there

v a lu es

p ro d u c tio n equipm ent,
essence,

th is

the

assum ption

is

as

short

run

Thus,

v a ria b le
it

(fix e d )

t ho u gh

states

its

a
fix e d

costs
w ill

are
be

cost,

fix e d

if

costs

im p lie s .
i.e .,

1 5 .0

an e q u i t a b l e
the

those

per c e n t.
but a lso

purchased
T h is
re fle cte d

retu rn

on new i n v e s t ­

fa c ility

t h e n became

u n d e r a s s u m p t i o n 5»

that

is ,

its

to z e ro .*

of a ll

are e s s e n t i a l l y

it

u tiliz a tio n ,

group d escrib ed
set

the

towards

upon t h e s e f a c i l i t i e s ,

year of

i n v e s t m e n t was

theory

costs.

in ve s tm en t

y e a r , was s e t a t

th is

retu rn

in

its

new f a c i l i t i e s ,

m ent.

that

provid ed

assumption

tra n s itio n
costs

be used

be a p p l i e d

thus,

i n s i s t e n c e on r e c e i v i n g

a member o f

to

c o n s is te n t w ith

T h is

v a ria b le

reg ard less o f

investm ent o f

firs t

its

run.

is

i n v e s t m e n t ha s be e n ma de ,

m anagement's
A fter

w ill

run,

recovered;

imposed f i x e d

short

any r e t u r n s

is what

R e t u r n on

not o n ly

in

the

(fa c ility )

le a s t

need n o t o b t a i n

costs

u tiliz e d

theory o f

T h is

and t h o s e a t

fa c ilitie s

no a l t e r n a t i v e

zero

were

assumed t o be z e r o .

us e s f o r

most f e r t i l i z e r

s a l v a g e v a l u e becomes a p p r o p r i a t e .

im p lies

t h a t any c o s t

in vo lved

In

in s c ra p p in g

Th e 1 5 . 0 p e r c e n t r e t u r n on new i n v e s t m e n t was s e l e c t e d t o
a l l o w f o r t h e r i s k a s s o c i a t e d w i t h such v e n t u r e s .
The 1 5 .0 per c e n t
p lus th e 10.0 per c e n t d e p r e c ia t io n approxim ates the o f t e n expressed
r u l e o f thumb in m a n u f a c t u r i n g i n d u s t r i e s o f n o t m a k i n g an i n v e s t m e n t
u n l e s s i t c o u l d be e x p e c t e d t o be " p a i d o f f " w i t h i n f o u r y e a r s .

88

a fa c ility
salvage
more,

is

values

of

the

8.

For e x is tin g

le v e l

o f supply
That

fa c ilitie s

q u a n tity

s u p p lied

T h i s was done
lim it

assumption

the

rate

fa c ilitie s

not

could

under
is ,

fo r

ou tsid e

supply

the

on e x i s t i n g

That

1970 A c t u a l

(Y e a r 0)

in w h i c h s p e c i f i c

products

^ 2^ 5 ’

o n l y N,

C onstrained

Optimum p r o d u c t i o n

e x is tin g

and 2 , 6 5 ^

fa c ilitie s

id le n e s s.

fa c ility

was
is

to s i t

However,

assumed t o

u tiliz e d .

i t is

assumed t h a t

to

M ichigan

is t h e g r e a t e r o f

o r C o n s t r a i n e d Optimum

fe rtiliz e r

to M ichigan,

those

c o u l d n o t s u p p l y more th a n
o r C onstrained

s itu a tio n

th at

Optimum.

and e s t a b l i s h

an

fa c ilitie s .

0,

be f o r c e d
w o u l d be

in to pro d u ctio n
the

w o u l d ha v e

o n ly year

forced

of

p r o d u c t s w o u l d be

c u rre n tly

used d u r i n g Y e a r

in e x i s t e n c e ;
1 to

lim it

a fter
in

the

p ro d u c tio n .

an<* *^2^ l e v e l s w o u l d be f o r c e d .

and f a c i l i t i e s
were

such

rows

M ichigan

current

pro d u c ts would n o t

co n s tra in ts

had 771

o f one t h a t

1970 A c t u a l

the

Th ereafter,

lim ite d

In Y e a r
to

th e re fo re ,

p rod uction

to

1,

those
capac­
the

c a p a c itie s .

10.
1970

s ta te

S p e c ific

technologies

id le

F u rther­

would have n e a r l y

to allo w

fo r

1970 A c t u a l

the

Actual

in

s u p p lyin g

under e i t h e r

to approxim ate

is ,

is

cost

9.

tra n s itio n

ity

alre ad y

tw ice

at

components.

values

an

they

e x is tin g

Year

th is

its

a r e n o t known t o e x i s t .

two,

d e te rio ra te

o rg a n izatio n s .

upper

of

of

salvage

under assum ption

maximum amount

th e ir

fa c ilitie s

im p o s i n g a m a i n t e n a n c e

po in ted o u t

p h y s ic a lly

the s a le

t h e m o d e l , w h ic h

The e f f e c t

id le w ith o u t

by

o f non-zero

the s i z e o f

columns.

the

o ffs e t

in co rp o ratio n

doubled

as

ju s t

le v e ls

com parison

The "d emand" f o r N ,
of

consum ption.

among t h e v a r i o u s

P2^5 *

T h i s was
stages

of

anc* *^2^ w e r e m a i n t a i n e d
done

t o s e r v e as a b a s i s

tra n s itio n .

at
for

the

89

11.
e ith e r

It

in te rn a l

I s assumed

or extern al

th a t
to

there

the

i s no e f f e c t i v e

firm .

In o t h e r w o rd s,

investm ent

f u n d s a r e assumed t o be a v a i l a b l e

q u a n tity .

Th is

a s s u m p t i o n may n o t be v e r y

us t o d e t e r m i n e
m ize

to tal

t h e amount o f

investm ent

c a p ita l
the

reg ard less o f

re a lis tic ,

that

but

ra tio n in g ,

necessary

the de s ire d
it

allo w s

s h o u l d be made t o m i n i ­

cost.

Procedure

As p r e v i o u s l y
the

p o in t o f

optim al

m ention ed ,

departure

t o make t h e

t o be c o n s i s t e n t w i t h
capacity

c o n s tra in ts

the

Furtherm ore,

the

to

the

firs t

o rg a n izatio n a l

is

l o n g ru n

y e a r was assumed
changes n e c e s s a ry

C o n s t r a i n e d Optimum o r g a n i z a t i o n .

necessary

t o make t h e

firs t

used as

y e a r's

Thus,

the

tra n s itio n

are

t h o s e o f C o n s t r a i n e d Optimum ( A p p e n d i x E , T a b l e E - l ) .

firs t

T a b l e E -1
itie s

o rg a n izatio n

the t r a n s i t i o n

a p p ro p riate

c o n s t r a i n t s on n o n - e x i s t i n g
th is

1970 A c t u a l

trac in g

in d u stry o r g a n iz a tio n .

t o be u t i l i z e d

e x a c tly

fo r

the

year o f

fa c ilitie s

tra n s itio n .

were d e r iv e d a f t e r

were a l l

se t equal

The n o n - z e r o c a p a c i t y

a careful

study o f

to

The
zero

c o n s tra in ts

the e x i s t i n g

for
in

fa c il­

in M ic h ig a n .^
The C o n s t r a i n t s

were d e r iv e d

fo r

by a p p l y i n g a s s u m p t i o n s

tio n s w i l l

a id

Year

G u lf Coast

2 fo r

t o be us ed

in u n d e rs ta n d in g

the

the

se co nd y e a r o f

2 and 8 .
procedure.

tra n s itio n

Some e x a m p l e c a l c u l a ­
The

c o n s tra in t

fo r

p r o d u c t i o n o f a n h y d r o u s ammonia by t h e c e n t r i f -

^See B e l l , e t a l . .
f e r t i l i z e r in d u s try .

fo r

a thorough d e s c r i p t io n

o f th e M ichigan

90

ugal

process

th is

p a rtic u la r

Op tim um ,

(Appendix E, T a b le
fa c ility

was us e d

t h e maximum o f e i t h e r

1 970 A c t u a l

o r 80 per

cent o f

was t h e c o n s t r a i n t v a l u e
Table A -2 ,

we s e e

tons

1970 A c t u a l ;

under

it

under

of

the

form er

la tte r

fig u re

(**3*820).

so lu tio n s

fo r

the

produced
the

fa c ility

id le

was

s e q u e n tly ,

per cent

fo r

d u rin g the

to e s ta b lis h

itie s

were

or

le v e l

was used a t

is

use

a

le v e l

o f 73*033

C le a rly ,

than 60

per

case o f

80 p e r

fo r

is

the
fa c ility

non-pressure

n itro gen

**0,912 tons;

the

fo r

the

w hereas,

tons,

cap acity

th ird

y e a r w e r e made

cap acity o f

the

an a d d i t i o n a l

T ab le E - 3 ) .

cap acity c o n s tra in ts
When a l l

d e te rio ra te d ,

the

Th is
fo r
of

Th is
for

Con­

le ft

the

o n ly

s e co nd

in a s i m i l a r m anner,

fa c ilitie s

a s s u m p t i o n number 4 )

re fle c tin g

E -4 through E - 6 ) .

as th e

E -2).

(u sin g

the

t o C o n s t r a i n e d Optimum p l u s

T able

the

level

c a p a c i t y o f 6 0 p e r c e n t was made

1 9 70 A c t u a l

(A ppendix E ,

cent

the

(Appendix A , T a b le A - 6 ) ,

o rg a n izatio n

through

cent o f

the c o n s t r a in t

In t h e

in

From A p p e n d i x A ,

tons were processed

greater

tons

of

i n C o n s t r a i n e d Optimum

second y e a r .

8 0,308

and C o n s t r a i n e d

under C o n s tr a in e d Optim um ).

(Appendix E,

fu lly

is

16,365

c a lc u la tio n ,

the

the

p o te n tia l

id le

se co nd y e a r

d e te rio ra tio n

E, Tables

in

90 per c e n t o f

new c a p a c i t y

fo r

o f us e

since

t h e C o n s t r a i n e d Optimum o r g a n i z a t i o n .

going from

The c o n s t r a i n t s
th at

le v e l

its

Optimum o r g a n i z a t i o n .

1970 A c t u a l

f o r b ein g

year

its

whereas,

under

1970 A c t u a l

60 per cent o f

th e M idw est

40 per cent o f 4 0 ,9 1 2 ,
tra n s itio n

in both

second y e a r .
in

was o b t a i n e d a s f o l l o w s :

fa c ility

(6**,846)

a re d u c tio n

per cent

except

th is

Thus, 6 4 ,8 4 6

o f use u n d e r

40

used

the C o n strain ed

in q u e s tio n

(20

that

E-2)

purchased

was added
year of

to

the

ph ysical

p r o c e d u r e was r e p e a t e d

the ensuin g years
the c u r r e n t ly

p r o c e s s was h a l t e d .

(A ppendix

e x is tin g

fa c il­

91
A fter
ra tio

the

c o n s tra in ts

c o n s tra in ts
Optimum)

purposes o f

under

the

sim u la tin g

to Year

2.

firs t

Since
per c e n t,

the
it

a v a ria tio n

of

w ith

7.5

on

it.

were

ch an ge
the

in

new f a c i l i t i e s

t o compare

re s u lts

2 0 .0

the

per cent

re la tiv e

le v e ls

of

the

s h o u l d be r e f e r r e d

to

o th erw ise,

when c o m p a r i n g t h e
optim al

tra n s itio n

if

the

than

the

to making the

s in c e ,

beginning

is

set

than

the

p revious
per cent

q u a n titie s

7 .5

per

chapter
in

the

lo n g

A c tu a lly

the

i s made t o Optimum
but

there

fa c ilitie s .
the

15.0

o rg a n iz a tio n s w ith

o f com parison.

various

at

ta b le s
o f each

is

a small

Th erefore,
o f A ppendix 0
fa c ility

are

can be made t o Optimum i n A p p e n d i x A

tra n s itio n a l
of

10.7

1 0 . 8 % ,r i n a l l

s p e c ific

reference

o rg a n izatio n

in th e

in ve s tm en t,

the

for

was n o t a l l o w e d .

ob tain ed

r e t u r n on

s p e c ific

c o u l d be p u r c h a s e d ;

same w h e t h e r c o m p a r i s o n

column h e a d e d by " 2 0 . 0 % t o

d e s ire d ;

removed p r i o r

lo nger needed,

i n v e s t m e n t was g r e a t e r

the

C onstrained

i n v e s t m e n t o n new f a c i l i t i e s

The

the

i s t the

p r o d u c t io n between

o f Optimum t h a t e m b o d i e s a h i g h e r r a t e

used a r e

or

(to

That

2,

t h e M i d w e s t and G u l f C o a s t ) ,

r u n a r e e x a c t l y w h a t we need f o r a b a s i s
fa c ilitie s

fa c ilitie s .

purchase a c t i v i t y

necessary

imposed on

when r e t u r n

the

r e t u r n on

is

in

T h e y w e r e no
2,

to th a t o f Year

tra n s itio n

ra tio

re a lity ,

to Year

p re v io u s ly

1 and p r i o r

removed f r o m a l l

NH^ p r o d u c t i o n

the t r a n s i t i o n

whereas,

cent

u tiliz e d

(e .g .,

tra n s itio n
w ith

were

to Year

to m a in ta in a constant

fa c ilitie s
the

tra n s itio n

o rg a n izatio n s

to

the d e s ire d

l o n g run

in d u stry.

Th e T r a n s i t i o n

The

com plete

those a c t i v i t i e s

tra n s itio n

w ill

affected w ill

be d i s c u s s e d y e a r by y e a r .

be a n a l y z e d ,

F irs t,

then a c o s t a n a l y s i s

w ill

92

be

undertaken.

In

the n ex t

sectio n ,

ne ed ed

i n v e s t m e n t and p o t e n t i a l

Year 0

to Year

During
s train ed
were

In

in

numerous

le v e l

increased
the

in

an h y d r o u s

down o f
and

ammonia as
am monia,
tio ns

the

le v e l

of

(a ll

s itio n

red u ctio n
the

acid

Most n o t a b l e was
prod uction

use o f

d ire c t

The

im p e t u s

made dui—

seven

s o lu tio n s ,

produc­

the

com plete

f o r M i c h i g a n c on­

a p p lic a tio n

d ire c t

in Y e a r

o f NH^.

a p p lic a tio n ,
of

w h ile

anhydrous

1 c a u s e d aqueous

lo w -p re ss u re
products)
high

a v e ry econom ical

n itro gen

t o no

s o lu ­

l o n g e r be

in n i t r o g e n

c on­

source o f n itr o g e n

m entioned.

dropped n e a r l y

o f ammonium n i t r a t e

tra n s itio n ,

type

in d u s try

i n c r e a s e d more

use o f d i r e c t a p p l i c a t i o n

it

the

s e ve n o t h e r p r o d u c t s

p rod uction

are n it r o g e n

makes

of

C o a s t and M i d w e s t

am monia, b e i n g e x t r e m e l y

pro d u ctio n

1.

G u lf

tons o f NH^ f o r

the o t h e r p r o d u c t s

to Year

the

u tiliz a tio n .

A -2).

doubled

o f which

per cent N,

N itric

th e ir

piston

nitro gen

te n t,

to

to

t o Con­

to M ichigan; w h ereas,

M ichigan

Table

The

1970 A c t u a l

the o r g a n iz a tio n

source o f n itro g e n

An hydrous

re la tiv e

whereas,

tons.

u tiliz e d .

to

supply

on ly 6 2 ,0 8 2

(from

In a d d i t i o n ,

th e ir

Coast

no n-pressure

and u r e a

re la te d

made d u r i n g Y e a r 0 w e r e n o t

Table A - l ) .

t h e more t h a n

a p rim ary

82.2

products

in

ammonia s e c t o r ,

the G u l f

128,338

tra n s itio n

changes

( A p p e n d i x A,

Year 0 u t i l i z e d
1 used

be

savings.

of

d eclin ed s l i g h t l y ;

sum ption

Year

year o f

S ixteen

the

than o n e - t h i r d
shut

firs t

1 ( A p p e n d i x A,

products

tio n

the

re a lize d .

decreased

costs w i l l

1

Optimum),

ing Y e a r

the

fo r

this

decrease

(Appendix A,

ammonium n i t r a t e

5 0 ,000

tons

came s o l e l y

Tables

was b e i n g

du ring

used

A-4
in

the

from the

and A - 5 ) the

tran ­

P rio r

prod uction

93
o f n itro g e n m an u factu rin g
s o lu tio n s ,
a d d itio n ,

27,70^
it

was used o n l y

fe rtiliz e r.

d u ring Year

Year

to

the

t h e NH^ s e c t o r

c a p a c itie s
s tra in ts
o p tim al

1970,
of

were

but are

As a r e s u l t ,

optim al

products

at

in

the

given

the

those

farm s.

S im ila rly ,

the aforem entioned

NHj was a v a i l a b l e

at

the

that

G u lf

Coast to

t h a t were

1,

longer

and

those sub-

needed f o r

products,

and

it

p ro d u c tio n o f sub-

usin g

product
produce

G u l f C o a s t NH^,
c o n s tra in ts .
the

had p r e v i o u s l y been p r o d u c e d

3 See a s s u m p t i o n number n i n e .

the

more e c o n o m i c a l .

sub-optim al

G u l f C o a s t and F l o r i d a ,

to

when t h e s e con ­

to Year

on es t h a t a r e

of

s o lu tio n s

products

Th erefore,

tra n s itio n

the

and A - 8 ) .

the o r g a n i z a t i o n

removal

m a nufacturing

prod uction

c o n s tra in ts o f Year 0

t h e M i d w e s t was no

producers o f
to

s o lu tio n s

pro d u ctio n o f

rep laced w ith

flo w d i r e c t l y

c e as e d upon t h e
Thus,

the

fa c ilitie s .^

NHg p r o d u c e d

M i d w e s t and M i c h i g a n
could then

The p r o d u c t i o n

removed f o r m a k i n g t h e

the

for d ire c t

(Appendix A, T a b le s A - l

s ub-o ptim al

the e x i s t i n g

p r o d u c ts were

used

t h e M i d w e s t NHj g o i n g d i r e c t l y

f o r c e d m os t NH^ t o be used f o r
in

n i t r o g e n manufac­

G u l f C o a s t as a c o n s e q u e n c e o f

w h e r e a s Y e a r 0 had n o n e .

consumed

D uring Year

used t o make g r a n u l a t e d m i x e d

n itro g e n m anufacturing

fr o m t h e M i d w e s t
in

In

1.

1 had o v e r 8 0 p e r c e n t o f

farm s;

prod uction o f

ammonium n i t r a t e was n o t

The m a jo r p o r t i o n o f

re o rg a n iza tio n

the

which were e v e n t u a l l y

Furtherm ore,

a p p lic a tio n

fo r

n itro gen

fe rtiliz e rs .

t o n s w e r e used f o r d i r e c t a p p l i c a t i o n .

s o lu tio n s

sw itched

low and n o n - p r e s s u r e

and g r a n u l a t e d m ix e d and d r y b l e n d e d

1, h o w e v e r ,
tu rin g

s o lu tio n s ,

nitro gen
in th e M id w e s t.

94
The t r a d e - o f f s

between

ship pin g

the

farm

NH^ f r o m t h e

re ta ile r

and t h e n t o

fo r d ire c t

d ire c tly

f r o m t h e M i d w e s t NH^ p r o d u c e r

G u lf Coast to
such t h a t

favor
at

the

p rod uction o f
G u lf Coast

I.

E lem ental

phosphoric a c id

C entral

in M ic h ig a n which

e lim in a t in g e lem en tal

Th is

used f o r

a c i d was used

liq u id s ,

I

placed

phosphorus

in

the

superphosphate,

in Y e a r

The e x t r e m e l y h i g h

1 re s u lte d

in Y e a r

I.

A -12,

g r a n u l a t e d m ix e d

in a shut-down o f

producer,

p ro d u ctio n .

blended

S im ila rly ,

PjOg*

thereby

in d ire c tly

E lem ental

phosphorus

in

the M idw est.
polypho sp hate

C onsequently,
not

20 p e r c e n t

fe rtiliz e rs

makes t h e

fe rtiliz e rs

elem en tal

produced

in

P 2 O5 » was r e _

(Appendix A ,

use o f no rma l

P2 O5 i n
T a b l e A—1 7 ) -

13 p e r c e n t
superphosphate

monoammoniurn p h o s p h a t e r e p l a c e d
use

the

and A - | i + ) .

is o n ly

p o r t i o n o f diammonium p h o s p h a t e f o r
blended

R eduction o f

a n a l y s i s o f monoammonium p h o s p h a t e ,

and 5 2 p e r c e n t

uneconom ical.

which

m anufactur­

pro d u ctio n o f w h ite

1 by monoammonium p h o s p h a t e a s a s o u r c e o f

g r a n u l a t e d m i x e d and d r y

n itro gen

in th e

and supei— p h o s p h o r i c a c i d s w e r e

(Appendix A , T a b le s A - l l ,

producers are

Table A -8) .

p r o d u c t i o n o f a m m o n ia t e d

w h i c h became s u b - o p t i m a l

Normal

t h e M i d w e s t and

n itro g en

producing sup erp h o sp h o ric a c id

ph o s p h o r u s and w h i t e
Year

and p r o d u c t i o n

i n t u r n was used by t h e C e n t r a l

producer.

p ro d u ctio n d u rin g Year

the

p h o s p h o r u s d u r i n g Y e a r 0 was a ba ndo ned

M i c h i g a n diammonium p h o s p h a t e

was a l s o

in

a m a jo rity o f

p h o s p h o r u s was us e d

M i c h i g a n diammonium p h o s p h a t e
fe rtiliz e r

farm s,

s o lu tio n s

(A ppendix A,

The p r o d u c t i o n o f e l e m e n t a l
in Year

the

through

s h i p p i n g NH^

th e M ic h ig a n g r a n u l a t e d mixed f e r t i l i z e r

they

ing s o l u t i o n s

a p p lic a tio n ,

to

and s h i p m e n t o f n i t r o g e n m a n u f a c t u r i n g

G u lf Coast

a m ajor

i n g r a n u l a t e d m ix e d and d r y

(Appendix A, T a b le s A -2 0

and A - 2 1 ) .

In the

tran­

95
s i t io n f r o m Y e a r 0 t o Y e a r
increased

1,

p r o d u c t i o n o f monoammoniurn p h o s p h a t e

from 26,2**4 t o 9 9 ,9 1 0

pro d u ctio n

decreased

tons,

from 1 0 5 ,2 0 5

to

w h ile

diammonium p h o s p h a t e

7 7,810

tons

(Appendix A, T a b le

A - 1).
Gre e n p h o s p h o r i c a c i d
Year

1.

In Y e a r 0 ,

p h o ric a c id s .
an

in cre a s e

blended

source o f

phosphate d u r in g

p h o s p h a t e was s u p p l i e d

by g r e e n ,

w h ite ,

1,

however,

in p ro d u c tio n o f

236,7 ^*8 t o n s
The

sole

In Y e a r

became t h e

was

its

had been used f o r d i r e c t
Year 0 (A ppendix A ,

o n ly

trip le

f r o m 138,91*5

to

115,303

tons

the decrease

is

the

o f-p ile

o f g ra n u lar

i n Y e a r s 0 and 1 ,

however,

superphosphate

trip le

superphosphate,

is

tons

and A - 1 4 ) .

I;

in d ry

whereas,

to b len d in g

trip le

in

decreased

s lig h tly

re s p e c tiv e ly .

Much o f

fe rtiliz e r

(A ppendix A, T a b le s A - l ,
t h e d e c r e a s e d usa ge o f

the d i r e c t
which

re s u lt

it

superphosphate,

g r a n u l a t e d m ixed

some o f

super-phosphate,

f r o m 195,^*55 t o

in Y e a r

R u n -o f-p ile

to 303,655

gave way t o

superphosphate

in a d d i t i o n

r e s u l t o f decreased

In a d d i t i o n ,

trip le

trip le

a p p lic a tio n

used t o make g r a n u l a t e d

A -13,

u tiliz a tio n

Table A - 1 9 ) .

from 3 8 8 ,5 5 5

two a c i d s

green phosphoric a c id

use o f g r a n u l a t e d

fe rtiliz e rs

and A - 2 8 ) .

la tte r

(Appendix A , T a b le s A - l , A - 1 2 ,

continued

p ro d u ctio n

the

and s u p e r -

A -27,
run-

o f d e c r e a s e d usage

i s made f r o m r u n - o f - p i l e

(Appendix A , T a b le A - 1 8 ) .
In th e
o f the

potash

tra n s itio n

secto r,

t h e m a j o r ch an ge t h a t o c c u r r e d

from Y e a r 0 t o Y e a r

granular

potassium c h l o r i d e .

usage o f

it

and A - 2 5 ) .
to tal

volume

are

re sp o n s ib le

In cre a s es
fo r

A lthou gh d ry blended
produced

1 is

th is

to

i n c r e a s e d usage o f

in d r y b le n d e d

re a c tio n

fe rtiliz e r

from 2 0 3 ,2 1 3

the

as a r e s u l t

fe rtiliz e r's

( A p p e n d i x A , T a b l e s A-T

p ro d u c tio n decreased

185,535

tons,

the

in

average p o ta s -

96

sium c o n t e n t o b v i o u s l y
few er

tons o f b len d ed

c h lo rid e
the
of

usage

la tte r
the

in cre a s ed ,
fe rtiliz e r.

decreased.

w e r e n o t used a t

tons were s u p p lie d

in Y e a r 0 .

tio n

service

The s m a l l

ra th e r

Im p lic a tio n s o f

fo r

various

groups

is

p a rtic ip a tin g

in

duced

in Y e a r

16 p r o d u c t s

1.

1 reaches

the

ammonia).

If

fe rtiliz e r

a p p lic a tio n

more,

the

A - 27 and A - 2 9 ) .

tons o f dry
The

e lim in a ­

w ith the c u rre n t tre n d

toward

r e l y on c u s t o m a p p l i c a ­

and h a n d l i n g e q u i p m e n t .

1 has

s ig n ific a n t

in d u s try.

im p lic a tio n s

The f o l l o w i n g

the a n t i c i p a t e d

t h a t were

in a

produced

ad ju stin g

For e x am p le,
farm

whereas,

problems a s s o c i a t e d

tra n s itio n .

For the fa r m e r ,

p r e s e n t some p r o b l e m s .
in Y e a r

the

I;

Step

from Y e a r 0 t o Y e a r

step o f

of

potash s e c t o r

and 5 3 , 2 1 7

than purchase a p p l i c a t i o n

w ith

A to tal

alth o u g h

t o n n a g e was composed o f

f a r m e r would p r o b a b ly

p o i n t o u t some o f

firs t

T h is

co n s is te n t

paragraphs w i l l
th is

the

in Year

fe rtiliz e rs

the F i r s t T r a n s i t i o n

The t r a n s i t i o n

a ll

(Appendix A , T a b le s

o f ba gg ed f e r t i l i z e r

b u lk m a te r ia l.

in

potassium

th e abandonment o f d i r e c t a p p l i c a t i o n o f

1 5 5*4 0 0 to n s o f g r a n u l a t e d mixed

tio n

in cre a s ed ,

in to

potassium c h l o r i d e .

Bagged f e r t i l i z e r s

fe rtiliz e rs

changes

is g o in g

ru n -o f-m in e

fe rtiliz e rs

O ther n o tab le

in clu d e

g r a n u l a r and c o a r s e

blended

S im ila rly ,

in g r a n u l a t e d mixed

in d u s try

208,617

s i n c e more p o t a s s i u m

none o f

liq u id

sta te

a f a r m e r was p r e v i o u s l y u s i n g

to

in Y e a r 0 a r e

not

new p r o d u c t s

could

the

fe rtiliz e r

(exclu d in g
liq u id

produced

anhydrous

fe rtiliz e r,

e q u i p m e n t w o u ld no l o n g e r be u s e f u l .

he w o u l d need t o e i t h e r

e q u i p m e n t o r make a r r a n g e m e n t s

buy o r
fo r

pro­

h is

Fu rther­

borrow d r y b u lk a p p l i c a t i o n

cus tom a p p l i c a t i o n .

Thus,

some

97

fa rm e rs would
fe rtiliz e r,

fin d

but

shou ld e a s i l y

t h e y w o u l d be p a y i n g more

the

red u ctio n

o ffs e t

In a d d i t i o n

to

the

ch an ge

were

in

product

new p r o d u c t s .

p r o d u c i n g a n y new p r o d u c t s ,
th at

the

fe rtiliz e r

form ,

the

A lthou gh

many f a r m e r s w i l l

farm er w i l l

the

p r o d u c t s b e i n g a p p l i e d on t h e

t h e r e were o n ly

three d is t in c t

b u l k and custom b l e n d
t h a t was p r e v i o u s l y
n itro g en w i l l

u sin g u rea as a d i r e c t

farm ; whereas

p ro d u ct).

T h e s e two p r o d u c t s d i f f e r

not o n ly

not

in Y ear

1

(coun ting a l l
Thus,

a p p lic a tio n

need t o become a c q u a i n t e d w i t h

is

In Y e a r 0 t h e r e

products being a p p lie d

p r o d u c t s as a s i n g l e

in d u s try

need

be u s i n g a f e r t i l i z e r

t h e y had n o t p r e v i o u s l y e n c o u n t e r e d .

19 b a s i c

m a te ria l

it.

t o become a c q u a i n t e d w i t h

m a te ria l

in c o s t o f

fo r a p p lic a tio n o f

a farm er

source o f

a n h y d r o u s ammonia.

in p h y s ic a l

fo r m b u t

in

th e ir

n i t rogen c o n t e n t .
A nother
tio n .

Th e

problem d i r e c t l y

in d u stry o r g a n iz a tio n

firm s

su p p lyin g

m ight

n o t be a b l e

s in c e each
Host

fe rtiliz e r
to

urea o r

firm s

in

get his

the

in Year

farm ers.

is

1 would

th at o f d is trib u ­

lik e ly

C onsequently,

fe rtiliz e r

in d u stry are

o f Year

those f a c i l i t i e s

liq u id

m ixes.

by a n e x t e n s i o n
Year

to

farm ers

have fe w e r

each

farm er

e x a c t l y when he w a n t s

it,

f i r m w o u l d be s e r v i n g more f a r m e r s .

to the o r g a n iz a tio n
o p era tin g

a ffe c tin g

1 products,

If

p r o g ra m )
then

p ro d u c in g suboptim al

1.
that

g o i n g t o be h e s i t a n t

Th e y w i l l
produce

farm ers a re
about

the

those f ir m s
products w i l l

most

sw itch

l i k e l y want to

continue

suboptim al

products

such a s

s u ffic ie n tly

inform ed

(p ro b ab ly

p o te n tia l
that

to

cost

continue

q u ic k ly

learn

savings o f

to operate
th at

the

fa c ilitie s

t h e y no l o n g e r

98

h a/e

a m arket f o r

a b le

to

a b le

to co ntin ue

those

r e c o v e r even

th e ir

re a d ily
T h e ir

those

support a sw itch

through
than 6 .5

it

u n p ro fit­

t h a t w o u ld

stand

to

in crease

p ro fit,

i n c r e a s e and

but

n e a rly

in d u s try o rg a n iz a tio n o f Year

per cent o f

re ta ile rs ;

whereas,

per c e n t .

Thus,

a ll

is

lik e ly

fe rtiliz e r

in Y e a r

1 th is

A m ajor p o rtio n

these

it

producers

p r o d u c tio n but they c o u ld a ls o

of

could

p rod uction

fig u re

dropped

the r e t a i l i n g

some o f

i t was

not on ly

th e ir

would
1.

th e y could a ls o

t h e s e p r o d u c e r s w o u l d n o t be w i t h o u t

a b s o r b e d by t h e s e p r o d u c e r s , w h i l e
m ix e rs .

c o s t s and w o u l d f i n d

firm s

to the

s a le s would

th e ir

In Y e a r 0 ,

v a ria b le

t h e y w o u l d n o t be

such as a n h y d r o u s ammonia o r g r e e n p h o s p h o r i c a c i d ,

to tal

crease

Consequently,

p ro d u c tio n .

On t h e o t h e r h a n d ,
p ro d u ctio n

products.

in ­

problem s.

flo w ed
to

le s s

f u n c t i o n was

t a k e n on by d r y

in crease

pro v id e a d d itio n a l

th e ir

to tal

s e rv ic e s w it h

th e ir

product.
The f e r t i l i z e r
and

liq u id

1.

In a d d i t i o n ,

re ta ile r

re ta ile rs

by more t h a n

are

h is

25 p e r c e n t .

In stead,

business w ith

could

id le d

the

No l o n g e r

re ta ile r

re g io n a lly

to

from Year 0 t o
decreases h is

farm er

dry

Year

a c tiv ity

r e l y on h i s

s u p p l y t h e p r o d u c t s and s e r v i c e s
fin d

lo ca te d

income

A ll

it

necessary

to t r a n s a c t

producer o r m ix e r.

re d is trib u tio n

effects

T h is

on s m a l l

com m unities.

Th e t r a n s p o r t a t i o n
affected

s ig n ific a n tly .

tra n s itio n

can t h e

the fa rm e r w i l l

ha v e some u n d e s i r a b l e

a g ric u ltu ra l

by t h e

very

t h e a n h y d r o u s ammonia r e t a i l e r

neig hbo rh ood f e r t i l i z e r
he d e s i r e s .

is a f f e c t e d

associated w ith

in t h r e e b a s ic ways.

(e lim in a tio n of

liq u id s ,

e tc .)

F irs t,
w ill

fe rtiliz e r

t h e ch an ge

a ffec t

the

in

products w i l l
product

type o f

be

forms

tra n s p o rtin g

99
v e h ic le

re q u ire d .

to a farm w i l l
e s s e n tia lly

Secondly,

be

in cre a s ed ,

e lim in a te d .

n e a rly

20 p e r c e n t

fa c to r

a ris es

per c e n t

since

T h ird ly ,

less

fr o m an

to 6 2 .2

the average d is ta n c e o f a t y p ic a l

in Year

in crease

per cent

tons o f

fille r

Th e m os t s i g n i f i c a n t
the

re d u c tio n

g reater d e ta il

la te r).

tran s p o rta tio n

and

about

26

w ith

however,

h a v e been s t a b l e

1 to Year
Th e

or

steps o f

(th is w ill
for

than

to tal

fo r

step o f

nu­

over

b u t,

the

be d i s c u s s e d

fe rtiliz e r

tran ­
in

(in c lu d in g

18 m i l l i o n d o l l a r s

in Year 0 .T h is

savings,

(or

if

f a r m e r s who h a v e been f a c e d

the t r a n s it io n

to Year

fe rtiliz e r

ha v e

firs t,

p ric e s ,

im portant im p lic a tio n s

l e t ' s examine those s t e p s .

the

2 marked t h e b e g i n n i n g o f

were updated

fa c ilitie s

same t i m e ,

T a b l e E - 2 o f A p p e n d i x E shows t h e
fa c ilitie s ,
u tiliz a tio n
o m itted

fa c ilitie s

firs t

in re c e n t y e a rs .

e x is tin g

of

the

d e c lin in g

At

s tra in ts

from ^ 9 . 9

products,

years;

o f new f a c i l i t i e s .

and t o t a l

la s t

2

tra n s itio n

use o f o l d

a n a ly s is

in r e c e n t

in v e s tm e n t d e c is io n m aking;

Year

of

expenditu res

in Y ear I

in p u t p r ic e s

The re m a in in g
fo r

total

T h is

Table A - 3 2 ) , w h ile

cost

w o u l d be a we lco me b r e a k

in cre a s in g

to Year 0 .

be

were e l i m i n a t e d .

in t o t a l

less

h a v e been

volume h a u l e d w i l l

in d ry blended

im p lic a tio n

To tal

re ta ile rs

a p p l i c a t i o n ) w o u l d be a b o u t

per c e n t)

pa s s ed o n ,

to tal

(Appendix A,

15,000

is

the

in a v e ra g e

tonnage remained c o n s t a n t ;

s itio n

lo ca l

1 as co mpa red

trie n t

lim estone

the

ha ul

f o r each c o n s tra in e d

in

the

ph ysical

new f a c i l i t i e s

in

fa c ility .

on

d e te rio ra tio n .
the

le v e l

of

tonnage c a p a c it y ,
T h e o n l y con­

t h o s e used t o p r e v e n t

long

purchasing

c o n s tra in ts

updated c o n s t r a i n t s ,

purchases o f

not

capacity

to r e f l e c t

from A p p e n d ix E a r e

th a t are

the

the

the

purchase

r u n Optimum o r g a n i z a t i o n .

100

A com parison o f T a b le
re s p e c tiv e ly ,
2 as

in Y e a r

elem en tal

shows t h a t

F-l

n e a rly

p h o s p h o r u s and w h i t e

The u t i l i z a t i o n
per c e n t

Optimum w i t h

7 .5

phosphoric a c id .

products w ith

in

w h ile

in vestm en t a t

su b -o p tim al

not optim al

given

c e n t on

b a re ly

The n o t i c e a b l e

the

in

short

b u t when t h e i r
they e x i s t

to Y ear 2.

Table

7 .5

the

the

tons o f

and o t h e r

in vestm en t a t

n o t used

in

per

suggests

that

long

cent,

run.

On t h e o t h e r

i n t e r e s t on

is dropped

fa c ilitie s

The most n o t i c e a b l e

A d d itio n a l

the e x i s t i n g

purchase o f
NH^ w e r e

w ith e x is tin g
a v aila b le

are

hand,

in vestm en t a t

to z e r o ,

t h e y become

charged

10,522

fa c ilitie s .

capacity

p ro d u c tiv e

at
of

in

15-0 per

and C e n t r a l
pro d u ctio n

NH^ u s e s , o t h e r

n itro g e n m anufacturing

c a p a c i t y w e re supplemented

a ll

M eanw hile,

11,315

o f w h i c h was p r o d u c e d

enough,

not a ll

36 ,1 *tO t o n s o f

im p lic a tio n

M i c h i g a n NH^ p r o d u c t i o n a r e
fo r

(Appendix

of

the

NH^ m a n u f a c t u r e r was u t i l i z e d .

a v a ila b le
Th e

tran ­

purchase o f

M ichigan

new c a p a c i t y .

In te re s tin g ly

used ( A p p e n d i x E , T a b l e E - 2 ) .

the

c a p a c i t y was p u r c h a s e d on t h e

the M id w est,

t h e M idwest
the

in C e n t r a l

tons o f

tons o f

change d u r i n g

c h a r g e was t h e

cap acity

64,2^6

produced

Le s s t h a n o n e - t h i r d

of

coarse

th e y were

run w i t h

in te re s t

NH^ p r o d u c t i v e

F -2 ).

G u lf C oast;
w ith

In a d d i t i o n ,

in ve s tm en t.

8 6 ,2 M f tons o f
F,

excep tio n s are

i n t e r e s t on

A n h y d r o u s ammonia u n d e r w e n t c o n s i d e r a b l e
s itio n

in Year

in Y e a r 2.

these

i n t e r e s t on

per c e n t ,

o p tim al,

of

i n A p p e n d i c e s F and A ,

same p r o d u c t s w e r e used

( a s s u m p t i o n number 4 ) ,

they a re j u s t
th e y were

the

1 (C o n s t r a in e d Optim um ).

p o t a s s i u m c h l o r i d e was used

zero

and T a b l e A - l ,

is

c a p a c it y were

that

cheaper than

th e M idwest

than d i r e c t a p p l i c a t i o n

s o lu tio n s ,

n itric

a c id ,

G u lf Coast

and p r o d u c t i o n

and ammonium n i t r a t e ,

101

w hich a r e a l l
fe rtiliz e r
is

used d i r e c t l y

producer.

not charged

charged

15.0

fo r

or

T h is

in d ire c tly

is

If

n itric

p r o d u c e NH^ f o r

a c id ,

w h ile

the

A fa c to r o f
the

id le

the

prime

NH^ c a p a c i t y

you w i l l

re c a ll,

stored.

(n Y e a r 2 ,

t h e model
a ll

of

c a p a c i t y was

le ft

at

in

the m a n u fa c tu r e r ;

d ire c t a p p lic a tio n
o n ly

if

storage

in ve s tm en t.

the a v a ila b le

lo c a tio n

of

is

no o t h e r

used

NH^

NH^ p r o d u c t i v e

the

C entral

NH^ s t o r a g e a t

produced

M ichigan

In a d d i t i o n ,

C entral

MH^ s t o r a g e

M ichigan

th e re .

(6 1 ,1 28

th ere)

NHj

in

the

NH^ manu­

of

t h e NHj
is stored

Consequently,
is o p tim a l

fo r

c a p ita l
fu ll

M ich ig an ,

use o f

w ith

the

M ichigan m a n u fa c tu re r.
th e M idwest

(2 5 » ll6

and p r o d u c t i o n o f 2 5 , 1 1 6

t o n s o f NHj a t

at

t h e M i d w e s t and c o r r e s p o n d ­

in C e n t r a l

the C en tra l

t o be

19,972

a p p lic a tio n

paying a charge

in

As

c o u l d be p u r c h a s e d

E xactly a l l

fo r d ire c t

capacity

capacity

storage.

c a p acity

t h e model w o u l d h a v e a l l o w e d

p ro d u c tio n o f 3 6 ,**3 1 tons o f

than o p tim a lly

n itro g e n

NH^ s t o r a g e

is s to re d

can be used w i t h o u t

s o lu tio n s ,

the e x p la n a tio n o f

NHj f r o m t h e M i d w e s t m a n u f a c t u r e r

l o w e r new p r o d u c t i o n

same l e v e l
is ,

that

and p r o d u c t i o n o f

per c en t o f each n u t r i e n t

purchased a t

For exam ple,

the a v a ila b le
in g ly

of

in to

p r o d u c e r s was u t i l i z e d .

th e Midwest

cap acity

id le .

a s a c o n s e q u e n c e o f a s s u m p t i o n number s e v e n .
produced

the c a p a c ity

s u ffic ie n t

a p p lic a tio n

is t h a t o f

f o r c e s 50

w h i c h was t h e o n l y

of

and n i t r o g e n m a n u f a c t u r i n g

in th e M idw est

NH^ s t o r a g e w e r e

fa c tu re r,

some d i r e c t

two a r e e a c h

then a l l

whereas,

im portance t h a t e n t e r s

M i d w e s t and G u l f C o a s t
tons o f

u tiliz e d ;

ammonium n i t r a t e ,

rem ainder o f

i n v e s t m e n t and t h e o t h e r

t h i s were not t r u e ,

i n t h e M i d w e s t w o u l d h a v e be en
was used t o

g r a n u l a t e d m ix e d

t r u e e v e n when t h e M i d w e s t p r o d u c e r

i n t e r e s t on

per c en t.

by t h e

the

That

t o n s more

fe w e r tons

new m a n u f a c t u r e r )

could

in

102

have ta k e n
s till

place.

h a v e been

Storage a t

19,972

centage o f C e n tra l

tons,

the C e n tra l
which w o uld

M i c h i g a n and s m a l l e r

t i o n w o u l d h a v e be e n s t o r e d .
less

new i n v e s t m e n t on w h i c h t o

o f new NH^ p r o d u c t i o n
M ic h ig an ),

the

th is

from th e M idwest

to

farm s.

et a l .)

same a s

T h e NHj was r a i l e d

is

the o p tim a l
m anufacturer
A nother
capacity o f

org an izatio n

in te re s tin g
pisto n

C entral

pressors
pressors,

are

both

Furtherm ore,

it

from the

lo c a tio n s .

in

to

the

$9 .8 0

the

that

u tiliz a tio n

is even cheaper
to M ich ig an

to

that
the

c e n trifu g a l

pa y f o r

than

to

the

th e M idwest
charge.

Th e a v a i l a b l e

to other areas,
o f 1+1,27** t o n s

new c e n t r i f u g a l

the advantage o f

the

From

C onsequently,

at

2.

A to ta l

im p lies

(Henderson,

f o r M ic h ig a n con­

producer

co m p e titiv e w ith

th at

M ichigan

tran s p o rta tio n

id le d .

w h ile

transpor­

is e x a c tly

in Y e a r

Th e

te rm in a l.

c he a p s t o r a g e

tons

C entral

per ton

farms

prod uction

Th is

given

its

is

the M ic h ig a n

G u lf Coast

p r o d u c e r was

in d ic a te s

G u lf Coast

fewer

than fro m C e n t r a l

phenomenon o c c u r r e d

not e c o n o m ic a lly

T h is

(sin ce

c o s t s was c h e a p e r .

s itu a tio n

$ 9 .80 e x tr a

id le d o r d iv e r t e d ,

i s much more e f f i c i e n t

from th e

the

e v e n when t h e y a r e

in ve s tm en t.

to

a ll

per­

w o u l d h a v e had

charges

a cost o f

c o m p r e s s o r t y p e NHj

M ichigan

purchased a t

s o lu tio n

M i c h i g a n NH^ m a n u f a c t u r e r .

u tiliz e s

and t h e n a v o i d s

o f c a p a c ity were
we re

at

c o s t by t r u c k

fr o m t h e C e n t r a l

s u m p t i o n was d i v e r t e d
and t h e

p arad o xical

i s more e x p e n s i v e

tran s p o rta tio n

it

th is

in te re s t

from th e M idw est m a n u fa c tu r e r

the

1a r g e r

p e rc e n ta g e o f M idwest produc­

in te re s t

h i gher

seem in gly

ta tio n
the

pay

im ply t h a t a

c a p a c i t y w o u l d h a v e been p u r c h a s e d a t

s o lu tio n w ith

e x p la n a tio n o f

there

A lthough

M ich ig an m a n u fa c tu re r could

the

compressors
p i s t o n com­

c e n trifu g a l
zero

com­

r e t u r n on

compressor

o f no n-investm ent

technology
fa c to rs .

t r a n s p o r t a t i o n o f NH^

u tiliz e

the e x is t in g

piston

103

t y p e NH^ p r o d u c t i o n
tran s p o rta tio n
technology

A service

op tion

at

ammonia

re p la c in g
a c tiv ity

but

re ta ile r

that

is n o t

however,

it,

on

lik e

the

used

in

long

tra n s itio n ,

Y e a r s 0 and

Y e a r 2 uses

even

investm ent.

type

run Optimum
the n o - s t o r e

1 both

used t h e

anhydrous

f r o m one t r a n s p o r t a t i o n

case.

though
Sin ce

tra n s p o rta tio n ,

is

the M ichigan

in e i t h e r

cost,

in vestm en t plus

c e n trifu g a l

the

tra n s fe rrin g

is s t o r e d

in tere s t

Thus,

type.

the

te rm in a l.

as h a v i n g m i n i m a l

a s e rv ic e ,

pisto n

used d u r i n g

No p r o d u c t

charged w ith
is

the

as a means o f

mode t o a n o t h e r ;

sele c te d

is

the M ichigan

fu n ctio n .

in M i c h i g a n .

charges would n o t p r e v e n t

from

o rg a n izatio n ,

technology

term inal

The

the
the

fo r

term inal

was

r e t a i l e r was n o t
tran s p o rta tio n

does n o t

th is

incur

tran s fe r

investm ent

charges.
Although n e i t h e r
fu ll
the
at

a v a ila b le

capacity

M id w e s t n i t r o g e n
fu ll

F-4,

capacity

and F - 5 ) .

producer
a ll.

is

This

n itra te

n itric

( A p p e n d i x E,

fu ll

creates

Table

the M iA /e s t

ca p a city ,
excess

in d u s try.

l o n g e r used e i t h e r

fo r

d ire c t

the M iA je s t

in

D ire c tly

u lated

ad d itio n al

in

excess

connected w ith

these

and n i t r o g e n

mi x e d f e r t i l i z e r

or

capacity

(t

is

th e ir

lin k e d w ith

on

acid

is

Tables

not

used a t

and ammonium

dry blended

sectors

and

in

sectors.

(v iz .,

so lu tio n s)

d iffic u lt

is no

fe rtiliz e rs ,

the G u lf Coast
a cid

F~3,

s o lu tio n s

ammonium n i t r a t e

in

and n i t r i c
three

F,

producer

the n i t r i c

m an u fa c tu rin g

producer.

d ire c tly

m anufacturing

Coast

a p p lic a tio n

u tiliz e

producers which o p e r a t e

Furtherm ore,

t h e ammonium n i t r a t e

ammonium n i t r a t e ,

are

and A p p e n d i x

n itro gen

capacity

the

c rea tin g

they

E -2,

the G u lf

of

thereby

sectors

du ring Year 2 ,

m anufacturing s o lu tio n s

W h ile

at

a c i d n o r ammonium n i t r a t e

n itric

a c id ,

is

gran­

the

to determ ine w h eth er

104
the

s h u t down o f

cap acity

in th e

la tio n s h ip
of

is

the

a ll

F -l,

a nd 2 0 , 8 0 2 a n n u a l

and

1 to Year

cap acity,
F -5,

2.

tons,

no l o n g e r

A ll

have f o r c e d

W hite

is j u s t

th re e are
but

2 , w h ile

n itro g en

id le d

below

its

1 ,5 9 1

p ro d u ctio n o f w h ite

they

Green p h o s p h o ric a c i d ,

is

its
us e d

id le

fu ll
in

are

16,365;

11,268;

T ab le E -2 ).

T h eir

in C o n s train e d
us ed

co n strain ed
of

in c o n s id e r ­
when t h e y

cap acity.

the a v a ila b le

on t h e o t h e r

F-6,

1 ,6 0 2

capacity e x is t
in the M id w e s t

u tiliz e d
111,918

242,603

tons o f capac­
tons

la rg e ly

its

in

fu ll

tons o f annual

tons.

in th e M id w e s t ,
is

Elem ental

and F - 7 ) .

hand,

in F l o r i d a

ca p a city ,

pro d u ctio n o f w h ite

p h o s p h o r i c a c i d was 6 , 7 4 6

prod uction

c a p a city

e x is tin g

the

a n d p u r c h a s e d an a d d i t i o n a l

5 8 ,7 1 4 tons o f a v a i l a b l e
T h is

40 ,1 9 7;

and u r e a a r e

become s u b - o p t i m a l

2 ( A p p e n d i c e s E and F , T a b l e s E - 2 ,

used.

s o lu tio n s

products c u r r e n t ly

Year

making t o t a l

ammonium

( A p p e n d i c e s E and F ,

tren d e s tab lis h e d

w h ile

cap acity,

a c id ,

ha v e 3 0 , 7 5 2 ;

c a p a c itie s

ity ,

in F l o r i d a

n itric

(Appendix E,

i s used t o

p h o s p h o r u s p r o d u c t i o n us e d

c ap acity

G ranulation

p ro d u ctio n .

ph osp h o ru s, which

s lig h tly

re­

c a p a c i t y as a r e s u l t

re s p e c tiv e ly

re s p e c tiv e ly

phosphoric a c id

w h ile elem en tal

causal

and F - 1 5 ) .

Th eir

in M ic h ig a n ,

the

the excess

R eg ard less o f the d i r e c t i o n

to n s o f excess

low -pressure

Year

1).

q u a n titie s

or whether

m an u fa c tu rin g s o lu tio n s

F-4,

caused

possess excess c a p a c i t y .

is a c o n t in u a t io n o f the

Op tim um ( Y e a r

a c id ,

from Year

F -3,

unus ed d u r i n g

a b le

sectors,

104,147

tons o f e xcess

Non-pressure

id len ess

sectors

has

and n i t r o g e n

Tables E -2 ,

a ll

m entioned

four

fe rtiliz e rs

11,053

M ichigan g r a n u la to r

the o p p o site d i r e c t i o n .

tra n s itio n

n itra te ,
and

three

in

c a u s a lity ,

o f m ixed
of

the o u ts ta te

A lthough

none o f

a re s u lt of

it
the

was

105
id len ess o f

th e m a jo r phosphate

product m anufacturers

monium and monoammonium p h o s p h a t e h a v e
1 3 ,5 8 8 annual
ever,

a ll

tons,

re s p e c tiv e ly ,

diammonium c a p a c i t y

was au gm ent ed w i t h

the

is

in

id le

purchase o f

granulated

has

F lo rid a ,

and r u n - o f - p i l e

trip le

1 0 , 5 8 2 and

of

In F l o r i d a ,

103,980 tons o f annual

F -8 , F-10,

superphosphate

D ia m ­

how­

and monoammonium p r o d u c t i o n

( A p p e n d i c e s E and F , T a b l e s E - 2 ,
trip le

c a p a c itie s

the M id w e st.

u tiliz e d

th e re.

and F - T l ) .

15,959 tons o f

ca p a city

In a d d i t i o n ,

id te

capacity

s u p e r p h o s p h a t e has 5 3 , 0 1 9

tons

in

id le d

i n th e Mi d w e s t.
These
la te d

id le

tonnages are caused

m ix e d and d r y b l e n d e d

272,000

to

2i*5,699 annual

la rg e ly

fe rtiliz e rs .

tons.

by t h e

cha ng e s

in

granu­

Th e f o r m e r d e c r e a s e d

Furtherm ore,

the

change

from

in d ry b le n d ­

i n g f o r m u l a t i o n s was such t h a t no diammonium p h o s p h a t e was used
Year

2 in blended

phate

su p p lied

same y e a r .
blended

fe rtiliz e rs ;

a ll

the

phosphate

In a d d i t i o n

fo r
that
the

its

i n an y o f

the

tons

it

fa c ilitie s

1,

b len d in g

fa c ilitie s

fo r d ire c t

in F l o r i d a ,

2; w hereas

is

th at

t h a t was

n o t used f o r b l e n d ­

(Appendix F ,
it

The z e r o

ra th e r econom ical,

A l t h o u g h diammonium f a c i l i t i e s
it

in Year

in Y e a r

f o r m u l a t i o n w h i c h had p r e v i o u s l y

pro d u ctio n o f

superphosphate,

preceeding y e a r s .

p r o d u c t i o n make

a d d itio n a l

products d u rin g

o f diammonium p h o s p h a t e

amounted t o 3 5 , 3 8 6

d ire c tly

fe rtiliz e r

monoammonium p h o s ­

2.

D ire c t a p p lic a tio n
F-10)

f o r blended

g ran u lar t r i p l e

in a custom b l e n d

ing d u r in g Year

on t h e o t h e r h a n d ,

in

Table

was n o t a p p l i e d
investm en t charges

but not to

the e x t e n t

w o u l d be p u r c h a s e d t o m a i n t a i n
us ed
were

a p p lic a tio n

it.
le ft

id le

in

was u n d e r t a k e n

w h e r e c h e a p e r a n h y d r o u s ammonia

the M id w e s t,
in th e e x i s t i n g
is a v a i l a b l e

106

(from

the

c e n trifu g a l

p h o ric a c id

is

c o m p r e s s o r on t h e G u l f

produced.

It

is

less e x p e n s iv e

high

a n a l ys i s diammonium p h o s p h a t e

t han

it

is

to s h ip anhydrous

phosphoric a c id
and p i s t o n
su p p lied
phate

(1 8 —^+6 —0 )

ammonia f r o m

from F l o r i d a .

prod uction

producer,

but

inputs

th is ,

to the

and g r e e n

to s h ip

the

fr o m F l o r i d a

the G u lf Coast

A lte rn a tiv e ly ,

c o m p r e s s o r NH^ m a n u f a c t u r e r s

the

Coa st)

in

id le d

re la tiv e ly
to Michigan

and g r e e n

the e x i s t i n g

the M id w e st

pho s­

green a c id

c o u l d have

Midwest diammonium p h o s ­

t o o , was more e x p e n s i v e

than

the op tim al

scheme.
S im ila rly ,
e x is tin g
input
of

and new f a c i l i t i e s

d esp ite

and p r o c e s s i n g f a c i l i t i e s

cheaper

id le

monoammoniurn p h o s p h a t e was

inputs

fa c ilitie s
In

the

and

in

less

in

the M idwest.

used;

Year 0 .

S ta n d a rd potassium c h lo r i d e

co n s tra in ts

liq u id

this

50,000

potash

Tables

A -l

Again

a v a ila b le

the

com bination

re su lte d

in

tons o f

the
(in

fe rtiliz e rs ;

standard

potassium

trend e s ta b lis h e d

a fter

Y e a r 0 ) was o r i g i n a l l y
however,

the

removal

of

used
th e ir

them s u b o p t i m a l .

s till

used f o r

c a p a c it y were

d ire c t

reduced

used d u r i n g Y e a r

a p p lic a tio n .
to 2 0 ,0 0 0

Its

tons,

1 (Appendices

bec aus e

A and F ,

and F - 14) .

of e x is tin g

potassium c h lo r i d e

c a p acity.
of

used 5 9 , 3 2 3
121,462

is

p r o d u c t was n o t

R un-of-m ine

prod uction

the

expenditures

in d u s try ,

continued

rendered

Coarse p o ta s s iu m
o rig in a l

th is

the

was n o t

fo rc in g

F lo r id a w ith

the M idw est.

ch lo rid e

m ix e d

in

the e x is t e n c e o f

tran s p o rta tio n

potassium s e c t o r o f

t o make c l e a r

prod uced

tons

Its

granulated

tons o f t h i s
an n u ally.

decrease

used o n l y
is

due

m ix e d f e r t i l i z e r s .
potash

product;

part o f

p rim a rily

its
to

In Y e a r 2 ,

whereas,

in

97.170

the

tons

decreased

granulato rs

Year

1 they

used

107

Dry b l e n d i n g o f
potassium c h l o r i d e

fe rtiliz e r

in Y e a r

2; w h e r e a s ,

same p r o c e s s

in Ye a r

ch lo rid e

ton o f b le n d e d

in Y ear

per

1 to 46.1 5

1.

Furtherm ore,

At

t io n c a p a c it y were purchased.
used, accounted
S im ila r

d ire c t

M ichigan

term inal

M ic h ig a n .

At

fe rtiliz e r

the

same t i m e ,

M ic h ig a n were

F -16).

In a d d i t i o n
M ich ig an ,

le ft

to

2 2,050

the

16,000

103,980

tons o f

b len d in g c a p a b i l i t y .
p rio rity

t o be ma de .

purchased

fo r

if

These

fiv e

the

fa c ilitie s

pur­

in

c a p acity

pro d u ctio n

annual

in

2 in clu d e:

p r o d u c e NH^

fa c ilitie s

new f a c i l i t i e s

a tran s fo rm a tio n o f

On t h e o t h e r h a n d ,

c a p a c it y were

to

in

in

in F l o r i d a ;

Saskatoon;

tons o f d ry

s h o u l d be g i v e n

fe rtiliz e r
such as t h e

at

E - 2 and

purchased

green phosphoric a c id

purchase o f 4 4 ,0 9 9

from th e

cap acity

Tables

use d u r i n g Y e a r

compressor c a p a c i t y
tons o f

the

in o u t s t a t e

fa c ilitie s

potassium c h l o r i d e

M ich ig an

produc­

down s l i g h t l y

( A p p e n d i c e s E and F ,

t o n s o f monoammonium p h o s p h a t e

granular

to tal

tons o f a v a i l a b l e

100,800 to n s .

111,918

not p re v io u s ly

F—1 3 ) -

supplement th e e x i s t i n g

M ichigan;

new p r o d u c ­

c ha nge d t r a n s p o r t a t i o n modes a t

new p r o d u c t i o n

c e n trifu g a l

g ran u lar

potassium c h l o r i d e ,

new r e t a i l i n g

and t h e o u t s t a t e

highest

granular

the

per cent

to tal

tons o f

1 7 9 ,7 0 4 tons o f

tons o f

8 6 ,2 4 4 tons o f

69 ,6 3 2

however,

t o n s o f new c a p a c i t y

id le

the

The m a jo r f a c i l i t i e s

F lo rid a ;

same t i m e ,

for

potassium

from 5 0 .5 8

decreased

p ro d u c tio n , w h ile

ob tained 44,0 9 9

C entral

C entral

t h e amount o f g r a n u l a r

the

(Appendix F , T a b le

Dry b le n d in g
p revious y e a r ,

a p p lic a tio n ,

granular

t o n s w e r e used

D ire c t a p p lic a tio n ,

t o a n h y d r o u s am mo ni a,

fo r

c ha s ed t o

the

f o r 6 6 , 3 1 4 tons o f

destin ed

o u tstate

137,590

fe rtiliz e r

per ce n t.

113,390 tons o f

i n c r e a s e d by 4 2 , 1 1 4 t o n s , w h i l e 6 9 , 6 3 2

p rod uction

tio n .

used o n l y

in d u stry
pisto n

is

tech-

108
nology f o r

p r o d u c in g NH^» t h e p r o d u c t i o n o f

phosphate

liq u id s

the

on es t o be s c r a p p e d .

firs t

Th e g e n e r a l

and g r a n u l a r

trend o f

the

ensuing y e a rs w i l l

c o n tin u a lly

in d u s try c lo s e r

the

Year 2 to

to

products

su p p lied d u rin g
q u a n titie s

is

produced a t

has be en e s t a b l i s h e d ;

the o r g a n iz a tio n o f

run o p t i m a l

the

the

fe rtiliz e r

o rg a n izatio n .

in Y e a r 3 a r e e x a c t l y

previous year

la rg e r

t h e same as t h o s e

(A ppendix F, T a b le

At

w h ile

the

share o f

C entral

per cent o f

n itro g en .

w ith

the

in c re a s in g ly

tin u ed

s h o u l d be among

F -l);

o n ly

the

v a ried .

produced t h e r e ;

were

produced

An

fo r 5 6.1

superphosphate

tra n s itio n
b rin g

a m m o n ia t e d p o l y ­

3

The

tio n

long

trip le

urea,

M ich ig an .

the

to tal

d es p ite

the

fact

NH^

9 5 ,852

from C e n tra l

accounted

supply M ic h ig a n w i t h

s lig h tly

M ichigan.

NH^ p r o d u c t i o n w e n t

there

pro d u ctio n

con­

1 0 , 0 M f t o n s o f new c a p a c i t y

that

increased

p e r c e n t was

produced

(Appendix F , T a b le

of

M ichigan

5 0 .0

M id w est and G u l f Coast

D ire c t a p p lic a tio n

o f C entral

2,

tons

NH^ p r o d u c e d t o

p u r c h a s e d on t h e G u l f C o a s t

t o n s coming

a n h y d r o u s ammonia p r o d u c ­

In Ye a r

in Y e a r 3 th e 9 6 ,7 2 1

same t i m e ,

to decrease,

to tal

in to

the

to

F -2).

1 2 7 , 7 6 *t t o n s

The r e m a i n i n g 8 6 9

tons

p r o d u c t io n o f diam­

monium p h o s p h a t e .
The G u l f C o a s t
n itric

a c id ,

producers.
v o lu m e o f

NH^ m a n u f a c t u r e r s c o n t i n u e d

ammonium n i t r a t e ,

and n i t r o g e n m a n u f a c t u r i n g

These th r e e Midwest producers
p ro d u c tio n ,

w ith

the

continued

th e M idwest
s o lu tio n s

to decrease

in

pac e d e t e r m i n e d by t h e c o n s t r a i n t on

n itro g e n m an u factu rin g s o lu t io n s .
(Appendices

to supply

E and F , T a b l e s E - 3 ,

Th e o t h e r
F-3,

F -4,

two had e x c e s s

and F - 5 ) .

cap acity

109
E lem ental
liz e d

to

E -3 )•

the

acid

the

tons o f e le m e n ta l
so le

the decrease

source o f

in

242,603

fo r w h ite a c id

to ta l

tons

phosphorus w ere

phosphate

pro d u ctio n o f w h ite

p ro d u c tio n o f green a c i d ,
s e q u e n tly ,

p h o s p h o ric a c i d were

p r o d u c t i o n o f w h i t e a c i d was 3 * 3 7 3

795

is

and w h i t e

c o n s tra in t e s tab lis h e d

To tal

in which

phosphorus

green

in Ye a r

given

fo r

2 to

2 4 9 ,6 8 8 tons

Table

tons d u rin g Y ear 3
used.

Since

in creased

phosphoric

m an u factu rin g ,

n e c e ss a rily

c o n s t a n t demand f o r

phosphoric a c id

u ti­

(Appendix E,

fe rtiliz e r

acid

again

im p lie s

increased

phosphate.

by 7 , 0 8 5

Con­

tons,

fr o m

in Y e a r 3 (A p p e n d ix F ,

Table

p r o d u c t i o n was a g a i n a t

its

F - 8) .
R u n -o f-p ile
lim itin g

trip le

c o n s tra in t

superphosphate

in F l o r i d a ,

b u t was c o n s i d e r a b l y b e l o w t h e

s t r a i n t on M i d w e s t p r o d u c t i o n .

J u s t as

to ta l

trip le

p rod uction o f

ru n -o f-p ile

t h e g r a n u l a t e d m ix e d f e r t i l i z e r
The c o n t i n u e d d e c r e a s e
was

re sp o n sib le

phosphate.
tons,

f o r much o f

In a d d i t i o n ,

leavin g

fo r Year 3

to ta l

phosphate w ere

of

c a p a city .

T h is

in

(Appendix F,

p ro d u ctio n ,

45,6 9 0

T h is

m ark s an

fig u re

procedure

in th e

a ll

F -ll).

tons, went to

year.

F -9 ).

pro d u ctio n

diammonium

42,7 0 9

tons

and F - 1 0 ) .
c a p a c i t y o f monoammonium

t o aug m ent t h e e x i s t i n g

i n an
went

to d ry blended

farms f o r d i r e c t
tons

for

tons

fe rtiliz e r

A b o u t 23 p e r c e n t o f t h e
the

143,338

in crease o f o v e r 30,000

in c re a s e o f over 7*500

previous

fe rtiliz e r

by

d r o p p e d by n e a r l y 9 , 0 0 0

new p r o d u c t i v e

re s u lte d

Table

Table

diammonium p h o s p h a t e a t

F lo rid a

p r o d u c t io n o f which n e a r l y

d u ction

a p p lic a tio n

F-l

tons o f

purchased

(Appendix F ,

the decreased p ro d u c tio n o f

d ire c t

the

s u p e r p h o s p h a t e was u t i l i z e d

producers

p ro d u ctio n o f

5 7 ,7 3 2

the p re v io u s y e a r ,

g r a n u l a t e d m ix e d

(Appendix F , T a b le s

In Y e a r 3 ,

tons o f

in

in

con­

pro­

to tal

a p p lic a tio n .
th is

same

110

The potash
changes as
c h lo rid e

in

the

Saskatoon.

of

the decreased
d ry b len d in g

granular

ru n -o f-m in e

in

a p p lic a tio n ,
its

pro d u ctio n

in

by t h e c a p a c i t y

fe rtiliz e rs .

re sp o n sib le

fo r

lim ita ­

in d u c e d by
In crea ses

in

s u p p l e m e n t e d by
the

n e a r ly 30,000

(A p p e n d ic e s E and F, T a b l e s E - 3 ,

F-12,

and F - l * + ) .
Dry blended

tons a n n u a lly .

fe rtiliz e r

p rod uction

To t h e e x i s t i n g

i n c r e a s e d by more t h a n *+0,000

190,889

tons o f

9 7 , 6 5 * + t o n s o f new c a p a c i t y w e r e a d d e d .
fa c ilitie s
E,

purchased

potassium c h l o r i d e ,
were

potassium

p r o d u c t i o n was

p r o d u c t i o n o f g r a n u l a r m ixed

in crease

F-13,

i n c o a r s e was f o r c e d

us a g e o f g r a n u l a r

same t y p e s o f

w h i l e 6 * t , 2*+6 t o n s o f

in u t i l i z a t i o n ,

in

the

R u n - o f - m i n e and c o a r s e

potassium c h l o r i d e were

the decrease

in creased d i r e c t
ton

in d u s try experienced

to decrease

Th e d e c r e a s e

whereas,

the

p revio u s y e a r,

continued

new c a p a c i t y

tio n ;

sector o f

remained

Table E - 3 ) .

b rin g in g
Table

the

id le ,

as

th e y were

N ea rly 5 0 ,0 0 0

to tal

re ta ilin g

tons o f
capacity

u tiliz e d

The C e n t r a l
in

the

to

M ichigan b len d in g

previous

re ta ilin g
l*+*+,271

c a p a city ,

year

(Appendix

c a p a c ity were purchased,
tons

(Appendix F ,

F-16),

Y e a r 3 was h i g h l i g h t e d by i n c r e a s e d p u rc h as es o f t h o s e
requ ired

t o s u p p le m e n t t h e e x i s t i n g ones

o f supplying f e r t i l i z e r
b ility

was b u i l t

to M ich ig an .

in C e n tra l

in m in im izin g

A d d itio n al

increased c a p a c it y .

production

The t r a d e - o f f between

b l e n d i n g and d e c r e a s e d g r a n u l a r m i x i n g was l a r g e l y
the d e c l i n e o r r i s e o f p a r t i c u l a r p ro d u c ts .
capacity c o n s tra in ts

cost

NHj p r o d u c t i v e c a p a ­

p h o s p h o r i c a c i d and monoammonium phos pha te f a c i l i t i e s

received

the t o t a l

M i c h i g a n and on t h e G u l f C o a s t .

i n F l o r i d a , and g r a n u l a r p o t a s s iu m c h l o r i d e

fa c ilitie s

w er e augmented
i n Sask ato on

increased dry
resp onsible fo r

In a d d i t i o n ,

fo rc ed decreased p ro d u c tio n o f

Green

th e re duced

some p r o d u c t s .

111

Year 3 to 4
The t r a n s i t i o n
dustry
Three

c o n sid erab ly
products

o p t ima l
coarse
other

to Year 4 brought
c lo s e r

that are

in Y ear 4;

to

the

in

products were n e a r l y

T h is brought

2 1,012

w h i c h was used t o

pisto n

compressor

in Y e a r 4 .

1 1,050

capacity

E - 4 and F - l ) .
below h i s
ris e

th ere

n itro g en

be t h e

m an u fa c tu rin g

d e te rio ra tio n
and 3 , 2 1 3

fa c tu rin g

several

At

to

prod uction

the

c e n trifu g a l

in cre a s e

to

NH^ f o r d i r e c t

same t i m e ,

to 6 0 ,6 3 0

tons

in C e n tr a l

purchased

107*198 annual
a p p lic a tio n .

in M ic h ig a n .

tons,

a ll

of

In a d d i t i o n

G u lf C oast,

b rin g in g

( A p p e n d i c e s E and F , T a b l e s

d ir e c t a p p lic a tio n o f

th e decreased

M ichigan.

c o n trib u tio n s

to o p e ra te w ell
NH^ c o n t i n u e d

o f the

G u lf Coast

producers.

Year 4 w i l l

fo r

s o lu tio n s ,

schedule.

tons,

s o lu tio n s

la s t

n itric
since

T h eir

re s p e c tiv e ly .

c o n s tra in t

p r o d u c ts have exce s s c a p a c i t y
F-4,

there

in M ic h ig a n ,

slo w ly d e s p ite

and

technology fo r

Th e M i d w e s t NH^ m a n u f a c t u r e r c o n t i n u e d

capacity

and M i d w e s t

2,2 4 3 ;

In a d d i t i o n ,

t o n s o f NH^ c a p a c i t y w e r e p u r c h a s e d on t h e

to tal

th e ir

capacity

supply

o rg a n izatio n .

phosphoric a c id ,

t o n s o f new c a p a c i t y w e r e

the t o t a l

in ­

l o n g r u n became s u b -

phosphorus, w h ite

c o m p r e s s i o n t e c h n o l o g y was c o n t i n u i n g
D uring Year 4 ,

the

phase d o u t .

o f a n h y d r o u s ammonia e x i s t e d

to

the

potassium c h l o r i d e were n o t prod uced .

None o f t h e o r i g i n a l

the

tran sfo rm atio n o f

l o n g run o p t i m a ]

sub-optim al

e lem en tal

the

is th e

a c id ,

ammonium n i t r a t e ,

t h e y ha v e r e a c h e d

le v e ls o f

t h e end o f

u tiliz a tio n

Once a g a i n ,

the

l i m i t i n g one;

and

are

nitro g en

the o th e r

( A p p e n d i c e s E and F , T a b l e s E - 4 ,

1,716;
manu­
two
F-3,

a nd F - 5 ) .
Green p h o s p h o r i c a c i d

has c o m p l e t e l y

rep laced w h ite

phosphoric

112

acid .

T o tal

green a c id

pro d u ctio n

w h ic h 5 6 , 0 4 4 t o n s was n e w l y
green a c id

produced

make p h o s p h a t e
shipped t o

th e Midwest

phosphate

purchased.

in F l o r i d a

products.

i n Y e a r 4 was 2 5 6 , 7 7 4 t o n s ,

during Year 4

Th e o t h e r

to

be made

(A ppendix F , T a b le s

Over 9 9 .6 7
is

in to

per cent o f a l l

used

fo u r-ten th s

in F l o r i d a

to

o f one p e r c e n t

is

ru n -o f-p ile

trip le

super­

F - 8 and F - 9 ) .

Diammonium ph os pha te p r o d u c t i o n

in F l o r i d a dr op pe d t o 2 5 , 8 3 3 t o n s ,

w h i l e t h e C e n t r a l M i c h i g a n p l a n t was c o m p l e t e l y s h u t - d o w n .
to tal

p rod uction ,

17,924 tons,

tons o f

to ta l

up t o

increase

to tal

c a p a city ,

D ire c t

storage
factu rer

22,000

fa c ilitie s

t o make t o t a l

Coarse

of

3 9 ,8 4 6 were

178,459

n e c e ss a rily

fo r

133,844 to n s.

potassium c h l o r i d e

pro d u ctio n

fe ll

the d e t e r io r a t io n

scheme.

The o t h e r
picked

potash

up t h e

stack

168,563

tons

(Appendix F , T a b le s F - 1 2 ,

product,
le ft

New
manu­

to z e ro d u rin g Y ear 4

R u n -o f-m in e
producers
gran u lar

p o t a s h was

i n t h e amount o f
potassium c h l o r i d e ,

by c o a r s e and r u n - o f - m i n e ,

New c a p a c i t y o f

t o make t o t a l
F-13,

in creased

the F lo rid a

c a p a b ility

K 2 O demand was h e l d c o n s t a n t .
the e x i s t i n g

tons, w h ile dry

tons a n n u a l ly .

purchased

t o g r a n u l a t e d m ixed f e r t i l i z e r

19,772 to n s .

8 ,0 0 0

storage

as a r e s u l t o f
supp lied

i n c r e a s e d by n e a r l y

to a t o t a l

w ith

ton

a s com pared t o Y e a r 3 ( A p p e n d i x F , T a b l e

c o n s u m p t i o n o f monoammonium p h o s p h a t e

tons

in F l o r i d a

i n more t h a n a 3 0 , 0 0 0

2 3 1 , 8 2 3 and r e s u l t e d

a p p lic a tio n

blended f e r t i l i z e r ' s
more t h a n

to ns w en t t o

new monoammonium p h o s p h a t e c a p a c i t y

brought th e

F -ll).

The r e m a i n i n g 7 , 9 0 9

M i c h i g a n g r a n u l a t e d mixe d f e r t i l i z e r m a n u f a c t u r e r .

The 6 3 , 5 1 0

in

Of the

o r n e a r l y 7 0 pe r c e n t , were s h ip p e d t o

M i c h i g a n t o be a p p l i e d d i r e c t l y .
th e C e n t r a l

of

annual

and F - 1 4 ) .

70 ,6 7 8

sin ce

t o n s aug m e nt e d

c a p acity

259,006

To t h e e x i s t i n g

tons

storage

M3
c a p a b ility o f
added.

43 ,2 1 7

D ire c t a p p lic a tio n

ne a rly
4.

86,3 1 8 to n s ,

10,000

tons

D ry b l e n d e d

amount

o f granular

from 7 6 ,3 0 7

fe rtiliz e rs

tons

used

i s o v e r 5 9 P©r c e n t o f

is

less

(Appendix E,
g ranulated

than h a l f
Table E - 4 ) .

m ix e d

alm ost 4 3 ,0 0 0
4 9.000

tons

of

(Appendix F ,

o f which w ere

ity

fo r

a ll

tons o f

the e x i s t i n g

total

the

lo cated

tons

very

near

s till

in Year 4 a re
except

S ig n ific a n t
year.

are

to

that

schedule,

fo r

not

c a p acity

fe rtiliz e rs
the

form er

to

rep lace

in creased

c a p a c i t y were

M ich ig an .

c a p a c i t y was

Total

than

107,432 to n s,
b len d in g

were

a ll

long

in

the

brought

the

year of

new f a c i l i t i e s
2 4 ,6 9 2 tons o f

the 5 6 ,0 4 4

supplement

and r e d u c t i o n

the t r a n s i t i o n

o rg a n izatio n .

run o p t i m a l
la s t

N early

F -16).

long run o p t i m a l

the

schedule;

M ichigan.

purchased t o

Table

fa c ilitie s

the

in

in o u t s t a t e

fa c ilitie s

capac­

M ichigan dry blended

p u r c h a s e s o f new f a c i l i t i e s

purchases o f

M ic h ig a n ;

tons,

c o n s tra in t

continued

o rg a n izatio n

in

Those
b u t were

the M id w est.

w e r e made d u r i n g
NH^ p r o d u c t i o n

tons o f g re e n

of

th e ir d e te rio ra tio n

t h e a n h y d r o u s ammonia p r o d u c e r

Most n o t a b l e were

in C e n tra l

f o r Y e a r 4 was 4 9 , 4 3 1

The C e n t r a l

(Appendix F ,

a d d itio n a l

fa c ilitie s
used

100,000 ton

tons.

e lim in a tio n o f other

in d u s try

th is

p ro d u c tio n .

p ro d u ctio n

in o u ts t a t e

b len d in g

128,041

in Y e a r

tons d u rin g Y ear 4 ;

new d r y b l e n d i n g

new r e t a i l i n g

In Y e a r 4 ,
or

tons

m a n u f a c t u r e r was phased o u t by t h e d e t e r i o r a t i o n

consequently,
60 .0 0 0

in creased

l a t t e r 1s p r o d u c t i o n d e c r e a s e d m ore

t h e y e a r was 3 3 1 , 4 0 0

fe rtiliz e r

c h lo rid e

were

T ab le F - l ) .

Year 4 purchases o f
a ll

152,941

as p r o d u c t i o n o f

and t h e

fa c ilitie s

in Y e a r 3 to 8 6 ,3 0 0

Dry blended

products

tons,

the

new s t o r a g e

potassium

the t o t a l

G r a n u l a t e d m ix e d f e r t i l i z e r
which

tons o f

the

c a p acity

p h o s p h o r i c a c i d and

the

6 3 ,510

t o n s o f monoammonium p h o s p h a t e

tons o f g r a n u l a r
and f i n a l l y

the

potassium c h lo r i d e
in s ta lla tio n

of

c a p acity

in F l o r i d a ;

p ro d u ctio n

107,432

fa c ilitie s

the

70,678

in Saskatoon

tons o f d ry b le n d in g c a p a c ity

in o u t s t a t e M ic h ig a n .
T h re e m ajo r p ro d u c ts were
elem en tal

phosphorus, w h i t e

phased o u t d u r i n g

phosphoric a c i d ,

the

year,

and c o a r s e

nam ely,

potassium

c h 1o r i d e .
Th e t r a n s i t i o n
of

the

fe rtiliz e r

to Year 5 w i l l

n e a rly

com plete

the

tran s fo rm a tio n

in d u s try .

Year 4 to 5
From t h e s t a n d p o i n t o f
to

the

lo n g run o p t i m a l

fa c ilitie s

used

c om po s in g t h e

to supply

the

to

The continued
fa c ilitie s
o p t ima l
there,

t h e G u l f C o a s t and

tio n
sm all

up t o

tons

to

tons o f

s lig h tly

long

d iffe r

the

from those

the

fa c ilitie s

run o r g a n i z a t i o n .

from

the

lo n g

r un

c a p a c it y were a v a i l a b l e

(Appendix E,

Table E - 5 ) .

T h is

and 9 4 , 5 6 2 t o n s o f e x i s t i n g

in C e n tra l

in M ic h ig a n ,

172,763 annual

volume o f

th e 4 1,407

1 0 , 5 7 4 end 2 4 , 6 9 1

G u l f C o a s t and

However,

in w h ic h

the o p tim a l

produced

c a p acity

the

in

A lthou gh 9 ,0 3 5

combined w i t h

at

d iffe r

id e n tic a l

t h e M i d w e s t a n h y d r o u s ammonia m a n u f a c t u r i n g

tons w ere

s u p p l e m e n t e d by t h e

in d u s try .

th e o n l y ones

c a us ed t h e Y e a r 5 o r g a n i z a t i o n

1,529

is

Th e a n h y d r o u s ammonia and d r y b l e n d ­

are

p ro d u ctio n ,
at

the

products

t h o s e used

use o f

o rg a n iza tio n .
o n ly

those

in d u s try

not e q u iv a le n t

s u p p lie d , Year 5

o rg a n izatio n o f

lo n g r u n O p t im u m .

in g s e c t o r s o f
are

products

M ich ig an ,

re s p e c tiv e ly ,

t o n s o f new c a p a c i t y

re s p e c tiv e ly ,

brought

(Appendix F , T a b le s

F-l

p r o d u c t i o n by t h e M i d w e s t p r o d u c e r j u s t

and

purchased

to tal

produc­

and F - 2 ) .
fu lly

Th e

u tiliz e d

115

his

a v a ila b le

storage

cap acity.

p r o d u c t i o n was c o n v e r t e d
n itro g e n m a n u factu rin g
M ichigan

in to

n itric

s o lu tio n s ,

u tiliz e

his

In a d d i t i o n ,

ap p lied d i r e c t l y ,

a c id ,

ru n -o f-p ile
potassium

of

out o f

le v e l

I n Y e a r **,

of

tons were

a p p lic a tio n
a ll

of

the

a p p li­

p ro d u c tio n were

t o n s o f NH^ used f o r

(Appendix F,

Table

F -2 ).
s o lu ­

t h a t w e r e used

The o t h e r s

in

fe rtiliz e r

the

in

group w ere:
ru n -o f-m in e

p ro d u ctio n

260,*t87

shipped

superphosphate.

pro d u ctio n

s lig h tly

tons.

to

A ll

trip le

of

the

produc­

took p la c e

in Y ear 5,

green a c id

(Appendix F ,

in

the

phase

t o be made

Table

F -8 ).

s u p e r p h o s p h a t e and diammonium

pro d u ctio n

spurted

i n Y e a r 5 was 2 7 0 , * * 9 5

2 0 1 , 5 3 0 t o n s w e r e used i n d r y b l e n d e d

from the

th e M idwest m a n u fa c tu r e r

However,

freed a l l

in F l o r i d a

ru n -o f-p ile

increased

f r o m new f a c i l i t i e s ,

monoammonium p h o s p h a t e
T o tal

to

and n i t r o g e n m a n u f a c t u r i n g

p ro d u ctio n

256,77** t o

i n t o monoammonium p h o s p h a t e

**0,000 t o n s .

and

fo r d ire c t

diammonium p h o s p h a t e ,

t h a t M idw estern m a n u fa c tu re r

phosphate,

p la n t went

his

three

p revio u s y e a r ,

129,890

in Y e a r 5 .

822 tons w ere

trip le

R e p la c in g both

of

F -l).

o f w hich 5 8 ,2 7 5

ru n -o f-p ile

the

G u lf C o a s t's

and g r a n u l a t e d m ix e d

Gre e n p h o s p h o r i c a c i d

F lo rid a ,

the

of

superphosphate,

c h lo rid e ,

the

s e v e n p r o d u c t s and p r o c e s s e s

ph ase d o u t

(A ppendix F, T a b le

tio n ,

tons o f

ammonium n i t r a t e ,

trip le

previous y e a r 's

in

by M i c h i g a n f a r m e r s

t i o n s w e r e among t h e
Y e a r *+, b u t w e r e

9,108

in Y ear 5 ,

le a v in g o n ly d i r e c t

M ichigan

making a t o t a l

d ire c t a p p lic a tio n
N itric

However,

J u s t as

NHj m a n u f a c t u r e d by t h e C e n t r a l
c a tio n .

a c i d f ammonium n i t r a t e ,

phased o u t ,

p ro d u c tio n .

a po rtio n

th e re m a in d e r b e in g shipped

fo r d ire c t a p p lic a tio n .

m entioned p ro c e s so rs were
to

In p r e v io u s y e a r s ,

fe rtiliz e r

upward by n e a r l y
tons,

o f w hich

p r o d u c t i o n and t h e

116

rem aining 6 8 ,9 6 5
192,716 tons o f

tons went f o r
p ro d u ctive

d ire c t

c a p a b i l i t y were

t o n s o f newTy p u r c h a s e d c a p a c i t y
In Y e a r 5 ,
Its

total

the o n ly

p ro d u ctio n

blended f e r t i l i z e r
fo r

the

in Saskatoon

ing o f

a to tal

purchase o f

the

tons.

Table

to tal

previous

256,081

itie s
tio n

o f new f a c i l i t i e s
those

In th e n e x t
are

of

necessary to

f o c u s e d on t h e

the

s e c t i o n we w i l l
com plete th e

costs o f

tons o f

E x is tin g

In a d d i t i o n

fa c ilitie s ,

F-16)

dry

total

fa c ilitie s

to

128,041

tons o f
Table

p lan t

new

F -T 6).

in o u t­

and t h e M i d w e s t a n h y d r o u s

the

long

sectors o f

long

the

the

59,081

b len d in g

two e x c e p t i o n s

when combined w i t h
in

dry b len d ­

g r a n u l a t e d m ix e d

the 3 7 4 ,2 4 3

M ichigan.

from thos e o f

u tiliz e d

tons,

43,000

foregone

h o rizo n tal

other

c a p acity

in Y e a r 5 ( A p p e n d ix F ,

the o n ly

In a l l

tons o f

tons w ere supplem ented w i t h

(A ppendix F, T a b le

(Appendix D ) .

d u p lica te d

A ll

purchased

o f Year 5 d iffe r e d

191,267

n e a rly

the

d ry blended r e t a i l i n g

ammonia m a n u f a c t u r e r w e r e

p ro d u ctio n

F -13).

1 1 8 , 1 6 2 t o n s o f new c a p a c i t y .

s t a t e M ichigan

t o n s , o f which d ry

capacity

year.

use o f t h e

potassium c h l o r i d e .

New p u r c h a s e s o f

in o u t s t a t e

cap acity o f

The c o n t i n u e d

F -ll).

accounted

r e p l a c e d most o f

c a p a c i t y were

Table

77,779

t o n s and d i r e c t a p p l i c a t i o n

p ro d u ctio n o f

produced

tons o f e x i s t i n g
re ta ilin g

(Appendix F ,

t o n s aug m e nt e d t h e e x i s t i n g

fe rtiliz e rs

p ro d u ctio n were

supplemented w i t h

t h e y e a r was 2 5 9 , 0 0 6

(Appendix F ,

pro d u ctio n o f

w ith

fo r

took 172,713

W ith a jump in

The e x i s t i n g

s o u r c e o f K20 was g r a n u l a r

rem ain ing 8 6 ,2 9 3

o f 6 7 ,7 3 9 annual

a p p lic a tio n .

the

in w h ich th e

run o p t i m a l
in d u s try ,

the e x is t in g
run o p t i m a l

fa c il­

o rg an iza­

the

fa c ilitie s

purchases
e x a c tly

o rg a n izatio n .

see w h i c h p u r c h a s e s o f new f a c i l i t i e s

tra n s itio n .

Then,

supp lying f e r t i l i z e r

a tte n tio n

to M ichigan

w ill

be

in each o f

117
the t r a n s it io n a l
the

y e a r s a nd on how t h e y

Tong r u n o p t i m a l

compare t o

the

1 970 A c t u a l

and

o rg an izatio n s.

Year 5 to 6
The

to Year 6 com pletes

tra n s itio n

in d u s try

i n t o an o r g a n i z a t i o n

1970

le v e ls

cost,

given

In o r d e r

fe a s ib le

to com plete

ammonia c a p a c i t y w e r e

d u ctio n a t
Y e a r 5s

the

the

total

purchased

and F - 2 ) .

d ire c t

a p p lic a tio n

p revio u s year;
Th e 6 0 , 3 9 0

and o t h e r
however,

tons o f

to y ie ld

the

(Appendix F ,

Table F -8 ) .

t i o n went

the F lo r id a

to

N e a r l y **7,000
p a c it y were
fa c ilitie s .
tio n

Coast.

Total

between d r y

the

le a s t

the

po ssib le

uses
the

is

the

at

the

than

the

they were

in

same ( A p p e n d i x F ,

to tal
260,**87

le v e ls o f

somewhat d i f f e r e n t .
pro d u ctio n

the d e t e r io r a t io n
of

le v e ls o f pro­

same t o n n a g e

phosphoric a c id

same l e v e l
of

to ta l

1 1 ,1 7 2 tons

f l o w o f a n h y d r o u s ammonia t o

sources a re

o ff-set

A ll

is e x a c t l y
the

to n s o f anhydrous

M i c h i g a n and

somewhat d i f f e r e n t

new g r e e n

of

the e x is t in g

p r o d u c t io n as
tons o f

capacity

in Year 5

green ac id

produc­

monoammonium p h o s p h a t e m a n u f a c t u r e r .

tons o f

necessary

farm ers w ith

25,7**1

A lthou gh the

In a d d i t i o n ,

in F l o r id a j u s t

fa c ilitie s

in C e n t r a l

p r o d u c t i o n o f NH^

F -l

purchased

tra n s fo rm a tio n ,

two l o c a t i o n s a r e

Tables

the

P2 Q5 » a n ^ K 2 O a t

the

technology.

the

w e r e p u r c h a s e d on t h e G u l f

tran s fo rm a tio n o f

t h a t s u p p lie s M ich ig an

o f c o n s u m p t i o n o f N,
current

the

new monoammonium p h o s p h a t e

to o ffs e t

p ro d u ctio n

the d e t e r i o r a t i o n

of

p ro d u ctive
the

r e m a i n e d c o n s t a n t as d i d

b l e n d i n g and d i r e c t a p p l i c a t i o n

ca­

e x is tin g

the d i s t r i b u ­

(A ppendix F, Table

F -ll).
S im ila rly ,

5**,7**7 t o n s o f new g r a n u l a r

potassium c h l o r i d e

cap acity

118

were purchased
W ith

in Saskatoon

the d i s t r i b u t i o n

blen din g

used

fo r 8 6,293

viou s

dry blen der
pro d u ctio n

8 7,1 3*+ t o n s o f

re ta ilin g

of e x is tin g

to Year 6 re s u lte d

blen din g

re ta ilin g

were

F -16).

as a consequence o f

h o rizo n tal

the

Im p lic a tio n s

b ility

Is

its

pre­

b len d ers,

In a d d i t i o n ,

in

**3,567

tons

1**3»555 t o n s

remained

constant

in t h e

tra n s itio n

took p lac e d u rin g

fe rtiT z ie r
the

to a d ju s t

p ro d u c e r were

tra n s itio n .
the

flo w o f

th e Midwest p ro d u c er.

of a ll

o ther

Some
t h e NH^
O th erw ise,

pro d u c ts were e x a c t l y

the

previous y e a r.
tra n s itio n ,

le t's

examine

the

im p lic a tio n s

steps.

f o r Years

New i n v e s t m e n t
fa c ilitie s

h o ri­

t h e M i d w e s t a n h y d r o u s ammonia

dry blended

phase-out o f

H aving com pleted th e
fin a l

the

were purchased

c h a n g e s w e r e made

E lim in a tio n o f

t h e p r o d u c t i o n and d i s t r i b u t i o n

its

v e rtic a l

d ry blen d in g

a c c o m p a n y i n g m i n o r c h a n g e s w e r e ne ed ed

of

accounted

T o c o m pe ns a t e f o r

fa c ilitie s

To tal

few o r g a n i z a t i o n a l

two m a j o r cha ng e s t h a t

the

dry

tons.

m a n u f a c t u r e r and t h e

in

pro d uctio n .

previous y e a r ,

p u r c h a s e d t o accompany t h e

cap acity.

from Y e a r 5 t o Y e a r 6 .

same a s

the

in e x i s t i n g

(Appendix F , T a b le

fa c ilitie s

a t 37*+,2**3 a n n u a l

the

of

of

in e lim in a t io n o f

in o u t s t a t e M ic h ig a n .

new v e r t i c a l

R e la tiv e ly

th at

le v e l

t o n s o f 1 ^ 0 and d i r e c t a p p l i c a t i o n

and d e t e r i o r a t i o n

o u t s t a t e M ich ig an
of

to

a constant

(Appendix F , T a b le F - I 3 ) .

The t r a n s i t i o n
zontal

e q u iva len t

172,713

tons

to m a in ta in

very

2 through 6

in c e n t r i f u g a l
im p o rta n t.

was a v a i l a b l e ,

it

was

t y p e a n h y d r o u s ammonia p r o d u c t i o n

A lthou gh
le ft

id le

pisto n
in Y e a r

type

p ro d u ctio n

capa­

2 w h ile over 85 ,0 0 0

119
tons o f

new c e n t r i f u g a l

th e M ichigan
nology

is

p r o d u c tio n were

NH^ p r o d u c e r ,

c le a rly

the

in e ffic ie n t

im p lic a tio n

stan d p o in t o f m in im izin g

o b so lete

pisto n

no logy,
of

given

the

to tal

(in c lu d in g

the

v a ria b le

th at

the

cost m inim izing

in t h i s

s alvage v a lu e
nology m igh t
the
or

e ffic ie n t.
s w itch

but

to

in which case

of

to tal

cost

c lu d in g
the

case o f

the

than

in d ic a te

purchase th e

c e n trifu g a l
is

assum ption.

c ru c ia l
If

the

c e n trifu g a l

tech­

t e c h n o l o g y w o u l d be e i t h e r

zero

technology

products

fa c ilitie s

in vo lv e d

is c l e a r l y
support

more

the

re p laced .

hor i z o n ta l

the
it

t h e new p r o d u c t i o n

Th is

is

exceeds

tru e ,

bu lk b len d er

tra n s itio n ,

r e p l a c e an o b s o l e t e

a n h y d r o u s ammonia)

F o r some p r o d u c t s ,

ton o f

in th e

to e i t h e r

i s b a s e d upon e s s e n t i a l l y

per n u t r i e n t

larg e

less

th at

15 p e r c e n t r e t u r n on i n v e s t m e n t )

the

is

i s more r e a s o n a b l e

c e n trifu g a l

case w i t h

above.

product being

c e n trifu g a l

salvage v a lu e s

it

tech­

s tan d p o in t

and w o u l d

then the

the

technology.

( a s was t h e

presented

(p isto n )

the o th e r

product,

However,

the

investm ent)

t o be an a p p r o p r i a t e

technology.

farm ers

fr o m t h e

technology,

tech­

c e n trifu g a l

NH^ p r o d u c e r s s h o u l d w i l l i n g l y

purchase o f p r o d u c tio n

c rite ria

on

concerning z e ro

the o ld

the

Even

p r o c e d u r e w o u l d be t o

seems

c e n trifu g a l

in e ffic ie n t

the p isto n

n o t be c o m p e t i t i v e .

Thus,

technology

of

it

retu rn

s h o u l d ha pp en t o be n e g a t i v e ,

For several
the

costs o f

s a lv a g e value o f
p o s itiv e ,

to M ichigan

cost o f pro d u ctio n w ith

The a s s u m p t i o n

case,

cost

For

current

c e n trifu g a l

s h o u l d be r e p l a c e d w i t h

15 p e r c e n t

ju s t

technology.

to tal

in M ic h ig a n .

th a t his
the

the assum ptions o f the m odel.

t h e NHj f i r m ,

technology

is

as compared t o

From t h e

technology

purchased

or to

r e p l a c e an

same e c o n o m i c

is

c le a r

th at

fa c ilitie s

the

(in ­

the v a r i a b l e

f o r exam ple,

in o u t s t a t e

in

cost
the

M ich ig an .

In

120

Y e a r 0 and Y e a r
M ichigan;
In

the

a ll

long

v e rtic a l

I,

of

the

type;

phased o u t .

that

the
of

large

blenders

consequen tly,
the

it

to ta l

its

cost o f the

a ll

w h ile

the

h o rizo n ta l

blender

plus

b l e n d e r s had a t o t a l

fix e d

cost e q u ivalen t

vestm ent c o s t .

the h o r iz o n t a l

th at o f

from n o tin g
capacity
chasing
co st,
the

ad d itio n al

some v e r t i c a l

the h o r i z o n t a l

case.

p e titiv e

du ring

From t h e

re p la c e s,
thereby

b rin g in g

the 6 y e a r

is

in th e
about

c le a rly

the

that

in th e

to

the

to

v e rtic a l

c o s t was
costs)

the

in ­

le s s

per*

is e v id e n t

used t o

its

fu ll

b l e n d e r had t h e

id le ,

some o f
lo ng

but

th is

low est

was n o t

the products a n d /o r

run can be q u i t e

more e f f i c i e n t

in a p e r io d o f

tra n s itio n

in fe r

lik e ly

com­

a ttra ct

new

th in g s

in w h ich

in vest

in

it

about

the

th a n t h a t w hich
q u ite

o f a p o r tio n o f the

new

it
ra p id ly ,

l o n g ru n

t i m e t h a t w o u l d p r o b a b l y be s h o r t e r

presented above.

w ill

several

t h e NHj e x a m p l e

re a liz a tio n

tech n o lo g ies

re a d ily

set

t o n was e x a c t l y

to tal

the v e r t i c a l

i n d u s t r y w o u ld

some p r o d u c t s o r
not

cost

tra n s itio n .

In cases s i m i l a r

o p t i mum o r g a n i z a t i o n
than

If

from t h i s

s ub-o ptim al

product

firm s

t o be

15 p e r c e n t o f

fix e d

the

b l e n d i n g c a p a c i t y was o b t a i n e d by p u r ­

p r o c e e d i n g d i s c u s s i o n we can

tra n s itio n .

technology o r

the

blen ders

b l e n d e r s w o u l d have s a t

are

per

type.

on es w e r e b e i n g

whereas,

to

(w ith

are o f

fix e d

b l e n d e r was a l w a y s

blen ders.

We ca n c o n c l u d e
th at

d e p re c ia tio n ;

blender

the h o r iz o n ta l

and t h e n

technologies

the

the v e r t i c a l

th at

h o rizo n ta l

had t h e i r

costs

ton than

the h o r i z o n t a l

type allow ed

fa c ilitie s

v a ria b le

That

in o u ts t a t e

b u lk blenders

was t h e o n l y

tra n s itio n ,

S in ce e x i s t i n g

b u lk blenders

th e re were o f

r u n Optimum o r g a n i z a t i o n ,

purchased d u r i n g

zero,

t h e r e w e r e no v e r t i c a l

( s u c h as t h e
in ve s tm en t.

A t the
case o f

same t i m e ,

however,

the b u lk b len d ers)

Th e t r a n s i t i o n

fo r

these

121

products o r

t e c h n o l o g i e s w o u ld

a t t r i t i o n o f o ld p la n ts and,
th e t r a n s i t i o n

l i k e l y e v o l v e a t t h e same r a t e as t h e

th erefo re,

p re s c rib e d above.

Of course,

v a r i o u s p r o d u c t s and p r o c e s s e s a r e
re a lize d
It

the e x t e n t t o which th e

in terd e p e n d e n t could e f f e c t

the

r a t e o f the t r a n s i t i o n .
is

in te re s tin g

s u ffic ie n t

t o n o t e t h a t on an

in dustry b a s is ,

c o s t s a v i n g s g e n e r a t e d by t h e t r a n s i t i o n

new i n v e s t m e n t f o r

the f o l l o w i n g y e a r .

such c o s t s a v i n g s c o u l d be a c t u a l l y
w ith in

c o u l d be somewhat s l o w e r t h a n

the

But

it

there

t o pay f o r

is not

lik e ly

r e a l i z e d by i n d i v i d u a l

is
the

th at

firm s,

in d u s t r y , ex cep t to the e x t e n t th a t the savings a re generated

by t h a t same f i r m .
Th e s u b s t a n t i a l

cost

p a rtia lly

reta in e d

e q u ita b le

r e t u r n on t h e i r

on t o

farm er.

the

by t h e

savings o f

firm s w it h in

in crease

in

o u tlin e d

a b o v e was made u n d e r

us a ge

in

projected

in cre a s es

in

that

s lig h tly ,
the
N,

the

w h ile

le v e ls
the

l o n g r u n op ti m u m
P 2° 5 ar|d

p ro je c tio n s

of

the

products

to

farm ers co u ld
R ecall
that

to

that

the y e a r

1975.

The t o t a l

in c re a s e d
The

the

revealed

191,622,
cost

fo r

that

of

N,

in t h e

o f N,

tra n s itio n

P20 j ,

pro d u ctio n o f

the
here,

w o u l d be c ha n g e d

same.

and

in

Th e

s tra ig h t-lin e

and K20 r e s u l t i n g

1 6 0 , 6 5 0 a nd 1 9 8 , 2 7 6 a n n u a l
the

i n an

tra n s itio n

t h e on e o u t l i n e d

by m a k i n g s i m p l e

le v e ls

an

re s u lt

the q u a n tity

new f a c i l i t i e s

and f a c i l i t i e s

be

Subsequent a n a l y s i s

n u trien ts

id e n tic a l

re fle c t

could

r e m a i n d e r c o u l d be p a s s e d

constant.

three

to

i n d u s t r y o r g a n i z a t i o n w o u ld be t h e

from th e p r o j e c t io n s were
re s p e c tiv e ly .

is

purchases o f

demands w e r e
to

cost

tra n s itio n

in d u s try

th e assum ption

t r a n s i t i o n w o u l d be e s s e n t i a l l y
except

the

in M ic h ig a n .

P20 5 , and K2 0 demanded e a c h y e a r
w ith

completed

i n v e s t m e n t a nd t h e

Th e r e d u c t i o n

fe rtiliz e r

the

these

tons,

n u trie n t

122

l e v e l s was j u s t
tio n ,

storage,

under $60 m i l l i o n ,
m arketin g ,

increased about

same t y p e s o f

the

to ta l

fa c ilitie s

re fle c t

not a f f e c t

the

long run

c o s t and p r o p o r t i o n a l

those

fa c ilitie s

as w e ll

the

section

in vestm en t

Costs.

C o s t s and P o t e n t i a l
If
to

th at

tio n ,
the

in d u s try

w ould a l l o w
tio n

fo r

cent.
the

If

of

n u trien t

the

level

$ 5 2 ,5 55 ,2 4 7 .

the

the

consumption
fo r

p o te n tia l

tra n s itio n

and P o t e n t i a l

fe rtiliz e r
above,

in d u s try

then

the

increased
of

cost

savings

o u tlin e d

above.

Sayings

s e rv in g M ichigan were

to ta l

is e q u iv a le n t

cost o f

to

is e q u iv a le n t

passed

the

to n would

farm ers

tonnage o f 4 3 8 , 0 2 3
larg er

cost

fa ll

1970

E v o lv in g

cost o f

r e d u c t i o n on t o
to

(T ab le

I V —1)

(Appendix F , T a b le

F -l).

cost

I V —0 .

tra n s i­

l e v e l s o f consump­

in t o t a l

from $ 1 6 3 .1 1

$18,8 9 0 ,4 2 0

the

The

t o C o n s t r a i n e d O p t im u m ,

supply M ic h ig a n 's
is a r e d u c tio n

(Table

supp lying

reduced.

t o Y e a r 0 in

cost o f $ 71,445,667

Th is

in d u s try

A s ig n ific a n tly

in d e t a i l

f a r m e r s w o u l d be s u b s t a n t i a l l y

in d u stry

save M ic h ig a n

n u trien t

in

requirem en ts o f

1, which

cost per n u tr ie n t

would

in

changing

o f o p eratio n

as o u t l i n e d

to Y ear

the

growth

Thus,

increases

ana ly ze s

the

in a t o t a l

the

to M ich ig an .

to m in im iz e

except

o r g a n i z a t i o n which

re s u lte d

c o n s t a n t n u t r i e n t demand,

in d u s try o r g a n iz a tio n ,

In ve s tm en t,

to M ichigan

1 970 A c t u a l

cost

Savings

p o rtio n

be t r a n s f o r m e d

fe rtiliz e r

to tal

i n O p t im u m .

fo llo w in g
as

lin e a r

tran sporta­

A lthou gh the

s e l e c t e d b y t h e model

fe rtiliz e r

a sim ple

to tal

Th e

were

p rocessing,

etc.

over th a t of

cost o f su p p lyin g

t h e demand t o
d id

a p p lic a tio n ,

$12 m i l l i o n

the

in c lu d in g

the

2 6 .4 4 per
farm ers,

$ 1 1 9 .9 8 , w hich
on t h e

r e d u c t i o n w o u l d be r e a l i z e d

to tal

if

the

Table IV-1.

Cost data for the t r a n s i t i o n years

Year

Total Cost
(d o lla rs )

Reduction
in Cost3
(d o lla r s )

0d

71,445,667

-0 -

le

52,555,247

2

%

Reduction
in Cost^
(per cent)

C ost/N utrient
Tonc
(d o lla rs )

-0 -

163.11

18,890,420

26.44

119.98

48,490,653

22,955,014

32.13

110.70

3

47,292,651

24,153,016

33.91

107.97

4

47,168,520

24,277,147

33*98

107.69

5

47,019,035

24,426,632

34.19

107.34

6

^ ,7 5 4 ,2 2 0

24,691,447

34.56

106.74

aTotal cost of Year 0 less the to ta l cost fo r the year in question.
^Reduction in cost fo r the year in question as a per cent o f the to ta l cost of Year 0,
cTotal cost fo r the year in question divided by to ta l n u tr ie n t tons (4 3 8 ,0 2 3 ).
^Equivalent to 1970 A ctu al.
Equivalent to Constrained Optimum.

12 k

tra n s itio n

w e r e made t o Y e a r

o rg a n izatio n
o f Year 0.

is

2.

Th e t o t a l

$ 4 8 , 4 9 0 , 6 5 3 , which

The p o t e n t i a l

savings

is

cost

3 2 .13

is

per

tio n

a r e made.

$ 4 7,2 92 ,6 5 1 ;
(T ab le
clim b

u n til

n u trien t

the

To tal

At

it

ton f e l l

long

the

$24,691,447

cost o f 34.56
from $163.11

run o p t i m a l

s ig n ific a n t

p o te n tia l

re d u c tio n s,

the

the

the

cost

less

than t h a t

3,

years o f

4,

5,

p o te n tia l

per c e n t.

which

$106.74

i n d u s t r y such t h a t
in vo lv e s

it

re s p e c tiv e ly
continues

the

cost per

in Year 6 .

Con­

w o u l d be c o m p a r a b l e

the c r e a t io n

However,

to

corresponds to a

M eanw hile,

in Year 0 to

red u ctio n s.

savings

tra n s i­

and 6 a r e

and $ 4 6 , 7 5 4 , 2 2 0 ,

in Y ear 6 ,

o rg a n izatio n

p a rtic u la r

1.

fo r Y e a r's

$ 4 7 ,0 19 ,0 3 5 ,

same t i m e ,

tran sfo rm in g

cent

t o drop as a d d i t i o n a l

cost fig u re s

reaches

in t o t a l

s e q u e n tly ,

continued

$4 7,1 68 ,5 2 0 ;

IV -1 ).

re d u c tio n

to

cost

th is

$ 2 2 , 9 5 5 , 0 1 4 when com pared t o

Y e a r 0 and $ 4 , 0 6 4 , 5 9 4 when com pared t o Y e a r
Th e t o t a l

fo r

o f very

to ach ieve

i n d u s t r y w o u l d need t o make r a t h e r

larg e

those

investm ents

i n new f a c i l i t i e s .

Investm ents
The

1970 A c t u a l

$75,4 5 6 ,5 0 5
the

of

( Y e a r 0)

c a p ita l

in vestm en t.

C o n s t r a i n e d Optimum ( Y e a r

drops

to $ 4 1 ,5 4 6 ,8 5 4 ,

a ll

im p lie s a re d u c tio n o f
or e q u iv a le n tly ,

I)

If

the

o rg a n izatio n ,

o f which

is o ld

n e a rly 34 m illio n

lo ss

to

tra n s itio n

in v e s t m e n t , which

is

38-01

th e owners o f
to Year

in d u s try

the

d o lla rs

these

the

in

cent

in vo lves
sw itch

to

in vestm en t f i g u r e

(e x is tin g )

2 would

per cen t o f

the

in d u s t r y would

a r e d u c t io n o f n e a r l y 45 per

w o u l d be a c a p i t a l
Making th e

o rg a n izatio n o f

fa c ilitie s .
ne ed ed

(Table

Th is

in vestm en t,
1 V - 2 ) , w hich

fa c ilitie s .

in vo lv e

$ 1 4 , 0 8 2 , 2 5 5 o f new

$37,0 48 ,2 2 9 o f

to tal

in ve s t-

Table IV -2.

Investment data fo r the t r a n s itio n years

%

Year

Old
Investment
(d o lla rs )

New
Investment
(d o lla rs )

Total
Investment
(d o lla rs )

ob

75,*+56,505

-0 -

75,456,505

-0 -

-0 -

1C

41,546,854

-0 -

41,546,854

-0 -

44,94

2

22,965,974

14,082,255

37,048,229

38.01

50.90

3

29,209,945

7,717,540

36,927,485

20.80

51.06

1+

28,316,817

8,489,941

36,806,758

23.07

51.22

5

27,681,253

9,177,625

36,858,878

24,80

51.15

6

28,903,472

8,029,326

36,932,798

21.74

51.05

aNew investment as a per cent o f t o ta l
^Equivalent to 1970 A ctu al,
E q u iv a le n t to Constrained Optimum,

investment.

Per cent new
investment3
(per cent)

Reduction in
Total Investment
(per cent)

126

ment us ed
Year 0

that

(Table

year.

T h is

IV -2) .

A fter

purchases were a llo w e d ,

the

tra n s itio n .

four years o f
d o lla rs

per

o f Year 0 .
the

la s t

Year

per cen t le s s than

firs t

to ta l

o ff

to tal
about

the

o ff

to

rem ain der

investm ent d u rin g

the

la s t

about 3 6 .9 m i l l i o n

than

the

in vestm en t,
2 2 .6

le v e ls

throughout

less

th at o f

y e a r new i n v e s t m e n t

to average

per cen t

cent of

fo u r years averages

a n n u ally

the

le v e ls

o r a b o u t 51

As a p e r

2 f the

d o lla rs

S im ila rly ,

tra n s itio n

year,

is 5 0 .9 0

t h e amount o f new i n v e s t m e n t

average about 8 .4 m i l l i o n
of

to tal

total

investm ent

t h e new i n v e s t m e n t o f

per cent.

Summary

We h a v e seen t h a t
of

the f e r t i l i z e r

re d u c tio n

in

le v e ls o f

N,

At
in g N,

the

a com plete t r a n s f o r m a t io n o f

in d u stry
to tal

re s u lt

c o s t o f s u p p ly in g M ichigan

the

s ix -y e a r

per cent

le s s

tra n s itio n ,

w o u l d be

re q u ire d , w h ile

139.4 m i l l i o n

tra n s itio n ,

the

than

the c u r r e n t

about 47.5 m i l l i o n

d o lla rs ,

throug hou t

the

as

to tal

sium c h l o r i d e

the

the t o t a l

fa c ilitie s

fa c ilitie s

fo r

to tal

d o lla rs

cost o f
a n n u a lly ,

cost.
of

supp ly­

D uring

or
the

new i n v e s t m e n t

s a v i n g s w o u l d amount t o

n early

m a in ta in in g

to tal

the

current

tra n s itio n .

in

in C e n t r a l

Saskatoon,

M ich ig an ,

and d r y b l e n d e d

in o u t s t a t e M ic h ig a n a re

On t h e o t h e r h a n d ,

technology

cost

compared w i t h

A n h y d r o u s ammonia p r o d u c t i o n

pro d u ctio n

d o lla r

farm ers w ith

P2®5» anc* ^2® t o M i c h i g a n w o u l d be $ 4 6 , 7 5 4 , 2 2 0

s ix -y e a r

item s.

i n a l m o s t a 25 m i l l i o n

* an<* *^2^ t ^ieY p u r c h a s e d i n 1 9 7 0 .

t h e end o f

about 3 4 .5 6

cost

could

the o r g a n iz a t i o n

fa c ilitie s

p r o d u c i n g NH^,

the

green

fe rtiliz e r

t h e m a j o r new i n v e s t m e n t

s u c h as t h e p i s t o n

p ro d u ctio n o f

p o tas­

urea,

compressor

a m m o n ia t e d

127
phosphate

liq u id s

fa c ilitie s

th at

firs t

Changing th e
n u trien t
1970),

and g r a n u l a r

to m inim ize

not

re s u lt

to ta l

s u p e r p h o s p h a t e a r e among t h e

id le .

''demand11 t o a p p r o x i m a t e a f i v e

consum ption,

did

become

trip le

s im ila r

to

th at o f

in any changes

cost.

the

la s t

in t h e m ix o f

y e a r growth
fiv e

years

fa c ilitie s

in
(1965

to

selected

CHAPTER V

SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

Summary

Th e f e r t i l i z e r
on

in vestm en t

61

per cent greater

w hich

in

in d u s try

has be en p l a g u e d w i t h

recent years.

To tal

than e stim ated

is

la rg e ly

the

cap acity

greater

than consum ption,

in

re c e n t years

c a p acity
excess

low r e t u r n s .
but

growth

has c o n t i n u e d

1970, o v e r 645

to

fe rtiliz e r

p ric e d

the

d o lla rs .

In

I 967,

fe rtiliz e rs

in

the U .S .

2 .5 m i l l i o n
fa c tu rin g

f a c t u r i n g was $ 9 . 4 1 .
tio n

is ,

such t h a t

p ro d u ctive
these

two

growth o f
t h e amount o f

to tal

l a b o r were

consum ption.
exp en d itu re

fo r

used t o man­
W ith

lab o r exceeds

t h e v a l u e a d de d p e r m a n - h o u r

lab o r

was $l3 **+ 9 » w h i l e
is

la b o r

I n manu­

that o f a ll
in

the

manu­

an

im portant

fa c to r

produc­

how t h e o p t i m a l

s h o r t and

l o n g run o r g a n i z a ­

of fe rtiliz e r.
I n f o r m a t io n as

tio n s o f
r e t u r n on

the

to

in d u stry a re

affected

by c h a ng e s

i n v e s t m e n t c a n be used t o h e l p

o rg an izatio n
lower

Thus,

is

rates o f

That

thousand man-hours o f

per m an-hour,

1970,

grow.

u f a c t u r e and p r o c e s s M i c h i g a n ' s
near $4.00

in

Not o n ly

the growth

in consumption

low r e t u r n s

c a p a c i t y was a b o u t

d o m e s tic consumption

h a v e a d de d t o t h e d i s p a r i t y .

has e x c e e d e d

capacity
In

cause o f th e

p rod uctive

very

to tal

u tiliz in g
cost,

yet

less

l a b o r and

the

in

t h e wage r a t e

in d u s tr y ev o lv e

in vestm en t,

to

an

and r e s u l t i n g

in

s u p p l y i n g t h e same l e v e l s o f N ,

128

and

P2 O5 » a p d

129

to

the

M ichigan

q u ired

levels

in d u s try
cost)

farm s.

a more e f f i c i e n t

o rg an izatio n
c a p ita l

This

is

the

the

as

o rg an izatio n
was

(Optimum)

that

it

serves

The s i m u l a t i o n
pariso n w ith

the

rates

least

transform

fo r

W ith in

S im ila rly ,

a

t h a t was

F in a lly ,
za tio n
the

to

th e

investm ent

o f the

in s e n s itiv e
$6.50

on
of

pro g ra m m in g

A short
on ly

run o p t i m a l

c o n s tra in e d

th is

m odel,

run o p t i m a l

e x is tin g

fa c il­

o rg an izatio n

o n l y by e x i s t i n g

fe a s ib le

i n d u s t r y was

used as a be nc h m a r k

o rg a n izatio n s .

Wage

rates

f o r com­

and r e t u r n

on

to determ ine what e f f e c t s
the

sta n d p o in t

o rg a n iza tio n s .
tra n s itio n

long

op tim al

t o cha nges

the

in

the

in d u s try

o rg a n izatio n

s tru ctu re

run o p t i m a l

p e r m an-hour.

of

run o p t i m a l

to com plete

The s h o r t

and

demands.

two o p t i m a l

the

in te rm e d ia te

less

o rg an izatio n s

t h e y ha d on t h e Optimum and C o n s t r a i n e d Optimum ( f r o m
minimum c o s t )

the

retu rn

framework o f

u tiliz e d

in ve s tm en t were p a r a m e te r iz e d s e p a r a t e l y

of

re­

a more e n c o m p a s s i n g

the

long

and

lin e a r

M i c h i g a n was s i m u l a t e d .
th at

fo r

in te rn a l

cost

a Tar ge

constructed

( C o n s t r a i n e d Optimum)

and n u t r i e n t

run

the

tra n s fo rm a tio n .

o f wage

long

in d u s try .

was d e t e r m i n e d

the

these e f f e c t s ,

had been

determ ined.

technology

affect

run and

fe rtiliz e r

in d u s try

itie s

short

to

in d e t e r m i n i n g w h e t h e r

the e f f e c t s

To a n a l y z e

mode? was used
of

useful

study a n a ly z e d

in d u s try .

study

concernin g

(same o u t p u t o f n u t r i e n t s

ratio n in g w ill

i n v e s t m e n t on t h e
the

in fo rm atio n

o f new i n v e s t m e n t n e e d e d e a c h y e a r

in to

external

In a d d i t i o n ,

of

the

fr o m

its

current

was mapped o u t

in d u s try

to

o rg a n i­
a s c e rta in

and t h e n e e d e d a n n u a l

tran s fo rm a tio n .
org an izatio n
t h e wage

D esp ite

the

of

the

rate over

fact

fe rtiliz e r

the

th a t w ith in

range
th is

in d u stry

from $ 3 -0 0
range

the

is
to

to tal

1 30

cost o f

la b o r

c ha nge d by n e a r l y

approached 5 . 5
tio n

did not
In

the

by

the

of

run,

in d u s try
changes

hours.

to

however,

$3-75

th is

a p p lic a tio n

n e a rly

60 ,0 0 0

t ons

as

s im ila r
crease

in

run o p t i m a l

when

th a t noted
lab o r

of

u tiliz a tio n

n iu m p h o s p h a t e was

in itia te d

More
changes

of

e v id e n t

g a t i n g a change
stru ctu re

$ 6 .50

im po rtant

are

to

the

in

t h e wage

the

producers.

rate

did a f f e c t

to a m ino r e x t e n t .
long

The

run a r e

fe lt

p rim a rily

When t h e wage

rate

chang ed

t h e r e was a d e c r e a s e

dustry o rg a n iz a tio n

ra n g e d

o f dry

of

1 8 , 5 5 7 man-

blended f e r t i l ­
i n c r e a s e d by

fo r
the

the

in d u s try

r e m a in e d

from $ 3 .7 5

to $ 4 .75

per man-hour,

r a t e was

of

raised
This

by d r y b l e n d e d

at

t h e wage

to

$ 5 .0 0 ,

tim e ,

r a t e was

o f monoammo­

o f 68,965

ra is ed

the de­

p r o d u c e r s was

a p p lic a tio n

level

a change

however,

fe rtiliz e r

d ire c t

an a n n u a l

to

tons.

No

t h e maximum

p e r man-hour.

im p lic a tio n s

long

the

than

those

fe rtiliz e r

re s u ltin g

in dustry

in d u s try o rg a n iz a tio n
run o p t i m a l

i n d u s t r y employees engaged

T h is

sounds

d ra s tic ;

n e a rly

f r o m wage

l a b o r e r when

from t h a t o f

o rg a n izatio n .

would e l i m i n a t e

iz e r

rath er

in

t h e same t i m e ,

o c c u r r e d when

level

rate

abo v e o c c u r r e d .

At

o t h e r cha ng e s

in

g r a n u l a r potassium c h l o r i d e

the

2 1 ,7 8 5 man-hours.

exam ined

t h e minimum c o s t o r g a n i z a ­

bu t on ly

organ izatio n

r a t e was

However,

to

and t h e wage b i l l

per year.

t h e wage

in c lu s iv e .

d o lla rs

decreased p ro d u c tio n

d ire c t

long

changes

p e r m an-hour,

ize rs ,

s ta b le

cost,

t h e wage

fe rtiliz e r

O ffs e ttin g

The

total

o rg a n izatio n ,

in

dry blended

from $3 -50

the

m illio n

change.
long

the o p tim al
e ffec ts

per cent o f

1.6

Such

a s h ift

o n ly

in v e s ti­
current
in

in ­

U2 p e r c e n t o f t h e f e r t i l ­

in s u p p ly in g M ic h ig a n w i t h

however,

the

rate

135

fe rtiliz e r.

f e w e r e m p lo y e e s w o u l d be

131
n eeded, which
employees

in

i s o n l y a b o u t o n e - h a l f o f on e p e r
the U .S .

o rg a n izatio n o f
on n a t i o n a l

fe rtiliz e r

the e n t i r e

in d u s try .

in d u s try

cent o f

the

to tal

On t h e o t h e r h a n d ,

c ould have

a su b s ta n tia l

n e a r ly optim al

throughout

exam ined.

For r a te s o f

Optimum

suboptim al

cost o f

short

run o r g a n i z a t i o n

was j u s t

b a re ly

S im ila rly ,
op tim al

rates

in

less

p o te n tia l

re tu rn

the

O p t imum s o l u t i o n
over

23 m i l l i o n

cost o f
itie s

N,

of

the

range o f

to com plete

in

12.0

per

the op tim al

C o n s t r a i n e d Optimum

to tal

rates o f

cost

to

retu rn

th at,

i n v e s t m e n t w o u ld mean

is very

the

current

tra n s itio n

t y p e a n h y d r o u s ammonia p r o d u c t i o n

and

on

ton

in p o t e n t i a l

the

on

the
at

cost

i n s i g n i f i c a n t when compared

ton t h a t

Optimum c o u l d

1970 A c t u a l

are

fa c ilitie s

s ave

o rg a n izatio n .

in d u stry o rg a n iz a tio n

o r a b o u t 32 p e r c e n t o f

the

the op tim al

in

?2®5* an<* *^2^ consumed i n M i c h i g a n .

n e e de d

the

cost.

in d u s t r y o r g a n i z a t i o n would

d o lla rs

C onstrained

is

changes

term s o f

per n u t r i e n t

T h is

in vestm en t

t h e Optimum o r g a n i z a t i o n

per n u trie n t

fr om

in

it

between 6 . 0

number o f

close

M i c h i g a n f a r m e r s when com par ed w i t h
A tra n s fo rm a tio n

m oreover,

retu rn

very

o f one p e r c e n t o f

total

for

r e t u r n on

per c e n t,

terms o f

than $ 0 .1 3

$57*66

12.0

per c e n t,

M a in ta in in g
the

of

than 6 . 0

Optimum was q u i t e

s a v i n g s w o u l d be f o r e g o n e .
the

of

larg e

le s s

suboptim al

re g a rd le s s o f

than

than o n e -te n th

lo n g run o r g a n i z a t i o n s

the v e ry w o r s t ,

w ith

le s s

ra tes

o rg a n izatio n ;

fo r

retu rn s

in v e s tm e n t exam ined.
lo n g run

le s s

a c o n s id e ra b ly

fo r

range o f

re tu rn

the optim al

D esp ite

o rg a n izatio n

the

by

to ta l

cent.

im p a c t

unemployment.

T h e C o n s t r a i n e d Optimum and Optimum o r g a n i z a t i o n s w e r e

is

re­

save M i c h i g a n

to

the

farm ers

the c u r r e n t t o t a l
Among t h e

c e n trifu g a l
in c e n t r a l

new f a c i l ­

compressor
M i c h i g a n and

132

a d d itio n al

d ry blended

fe rtiliz e r

processing f a c i l i t i e s

in o u t s t a t e

Mi c h i g a n .

C o n c l u s io ns

The o v e r a l l

o b je c tiv e

of

th is

C o n s t r a i n e d Optimum and Op tim um
an o p t i m a l
Optimum.

tra n s itio n
P rio r

im plem ented,

t o and d u r i n g

two

be

be b r i e f l y

it

w ill

farm ers
of
the

after

As m e n t i o n e d
is

very

which

to

is to

s p e c ific

using

liq u id

F u rth e r e d u catio n al

exten sion

the

exten sion

be

Th e s e
c on­

new m a r k e t i n g

be n e c e s s a r y

advantages

them t h a t

the

to

be

pr og ra m s b e f o r e
personnel

w ill

products

to

farm er acceptance

s u c c es s fu lly
w ill

t o make t h e

re a liz in g

need t o h e l p

conversion

to

equipm ent.

w ill

be n e e de d t o

in su re proper

and m e r c h a n d i z i n g p l a n s

be used u n d e r t h e Optimum o r g a n i z a t i o n .
pro g ra m s w i l l

to

need t o

the o p tim al

personnel

products

effo rts

th at w ill

p re v io u s ly ,

c ru c ia l

p r o d u c t h a n d l i n g and a p p l i c a t i o n

to

it

in mind.

In e d u c a tio n a l

A g ric u ltu ra l

In a d d i t i o n ,

c u rre n tly

tra n s itio n

s a v in g advantages o f

products

tra n s itio n .

the

p a rtic ip a n ts

fa rm managers.

c o o rd in a tio n o f

assuming

s h o u l d be k e p t

discussed,

accepted.

the cost

these o p tim a l

farm ers
dry

in dustry

be r e a d i l y

and

and t o d e t e r m i n e

in d u stry o rg a n iz a tio n

tra n s itio n ,

the

lis te d .

to a l l

need t o e x p l a i n

current
the

T h e r e a r e many a s p e c t s o f
ex p la in ed

to a n alyze

in dustry o r g a n iz a tio n s

im po rtant concepts

two c o n c e p t s w i l l
clu sio ns w i l l

from th e

s t u d y has be en

A d d itio n al

inform f e r t i l i z e r

new i n d u s t r y

that w i l l

education al

producers o f

arrangem ent a f f o r d s ;

t h e p r o d u c e r s and p r o c e s s o r s w i l l

need

in fo rm a tio n

t h e y s h o u l d make new i n v e s t m e n t s

and/or

scrap o ld

the
m oreover,

on how and when
technology o r

fa c il­

133

itie s .

Thus,

there

is

part o f

the t r a n s i t i o n .

a

The second c o n c e p t
of fe rtiliz e r
it,

thereby

fo r

farm

to tal
fact

to

p ro d u ctio n ,
Th is

that

n e g lig ib le
p o lic y

th at o f

the

to tal

the

pro d u ctio n

however,

the

lik e ly

increased

is

they w i l l

Given

i n f l u e n c e on p r i c e s

th at

a necessary

The d e c r e a s e d c o s t

mean t h a t

fa rm e rs would

assumes t h a t

increased

e ffo rt

p o lic y .

p ro d u ctio n .

e f f e c t on p r i c e .

should,

farm

lik e ly

M ichigan

h a v e a downward

p o ssib le

is

farm ers w i l l

in cre a s in g

income.

larg e edu catio n al

use more o f

in e la s tic
re ce iv e

demand

a lo w er

p r o d u c t i o n does

farm ers

re ce iv e .

in

It's

i n M i c h i g a n w o u l d hav e a

Those persons

be made a w a r e o f

in vo lved

the

i n m aki ng f a r m

p o te n tia l

effect

of

in ­

creased o u tp u t.
The f o l l o w i n g
1.
du stry

can be used as a s h o r t
can s e t

flu ctu atio n s

tio n

over

stu d ied ,

retu rn s

1970 a c t u a l
Changes

can be dr aw n f r o m t h i s

o rg a n izatio n
3.
the s h o r t

targ et

ra te ,
on

Its
its

suggests

s ta b ility

p ro x im ity

th at

sole

it

in

is

the

impetus

those

technologies

the

fe rtiliz e r

its

u tiliz e d

in ­
par­

s ig n ific a n t

run,

throughout
cost

short

w ith in

reduc­

term g o a l .
the

lim its

changing t o a technology

The

from $ 3 .0 0

study;

when c o n f r o n t e d w i t h

a d e s ira b le

for

in d u s try

to o p tim a lity

short

i n C o n s t r a i n e d Op tim um.
f o r wage r a t e s

of

tow ards w h ich

i n v e s t m e n t and

i n t h e wage r a t e

was c o n s t a n t
th at

run

s ig h ts .

s h o u l d n o t be t h e

not re p res e n te d

suggests

th e ir

i n t h e wage

range o f

2.

tio n

conclu sions

Th e C o n s t r a i n e d Optimum o r g a n i z a t i o n

tic ip a n ts

a wide

s p e c ific

fact
to

in

th at

$ 6 .50

the

la b o r

u tiliz a ­

p e r man-hour

C o n s t r a i n e d Optimum

use l a b o r e f f i c i e n t l y .

Th e C o n s t r a i n e d
run o p t i m a l

Optimum o r g a n i z a t i o n

o rg an izatio n

fo r

retu rn s

can be c o n s i d e r e d
on

investm ent

as

f r om - 2 . 0

134
to

12*0 per c e n t ,

between - 2 . 0

In c lu s iv e ;

and 5 . 9

a c tu a lly ,

per c e n t,

in c lu s iv e ,

th a n o n e - t e n t h o f one per c e n t o f
n izatio n .

Th erefore,

if

it

the

management

is

suboptim al

fo r

retu rn s

but the d i f f e r e n c e

to ta l

cost o f

received

is

less

the optim al

an e q u i t a b l e

orga­

retu rn

on

i n v e s t m e n t t h e r e w o u l d be e s s e n t i a l l y

no e f f e c t on t h e

short

o p tim al

given

investm en t

below

o rg a n izatio n o f

in d u s try ,

r e t u r n s on

1 2.0 per c e n t.
4.

to

the

ru n

The n i t r o g e n

cha ng e s

mon ia

is

due t o

in

the

n e a rly

the

severaT

ly

n itro g en .
5.

v a riab le s

th at

pro d u ctio n

In vestm en t

appears

it

in e v e r y
7.

th e most s e n s i t i v e

In p a r t i c u l a r ,

a n h y d r o u s am­

prim ary

source o f

fe rtiliz e rs

run v e n t u r e .

amount o f

th a t are

A ll

the t o t a l

the

th is

n itro gen

is

and

la rg e ly
i s used

not predom inate­

in C e n t r a l

o f the

M ichigan

l o n g ru n

a n h y d r o u s ammonia

in M ic h ig a n .
fe rtiliz e r

producers

c o u l d be ph ase d o u t and

t o a l a r g e e x t e n t by l o w e r c o s t d r y b l e n d e d

lo cated

o f any o f

long

had a c o n s i d e r a b l e

G r a n u l a r mixed

rep laced

the

is

i n a n h y d r o u s ammonia f a c i l i t i e s

p ro d u ctio n m anufactured
6.

in d u stry

i n one way o r a n o t h e r ;

processes o f

t o be a d e s i r a b l e

analyses

ducers

is

the

studied .

alw ays a f f e c t e d

fact

in

segment o f

in o u t s t a t e

M ichigan.

lo ng run a n a ly s e s ;

lo n g r u n a n a l y s i s

fe rtiliz e r

Th e g r a n u l a t o r s

w hereas,

pro­

were never

the b le n d e rs were

part

s e le c te d

t o h e l p a c h i e v e minimum c o s t .

Monoammonium p h o s p h a t e a p p e a r s

t o be s l i g h t l y

su p erio r

to

diammoniurn p h o s p h a t e

f r o m an e c o n o m i c s t a n d p o i n t o f m i n i m i z i n g

cost.

However,

p o ssib le

n itro ­

gen t o

it

is

q u ite

phosphate

in

the

a p p e a r t o be s u p e r i o r .

to tal

th at,

given

demand,

a d iffe re n t

ra tio

of

diammonium p h o s p h a t e w o u l d

135
8.

Th e r e l a t i v e

v a ria b le s
tract

an alyzed ,

from t o t a l

and t h e n e a r l y

cost

in d u s try,

if

s ta b ility

im p lie s

suggest

in ve s tm en t,

le s s

ris k

However,

it

cost m in im iza tio n
th at

be made u n e c o n o m i c a l
on

s ta b ility

the

in vo lv e d

in

23 m i l l i o n

is

given

d o lla rs

s h o u l d be t h e

it

t h e wage

ranges exam ined.
in

t h e y c o u l d be made u n e c o n o m i c a l

ranges o f

c o u l d s ub­
of

the

M o r e o v e r , Optimum's

associated w ith

in e i t h e r

i n v e s t m e n t made

the

long te rm goal

the o b je c t i v e .

in vestm en ts

b y cha ng e s

g iven the

o f Op tim um ,

it

ra te

Th erefore,

wo ul d n o t

or

th e r e t u r n

t h e r e w o u ld be

th e optimum f a c i l i t i e s .
by new t e c h n o l o g y .

Recommendat i ons

Th e need f o r a d d i t i o n a l

r e s e a r c h became e v i d e n t

as

th is

study

progressed.
T h e most o b v i o u s a r e a
the

" de m a nd s" f o r

be b e t t e r

N,

s p e c ifie d

made

in to

in o n ly

nee ds a d d i t i o n a l

1*2^5* ar|d K^O.
than

three

Somehow,

the a g g re g a tio n s

high degree o f a g g re g a tio n
re s u lte d

th at

used

in

the

p rod ucts bein g

a 7 -2 8 -2 8 d ry blended

in d u stry o rg a n iz a tio n .
N,

Th erefore,

p£^ 5 » ar,d ^2® demands

in M ic h ig a n .

produced.

any c r o p

g iven the

p ro d uctio n a c t i v i t i e s

w ith

each crop r e p r e s e n te d

w o u ld m a x i m i z e

Secondly,

the e v e r

The model

The

o rg a n izatio n
a ll

p2°5 was

r e q u ir in g o n ly

the m ajor

c o u l d be b e s t u t i l i z e d

it

study.

l o n g r u n minimum c o s t

th is

such t h a t

that o f

recommend s p e c i f y i n g

in accordance w i t h

le v e ls o f f e r t i l i z a t i o n .

th is

S ince

Perhaps

numerous

in

l o n g run o p t i m a l

I would

is

t h e s e demands need t o

u tiliz e d

fe rtiliz e r,

w o u l d n e c e s s a r i l y g e t N and K^O,

research

by
in

could

crops

the

pr o d u c e d

in clu d in g
t h e model

crop
by

t h e n be c o n v e r t e d

farm p r o f i t .

i n c r e a s i n g e x c e s s c a p a c i t y and e x t r e m e l y

low

the

136

r e t u r n s on
done

in vestm en t

to analyze

the

w ith in

the

e ith e r

p o or o r a r e

suggest

the

It

a ffects

In a d d i t i o n ,
change

the

appears

the

the

rate

len g th o f

the e x is t a n c e o f

tra n s itio n

two a r e a s .

NH^

is

p ric e o f

A fter

procedures are

tra n s itio n

from

of d e te rio ra tio n

of e x is tin g

tim e

com plete

req u ired

to

degree.

po in t ou t

the

c o m p l e t i n g su ch

s i n c e a n h y d r o u s ammonia
so

The

1970 A c t u a l
fa c ilitie s

the

tra n s itio n .

could p o s s ib ly
in te r-re la tio n ­

need f o r

research,

basic
the

research

tra n s itio n

natural

gas among t h e

could y i e l d

i s made fr o m n a t u r a l

im p o rta n t throug hou t the
gas c o u l d

in d u s try o rg a n iz a tio n .
natural

u tiliz e d

c o u l d be r e c o n s i d e r e d .

F in a lly ,

the

needs t o be

procedures

current

the

to a c o n s id e ra b le

in

since

the

research

n o n-zero s a lv a g e values

t h e s e two a s s u m p t i o n s

a n a ly s is

th at

a s s u m p t i o n s made f o r

ship s o f
these

in -d ep th

n o t used a p p r o p r i a t e l y .

t o Op tim um c o n c e r n i n g
d ire c tly

some

investm en t d e c is io n -m a k in g

in d u s try .

T h ird ly ,

that

some v e r y

In

re s u lt

p a rtic u la r,

three
useful

pro d u ctio n
re s u lts .

in d u s try,

in changes
v a ria tio n s
s ite s

gas and

flu c tu a tio n s

in

in

the o p tim a l

in

e m bod ied

the
in

p ric e

of

t h e model

BIBLIOGRAPHY

BIBLIOGRAPHY

B e ll,

D a v i d M . , "The Im p a c t o f t h e A i r P o l l u t i o n A b a t e m e n t A c t i v i t i e s
o f C o a l - B u r n i n g E l e c t r i c Power G e n e r a t i n g P l a n t s on t h e
F e r t i l i z e r I n d u s t r y , " un published Ph.D. t h e s i s , M ichigan
S t a t e U n i v e r s i t y , 1971.

B e ll,

D a v i d M . , D e n n i s R. H e n d e r s o n , and G e o r g e R . P e r k i n s , A S i m u l a ­
t i o n o f the F e r t i l i z e r In d u s try in th e U n ite d S ta te s w i t h
S p e c i a l Empha sis on F e r t i l i z e r D i s t r i b u t i o n i n M i c h i g a n .
M ichigan S ta te U n i v e r s i t y , East L a n s in g , M ic h ig a n , A g r ic u l­
t u r a l Ec on o mi c s R e p o r t No. 1 8 9 , f o r t h c o m i n g .

Dean,

J o e l , JIM e a s u r i n g t h e P r o d u c t i v i t y o f C a p i t a l . " H a r v a r d B u s i n e s s
R e v i e w . V o l . 3 2 , No. 1 , J a n u a r y - F e b r u a r y , 1 9 5 ^ , pp . 1 2 8 - 1 3 0 .

Ec on o m ic C o n c e n t r a t i o n . H e a r i n g s b e f o r e t h e S u b c o m m i t t e e on a n t i t r u s t
and m on o po ly o f t h e C o m m i t t e e on t h e J u d i c i a r y , U n i t e d
S t a t e s S e n a t e , 8 9 t h and 9 0 t h C o n g r e s s e s , P a r t 5 A , " C o n c e n t r a ­
t i o n and D i v i s i o n a l R e p o r t i n g , " A p p e n d i x t o P a r t 5 i
'T h e
F o rtu n e D ir e c t o r y o f th e 500 L a rg e s t U .S . In d u s t r i a l Corpora­
t i o n s , 1 9 5 ^ 1 9 6 5 , " 1967.
Edwards,

C l a r k , " R e s o u r c e F i x i t y , C r e d i t A v a i l a b i l i t y and A g r i c u l t u r a l
O r g a n i z a t i o n , " u n p u b lis h e d Ph.D. t h e s i s , M ic h ig a n S t a t e
U n i v e r s i t y , 1958.

"E mp lo y m e nt a nd E a r n i n g s , "
U. S. D e p a r t m e n t o f L a b o r , B u r e a u o f
L a b o r S t a t i s t i c s , V o l . 1 7 , No. 1 1 , May 1971 , p. 8 9 .
H arg ett,

Norman L . , " 1 9 7 0 F e r t i l i z e r Summary D a t a , " T e n n e s s e e V a l l e y
A u t h o r i t y B u l l e t i n Y - 1 6 , 4M, J a n u a r y 1 9 7 1 .

Harre,

E dw in A .
" F e r t i l i z e r T ren d s— 1 9 6 9 ," Tennessee V a l l e y A u t h o r it y
B u l l e t i n F 7 0 , ACD1, 1 9 7 0 .

Harre,

E, A . , F . M. K e n n e d y , T . P. H i g n e t t , and D. L . McCune, " E s t i ­
m ate d W o r l d F e r t i l i z e r P r o d u c t i o n C a p a c i t y as R e l a t e d t o
F u tu re Needs:
1 9 7 0 - 1 9 7 5 , " Tennessee V a l l e y A u t h o r i t y B u l l e t i n
Y - 7 , Ju ne 1 9 7 0 .

H e n d e r s o n , D e n n i s R . , " F e r t i l i z e r C o n s um pt io n and I n d u s t r y A d j u s t m e n t , "
u n p u b lis h e d Ph.D. t h e s i s , M ichigan S t a t e U n i v e r s i t y , 1971.

137

138

H e n d e r s o n , D e n n i s R . , George R . P e r k i n s , and D a v i d M. B e l l , S i m u l a t i n q the F e r t i l i z e r In d u s try :
D a ta . M ichigan S ta te U n iv e r s i t y ,
E a s t L a n s i n g , M i c h i g a n , A g r i c u l t u r a l Ec o n o m ic s R e p o r t No. 1 9 0 ,
f o r t h c o m i ng.
In tern a l

Rev enu e S e r v i c e , U .
o f Incom e," 1965.

__________ , U. S.
1966.
.

U. S.
1967.

S.

Government,

" S o u r c e Book o f

S ta tis tic s

Government,

" S o u r c e Book o f

S ta tis tic s

of

Income,"

Government,

" S o u r c e Book o f S t a t i s t i c s

of

Income,"

M ic h ig a n D e p a rtm e n t o f A g r i c u l t u r e , 'T on nage o f F e r t i l i z e r Sold in
M i c h i g a n f r o m J a n u a r y 1 T h r o u g h December 31 , 1 9 7 0 , 11 C o m p i l e d
by L a b o r a t o r y D i v i s i o n , M ic h ig a n D ep artm en t o f A g r i c u l t u r e ,
1971.
M ille r,

'O il,

J . H . , "A G l i m p s e a t C a l c u l a t i n g and U s i n g R e t u r n on I n v e s t ­
ment , " _Natj_onaJ__Associ£t_ion-_of _Ac cou ntajTts_JluJJLetjhi, V o l . 4 l ,
No. 1 0 , Ju ne I 9 6 0 , p p . 7 1 - 7 5 .

P a in t,

and D ru g R e p o r t e r , " M a rc h 2 9 ,

■'Optima," A g r i c u l t u r a l E x p e r im e n t S t a t i o n
S ta te U n i v e r s i t y , 1969.

1971, V o l.

199,

LP D e s c r i p t i o n

No.

13.

1, M ic h ig a n

P erkin s,

George R . , D a v i d M. B e l l , and D e n n i s R. H e n d e r s o n , R e s o u r c e
A d ju s tm e n t in th e F e r t i l i z e r I n d u s t r y . M ic h ig a n S t a t e U n iv e r ­
s i t y , E a s t L a n s i n g , M i c h i g a n , A g r i c u l t u r a l E c on o m ic s R e p o r t
N o. 19**, f o r t h c o m i n g .

R e ilin g ,

E l d o n A l v i n , "Demand A n a l y s i s f o r C om me rc ial F e r t i l i z e r i n
t h e U n i t e d S t a t e s , By S t a t e s , " u n p u b l i s h e d P h . D . t h e s i s ,
M ichigan S t a t e U n i v e r s i t y , 1966.

S lack,

A. V . , Phosphoric A c i d . P a r t I . V o l .
and T e c h n o l o g y S e r i e s , 1 9 6 8 .

T of

the

F e rtiliz e r

Science

Sm ith,

V i c t o r E . , " P e r f e c t v s . D is c o n tin u o u s Input M a rk e ts ; A L in e a r
Pr og ra m m in g A n a l y s i s . " J o u r n a l o f Farm E c o n o m i c s . V o l . 3 7 ,
A u g u s t 1 9 5 5 , p. 5 3 8 .

T u r b e r v i l l e , W. J . , J r . , " F e r t i l i z e r M a r k e t i n g P r o b l e m s i n t h e 1 9 7 0 , s , "
p a p e r p r e s e n t e d a t F e r t i l i z e r P r o d u c t i o n and M a r k e t i n g
C o n f e r e n c e , M e m p h is , O c t o b e r 1 9 6 9 , p u b l i s h e d i n F e r t i 1 i z e r
M a r k e t in g in a Changing A g r i c u l t u r e , (p r o c e e d in g s p u b l i c a t i o n ) ,
by T e n n e s s e e V a l l e y A u t h o r i t y , 1 9 6 9 .

139
u.

S.

Bureau o f th e Census,
Government, I 9 6 9 .

U.

S.

Government,

"Census o f M a n u f a c t u r e r s ,

" E c o n o m ic R e p o r t o f

the

P resid en t,

1 9 6 7 , " U.

February

S.

1971,"

APPENDIX A

1970 A c t u a l ,

C o n s t r a i n e d O p t im u m , and Op tim um :

Data

140

Table A - l .

P r o d u c t use summary f o r
and o p tim um ( i n t o n s )

Product

T o ta l cost (in d o lla r s )
A n h y d r o u s ammonia
Aqueous ammon i a
N i t r i c aci d
Ammonium n i t r a t e
Nonpressure n itro g e n s o lu tio n
Low p r e s s u r e n i t r o g e n s o l u t i o n
N itro g e n m a nufacturing s o lu tio n
Urea
G r a n u l a r ammonium s u l f a t e
E l e m e n t a l p h os ph or ou s
W hite phosphoric a c id
Green p h o s p h o r i c a c i d
Superphosphoric a c id
Ammonium p o l y p h o s p h a t e l i q u i d
(10-34-0)
Ammonium p o l y p h o s p h a t e l i q u i d
(11-37-0)
N or m a l s u p e r p h o s p h a t e
R u n - o f - p i l e t r i p l e superphosphate
G ra n u la r t r i p l e superphosphate
Diammonium p h o s p h a t e
Monoammoniurn p h o s p h a t e
Rock p h o s p h a t e
R u n -o f-m in e potassium c h l o r i d e
Standard potassium c h l o r i d e
G ra n u la r potassium c h l o r i d e
Coarse po ta s s iu m c h l o r i d e
G r a n u l a t e d m ix e d f e r t i l i z e r s
Bulk b le n d e d f e r t i l i z e r s
Custom b l e n d e d f e r t i l i z e r s
Ho t p r o c e s s c l e a r m ix e d l i q u i d s
C o l d p r o c e s s c l e a r m ix e d l i q u i d s
Suspension l i q u i d s
N s u p p lle d
P2 O5 s u p p l i e d
K2 O s u p p l i e s

1970 a c t u a l ,

c o n s t r a i n e d optimum,

1970
actual

C onstrained
op tim um

,4 4 5,667
164,309
3 ,8 9 7
59 ,8 3 2
78,210
40,912
2 8 , 1 71
1 6 ,067
52,006
35 ,6 2 8
4 ,0 0 4
16,866
195,455
207

52 ,555,247
171,894
- 010,539
13,777
-0-019,737
-0-0-0-0236,748
-0-

4,832
40 2
53,791
138,945
26 ,598
105,205
2 6 ,2 4 4
277
111 , 1 6 6
1 ,877
9 5 ,5 1 9
5 0 ,0 0 0
388,555
203,213
27,785
11,450
7,633
-0141,932
140,650
155,441

-0-0-01 15,303
5 ,2 7 4
7 7,8 1 0
99,910
-0121,462
-0137,590
- 0303,655
185,535
86,465
-0-0-0 141 , 9 3 2
140,650
155,441

Optimum

4 8 ,2 9 7,76 3
17 2 , 8 2 8
-0- 0- 0- 0-0-0 -0 -0- 0-0260,565
-0-0 -0- 0-0-0- 0270,576
-0 -0-0259,032
- 0-0329,689
113,600
-0-0-0141,932
140,650
155,441

Table A-2.

Anhydrous ammonia product flow

Product tons per year
Originating
1ocat i on

Activity

Type

Terminating
location

1970
actual

Constrained
optimum

Optimum

80,308

*2,886

Gulf Coast

Production

Centrifugal

—

73,053

Gulf Coast

Product ion

Piston

—

10,363

Midwest

Production

Centrifugal

Central
Mi chi gan

Production

Centrifugal

Central
Michigan

Product ion

Piston

Gulf Coast

M f r's . storage

Cyrogenic

—

Mi dwest

M f r 's . storage

Cyrogeni c

—

Central
Mi chigan

Mfr's storage

Cyrogen i c

—

Gulf Coast

Product
tr an sfe r

On-s i te

Gulf Coast

TRansportation

Barge

<♦6,913
—

-0-

-Q*5,175
-0-

-0-0129,9*2

3*,000

*6,* 11

-0-

13,189

* 5 ,5 * 0

-0 -

-0-

7,6*7

-0 -

-0-

-0-

5*.239

Gulf Coast
producers^

50,763

7,**8

-0-

Florida
nrrwhirj* r<

19,012

27,320

*2,886

Table A-2,

(c o n t'd .)

Product tons per year

Activity

Type

Terminating
location

1970
actual

Constrained
optimum

Opt i mum

Gutf Coast

Transportat ion

Rail

Outstate
re ta i lers

13,622

^5,5^0

-0-

Midwest

Product
tr a n s fe r

On-site

Midwest
producers

25,9^6

8,788

-0-

Midwest

Transportation

Rai 1

Outstate
^
processors

2,157

-0-

-0-

Midwest

T ransportation

Rai 1

Outstate
retailers

18,810

-0-

-0-

Midwest

T ransportation

Truck

Farms

-0-

36,387

-0-

Central
Michigan

Product
tr a n s fe r

On-site

Michigan
producers

^ ,350

-0 -

-0-

Central
Mi chigan

Transportation

Truck

Outstate
retailers

29,6A2

-0-

-0-

Central
Michigan

Transportation

Truck

Farms

8

1

123,9^2

zijl

Originating
location

Table A-2.

(c o n t'd .)

Product tons per year
Originating
location

A cti vi ty

Outstate
Mi chigan

R e t a i 1ing

Outstate
re ta i lers

Transportation

Farms

Applicat ion

Type

_ _ _

Applicator

—

Terminating
location

1970
actual

Constrained
optimum

———

62,07*1

*♦5,540

-0-

Farms

62,07*1

45,540

-0-

---

62,082

128,338

Optimum

129,942

^ N i t r i c aci d, ammonium n i t r a t e , nitrogen manufacturing so lu ti on s , and urea producers.

2

Diammonium phosphate and monoammonium phosphate producers.

^ N i t r i c a c id , ammonium n i t r a t e , nonpressure and low pressure nitrogen solut ions , nitrogen manufactur­
ing solut ions , urea, ammoniated polyphosphates, diammonium phosphate, and monoammonium phosphate producers.

4

Aqueous ammonia, granular mixed and li q u id mixed f e r t i l i z e r producers,

^Diammonium phosphate and granular mixed f e r t i l i z e r producers.

Table A*3.

Aqueous ammonia product flow

O ri ginating
location

Activi ty

Type

Outstate
Michigan

Production

Airmon i a
converter

Outstate
Mi chi gan

Transportation

Rail

Outstate
Michigan

R e t a i 1ing

Outstage
retai lers

Transportation

Farms

Appli cation

Applicator

Terminali ng
location

1970
actual

Constrained
optimum

Optimum

—

3,897

-0-

-0 -

Outstate
retai l e r

3,897

-0 -

-0 -

—

3,897

-0 -

-0 -

Fa rms

3,897

-o -

-0 -

3,897

-0 -

'0 -

¥71

Product tons per year

Table A-4.

N i t r i c acid product flow

_______ Product tons per year________
Or iginating
location

Activity

Type

Terminating
location

1970
actual

Constrained
optimum

Optimum

Gulf Coast

Production

Medium
p res sure

—

41 ,882

7 >377

~0-

Midwest

Production

Medium
pressure

—

17,950

3,162

-0-

Gulf Coast

Product
t r a n s fe r

On-site

Gulf Coast
producers

41,882

7,377

Midwest

Product
tr a n s f e r

On-site

Midwest
producers

17,950

3,162

* Ammonium n i t r a t e producers.

-0-

Table A-5.

Ammonium n i t r a t e product flow

Product tons per year
Or iginating
location

Act i v i t y

Type

Terminating
location

1970
actual

Constrained
opt i mum

Opt imum

Gulf Coast

Production

N e u tr a li z a t io n evaporation

5*1,7*7

9,6**

-

0-

Midwest

Production

N e u tr a li z a t io n evaporation

23 ,*63

*,133

-

0-

Gulf Coast

M f r ' s . storage

Bulk

-

0

Guif Coast

Product
tr a n s f e r

On-s i te

Gulf Coast
1
producers

9,6**

-

0-

Gulf Coast

Transportation

Barge

Midwest
producers

-

0-

Gulf Coast

Transportation

Rail

Gulf Coast

Transportation

Guif Coast

Transportation

* ,87 9
-

0-

-

0-

20,105

-

0

Michigan
producers 3

1,027

-

0

Rail

Outstate
processors 3

5,912

Rail

Outstate
retailers

27 ,70*

-

-

-

-o -

-0 -

-

0

-

Table A-5.

(c o n t'd .)

Product tons per year
Origin ati ng
location

Activi ty

Midwest

Product
tr a n s fe r

Outstate
Michigan

R e t a i 1ing

Outstage
re ta i lers

Transportation

Farms

Application

Type

On-site

—

Appli cators

—

Terminating
location

1970
actual

Constrained
optimum

Midwest
^
producers

23 ,*63

4,133

-0-

—

27,70^

-0-

-0-

Farms

27,704

-0-

-0-

—

27,704

-0-

-0-

Optimum

^Nitrogen manufacturing solutions producers.
2

Nonpressure and low pressure nitrogen solutions and nitrogen manufacturing solutions producers.

3

Granulated mixed and dry blended f e r t i l i z e r producers.

Table A-6.

Nonpressure nitrogen solutions product flow

Product tons per year

Type

Activity

Terminating
location

1970
actual

Constrained
optimum

Optimum

Midwest

Production

Blending

—

40,912

-0-

-0 -

Midwest

M f r's . storage

Tank

—

40,635

-0-

-0-

Midwest

Transportation

Rail

Outstate
j
processors

1,109

-0-

-0 -

Midwest

Transportation

Rail

Outstate
retai lers

39,803

-0-

-0-

Outstate
Michigan

R e ta i1ing

—

—

39,803

-0-

-0-

Outstage
r etai lers

Transportation

Farms

39,803

-0-

-0-

Farms

Application

—

39,803

-0-

-0-

Applicators

—

^Cold process liq ui d mixed f e r t i l i z e r producers*

8+71

Originating
location

Table A~7*

Low pressure nitrogen solutions product flow

Product tons per year
Originating
location

Activi ty

Type

Terminating
location

1970
actual

Constrained
optimum

Opt imum

Midwest

Production

Blending

—

28,171

-0-

-0-

Midwest

M f r 's . storage

Tank

—

9^72

-0-

-0-

Midwest

Transportation

Rai 1

Michigan ^
producers

16,260

-0-

-0 -

Midwest

Transportation

Rai 1

Outstate
j
processors

9,756

-0-

-0-

Midwest

Transportation

Rai 1

Outstate
retai lers

2,155

-0-

-0-

Outstate
Mi chigan

R e t a i 1ing

—

2,155

-0-

-0-

Outstate
retailers

Transportation

Farms

2,155

-0-

-0-

Farms

Application

—

2,155

-0-

-0-

—

Applicators

—

^Granulated mixed f e r t i l i z e r producers.

Table A-8.

Nitrogen manufacturing solutions product flow

Product tons per year
Or iginating
location

Act i v i ty

Type

Terminating
1ocation

1970
actual

Constrained
optimum

Optimum

-0-

13,816

-0-

16,067

5,921

-o-

—

-0-

2,616

-o-

—

4,519

-0-

-o-

Michigan j
producers

-0-

10,329

-0-

Rai 1

Outstate
|
processors

-0-

3,488

-0-

Transportation

Rail

Michigan |
producers

10,042

5,921

-0-

Transportation

Rail

Outstate
j
processors

6,025

-0-

-0-

Gulf Coast

Product ion

Blending

—

Midwest

Production

Blend i ng

—

Gulf Coast

M f r ' s . storage

Tank

Midwest

M f r ' s . storage

Tank

Gulf Coast

Transportation

Rail

Gulf Coast

Transportat ion

Midwest

Midwest

1Granulated mixed f e r t i l i z e r producers.

Table A-9*

Urea product flow

Product tons per year
Or iginating
location

Activity

Type

Termtnating
locat ion

1970
actual

Constrained
optimum

29,470

-0-

-0'

-0-

-

0

-

-

0

-0-

*

0

Gulf Coast

Production

Gas separation

Gulf Coast

Production

Ammon\urn
carbamate
s lu r r y

6,934

Gulf Coast

Production

Water
absorption

10,401

Midwest

Production

Gas separation

Gulf Coast

Mf r's* storage

Bulk

Gulf Coast

Transportat ion

Barge

Midwest
j
producers

9,651

Gulf Coast

Transportation

Rail

Michigan
processors'

1,247

Gulf Coast

Transportation

Rail

Outstate
processors'

11,861

5,201

33,878

-

-

0

0

-

Optimum

-

-

-

-0-

Table A-9.

(c o n t'd .)

Product tons per year
1970
actual

Constrained
optimum

Z k t 0k7

-0-

-0-

5,201

-0-

-0-

24,0^7

-0-

-0-

1
0
1

Type

A ct iv i ty

Terminating
location

1
01

Originating
location

-0 -

-o-

Gulf Coast

Transportation

Rati

Outstate
reta i lers

Mi dwest

Product
transfer

On-site

Midwest
j
producers

Outstate
Michigan

R e ta i1 ing

Outstate
re ta i lers

Transportation

Farms

Applicat ion

—

Applicators

—

—

Farms

—

Nonpressure nitrogen solutions producers.
2

Granulated mixed and dry blended f e r t i l i z e r producers.

2A,Oi»7

Optimum

Table A -10*

Ammonium s u lfa te product flow

Product tons per year
Originating
location

Activity

Type

Term!nating
location

1970
actual

Constrained
optimum

11*17^

-0-

-0*

Optimum

Purchase

—

---

Outstate
processors

Purchase

—

—

21,984

-0-

-0-

Outstate
re ta i lers

Purchase

—

—

2^70

-0-

-0-

Outstate
Michigan

R et a ili n g

—

—

2,470

-0-

-0-

Outstate
retailers

Transportation

2,470

-0-

-0-

Farms

Appli cation

2,470

-0-

-0-

Appli cators

- -

Farms

153

Central
Michigan

Table A - I I .

Elemental phosphorus product flow

Product tons per year

Type

Florida

Production

Electric
furnace

Florida

Transportation

Barge

Florida

Transportation

Rai 1

1970
actual

Constrained
optimum

Optimum

4,00*

-0-

-0 -

Midwest
j
producers

27

-0-

-o -

Michigan j
producers

3,977

1
o
1

Act i v i ty

Terminating
location

•
o
1

Originating
1ocat i on

—

White phosphoric and superphosphoric acid producers.

Table A-12.

White phosphoric acid product flow

Product tons per year
Originating
location

Activity

Type

Central
Mi chIgan

Production

Furnace
process

Central
Michigan

Product

On-site

^Dianmonium phosphate producer.

Terminating
location

—

Michigan
producer

1970
actual

Constrained
optimum

16,866

-0-

-Q-

16,866

-0-

-0-

Optimum

Table A-13.

Green phosphoric acid product flew

Product tons per year
Originating
location

Act i v i ty

Type

Terminating
location

1970
actual

Constrained
optimum

Opt i mum

260,565

Florida

Product ion

Wet process

—

134.864

163,356

Hi dwest

Production

Wet process

—

60,591

73,392

-0-

Florida

M f r 's . storage

Rubber-1ined

—

3,561

-0-

-0 -

Florida

Product
transfer

On-site

Florida
^
producers

134,864

163,356

Midwest

Product
transfer

On-si te

Midwest
|
producers

55,8^3

73,392

-0-

Midwest

Transportation

Rai 1

Outstate
2
processors

4, 7 *8

-0-

-0-

260,565

^Ammoniated polyphosphates, t r i p l e superphosphate, diammonium phosphate and monoammonium phosphate
producers.
Hot process clear mixed li q u i d f e r t i l i z e r producers.

Table A -14.

Superphosphoric acid product flow

Product tons per year
Or iginating
location

Act i v i ty

Type

Hi dwest

Production

Thermal

Midwest

Product
transfer

On-site

* Ammon fated polyphosphates producers.

Terminating
location

—

Midwest
^
producers

1970
actual

Constrained
optimum

Optimum

207

-0-

-0-

207

-0-

-0-

Table A -15.

Ammoniated polyphosphate (10-3A-0) product flow

Activity

Type

Midwest

Production

Ammoniat ion

Mi dwest

M f r ' s . storage

Tank

Midwest

Transportation

Rail

Terminat ing
location

—
—

Outstate
j
processors

'Cold process clear mixed l i q u i d f e r t i l i z e r producers.

1970
actual

*1 , 8 3 2
Os
NJ
.e-

Originating
location

*i,832

Constrained
optimum

Optimum

-0 -

-0-

1
0
1

Product tons per year

-0-

-0-

-0-

Table A-16.

Ammoniated polyphosphate (11- 37- 0) product flow

Product tons per year
Originating
location

Activity

Type

Terminating
location

1970
actual

Constrained
opt imum

Optimum

Midwest

Production

Ammon?at ion

—

402

-o -

-o -

Midwest

M f r ' s . storage

Tank

—

302

-0-

-0-

Midwest

Transportation

Rail

402

-0-

-0-

Outstate
|
processors

^Cold process c l e a r mixed l i q u i d f e r t i l i z e r producers.

Table A -17*

Normal superphosphate product flew

Or ig in ati n g
location

Acti vi ty

Type

Terminating
location

1970
actual

Constrained
o p t )mum

Opt1mum

Florida

Production

Cone mixer

—

21,791

-0-

-0-

Central
Mi chigan

Production

Cone mixer

—

32,000

-0-

-0-

Flori da

M f r ' s . storage

Bulk

—

16,660

-0-

-0-

FI orida

T ransportation

Rail

Outstate
|
processors

21,791

-0-

-o-

Central
Mi ch i gan

Product
tr a n s fe r

On-si te

Michigan j
producers

31,5*0

-0-

-0-

Central
Mi chi gan

Transportation

Rail

Outstate
j
processors

89

-0-

-0-

Central
Mi chigan

Transportation

Rai 1

Outstate
re ta i lers

371

-0-

-0-

Outstate
Michigan

R e t a i1ing

371

-0-

-0-

091

Product tons per year

Table A - 17-

(c ont1d.)

_______ Product tons per year________
Originating
location

Activity

Outstate
re ta i lers

Transportation

Farms

Application

Type

Applicators

—

Terminating
location

Farms

—

^Granulated mixed and dry blended f e r t i l i z e r producers.

1970
actual

Constrained
optimum

Optimum

371

-0-

-0-

371

-0-

-0-

Table A-18.

R u n -o f- pi le t r i p l e superphosphate product flow

Product tons per year
Or iginating
location

Acti vi ty

Type

Terminating
locat ion

1970
actual

Constrained
optimum

Optimum

Florida

Production

Cone mixer

—

83,085

44,234

-o-

Mi dwest

Production

Cone mixer

—

55,860

71,069

-0-

Florida

M f r 's . storage

Bulk

—

55,907

25,897

-0-

Florida

Product
t ransfer

On-site

Florida
^
producers

27,130

5,380

-0-

Florida

Transportation

Rai 1

Michigan ^
producers

1*1,024

38,854

-0-

Flori da

Transportation

Rail

Outstate
^
processors

41,930

-0-

-0-

Midwest

Transportation

Rail

Michigan ^
producers

55,860

51,646

-0-

Midwest

Transportation

Rail

Outstate
2
processors

-0-

19,423

-0-

^Granulated t r i p l e superphosphate producers.

2

Granulated mixed f e r t i l i z e r s producers.

Table A-19.

Granular t r i p l e superphosphate product flow

Product tons per year
O ri ginating
location

Type

A ct iv i ty

Terminating
location

1970
actual

Constrained
opt i mum

Optimum

Florida

Production

Rotary drum
granulator

—

26,598

5,27*t

-0-

Florida

M f r ' s . storage

Bulk

—

17,2^2

3,956

-0-

Florida

Transportation

Rai 1

Michigan
^
processors

1,831

-0-

-0-

Florida

Transportation

Rail

Outstate
processors

21,159

5 ,271t

-0-

Florida

Transportation

Rail

Outstate
retai lers

3,608

-0-

-0-

Outstate
Mlchigan

R e ta iI in g

—

3,608

-0-

-0-

Outstate
retailers

Transportation

Farms

3,608

-Q-

-0-

Farms

Applicat ion

—

3,608

-0 -

-0-

—

Applicators

—

^Dry blended f e r t i l i z e r producers.

Table A-20.

Diammonium phosphate product flow

Originating
location

Activity

Type

Terminating
location

1970
actual

Constrained
optimum

Optimum

Florida

Production

Slurry
ammon i at i on

—

70,886

64,582

*0-

Mi dwest

Production

Slurry
ammoniat ion

—

1^,519

13,228

-0-

Central
Michigan

Production

Slurry
ammoniat ion

—

19,800

-0-

-0-

Florida

M f r ' s . storage

Bulk

—

51,19*

28,358

-0-

Florida

T ransportation

Rail

Michigan
producers

-0-

26,772

-0-

Florida

Transportation

Rail

Outstate
j
processors

64,0*8

37,810

-0*

Florida

Transportation

Rai 1

Outstate
retat lers

6,838

-0-

-0-

Midwest

Transportation

Rail

Michigan ^
producers

14,478

13,228

-0-

*791

Product tons per year

Table A-20.

(c o n t 'd . )

Product tons per year
Originating
location

Act Ivi ty

Type

Terminating
location

Constrained
optimum

Optimum

^0

-0-

-0-

1970
actual

Midwest

Transportation

Rail

Outstate
]
processors

Central
Michigan

Product
tr a n s fe r

On-s i te

Michigan ^
producers

19,800

-0-

-0-

Outstate
Michigan

R e t a i 1ing

...

6,838

-0-

-o-

Outstate
re ta i lers

Transportation

6,838

-0-

-0-

Farms

Appli cat ion

6,838

-0-

-0-

—

Appli cators

—

Farms

—

^Granulated mixed and dry blended f e r t i l i z e r producers.

Table A-21.

Monoammonium phosphate product flow

Product tons per year
Or!glnating
location

Type

A ctivity

Terminating
location

1970
actual

Constrained
opt imum

Optimum

270,576

Florida

Production

Slurry
ammon i at ion

—

21,783

82,926

Mi dwest

Production

Slurry
ammontat ion

—

4,461

16,985

Fl orida

M f r ' s , storage

Bulk

—

17,231

74,933

202,932

Florida

Transportation

Rail

Outstate
processors

18,514

72,156

270,576

Florida

Transportation

Rai 1

Outstate
retailers

3,269

-fl­

-0-

Flori da

Transportation

Rail

Michigan
processors

-0-

i t ) , 770

-0-

Midwest

T ransportation

Rail

Michigan
^
processors

2,180

-0-

-0-

Mi dwest

Transportation

Rail

Outstate
^
processors

2,281

16,985

-0-

-0-

Table A-21.

( c o n t 'd .)

Product tons per yea r
Originating
location

Activity

Outstate
Hi chigan

R e t a i 1ing

Outstate
retailers

Transportation

Farms

Appli cation

Type

—

App1icators

W y blended f e r t i l i z e r producers.

- - -

Terminating
locat ion

—

Farms

--------

1970
actual

Constrained
optimum

Optimum

3,269

-0-

-0-

3,269

-0-

-0-

3,269

-0-

-0-

Table A-22.

Rock phosphate product flow

Product tons per year
Or iginating
lo cat i on

Type

Act i v tty

Florida

Production

Grinding

Florida

Transportation

Rail

Outstate
Michigan

R et a iIi n g

Outstate
re ta i lers

Transportation

Farms

Applicat ion

—

Terminating
location

—

Outstate
re ta i lers
—

1970
actual

Constrained
optimum

Opt imum

-0-

-0-

277

-0-

-0-

277

-0-

-0-

277

-0-

-0-

277

-0-

-0-

168

277

Applicators

-- -

Farms

•

**-

Table A-23.

Run-of-mine potassium chloride product flow

________ Product tons per year
Or iginating
location

Activity

Type

Terminating
location

Saskatoon

Production

F lo ta tio n

Saskatoon

M f r ' s . storage

Bulk

Saskatoon

Transportation

Rail

Michigan
producers

Saskatoon

Transportation

Rail

Outstate
processors

^Granulated mixed f e r t i l i z e r producers.

1970
actual

}
j

Constrained
optimum

Optimum

111,116

121,462

-0-

31,265

16,096

-0-

69,479

100,000

-0-

41,687

21,462

-0-

Table A-2^.

Standard potassium chloride product flow

Product tons per year
Or i g in a t in g
1ocat i on

Type

Act iv i ty

Saskatoon

Production

Flot at ion

Saskatoon

M f r ' s . storage

Bulk

Saskatoon

Transportation

Rail

Terminating
location

- - -

Outstate
j
processors

1970
actual

Constrained
optimum

Optimum

1,877

-0-

-0-

1,^07

-0-

-0-

1,877

-0-

-0170

*Hot and cold process cl ea r mixed l i q u i d f e r t i l i z e r producers.

Table A-25.

Granular potassium chloride product flew

Product tons per year
Or iginating
location

Saskatoon

1970
actual

Constrained
optimum

Opt imum

Fl ota tio n

95,919

137,590

259,032

62,9^3

103,192

129,535

Type

Act i v i t y

Production

Terminating
location

Saskatoon

M f r ' s . storage

Bulk

Saskatoon

Transportation

Rail

Mi chigan
terminal

Saskatoon

Transportation

Rail

Michi gan
1
processors

6,321

9,230

Saskatoon

Transportation

Rail

Outstate
,
processors

77,602

128,360

Saskatoon

Transportation

Rail

Outstate
retailers

11.996

-

0-

Michigan
terminal

Transportation

Truck

Farms

-

0-

Outstate
Michigan

R et a ili n g

-

0

-

-

0-

0

-

11.996

-

0-

-

86,319

172,713

86,319

-

0

-

Table A-25.

(c on t' d. )

Product tons per year
Or!ginating
location

Type

Acti vi ty

Outstate
retailers

Transportat ton

Farms

Applicat ion

Appli cators

1970
actual

Farms

11,996

-0-

-0-

11,996

-0-

86,319

Constrained
optimum

Optimum

172

W y blended f e r t i l i z e r producers.

-----

Terminating
location

Table A-26.

Coarse potassium chloride product flow

Product tons per year
Ori ginating
location

Activity

Type

Saskatoon

Production

Flotation

Saskatoon

Transportation

Rai 1

Outstate
Mi chi gan

R e t a i 1ing

Outstate
reta i lers

Transportation

Farms

Applicat ion

—

Appli cators

---------

Terminating
location

—

Outstate
retai lers
—

Farms

---------

1970
actual

Constrained
opt i mum

Optimum

50,000

-0-

-o -

50,000

-0-

-0-

50.000

-0-

-0-

50,000

-0-

-0-

50,000

-0-

-0-

Table A-27.

Bagged granulated mixed f e r t i l i z e r s product flow

Product tons per year
Or iginating
location

A cti vi ty

Type

Terminating
location

1970
actual

Constrained
optimum

Opt imum

Central
Mi chi gan

Production

TVA
continuous

—

97,139

-0-

-0-

Outstate
Michigan

Product ion

TVA
(30,000 TPY)

—

58,283

-0-

-0-

Central
Michigan

M f r ' s , storage

Bagged

—

36,427

-0 -

-0-

Central
Michigan

Transportation

Truck

Outstate
re ta i lers

97,117

-0 -

-0-

Central
Mi chigan

Transportation

Truck

Farms

22

-0-

-0-

Outstate
producer

Transportation

Truck

Outstate
re ta i lers

58,283

-0-

-0-

Outstate
Michigan

Retai 1ing

155,400

-0-

-0-

Outstate
re ta i lers

Transportation

155,400

-0-

-0-

Farms

Appli cat ion

155,400

-0-

-0-

—

Wagons

—

Farms

—

Table A-28.

Bulk granulated mixed f e r t i l i z e r product flow

Product tons per year
Originat ing
locat ion

Activity

Type

Terminating
location

1970
actual

Constrained
optimum

Optimum

Central
Mi ch i gan

Production

TVA
continuous

145,708

250,000

-

0-

Outstate
Mi ch i gan

Production

TVA
continuous

87,425

53,655

-

0-

Central
Michigan

M f r ' s . storage

Bulk

187,500

-

0-

Central
Michigan

Transportation

Rai

Outstate
reta i lers

Centra]
Michigan

Transportation

Truck

Farms

Outstate
producer

Transportation

Truck

Outstate
re ta i lers

Outstate
producer

Transportation

Truck

Farms

-

0

Outstate
Michigan

R e t a i 1ing

-

0-

-

0

-

145,708

-

0-

250,000

87,425

-

0-

233,133

53,655

-

0-

-

Table A-28.

( c o n t 'd .)

Product tons per year
Ori ginating
location

Act i v i ty

Outstate
retai lers

Transportation

Farms

Appli cation

Type

Applicators

- - -

Terminating
locati on

1970
actual

Farms

233,133

- - -

233,133

Constrained
optimum

-0-

3-3,655

Optimum

-0-

-0-

ON

Table A-29.

Bagged blended f e r t i l i z e r product flow

Product tons per year
Or iginating
location

Activity

Type

Terminat ing
location

1970
actual

Constrained
optimum

Optimum

Production

Horizontal w/
rotary drum

—

16,444

-0-

-o-

Outstate
Michigan

Production

Horizontal
(1000 TPY)

—

6,986

-0-

-0-

Outstate
Mi chigan

Production

Horizontal
(2500 TPY)

—

29,787

-0-

-o -

Central
Michigan

Transportation

Truck

Outstate
r etai l e r

16,444

-0-

-0-

Outstate
processors

Transportation

Wagon

Farms

36,773

-o-

-0-

Outstate
Michigan

R e t a i 1ing

—

16,444

-0-

-0-

Outstate
r etai l e r

Transportation

Farms

16,444

-0-

-0-

Farms

Appli cation

53,217

-0-

-0-

—

Wagon

- - -

—

177

Central
Michigan

Table A-30.

Bulk blended f e r t i l i z e r s product flow

Product tons per year
Ori ginating
location

Activi ty

Type

Terminating
1ocat i on

1970
actual

Constrained
optimum

20,000

Opt i mum

0

Central
Michigan

Production

Horizontal w/
rotary drum

Outstate
Michigan

Production

Horizontal
(9000 TPY)

Outstate
Michigan

Production

V e r ti c a l
(9000 TPY)

Outstate
Michigan

Production

Horizontal
(2500 TPY)

1*1,653

-

0

-

-

0

Outstate
Mi chigan

Production

Horizontal
(1000 TPY)

33,226

-

0-

-

0

Central
Michigan

T fansportation

Rai 1

Outstate
retailers

2 .9 0 2

-

0-

Central
Michigan

Transportation

Truck

Farms

2.902

-

0-

252,000

-

0

-

-

-

0-

0-

20,000

-

-

H 3,290

-

-

-0'

Table A-30,

(cont'd.)

Product tons per year
Originating
location

Activity

Type

Terminating
location

Outstate
processors

T ransportation

Truck

S a t e l 1i te
out lets

Outstate
processors

Transportation

Appli cators

Farms

Outstate
Michigan

R e t a i 1ing

Outstate
retai lers

Transportation

S a t e l 1i te
ou tle ts

Product
hand)ing

S a t e l 1i te
outlets

Transportation

Farms

Applicat ion

Applicators

—

Appli cators

- - -

1970
actual

-0-

178,879

Constrained
opt i mum

Optimum

126,000

221,61*5

126,000

221,6^5

—

2,902

-0-

-0-

Farms

2,902

-0-

-0-

—

-0 -

126,000

221,61*5

Farms

-0-

126,000

22t,61*5

272,000

1*1*3,290

- - -

177,781

Table A-31.

Clear mixed li q ui d f e r t i l i z e r product flow

Product tons per year
Originating
location

Activity

Type

Termi nat i ng
location

1970
actual

Constrained
optimum

Opt i mum

Production

Hot process
(3000 TPY)

—

11,450

-

0

-

-

0-

Outstate
Michigan

Production

Cold blend
(1000 TPY)

—

7,633

-

0-

-

0-

Outstate
processors

T ransportation

Applicators

-

0

Farms

Applicat ion

-

0

Farms

19.083

19.083

-

0

-

180

Outstate
Michigan

-

-

Table A-32.

Miscellaneous items and f a c to r usage

1970
Actual

Item

Labor (man-hours)
Wage b i l l @ $4 .00/man-hour
Investment ca pital
Operating ca pit al

(d o lla rs )
(dol la rs )

In te r es t on investment @ 7.5^
Limestone f i l l e r

(tons)

Total f e r t i I i z e r material

Opt imum

6 * 5, 40 5

*452,182

397,545

2 ,5 8 1 ,6 2 0

1 ,808,728

1,590,180

75,**56,505

**1,5*6,85**

37,601,696

28,535,706

17,212,759

16,087,234

5,659,238

3,116,014

2,820,127

15,**82

(tons)

Constrained
Optimum

-

0-

-

0-

877,131

703,993

659,551

A11 nutr ien ts

**9.9

62.2

66.4

N

16.2

20.2

21.5

16.0

20.0

21,3

17.7

22. 1

23.6

Average content (per cent)

P2°5
y

Limestone f i l l e r

1.77

-

0-

-

0-

APPENDIX B

R e t u r n s on

Investm ent

in

the

S h o r t Run

Table B - l .

Product use summary for returns on investment in the short run (i n tons)

Rate of return
1*,0% to
i2 . i%

12.0% to
6.0%

5.9% to
*.*%

*.3% to
*.2%

*.1% to
2.1%

2.0% to
-2.0%

Anhydrous ammonia

171,89*

171,89*

171,89*

171,89*

171,89*

171,97*

171,97*

N i t r i c acid

10,539

10,539

10,539

10,539

10,539

9,930

9,930

Ammonium n i t r a t e

13,777

13,777

13,777

13,777

13,777

12,980

12,980

Nitrogen manufacturing solution

19,737

19,737

19,737

19,738

19,738

18,596

18,596

-0-

-0-

-0-

-0-

-0-

3,977

3,977

220,6*5

220,6*5

16,866

16,866

Elemental phosphorous
Green phosphoric acid
White phosphoric acid
Run -of-pile t r i p l e superphosphate

236,7*8
-0-

236,7*8
-0-

236,7*8
-0-

236,7*8
-0-

236,7*8
-0-

115,303

115,303

115,303

115,303

115,303

112,087

112,087

5, 2 7*

5,27*

5, 2 7*

5,27*

5,27*

8,352

8,352

Diammonium phosphate

77,810

77,810

77,810

77,810

77,810

111,857

111,857

Monoammonium phosphate

99,911

99,911

99,911

99,911

99,911

72,737

72,737

121,*62

121,*62

121,*62

121,*62

121, *62

11*,**0

11*,**0

Granular t r i p l e superphosphate

Run-of-mine potassium chloride

182

Product

20% to
1A.1%

Table B - l .

(c on t' d. )

Rate of return

Product

20% to
l*.l%

Granular potassium chloride

137,590

137,590

137,590

137,590

137,590

1**,629

144,629

Granulated mixed f e r t i l i z e r s

303,655

303,655

303,655

303,655

303,655

286,099

286,099

Bulk blended f e r t i l i z e r s

185,535

185,535

185,535

185,535

185,535

135,075

135,075

86, * 6 5

86,*65

86,*65

86,*65

86,*65

136,925

136,925

supplied

1*1,932

1*1,932

1*1,932

1*1,932

1*1,932

1*1,932

1*1,932

P2 O5 supplied

1*0,650

1*0,650

1*0,650

1*0,650

1*0,650

1*0,650

1*0,650

K^O supplies

155,**1

155,441

155,441

155,441

155,**!

155.441

155,**1

Custom blended f e r t i l i z e r s
N

14.0* to
12.1%

12.0% to
6.0%

5.9% to
*.*%

*.3% to
*.2%

*.1% to
2.1%

2.0% to
-2.0%

Table B-2.

Anhydrous ammonia product flew

20%

to
]*.U

5 . 9 * to
*.*3

Originating
location

Activi ty

Gulf Coast

Production

Centri fugal

—

80,308

80 ,308

80,308

80,308

Midwest

Production

Centri fugal

—

*5,175

*5,175

*5,175

*5,175

Central
Mi chigan

Production

Piston

—

* 6 , *11

*6,*11

*6,*11

*6,*11

Gulf Coast

M f r ' s . storage

Cyrogenic

—

36,752

36,752

*5,5*0

*8,205

Midwest

M f r ' s . storage

Cyrogenic

—

16,*35

16,*35

7 ,6 *7

*,981

Gulf Coast

Product
transfer

On-site

Gulf Coast
producers

7, * *8

7,**8

7, * *8

*,783

Gulf Coast

Transportation

Barge

Florida
2
producers

27,320

27,320

27,320

27,320

Gulf Coast

Transportation

Rail

Outstate
re ta i lers

-0-

-0-

*5,5*0

*8,205

Mi dwest

Product
tr a n s fe r

On-si te

Midwest
,
producers

-0-

-0-

8,788

11,*5*

Mi dwest

Transportation

Truck

Farms

*5,175

*5,175

36,387

33,721

Type

Terminating
locat ion

Rate of return
12.Q& to
1*.'0% to
6.0*
12.U
Product tons per year

Table B-2,

Or iginating
iocat ion

(c ont’ d.)

A ctivity

Type

Terminating
location

20% to
14.1%

Rate o f return
14.0% to
12.0% to
12.1%
6.0%
Product tons per year

46,411

46,411

Central
Mi chigan

Transportation

Truck

Farms

Outstate
re ta i lers

Transportation

Appli cator

Fa rms

Farms

Applicat ion

Gulf Coast

Transportation

Barge

Midwest
produce rs

Gulf Coast

Transportation

Barge

Midwest
terminal

Transportation

Gulf Coast

Transportation

—

-o-

-0-

5-9$ to
4.4%

46,411

46,411

45,540

48,205

128,338

128,338

128,338

128,338

8,788

8,788

-0-

-0-

Mi dwest
terminal

36,752

36,752

-0-

-0-

Truck

Fa rms

36,752

36,752

-0-

-0-

Rail

Michigan
^
processors

-0-

-0-

-0-

128,338

-0-

Table B-2.

( c o n t 'd .)

Or iginating
location

Activity

Midwest

Transportation

Type

Rail

Terminating
location

Michigan
,
processors

______________ Rate o f return______________
20% to
14.0% to
lY,0% to
5.9% to
14. 1%
12.1%
6.0%_______ 4.4%
Product tons per year

-0 *

-0-

-0-

-0-

Table B-2.

( c o n t 'd .)

Or iginating
locat ion

Activi ty

Gulf Coast

Production

Centri fugal

—

80,308

80,31(5

80,345

Hi dwest

Production

Centri fugal

—

*>5,175

45,196

45,196

Central
Mi chi gan

Product ion

Piston

—

**6,**11

46,433

46,433

Gulf Coast

H f r ' s . storage

Cyrogenic

—

1*8,828

45,739

50,085

Midwest

M f r 's . storage

Cyrogeni c

—

*>,359

8,789

4,443

Gulf Coast

Product
tr a n s fe r

On-site

Gulf Coast^
producers

A , 160

3,920

3,920

Gulf Coast

Transportation

Barge

Florida
producers

27,320

26,340

26,340

Gulf Coast

Transportation

Rail

Outstate
re ta i lers

1*8,828

45,739

50,085

Midwest

Product
transfer

On-si te

Midwest
producers^

12,076

11,501

11,501

Mi dwest

Transportation

Truck

Farms

33,099

33,695

29,349

Type

Terminating
locat ion

Rate of return
k . ] % to
2.0? to
*>.3^ to
2.1%
-2 .0?
h.1%
Product tons per year

Table B-2.

Or iginating
location

( c o n t 'd .)

A cti vi ty

Type

Terminating
location

Rate of return
2 . 0 * to
* . 1 * to
1*.3* to
*.2*
-2.0*
2.1*
Product tons per year

Transportation

Truck

Farms

*6,411

* 6 ,* 3 3

*6,*33

Outstate
retai lers

Transportation

Appli cator

Fa rms

*8,828

*5,739

50,085

Fa rms

App1icat ion

—

128,338

125,867

1125,867

Gulf Coast

Transportation

Barge

Midwest
^
p roduce rs

-0-

-0-

-0-

Gulf Coast

T ransportation

Barge

Midwest
terminal

-0-

-0-

-0-

Midwest
terminal

Transportation

Truck

Farms

-0-

-0-

-0-

Gulf Coast

Transportation

Rai 1

Michigan
^
processors

-0-

*,3*6

-0-

Midwest

Transportation

Rai 1

Michigan
^
processors

-0-

-0-

*,3*6

—

188

Central
Michigan

Table B-2.

(c o n t 'd .)

^ N i t r i c acid, ammonium n i t r a t e , and nitrogen manufacut ring solutions producers.
2

Diammonium and monoammonium phosphate producers.

3

N i t r i c ac id, ammonium n i t r a t e , nitrogen manufacturing solu ti ons , and diammonium and monoammonium
phosphate producers.
Granular mixed f e r t i l i z e r producers.

Table B-3.

Originating
location

N i t r i c acid product flow

Act i v i ty

Type

Terminating
location

20% to
\k.\%

Rate of return
TOTTo
12.0% to

}2.}%

6.01

5-9^ to

kM

Product tons per year

Gulf Coast

Production

Medi urn
pressure

7,377

7,377

7.377

7.377

Midwest

Production

Med ium
pressure

3,162

3,162

3,162

3,162

Gulf Coast

Product
tr an sf e r

On-site

Gulf Coast
producers

7,377

7,377

7.377

7.377

Midwest

Product
tr a n s fe r

On-si te

Midwest
producers

3,162

3,162

3,162

3,162

Table B-*3.

( c o n t 'd ,)

Terminating
location

Rate of return
A.l? to
2.0? to
A . 32 to
2.1?
-2 .0?
Product tons per year

O ri ginating
locat ion

Act ivi ty

Gulf Coast

Production

Medium
pressure

—

7,377

6,951

6,951

Midwest

Production

Medi urn
pressure

—

3,162

2,979

2,979

Gulf Coast

Product
transfer

On-si te

Gutf Coast,
producers

7,377

6,951

6,951

Midwest

Product
tr a n s fe r

On-site

Midwest
j
producers

3,162

2,979

2,979

^Ammonium n i t r a t e producers.

Type

Table B-4.

Ammonium n i t r a t e product flow

Terminating
location

W IxT

Rate o f return
T O T to
12.0? to
1 2 . 1?
6.0?
Product tons per year

5-9? to
4.4?

Or iginating
location

Activity

Gulf Coast

Production

N e u t r a li z a t io n
evaporation

9.644

9.644

9.644

9,644

Midwest

Production

N e u t r a li z a t io n
evaporation

4,133

4,133

4,133

4.133

Gulf Coast

Product
tr a n s fe r

On-site

Gulf Coast
producers

9.644

9.644

9.644

1,826

Gulf Coast

Transportation

Barge

Mi dwest
producers

0

7 ,8 1 8

Mi dwest

Product
transfer

On-site

Mi dwest
producers

Type

14.1?

-

0

-

4,133

-

0-

4,133

-

-

4,133

4.133

Table B-4.

(c o n t 'd .)

Terminating
location

Rate of return
O TTo
2.0% to
4 . 3V to
it. 2%
2 . 1%
- 2 . 0%
Product tons per year

Originating
location

Activity

Gulf Coast

Production

N eu trali zation
evaporation

9,644

9,086

9,086

Midwest

Production

N eu trali zation
evaporat ion

4,133

3.894

3.894

Gulf Coast

Product
transfer

On-site

Gulf Coast
Producers

Gulf Coast

Transportation

Barge

Midwest
1
producers

9,644

9,086

9,086

Midwest

Product
transfer

On-s i te

Mi dwes t
producers

it ,133

3.894

3.894

Type

^Nitrogen manufacturing solutions producers.

-

0-

-

0

-

Table B-5.

Nitrogen manufacturing solutions product flow

20? to
1 4 . 1?

Rate of return
12.0? to
14.0? to
12.1?
6.0?
Product tons per year

—

13,816

13,816

13,816

2,616

B1end ing

—

5,921

5,921

5,921

17,122

M f r ' s . storage

Tank

—

2,616

2,616

2,616

2,616

Midwest

M f r ' s . storage

Tank

—

-0-

-0-

-0-

-0-

Gulf Coast

Transportation

Rai 1

Mi ch i gan ^
producers

10,329

10,329

10,329

-0-

Gulf Coast

Transportation

Rail

Outstate
j
processors

3, **88

3,488

3,488

2,616

Midwest

Transportation

Rail

Mi ch i gan .
producers

5,921

5,921

5,921

16,250

Midwest

Transportation

Rai 1

Outstate
^
n rnrpccnrc

-0-

-0-

-0-

Originating
location

Acti vi ty

Gulf Coast

Production

Blending

Midwest

Production

Gulf Coast

Type

Terminat ing
locat ion

5.9^ to
4.4?

872

Table B-5.

(cont'd.)

Terminating
location

Orig in ati n g
location

Acti vi ty

Gulf Coast

Production

Blending

- —

Midwest

Production

Blending

—

Gulf Coast

M f r 's . storage

Tank

Mi dwest

M f r ' s , storage

Tank

Gulf Coast

Transportation

Rail

Gulf Coast

Transportation

Midwest

Midwest

Type

Rate of r e t urn
V.Ofc
*.3% to
*.0% to
2.0% to
k. 1 %
2 . } % ________ -2.0%
Product tons per year

-0-

-0-

-0-

19,738

18,596

18,596

-0-

-0-

-0-

2,616

1,760

1,760

Michigan ^
producers

-0-

-0-

-0-

Rail

Outstate
processors

-0-

-0-

-0-

Transportat ion

Rail

Mi ch i gan j
producers

16,250

16,250

16,250

Transportation

Rai 1

Outstate

3, *8 8

2, 3*6

2,3 *6

^Granulated mixed f e r t i l i z e r producers.

—

j

Table B-6.

Elemental phosphorous product flow

Or igi na tin g
location

A ctivity

Florida

Production

Electric
furnace

Florida

Transportation

Rail

Type

Terminating
location

--

Michigan ^
producers

Rate of return
20% to
14.0% to
JO T~to
5-9? to
14.1%______ 12 , \%_______ 6.0%_______ 4.4%
Product tons per year

-0-

-0-

-0-

-0-

-0-

-0-

-0-

-0-

Rate o f return
4.3% to
4.1% to
2.0% to
4,2%________ 2J%________ -2.0%
Product tons per year

Florida

Production

Electric
furnace

Flori da

Transportation

Rail

^White phosphoric acid producers.

--

Michigan ]
producers

-0-

3*977

3,977

-0-

3,977

3,977

j*

Type

Central
Mi chigan

Product
t r a n s fe r

On-s i te

—

Michigan j
producers

O

r~t

O

-0-

1
01

Furnace
process

-0-

-0-

-0-

-0-

Rate o f return
to
2,0? to
4 . 3 * to
k. 1 %
2,1?
-2.0?
Product tons per year

Central
Hi chigan

Production

Furnace
process

Central
Hichigan

Product
t r a n s fe r

On-s it e

] Diammonium phosphate producers.

—

Mi ch igan ^
producers

k,k%

1
o
1

Production

5.9? to

1
01

Central
Hi chigan

Rate of return
1^.0% to
12.0? to
12.1?
6.0?
Product tons per year

a*

Activity

Terminating
location

.t—‘

Or iginating
location

White phosphoric acid product flow

—

Table B-7.

-0-

16,866

16,866

-0-

16,866

16,866

Table B-8.

Green phosphoric acid product flow

Origi na tin g
location

Activity

Florida

Production

Wet process

---

Midwest

Production

Wet process

—

Florida

Product
tr a n s fe r

Qn-si te

Midwest

Product
tr a n s f e r

On-s i te

Type

Terminating
location

____________ Rate o f return
20^~to
to
12.0% to
5.9% to
1*<. 1%______ 12.1%_______ 6.0%_________ ^%
Product tons per year

163,356

163,356

163,356

163,356

73,392

73,392

73,392

73,392

Fl or id a
^
producers

163,356

163,356

163,356

163,356

Midwest
|
producers

73,392

73,392

73,392

73,392

(cont'd.)

Act ivi ty

Florida

Production

Wet process

—

163,356

152,245

152,245

Midwest

Product ion

Wet process

—

73,392

68,400

68,400

Florida

Product
tra n s fe r

On-site

Florida
}
producers

163,356

152,245

152,245

Mi dwest

Product
tr a n s fe r

On-si te

Midwest
|
producers

73,392

68,400

68,400

Type

Terminating
location

Rate of return
4 . 1 * to
2 . 0 * to
4.3^ to
4.2*
2,)%
-2.0*
Product tons per year

O ri ginating
location

^Triple superphosphate, and dtammoniurn and monoarrnionium phosphate producers.

661

Table B-8.

Table B-9.

R un -of -pile t r i p l e superphosphate product flew

Or iginating
location

Activity

Flori da

Product ion

Cone mixer

—

Vt,234

AA,23*t

66,236

66,236

Midwest

Production

Cone mixer

—

71,069

71,069

71,069

71,069

Florida

M f r 's . storage

Bulk

—

25,897

25,897

25,897

25,897

Florida

Product
transfer

On -s i te

F lo r id a
j
producers

5,380

5,380

5,380

5,380

Florida

Transportation

Rail

Michigan ^
producers

38,85^

38,8511

38,856

38,856

Mi dwest

Transportation

Rai 1

Mi ch i gan ^
producers

5 1 , 6 A6

51,61(6

51,666

51 ,666

Mi dwest

Transportation

Rail

Outstate
2
processors

19,**23

19,1(23

19,623

19,623

Type

Terminating
1ocat i on

Rate of return
U.0% to
12.0% to
12.1%
6.0%
Product tons per year

20% to

}k.)%

5-9^ to
6.6*

200

Table B-9.

( c o n t 'd .)

Terminating
location

Rate o f return
A . U to
Z.0% to
*t.3^ to
k.2%
2. ]%
-2.0%
Product tons per year

Originating
location

Acti vi ty

Florida

Production

Cone mixer

—

Mi,23*t

45,066

*15,066

Mi dwest

Production

Cone mixer

—

71,069

67,021

67,021

Florida

M f r 's . storage

Bulk

—

25,897

17,*»2*i

1 7 , *i2 *i

Florida

Product
tr a n s fe r

On-si te

Florida
j
producers

5,380

8,519

8,5)9

Florida

Transportation

Rai 1

Michigan ^
producers

38,85*1

36,5*t7

36,5*17

Mi dwest

Transportation

Rai 1

Mi chigan
producers^

5 1 , 6*16

53,953

53,953

Midwest

Transportat ion

Rail

Outstate
2
processors

19,**23

13,068

13,068

Type

' Granulated t r i p l e superphosphate producers.
2

Granulated mixed f e r t i l i z e r producers.

Table 8-10.

Granular t r i p l e superphosphate product flow

203 to
lit. 1%

5 - 9 * to
6.6*

Ori ginating
location

Acti vi ty

Florida

Production

Rotary drum
granulator

—

5 . 2 7 1*

5,276

5,276

5,276

Flori da

M f r ' s . storage

Bulk

—

3,956

3,956

3,956

3,956

Florida

Transportation

Rai 1

5,276

5,276

5,276

5,276

Type

Terminat ing
location

Rate of return
14.0% to
12.0% to
12.n
6.0%
Product tons per year

202

Outstate
processors

Table B-1Q.

(c o n t 'd .)

Rate of return
4 . 1 * to
2 . 0 * to
4 . 3 * to
-2.0*
4.2*
2.1*
Product tons per year

Originating
location

A cti vi ty

Florida

Production

Rotary drum
granulator

—

5,274

8,352

8,352

Florida

M f r ' s . storage

Bulk

—

3,956

6,264

6,264

Florida

Transportation

Rai 1

5,21k

8,352

8,352

Type

Outstate
j
processors

203

W y blended f e r t i l i z e r producers.

Terminating
location

Table B - l l .

Diammonium phosphate product flow

Rate of return
14 .0* to
12.0% to
6.0*
12.1*
Product tons per year

5-9% to
4.4*

-0-

64,582

64,582

64,582

-0-

13,228

13,228

13,228

-0-

-0-

-0-

-0-

28,358

28,358

28,358

28,358

Origi na tin g
location

Act i v i ty

Florida

Production

Slurry
ammon i at i on

Midwest

Production

Slurry
ammoniat ion

Central
Michigan

Production

Slurry
amnion i at ion

Florida

M f r ' s . storage

Bulk

Florida

Transportation

Rai 1

Michigan j
producers

26,772

26,772

26,772

26,772

Florida

Transportation

Rail

Outstate
processors

37,810

37,810

37,810

37,810

Midwest

Transportation

Rai 1

Michigan (
producers

13,228

13,228

13,228

13,228

Florida

Production

TVA process

—

6^,582

-0-

-0-

-0-

Midwest

Production

TVA process

—

13,228

-0-

-0-

-0-

—

—

20% to
14.1*

*lOZ

Type

Terminating
location

Table B - l l .

( c o n t 'd .)

O ri ginating
location

Activity

Michigan

Transportation

Farms

Appli cation

Type

Terminating
location

20% to
}k.}%

Rate of return
1A.0% to
12.0% to
12.1%
6.0%
Product tons per year

S-S%

Truck

Farms

-0-

- 0-

-o-

-0-

™™™

———

-0-

-0-

-0-

-0-

to

205

Table B -1 I .

(c o n t 'd .)

Rate of return
A. }% to
4.1£ to
2 . 0 * to
b.1%
2 . 1*
-2 .0*
Product tons per year

Activity

Florida

Production

Slurry
ammoniation

—

6*,5 8 2

76,*07

76,*07

Mi dwest

Production

Slurry
ammon i at i on

—

13,228

15,650

15,650

Central
Michigan

Product ion

Slurry
ammon i at i on

—

-0-

19,800

19,800

Florida

M f r ' s . storage

Bulk

—

28,358

39,0*2

39,0*2

Florida

Transportation

Rai 1

Michigan ^
producers

26,772

2*,350

2*.350

Fl orida

Transportation

Rail

Outstate
processors

37,810

52,057

52,057

Mi dwest

Transportation

Rail

Michigan j
producers

13,228

15,650

15,650

Fl orid a

Production

TVA process

—

-0-

-0-

-0-

Midwest

Production

TVA process

—

-0 -

-0-

-0-

Type

Termtnating
location

206

Or iginating
location

Table B -11.

Or ig in ati n g
location

(c o n t' d . )

Activity

Michigan

Transportation

Farms

Application

Type

Truck
—

Terminating
location

Farms
—

-0-

19,800

19,800

-0-

19,800

19,800

207

^Granulated mixed and dry blended f e r t i l i z e r producers.

_______Rate of return
A. 3% to
V . 1% to
2.0% to
A._2%________ 2.1%________ -2.0%
Product tons per year

Table B-12.

Monoammonium phosphate product flow

20? to
1 4 . 1?

Rate of return
14.OS to
12.0? to
12.1?
6.0?
Product tons per year

—

82,926

82,926

82,926

82,926

SIurry
ammoniation

—

16,985

16,985

16,985

16,985

M f r ' s . storage

Bulk

—

76,933

74,933

7^,933

7^,933

Florida

Transportation

Rai 1

Outstate
j
processors

72,156

72,156

72,156

72,156

Midwest

Transportation

Rail

Outstate
.
processors

16,985

16,985

16,985

16,985

Florida

Transportation

Rai 1

Michigan
processors

10,770

10,770

10,770

10,770

Activity

Florida

Production

Slurry
ammon i at ion

Midwest

Production

Florida

Type

Terminating
location

5.9% to
4.4?

208

Or iginating
location

Table B-12.

( c o n t 'd .)

Terminating
location

Activity

Florida

Product ion

Slurry
ammon i at ion

—

Midwest

Production

Slurry
ammoniat ion

—

Florida

M f r ' s . storage

Bulk

—

Flori da

Transportation

Rail

Midwest

Transportation

Florida

Transportation

Type

82,926

60,372

60,372

16,985

12,365

12,365

74,933

5<it 553

56,553

Outstate
j
processors

72,156

49,602

49,602

Rai 1

Outstate
|
processors

16,985

12,365

12,365

Rail

Mi chi gan
processors

10,770

10,770

10,770

^Dry blended f e r t i l i z e r producers.

209

Or igina tin g
location

Rate of return
4.1% to
2.0% to
4.3& to
4.2%
2.1%
-2.0%
Product tons per year

Table B-13.

Run-of-mine potassium chloride product flow

5.9? to
4.4?

—

121,462

121,462

121,462

121,462

—

16,096

16,096

16,096

16,096

100,000

100,000

100,000

100,000

21,462

21,462

21,462

21,462

Activity

Saskatoon

Production

F lo ta tio n

Saskatoon

M f r ' s . storage

Bulk

Saskatoon

Transportation

Rail

Michigan ^
producers

Saskatoon

Transportat ion

Rai 1

Outstate
^
processors

Type

Terminating
location

210

20fe to
14.1?

Rate of return
A . 0 ? to
12.0? to
12.11
6.0?
Product tons per year

Or iginating
location

Table B - 13-

(cont'd.)

Rate o f return
4.1? to
2.0? to
4.3? to
4.2?
2.1?
-2 .0?
Product tons per year

Activity

Saskatoon

Production

F l o ta t ion

—

121,462

114,440

114,440

Saskatoon

M f r ' s . storage

Bulk

—

16,096

10,830

10,830

Saskatoon

Transportation

Rai 1

Michigan
producers

100,000

100,000

100,000

Saskatoon

Transportation

Rail

Outstate
|
processors

21,462

14,440

14,440

Type

'Granulated mixed f e r t i l i z e r producers.

Terminating
location

211

Or tgina ting
location

Table B-lA.

Granular potassium chloride product flow

20? to
H t .l ?

5 - 9 * to
4.4?

Or iginating
location

Activity

Saskatoon

Product ion

Flotation

—

137,590

137,590

137,590

137,590

Saskatoon

M f r ' s . storage

Bulk

—

103,192

103,192

103,192

103,192

Saskatoon

Transportation

Rai 1

Michigan
j
processors

9,230

9,230

9,230

9,230

Saskatoon

Transportation

Rail

Outstate
j
processors

128,360

128,360

128,360

128,360

Type

Terminating
location

Rate of return
14.0? to
12.0? to
12.1?
6.0?
Product tons per year

Table B - 14.

( c o n t 'd .)

Terminating
location

Rate o f return
4.3$ to
4.1$ to
2.0$ to
4.2$
2.1$
-2. 0$
Product tons per year

Originating
location

A ctivi ty

Saskatoon

Production

Flot at ion

—

137,590

144,629

144,629

Saskatoon

M f i ' s . storage

Bulk

—

103,192

108,472

108,472

Saskatoon

Transportat ion

Rail

Michigan
^
processors

9,230

9,230

9,230

Saskatoon

Transportation

Rai 1

Outstate
processors

128,360

135,399

135,399

Type

^Dry blended f e r t i l i z e r producers.

Table B-15-

Originating
location

Bulk granulated mixed f e r t i l i z e r product flew

Act!vi ty

Type

Terminating
location

20% to
U.1%

Rate of return
1A.0% to
12.0% to
12. n
6.0%
Product tons per year

250,000

250,000

250,000

250,000

53,655

53,655

53,655

53,655

5.9% to

k.k%

Central
Michigan

Production

TVA
continuous

—

Outstate
Michigan

Production

TVA
continuous

—

Central
Michigan

M f r's , storage

Bulk

—

187,500

187*500

187,500

187,500

Central
Michigan

T ransportation

Truck

Farms

250,000

25 0,000

250,000

250,000

Outstate
producer

Transportation

Truck

Farms

53,655

53,655

53,655

53,655

Fa rms

Application

- --

303,655

303,655

303,655

303,655

---

Table B-15.

Originating
location

(c o n t 'd .)

Activity

Type

Rate of return
A . 1% to
A , I * to
2. 0 % to
k.2%
-2.0*
2.1*
Product tons per year

Terminating
location

Production

TVA
continuous

—

250,000

250,000

250,000

Outstate
Michigan

Product ion

TVA
continuous

—

53,655

36,099

36,099

Central
Michigan

M f r ' s , storage

Bulk

—

187,500

187,500

187,500

Central
Mi ch i gan

Transportation

Truck

Farms

250,000

250,000

250,000

Outstate
producer

Transportation

Truck

Farms

53,655

36,099

36,099

Farms

App1icat ion

— —~

303,655

286,099

286,099

—— —

«k

I

215

Central
Michigan

Table B-16.

O ri ginating
location

Bulk blended f e r t i l i z e r s product flow

Acti vi ty

Type

Terminating
locat ion

20% to
U .1 *

Rate o f return
1A.0% to
12.0% to
12.1%
6.0%
Product tons per year

5-9% to
M%

Production

Horizontal w/
rotary drum

—

20,000

20,000

20,000

20,000

Outstate
Mi chigan

Production

Horizontal
(9000 TPY)

—

252,000

252,000

252,000

252,000

Central
Mi chi gan

Transportation

Truck

Farms

20,000

20,000

20,000

20,000

Outstate
processors

Transportation

Truck

S a t e l 1i te
o u tl e ts

126,000

126,000

126,000

126,000

Outstate
processors

Transportation

Applicators

Farms

126,000

126,000

126,000

126,000

S a t e l 1i t e
ou tl e ts

Product
hand!ing

—

126,000

126,000

126,000

126,000

S a t e l 1i te
ou tl e ts

Transportation

Farms

126,000

126,000

126,000

126,000

Farms

Applicat ion

272,000

272,000

272,000

272,000

—

Applicators

-

216

Central
Michigan

Table B-16.

O ri ginating
location

(c o n t 'd .)

Act!vi ty

Type

Terminating
location

Rate of return
4.1% to
2.0% to
to
4.2%
2.1%
-2.0%
Product tons per year

Production

Horizontal w/
rotary drum

—

20,000

20,000

20,000

Outstate
Michigan

Production

Horizontal
(9000 TPY)

—

252,000

252,000

252,000

Central
Michigan

Transportation

Truck

Fa rms

20,000

20,000

20,000

Outstate
processors

Transportation

Truck

S a t e l 1i te
ou tle ts

126,000

126,000

126,000

Outstate
processors

Transportat ion

Applicators

Farms

126,000

126,000

126,000

S a t e l 1i te
ou tl e ts

Product
handling

—

126,000

126,000

126,000

S a t e l 1i te
o u tl e ts

Transportation

Farms

126,000

126,000

126,000

Farms

Applicat ion

—

272,000

272,000

272,000

-- * ■

Appl icators

—

217

Central
Hi chigan

APPENDIX C

The L a b o r M a r k e t and t h e

Long Run

218
T a b le C - l .

P ro d u c t use summary f o r changes
th e long ru n ( i n to n s )

in

th e

la b o r m a r k e t in

Product

$3 . 0 0 t o
$3.50

Waqe r a t e
$3 . 7 5 t o
$4.75

$5 . 0 0 t o
$6 .5 0

A n h y d r o u s ammonia

172,764

172,828

172,763

Green p h o s p h o ric a c i d

260,492

260,565

260,487

Monoammonium p h o s p h a t e

270,500

270,576

270,495

G ranular

258,985

259,032

259,006

502,321

329,689

374,243

- 0-

11 3,601

- 0-

N s u p p lie d

141,932

1 4 1 ,932

1 4 1 ,932

P 2 O5 s u p p l i e d

140,650

140,650

140,650

K 20 s u p p l i e d

155*4 41

155,441

155,441

potassium c h l o r i d e

B u lk blended

fe rtiliz e r

Custom b l e n d e d

fe rtiliz e r

Table C-2.

Anhydrous ammonia product flow

$3.00 to
$3.50

Waqe rate
$3.75 to
$4.75

$5.00 to
$6.50

42,874

42,886

42,873

129,890

129,942

129,890

54,248

54,239

62,429

42,874

42,886

42,873

Farms

129,890

129,942

129,890

---

129,890

129,942

129,890

O rig in a tin g
location

Acti vi ty

Gulf Coast

Production

C entrifugal

—

Central
Michigan

Production

Centrifugal

—

Centra]
Michigan

M f r 's . storage

Cyrogeni c

---

Gulf Coast

Transportation

Barge

F lo rid a
j
producers

Central
Mi chi gan

Transportation

Truck

Farms

A pp lication

Type

—

' Monoammoniurn phosphate producers.

Tern i nat i ng
location

Table C-3.

Green phosphoric acid product flow

Waqe ra te
O rig in a tin g
location

Acti vi ty

F lo rid a

Production

Wet process

F lo rid a

Product
tra n s fe r

On-si te

Type

Terminating
location

—

F lo rid a
.
producers

$3.00 to
$3.50

$3.75 to
$4.75

$5.00 to
$6.50

260,492

260,565

260,487

260,492

260,565

260,487

Monoammoniurn phosphate producers.
220

Table C-4.

Monoammonium phosphate product flow

Waqe rate
O rig in a tin g
location

A c tiv ity

F lo rid a

Production

S lu rry
ammoniat ion

—

F lo rid a

M f r 's . storage

Bui k

—

F lo rid a

Transportation

R ail

Farms

Appli cation

F lo rid a

Transportation

Rai 1

Michigan
termi nal

Transportation

Truck

Type

—

^Dry-blended f e r t i l i z e r producers.

Terminating
location

$3,00 to

$3.75 to
$‘*.75

$5.00 to
$6.50

270,500

270,576

270,^95

202,875

202,932

1 5 1 ,1 ^

270,500

270,576

201,530

-0 -

-0 -

68,965

Mi ch i gan
terminal

-0 -

-0 -

68,965

Farm

-0 -

-0 -

68,965

Outstate
|
processors

...

$3,50

Table C-5.

Granular potassium ch loride product flow

Origi nati ng
location

A c t i v it y

Saskatoon

Production

F lo ta tio n

Saskatoon

M f r 's , storage

Bulk

Saskatoon

Transportation

Rail

Mi chi gan
termi nal

Saskatoon

Transportation

Rail

Outstate
processors

Michigan
termi nal

Transportation

Truck

Farms

Appli cation

—

Type

$3.00 to
$3.50

54.75

$5.00 to
$6.50

258,985

259,032

259,006

173,866

129,535

129,535

27,163

86 ,319

86,293

231,821

172,713

172,713

Farms

27,163

86 ,319

86,293

—

27,163

86,319

86,293

...

222

^Dry-blended f e r t i l i z e r producers.

Terminating
location

Waae rate
$3.75 to

Table C-6.

Bulk blended f e r t i l i z e r product flow

Waqe rate
O rig in a tin g
location

A c t i v it y

Type

Termi nating
location

---

$3.00 to
$3.50

$3.75 to
$4.75

$5.00 to
$6.50

502,321

443,290

374,243

Production

V e r tic a l
(9000 TPY)

Outstate
processors

Transportation

Truck

S a te l1i te
o u tle ts

251,160

221,645

187,121

Outstate
processors

Transportation

Applicators

Farms

251,160

221,645

187,121

S a t e l1i te
o u tle ts

Product
handli ng

—

251,160

221,645

187,121

S a te l1it e
o u tle ts

Transportation

Farms

251,160

221,645

187,121

Farms

Appli cation

—

502,321

443,290

374,243

—

Appli cators

223

Outstate
Mi chi gan

APPENDIX D

R e t u r n s on

Investm en t

i n t h e Lo ng Run

Product use summary for returns on investment in the long run (in tons)

Product

20.0% to
10.8%

Rate o f return
10.7% to
8.0%

Anhydrous ammonia

172,763

172,828

172,76A

Green phosphoric acid

260,A87

260,565

260,A92

Monoammonium phosphate

270,A95

270,576

270,500

Granular potassium chloride

259,006

259,032

258,985

Bulk blended f e r t i l i z e r

37A,2A3

329,689

502,321

-0 "

113,600

-0 -

supplied

1A l ,932

1A l ,932

lAl ,932

supplied

1A0,650

1A0,650

IAO.650

supplied

155,AAI

1 5 5 , AAI

155,AAI

Custom blended f e r t i l i z e r
N

K 0
2

6.0% to
-2.0%

*tzz

Table D - l.

Table D-2,

Anhydrous ammonia product flow

Rate o f return
6.0% to
20.0% to
10.7% to
-2.0%
10.8%
8 .«
Product tons per year

Acti vi ty

Gulf Coast

Product!on

Centri fugal

—

*+2,873

42,886

42,874

Central
Michigan

Production

Centri fugal

—

129,890

129,942

129,890

Central
Michigan

M f r 's , storage

Cyrogeni c

—

62,429

5*+, 239

54,248

Gulf Coast

Transportation

Barge

F lo rid a
j
producers

42,873

42,886

42,874

Central
Michigan

Transportati on

Truck

Farms

129,890

129,942

129,890

Farms

Appli cation

---

129,890

129,9*+2

129,890

Type

...

'Monoammonium phosphate producers.

Termi nating
location

225

O rig in a t i ng
location

Table D-3,

Green phosphoric acid product flow

Rate of return
O rig in a tin g
location

Acti vi ty

F lo rid a

Production

Wet process

F lo rid a

Product
tra n s fe r

On-st te

Type

F lo rid a
j
producers

20.0% to
10.8%

6.0% to
10.7% to
8.0%
-2.0%
Product tons per year

260,487

260,565

260,492

260,487

260,565

260,492

226

Monoammonium phosphate producers.

Terminating
location

Monoammonium phosphate product flow

Termi nati ng
location

Rate o f return
20.0% to
10.7% to
6.0% to
10.8%
8.0%
-2.0%
Product tons per year

O rig in a ti ng
location

Act i v i ty

F lo rid a

Production

S lurry
ammoniation

...

270,495

270,576

270,500

F lo rid a

M f r 's . storage

Bulk

—

151,148

202,932

202,875

F lo rid a

Transportation

Rai 1

201,530

270,576

270,500

Farms

A pp lication

68,965

-0 -

-0 -

F lo rid a

Transportation

R ail

Michi gan
term!nal

68,965

-0 -

-0 -

Michi gan
terminal

Transportation

Truck

Farms

68,965

-0 -

-0 -

Type

...

^Dry blended f e r t i l i z e r producers.

Outstate
j
processors

—

LZZ

Table D-4.

Table D-5.

Granular potassium ch loride product flow

Rate o f return
Terminating
location

A c tiv i ty

Saskatoon

Production

F lo ta tio n

—

259,006

259,032

258,985

Saskatoon

M fr ’ s. storage

Bulk

—

129,535

129,535

173,866

Saskatoon

Transportation

R ail

Michi gan
terminal

86,293

86,319

27,163

Saskatoon

Transportation

R ail

Outstate
|
processors

172,713

172,713

231,821

Michigan
terminal

Transportation

Truck

Farms

86,293

86,319

27,163

Farms

A pplicat ion

—

86,293

86,319

27,163

Type

—

*Dry blended f e r t i l i z e r producers.

20.0% to
10.8%

6,0% to
10.7% to
8.0%
-2.0%
Product tons per year

228

O rig in a tin g
location

Table D-6.

Bulk blended f e r t i l i z e r s product flow

Rate of return
O rig in a tin g
location

A c tiv i ty

Type

Production

V e r tic a l
(9000 TRY)

Outstate
processors

Transportation

Truck

Outstate
processors

Transportation

Appli cators

S a t e l1i te
o u tle ts

Product
hand!i ng

S a t e l1i te
o u tle ts

Transportation

Farms

A pp lication

—

20.0% to
10.8%

6.0% to
10.7% to
“2,0%
8.0%
Product tons per year

374, 243

443,290

502,321

S a te lIite
o u tle ts

187,122

221,645

251,161

Farms

187,122

221,645

251,161

187,122

221,645

251,161

187,121

221,645

251,161

374,243

443,290

502,321

229

Outstate
Michigan

Terminati ng
location

—

Applicators

Farms

APPENDIX E

T ra n s itio n

C o nstraints

Table E - l ,

T ra n s itio n co nstraints and levels o f u t i l i z a t i o n fo r Year 1 ( in tons)

0

Product

Location

A c tiv i ty

Anhydrous
ammoni a

Gulf Coast

Production

Centri fugal

none

80,308

Anhydrous
ammonia

Gulf Coast

Production

Piston

none

-0 -

Anhydrous
ammonia

Midwest

Production

Centri fugal

none

*♦5,175

Anhydrous
ammonia

Central
Michi gan

Production

Centri fugal

-0 -

-0 -

Anhydrous
ammonia

Central
Michi gan

Production

Piston

Anhydrous
ammon i a

Gulf Coast

M f r 's .
storage

Cyrogeni c

none

45,5*tO

Anhydrous
ammonia

Midwest

M f r 's .
storage

Cyrogenic

none

7,6**7

Anhydrous
ammon i a

Central
Mi chigan

M f r 's ,
storage

Cyrogeni c

-0 -

-0 -

N i t r i c acid

Gulf Coast

Production

Medium pressure

none

7,377

N i t r i c acid

Midwest

Production

Medium pressure

none

3,162

Constraint

Level

230

*

Type

68,000

Table E - l ,

(c o n t 'd .)

Product

Location

A c t i v it y

Type

Ammoniurn
ni t r a t e

Gulf Coast

Product ion

Neutrali zation
evaporation

none

Ammon i urn
ni tr a te

Midwest

Production

N eu trali zation
evaporation

none

Ammon i urn
n itra te

Gulf Coast

M fr's .
storage

Bulk

none

-

0-

Non-pressure
N-solution

Midwest

Production

Blending

none

-

0-

Non-pressure
N-solution

Midwest

M f r 's .
storage

Tank

none

-

0-

Low-pressure
N -solution

Midwest

Production

Blending

none

-

0-

Low-pressure
N -solution

Midwest

M f r 's .
storage

Tank

none

-

0-

N-mfg.
solution

Gulf Coast

Production

Blending

none

13,816

N-mfg.
solution

Mi dwest

Production

Blending

none

5,921

Constraint

Level

*+,133

Table E - l .

(c o n t1d .)

Product

Location

Act i v it y

N-mfg.
solution

Gulf Coast

M fr's .
storage

Tank

none

2,616

N-mfg.
solution

Midwest

M f r 's .
storage

Tank

none

-0 -

Urea

Gulf Coast

Production

Gas separation

none

-0 -

Urea

Gulf Coast

Production

Ammonium carba­
mate s lu rry

none

-0 -

Urea

Gulf Coast

Production

Water
absorption

none

-0 -

Urea

Midwest

Production

Gas separation

none

-0 -

Urea

Gulf Coast

M f r 's .
storage

Bui k

none

-0 -

Elemental
phosphorus

F lo rid a

Production

E le c t r i c
furnace

none

-0 -

White phos­
phoric acid

Central
Mi chi gan

Production

Furnace
process

Green phos­
phoric acid

F lo rid a

Production

Wet process

Type

Constrai nta

none

-0 -

163,356

232

121,900

Level

Table E - l ,

(c o n t'd .)

Type

Product

Location

Acti vi ty

Green phos­
phoric acid

Midwest

Production

Wet process

none

73,392

Green phos­
phoric acid

Florida

M f r 's .
storage

Rubber-1ined

none

-0 -

l O ^ - O 11

Midwest

Production

Ammoniation

none

-0 -

10-3^-0b

Midwest

M fr 's .
storage

Tank

none

-0 -

1l-37-O c

Midv^st

Production

Ammoniation

none

-0 -

il-3 7 -0 C

Midwest

M f r 's .
storage

Tank

none

-0 -

NSPd

Florida

Production

Cone mixer

none

-0 -

NSPd

Central
Mi ch i gan

Production

Cone mixer

32,000

-0 -

NSPd

Florida

M f r 's .
storage

Bulk

none

-0 -

R-Q-P TSP®

F lo rid a

Production

Cone mixer

none

Mf,23U

R-O-P TSP*

Midwest

Production

Cone mixer
i

none

71,069

Constrai n ta

Level

Table E-1 *

(c o n t'd .)

a

Product

Location

A c t i v it y

R-O-P TSP®

F lo rid a

M f r 's ,
storage

Bulk

none

25,897

Granular
TSPf

Florida

Production

Rotary drum
granulator

none

5,27^

Granular
TSPf

Florida

M fr 's .
storage

Bulk

none

3,956

Di ammonIum
phosphate

Florida

Production

SIurry
ammoniation

none

61+, 582

Diammonium
phosphate

Midwest

Production

Slurry
ammoniation

none

13,228

Diammonium
phosphate

Central
Michigan

Production

Slurry
ammoniation

19,800

-0 -

Diammonium
phosphate

F lo rid a

M fr's .
storage

Bulk

none

28,358

Monoammon i um
phosphate

F lo rid a

Production

Slurry
ammoniation

none

82,926

Monoammon i um
phosphate

Midwest

Production

Slurry
ammoniation

none

16,985

Type

Constraint

Level

Table E - l ,

(c o n t'd .)

Product

Location

A c t i v it y

Monoammon i um
phosphate

F lo rid a

M f r 's .
storage

Bui k

none

7M 33

Rock
phosphate

F lo rid a

Production

Gri nding

none

-0 -

Super phos­
phoric acid

Midwest

Production

Thermal

none

-0 -

R-O-M KCL9

Saskatoon

Production

F lo ta tio n

none

121, <462

R-O-M KCL9

Saskatoon

M f r ’ s.
storage

Bulk

none

16,096

STD. KCLh

Saskatoon

Production

F lo ta tio n

none

-0 -

STD. KCLh

Saskatoon

M f r 's .

Bui k

none

-0 -

Gran. KCL1

Saskatoon

Production

F lo ta tio n

none

137,590

Gran. KCL1

Saskatoon

M f r 's .
storage

Bui k

none

103,192

Coarse KCL^

Saskatoon

Production

F lo ta tio n

none

Granulated
mixed f e r t .

Central
Mi chi gan

Production

TVA continuous

Type

Constrai nta

-0 250,000

235

250,000

Level

Table E - l ,

(c o n t'd .)

Product

Location

A c t i v it y

Type

Granulated
mixed f e r t .

Outstate
Michigan

Product ion

TVA continuous

Granulated
mixed f e r t .

Central
Mi ch i gan

M f r 's .
storage

Bulk blended
fe rt.

Central
Mi ch igan

Bulk blended
fe rt.

Constrai nt

a

Level

250.000

53,655

Bulk

none

187,500

Production

Horizontal w/
ro ta ry drum

20.000

20,000

Outstate
Michigan

Production

Horizontal
( 9 0 0 0 TPY)

252.000

252,000

Bulk blended
fe rt.

Outstate
Mi ch igan

Production

V e r tic a l
(9000 TPY)

-0 -

-0 -

Bulk blended
fe rt.

Outstate
Michigan

Production

Horizontal
(2500 TPY)

210.000

-0 -

Bulk blended
fe rt.

Outstate
Michigan

R e t a i1ing

Dry
products

Michigan

R e t a i1i ng

Anhydrous
ammonia

Mi chi gan

R e t a i1i ng

—

---

none

126,000

687.300

-0 -

7^,800

Table E - l .

( c o n t 'd .)

Product

Location

A c tiv i ty

Type

Liquid
products

Michigan

R e t a i1i ng

—

Constraint3

55,100

Level

-0 -

aL im itin g capacity fo r cu rren t f a c i l i t i e s during th is year,
^Ammonium polyphosphate liq u id ( 1 0 - 3 ^ 0 ) .
cAmmonium polyphosphate liq u id (1 1 -3 7 -0 ).

eR u n -o f-p ile t r i p l e superphosphate.
^Granular t r i p l e superphosphate.
^Run-of-mine potassium c h lo rid e .
L

Standard potassium c h lo rid e .
'Granular potassium c h lo rid e ,
J Coarse potassium c h lo rid e .

237

^Normal superphosphate.

Table E-2.

T ra n s itio n constraints and lev els of u t i l i z a t i o n fo r Year 2 ( in tons)

A c tiv i ty

Type

Product

Location

Anhydrous
ammonia

Gulf Coast

Production

Centrifugal

Anhydrous
ammon i a

Gulf Coast

Production

Pi ston

Anhydrous
ammonia

Midwest

Production

Anhydrous
ammonia

Central
Michigan

Anhydrous
ammoni a

C onstraint3

01db

6 * ,2 * 6

6 4 ,2 *6

Purchased
Newc

10,522

Total
Use

7*.76 8

4 ,1 *5

-0 -

NAd

-0 -

Centri fugal

36 ,1*0

11,315

NAd

11,315

Production

C entrifugal

-0 -

Central
Mi chi gan

Production

Pi ston

37,129

Anhydrous
ammon i a

Gulf Coast

M f r 's .
storage

Cyrogeni c

36,*31

36,*31

NA

36,*31

Anhydrous
ammonia

Mi dwest

M f r 's .
storage

Cyrogen i c

6,118

6,118

NA

6,118

Anhydrous
ammonia

Central
Mi chi gan

M f r 's .
storage

Cyrogeni c

-0 -

-0 -

19,972

19,972

N i t r i c acid

Gulf Coast

Production

Medium pressure

25,129

-0 -

NA

-0 -

.

-0 -

8 6 ,2 * *

8 6 ,2 * *

-0 -

NA

-0 -

Table E-2.

( c o n t 'd .)

.
Product

Location

A c tiv ity

N i t r i c acid

Midwest

Ammon i um
ni t r a t e

Gulf Coast

Ammonium
ni t r a t e

Midwest

Ammonium
n itra te

Gulf Coast

M f r 's .
storage

Bui k

Non-pressure
N -solution

Midwest

Production

Non-pressure
N-solution

Midwest

Low-pressure
N-solution

Production

Type

Constraint*

Medium pressure

10,770

Production

N e u tra liz a tio n
evaporation

32,848

Production

N e u tra liz a tio n
evaporation

14,078

Old

Purchased
Newc

Total
Use

5,147

NA

5,147

0-

NA

-

6,729

NA

-

0-

6,729

1,952

-

0-

NA

-

0-

Blending

16,365

-

0-

NA

-

0-

M f r 's .
storage

Tank

16,254

-

0-

NA

-

0-

Midwest

Production

Blendi ng

11,268

-

0-

NA

-

0-

Low-pressure
N-solution

Midwest

M f r 's .
storage

Tank

3,789

-

0-

NA

-

0*

N-mfg.
solution

Gulf Coast

Production

Blending

11,053

-

0-

NA

-

0-

(c o n t 'd .)

Total
Use

Type

Constrai nt

01db

Purchased
Newc

Production

Blend ing

9,640

9,640

NA

9,640

Gulf Coast

M f r 's ,
storage

Tank

2,093

-0 -

NA

-0 -

N-mfg,
solution

Midwest

M f r 's .
storage

Tank

1,8 08

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Gas separation

11,788

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Ammonium carba­
mate s lu rry

2,77**

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Water absorption

4,160

-0 -

NA

-0 -

Urea

Midwest

Production

Gas separation

2,080

-0 -

NA

-0 -

Urea

Gulf Coast

M f r 's .
storage

Bulk

11,788

-0 -

NA

-0 -

Elemental
phosphorus

Flo rid a

Production

E le c t r i c
furnace

1,602

1,591

NA

1,591

White phos­
phoric acid

Central
Michigan

Production

Furnace
process

6,746

6,746

NA

6,746

Product

Location

A c tiv ity

N-mfg.
solution

Midwest

N-mfg.
solution

A

0+72

Table E-2.

Table E -2.

(c o n t 'd .)

Type

Purchased
Newc

Total
Use

111,918

2*+2,603

Product

Location

A ctiv i ty

Green phos­
phoric acid

F lo rid a

Production

Wet
process

130,685

Green phos­
phoric acid

Midwest

Production

Wet
process

58,71*+

-0 -

NA

-0 -

Green phos­
phoric acid

F lo rid a

M f r 's .
storage

Rubber-lined

!,*+2*+

-0 -

-0 -

-0 -

1 0 -3 4 -0 e

Midwest

Production

Ammoniation

1,933

-0 -

NA

-0 -

10-3*+-0e

Midwest

M f r 's .
storage

Tank

1 ,*+50

-0 -

NA

-0 -

n -3 7 -o f

Midwest

Production

Ammoniation

161

-0 -

NA

-0 -

11-37-O f

Midwest

M f r 's .
storage

Tank

121

-0 -

NA

-0 -

NSPS

F lo rid a

Production

Cone mixer

8,716

-0 -

NA

-0 -

NSP9

Central
Michigan

Production

Cone mixer

12,800

-0 -

NA

-0 -

NSP9

F lo rid a

M f r 's ,
storage

Bulk

6,66*+

-0 -

NA

-0 -

C onstrain t9

01db

130,685

(c o n t 'd .)

b

Purchased
Newc

Total
Use

Product

Location

A c tiv i ty

R-O-P TSPh

F lo rid a

Production

Cone mixer

49,851

49,851

R-O-P TSPh
L
R-O-P TSP

Midwest

Production

Cone mixer

56,855

3,836

F lo rid a

M f r 's .
storage

Bulk

33,058

-0 -

NA

-0 -

Granular
TSP'

F lo rid a

Production

Rotary drum
granulator

15,959

-0 -

NA

-0 -

Granular
TSP'

F lo rid a

M f r 's .
storage

Bulk

10,345

-0 -

NA

-0 -

DIammonium
phosphate

F lo rid a

Production

S lurry
ammoniation

51,666

51,666

NA

51,666

0 i amnion i um
phosphate

Midwest

Production

S lurry
ammoniation

10,582

-0 -

NA

-0 -

Diammonium
phosphate

Central
Mi chi gan

Production

S lu rry
ammoniation

7,920

7,920

NA

7,920

Diammonium
phosphate

F lo rid a

M f r 's .
storage

Bulk

30,716

-0 -

NA

-0 -

Monoammoni um
phosphate

Flo rid a

Production

S lurry
ammoniation

66,341

Type

C onstraint3

Old

66,341

NA
NA

103,980

49,851
3,836

170,321

Z*iZ

Table E -2.

Table E -2.

(c o n t 'd .)

Total
Use

01db

Purchased
Newc

-0 -

NA

-0 -

59,9*6

39,286

99,232

-0 -

NA

-0 -

-0 -

NA

-0 -

97,170

59,323

NA

59,323

18,759

-0 *

NA

-0 -

F lo ta tio n

751

-0 -

NA

-0 -

M f r 's ,
storage

Bulk

563

-0 -

NA

-0 -

Saskatoon

Production

F lo ta tio n

Saskatoon

M f r 's .
storage

Bulk

Product

LocatI on

Act i v i t y

Monoammontum
phosphate

Midwest

Production

S lu rry
ammoniation

13 ,588

Monoammoni um
phosphate

F lo rid a

M f r 's ,
storage

Bulk

59,946

Rock
phosphate

F lo rid a

Production

Gri ndi ng

Super phos­
phoric acid

Midwest

Production

Thermal

R-O-M KCLJ*

Saskatoon

Production

F lo ta tio n

R-O-M KCL-*

Saskatoon

M f r 's ,
storage

Bulk

STD. KCLk

Saskatoon

Production

STD. KCLk

Saskatoon

Gran. KCL*
Gran, KCL^

Type

Constrai nta

111

C*"\
GO

110,072

110,072

69,632

179,704

82,55**

82,55**

2,489

85,043

Table E-2,

(cont'd.)

Total
Use

01db

Purchased
Newc

20,000

20,000

NA

20,000

TVA continuous

200,000

H+8,308

NA

146,308

Production

TVA continuous

52,i+55

Central
Michigan

M f r 's ,
storage

Bulk

Bulk blended
fe rt.

Central
Michigan

Production

Horizontal w/
ro ta ry drum

Bulk blended
fe rt.

Outstate
Mich igan

Production

Horizontal
(9000 TPY)

Bulk blended
fe rt.

Outstate
Michi gan

Production

V e rtic a l
(9000 TPY)

-0 -

Bulk blended
fe rt.

Outstate
Michigan

Production

Horizontal
(2500 TPY)

56,661

Bulk blended
fe rt.

Outstate
Michigan

R e t a i1i ng

—

100,800

Dry
products

Michigan

R e t a i1i ng

—

215,383

Product

Location

Acti vi ty

Type

Coarse KCLm

Saskatoon

Production

F lo ta tio n

Granulated
mixed f e r t .

Centra]
Mich igan

Production

Granulated
mixed f e r t .

Outstate
Michigan

Granulated
mixed f e r t .

Constraint

150,000

16,000

201,600

a

-0 -

111,231

-0 -

201,600

NA

NA

NA

-0 -

111,231

-0 -

NA

201,600

-0 -

¥+,099

¥+,099

-0 -

NA

-0 -

100,800

-0 -

22,050

NA

122,850

-0 -

Table E-2.

(cont'd.)

A c tiv ity

Type

Anhydrous
ammonia

Hi chi gan

R e t a i1i ng

—

Liquid
products

Mi chigan

R e t a i1i ng

C onstraint3

3 7 , 2W

Old^

-0 -

NA

-0 -

i
o
1

Location

CNI
-4**
oo

Product

NA

-0-

aL im ltin g q u an tity fo r OLD f a c i l i t i e s during th is year,
b
Total capacity from previous years a f t e r adjustments fo r physical d e p reciatio n ,
°Total capacity o f f a c i l i t i e s purchased during th is year,
^Not a]lowed.
Ammonium polyphosphate liq u id (1 0 -3 h -0 ).
^Ammonium polyphosphate liq u id (1 1 * 3 7 -0 ).
^Normal superphosphate,
^R u n-o f-p ile t r i p l e superphosphate.
♦

'Granular t r i p l e superphosphate,
^Run-of-mine potassium chloride*

Total
Use

Purchased
Newc

Table E-2.

(cont'd.)

Standard potassium ch loride.
^Granular potassium ch lo rid e .

9 *jZ

mCoarse potassium c h lo rid e .

i

Table E-3.

T r a n s it i o n constraints and levels o f u t i l i z a t i o n for Year 3 ( i n tons)

Total
Use

Constraint

01 db

Purchased
New0

57,655

57,655

10,044

67,699

-0 -

-0 -

NAd

-0 -

Centri fugal

27,105

8,053

NA

8,053

Production

Centri fugal

77,620

77,620

Centra]
Michigan

Production

Piston

18,564

-0 -

NA

-0 -

Anhydrous
ammonia

Gulf Coast

M f r 's .
storage

Cyrogeni c

27,324

27,324

NA

27,324

Anhydrous
ammonia

Midwest

M f r 's .
storage

Cyrogeni c

4,588

4,588

NA

4.588

Anhydrous
ammonia

Central
Michigan

M f r 's ,
storage

Cyrogenic

17,975

17,975

12,603

30,578

N i t r i c acid

Gulf Coast

Production

Medium pressure

8,376

-0 -

NA

-0 -

N i t r i c acid

Midwest

Production

Medium pressure

7,180

3,432

NA

3,432

0
Product

lo c a tio n

A c tiv ity

Anhydrous
ammonia

Gulf Coast

Production

C entrifugal

Anhydrous
ammonia

Gulf Coast

Production

Piston

Anhydrous
ammon i a

Midwest

Production

Anhydrous
ammon i a

Central
Mi chi gan

Anhydrous
ammonia

Type

19,101

96,721

Table E-3.

(cont'd.)

a
Product

Location

A c t i v it y

Ammon i um
ni tr a te

Gulf Coast

Production

Ammon i um
ni t r a t e

Midwest

Ammon i um
n itra te

Type

b

Constraint

Old

N e u tra liz a tio n
evaporation

10,949

-

Production

N e u tra liz a tio n
evaporation

9,385

Gulf Coast

M f r 's ,
storage

Bulk

-

0-

Non-pressure
N -solution

Midwest

Production

Blending

-

Non-pressure
N-solution

Midwest

M f r 's ,
storage

Tank

Low-pressure
N -solution

Midwest

Production

Low-pressure
N-solution

Midwest

N-mfg,
solution
N-mfg,
solution

Purchased
Newc

Total
Use

0-

0-

NA

4,486

NA

-

0-

NA

-

0-

0-

-

0-

NA

-

0-

-

0-

-0 -

NA

-

0-

Blending

-

0-

-0 -

NA

-

0-

M f r 's .
storage

Tank

-

0-

-

0-

NA

-

0-

Gulf Coast

Production

Blending

5,526

-

0-

NA

-

0-

Midwest

Production

Blending

6,427

6,427

NA

-

4,486

6,427

Table E-3.

(cont'd.)

Total
Use

0 ld b

Purchased
Newc

l f 0W

-0 -

NA

-0 -

Tank

»0p

-0 -

NA

-0 -

Production

Gas separation

-0 -

-0 -

NA

-0 -

Gulf Coast

Production

Ammonium carba­
mate s lu rry

-o-

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Water
absorption

-0 -

-0 -

NA

-0 -

Urea

Midwest

Production

Gas separation

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

M f r 's .
5 torage

Bulk

-0 -

-0 -

NA

-0 -

Elemental
phosphorus

F lo rid a

Production

E le c t r i c
furnace

801

795

NA

795

White Phos­
phoric acid

Central
Michigan

Production

Furnace
process

3,373

3,373

NA

3,373

Product

Location

Act i v i t y

Type

N-mfg.
so lu tio n

Gulf Coast

M f r 's .
storage

Tank

N-mfg.
solution

Midwest

M f r 's .
storage

Urea

Gulf Coast

Urea

Constraint

a

Table E-3.

(cont'd.)

Total
Use

Locat i on

A c t i v it y

Green phos­
phoric acid

F lo rid a

Production

Wet
process

198,7^*0

Green phos­
phor! c acid

Midwest

Production

Wet
process

29,357

-0 -

NA

-0 -

Green phos­
phoric acid

F lo rid a

M f r 's .
storage

Rubber-1i ned

-0 -

-0 -

-0 -

-0 -

10-3^0®

Midwest

Production

Ammoniat ion

-G-

-0 -

NA

-0 -

1 0 -3 V 0 6

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

uo
1r-~
m
i

Type

Purchased
Newc

Product

Midwest

Production

Ammoniation

-0 -

-0 -

NA

-0 -

11-37-0

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

NSP9

F lo rid a

Production

Cone mixer

-0 -

-0 -

NA

-0 -

NSP9

Central
Mi chi gan

Production

Cone mixer

-0 -

-0 -

NA

-0 -

NSP9

F lo rid a

M f r 's .
storage

Bulk

-0 -

-0-

NA

-0 -

Constraint3

01db

198,7^*0

50,9^8

2^9,688

Table E-3.

(cont'd,)

b

Purchased
Newc

Total
Use

Product

Location

A c tiv ity

R-O-P TSPh

F lo rid a

Production

Cone mixer

33,522

33,522

NA

33,522

R-O-P TSPh

Midwest

Production

Cone mixer

42*641

2,271

NA

2,271

R-O-P TSPh

F lo rid a

M f r 's .
storage

Bulk

11,181

-0 -

NA

-0 -

Granular
TSPT

F lo rid a

Production

Rotary drum
granuiator

5,320

-0 -

NA

-0 -

Granular
TSP1

F lo rid a

M f r 's .
storage

Bui k

3 ,W

-0 -

NA

-0 -

Di ammon i um
phosphate

F lo rid a

Production

S lurry
ammoniation

38*749

38,749

NA

38,749

Di ammonIum
phosphate

Midwest

Production

S lurry
ammoniation

5,291

-0 -

NA

-0 -

0 i ammon i um
phosphate

Central
Mi chi gan

Production

S lu rry
ammoniation

3,960

3,960

NA

3,960

Diammonium
phosphate

F lo rid a

M f r 's .
storage

Bulk

10,239

-0 -

NA

-0 -

Type

C onstraint9

Old

i

(cont'd.)

Product

Location

A c tiv i ty

Monoammon i um
phosphate

F lo rid a

Production

S lurry
ammoniation

1*0,338

Monoammon i um
phosphate

Midwest

Production

Slurry
ammoniation

6,79**

Monoammon i um
phosphate

F lo rid a

M f r 's .
storage

Bulk

Rock
phosphate

F lo rid a

Production

Super phos­
phoric acid

Midwest

R-O-M KCLJ*
4
R-O-M KCLJ

Type

Constrai nta

Oldb

Purchased
Newc

57,732

Total
Use

201,070

-0 -

NA

80,317

80,317

36,218

Grinding

-0 -

-0 -

NA

-0 -

Production

Thermal

-0 -

-0 -

NA

-0 -

Saskatoon

Production

F lo ta tio n

NA

39,551

Saskatoon

M f r 's .
storage

Bulk

STD. KCLk

Saskatoon

Production

STD. KCLk

Saskatoon

Gran. KCL*

Saskatoon

72,877

39,551

-0 -

116,535

6,253

-0 -

NA

-0 -

F lo ta tio n

-0 -

-0 -

NA

-0 -

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Production

F lo ta tio n

1**5,223

] 1*5,223

6*t,2<*6

209,A69

zSz

Table E-3.

Table E-3.

(cont'd.)

Purchased
Newc

Total
Use

Product

Location

A c tiv i ty

Gran, K cJ

Saskatoon

M f r 's .
storage

Bulk

64,155

64,155

35,717

99,872

m
Coarse KCL

Saskatoon

Production

F lo ta tio n

10,000

10,000

NA

10,000

Granulated
mixed f e r t .

Central
Michigan

Production

TVA continuous

150,000

98,877

NA

98,877

Granulated
mixed f e r t .

Outstate
Mt ch igan

Production

TVA continuous

17,485

Granulated
mixed f e r t .

Central
Michigan

M f r 's ,
storage

Bulk

Bulk blended
fe rt.

Central
Mi ch igan

Production

Horizontal w/
ro ta ry drum

Bulk blended
fe rt.

Outstate
Mi chi gan

Production

Horizontal
(9000 TPY)

151,200

151,200

NA

151,200

Bulk blended
fe rt.

Outstate
Michigan

Production

V e r ti cal
(9000 TPY)

39,689

39,689

97,654

137,343

Bulk blended
fe rt.

Outstate
Mi chigan

Production

Horizontal
(2500 TPY)

28,331

-0 -

NA

Type

C onstraint3

0!d b

NA

-0 -

74,158

NA

74,158

-0 -

NA

-0 -

253

-0 -

112,500

8,000

-0 -

Table E-3.

(cont'd.)

Product

Location

A c tiv i ty

Type

Bulk blended
fe rt.

Outstate
Michi gan

R e t a i1i ng

—

Dry
products

Michi gan

R e ta i1ing

—

Anhydrous
ammoni a

Mi chi gan

R e t a i1i ng

—

Liquid
products

Michigan

R e t a i1i ng

- - -

Purchased
Newc

Constraint

01 db

95,<*5

95,445

48,826

-0 -

-0 -

NA

-0 -

12,415

-0 -

NA

-0 -

-0 -

-0 -

NA

-0 -

aLim iting qu an tity fo r OLD f a c i l i t i e s during th is year.
^Total capacity from previous years a f t e r adjustments fo r physical d e p reciatio n.
‘T o t a l capacity of f a c i l i t i e s purchased during th is year,
^Not allowed.
eAmmonium polyphosphate liq u id (1 0 -3 4 -0 ).
^Ammonium polyphosphate liq u id (1 1 -3 7 -0 ).
^Normal superphosphate.

Total
Use

144,271

Table E-3.

(cont'd.)

^R u n -o f-p ile t r i p l e superphosphate.
'Granular t r i p l e superphosphate.
jRun-of-mine potassium c h lo rid e ,
k

Standard potassium c h lo rid e .

^Granular potassium c h lo rid e .
mCoarse potassium c h lo rid e .

N)
vi
VI

Table E-4.

T r a n s it i o n Constraints and levels of u t i l i z a t i o n for Year 4 ( i n tons)

0 ld b

Purchased
New0

**9,580

**9,580

11,050

-0 -

-0 -

NAd

-0 -

Centrifugal

18,070

**,791

NA

**,791

Production

C entrifugal

86,186

86,186

21,012

Central
Michi gan

Production

Pi ston

-0 -

-0 -

NA

-0 -

Anhydrous
ammonia

Gulf Coast

M f r 's .
storage

Cyrogenic

18,2)6

18,216

NA

18,216

Anhydrous
ammonia

Midwest

M f r 's .
storage

Cyrogenic

3,059

3,059

NA

3,059

Anhydrous
ammonia

Central
Michigan

M f r 's .
storage

Cyrogenic

27,320

27,320

13,865

**1,185

N i t r i c acid

Gulf Coast

Production

Medium pressure

-0 -

-0 -

NA

-0 -

Product

Location

A c tiv ity

Anhydrous
ammonia

Gulf Coast

Production

Centri fugal

Anhydrous
ammonia

Gulf Coast

Production

Pi ston

Anhydrous
ammonia

Midwest

Production

Anhydrous
ammonia

Central
Michigan

Anhydrous
ammonia

Type

Constraint3

Total
Use

60,630

107,198

Table E-4,

(cont'd,)

Type

Purchased
Newc

Total
Use

Product

Location

A ct!vi ty

N i t r i c acid

Midwest

Production

Medium pressure

3,590

1,716

NA

1,716

Ammoni um
ni t r a t e

Gulf Coast

Production

N e u tra liz a tio n
evaporation

-0 -

-0 -

NA

-0 -

Ammoni um
ni tr a te

Midwest

Production

N e u tra liz a tio n
evaporation

4,693

2,243

NA

2,243

Ammonium
ni t r a t e

Gulf Coast

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Non-pressure
N -solution

Midwest

Production

Blendi ng

-0 -

-0 -

NA

-0 -

Non-pressure
N-solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

Low-pressure
N -solution

Mi dwest

Production

Blendi ng

-0 -

-0 -

NA

-0 -

Low-pressure
N-solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

N-mfg,
solution

Gulf coast

Production

Blendi ng

-0 -

-0 -

NA

-0 -

Constrai nta

01db

257

Table E-4,

(cont'd.)

b
Product

Location

A c tiv ity

N-mfg.
solution

Midwest

N-mfg.
solution

Type

Constraint

Production

Blending

3,213

Gulf Coast

M f r 's .
storage

Tank

-

0-

N-mfg,
solution

Midwest

M f r 's .
storage

Tank

-

Urea

Gulf Coast

Production

Gas separation

Urea

Gulf Coast

Production

Urea

Gulf Coast

Urea

Old

Purchased
Newc

Total
Use

3,213

NA

-

0-

NA

-

0-

0-

-

0-

NA

-

0-

-

0-

-

0-

NA

-

0-

Ammonium carba­
mate s lu rry

-

0-

-

0-

NA

-

0-

Production

Water
absorption

-

0-

-

0-

NA

-

0-

Midwest

Production

Gas separation

-

0-

-

0-

NA

-

0-

Urea

Gulf Coast

M f r 's .
storage

Bui k

-

0-

-

0-

NA

-

0-

Elemental
phosphorus

F lo rid a

Production

E le c t r i c
furnace

-

0-

-

0-

NA

-

0-

3,213

Table E-4.

(Cont'd.)

Product

Location

A c t i v it y

White phos­
phoric acid

Central
Michigan

Green phos­
phoric acid

Old

b

Purchased
Newc

Total
Use

Type

Constraint®

Production

Furnace
process

-0 -

F lo rid a

Production

Wet
process

Green phos­
phor ic acid

Midwest

Production

Wet
process

-0 -

-0 -

NA

-0 -

Green phos­
phoric acid

F lo rid a

M f r 's .
storage

Rubber-1ined

-0 -

■0-

NA

-0 -

IO-34-Oe

Midwest

Production

Ammoniation

-0 -

-0 -

NA

-0 -

10-34-0®

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

11-37-0f

Midwest

Production

Arrmoniation

-0 -

*0 *

NA

-0 -

l l- 3 7 - O f

Midwest

M f r 's ,
storage

Tank

-0 -

—0—

NA

-0 -

NSP9

F lo rid a

Production

Cone mixer

-0 -

•*0“

NA

-0 -

NSP9

Central
Michigan

Production

Cone mixer

-0 -

-0 -

NA

-0 -

200,730

-0 -

200,730

NA

56,044

-0-

256,774

25 9

Table E-4,

(cont'd.)

Total
Use

Qldb

Purchased
Newc

-0 -

-0 -

NA

-0 -

Cone mixer

16,617

16,617

NA

16,617

Production

Cone mixer

28,428

1,277

NA

1,277

F lo rid a

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Granglar
TSP1

F lo rid a

Production

Rotary drum
granulator

-0 -

-0 -

NA

-0 -

Granular
TSP'

F lo rid a

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Diammonium
phosphate

F lo rid a

Production

Slurry
ammoniat ion

25,833

25,833

NA

25,833

Diammonium
phosphate

Midwest

Production

S lurry
ammoniat ion

-0 -

-0 -

NA

-0 -

Di ammon ium
phosphate

Central
Mi ch i gan

Production

S lurry
ammoniat ion

-0 -

-0 -

NA

-0 -

Product

Location

A c tiv ity

Type

NSP9

F lo rid a

M f r 's .
storage

Bulk

R-O-P TSPh

F lo rid a

Production

R-O-P TSPh

Midwest

R-O-P TSPh

Constraint

a

Table E-h,

(cont'd.)

Product

Location

A c tiv i ty

Di ammon iurn
phosphate

F lo rid a

M f r 's .
storage

Bulk

Monoammon i um
phosphate

F lo rid a

Production

S lurry
ammoni at ion

Monoammonium
phosphate

Midwest

Production

S Iurry
ammoniat ion

Monoammon i um
phosphate

F lo rid a

M f r 's .
storage

Bulk

Rock
phosphate

F lo rid a

Production

Super phos­
phoric acid

Midwest

R-O-M KC0

Type

Constrai n ta

01 db

Purchased
Newc

-0 -

-0 -

NA

168,313

168,313

63,510

Total
Use

-0 -

231,823

-0 -

-0 -

NA

93,998

93,998

39,846

Gri ndi ng

-0 -

-0 -

NA

-0 -

Production

Thermal

-0 -

-0 -

NA

-0 -

Saskatoon

Production

F lo ta tio n

*+8,585

19,772

NA

19,772

R-O-M KCLj

Saskatoon

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

STD.

KCLk

Saskatoon

Production

F lo ta tio n

-0 -

-0 -

NA

-0 -

STD.

KCLk

Saskatoon

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

-0 -

133,844

Table E-4.

(cont'd.)

Total
Use

Type

Constraint

Old 6

Purchased
Newc

Production

F lo ta tio n

-0 -

-0 -

NA

-0 -

Saskatoon

M f r 's .
storage

Bui k

-0 -

-0 -

NA

-0 -

Gran. KCL*

Saskatoon

Production

F lo ta tio n

Gran. KCL1

Saskatoon

M f r 's .
storage

Bulk

Coarse KCLm

Saskatoon

Production

F lo ta tio n

Granulated
mixed f e r t *

Central
Michigan

Production

TVA continuous

Granulated
mixed f e r t .

Outstate
Mich i gan

Production

TVA continuous

Granulated
mixed f e r t .

Central
Mi chi gan

M f r 's ,
storage

Bulk

Bulk blended
fe rt.

Central
Michigan

Production

Horizontal w/
ro ta ry drum

Bulk blended
fe rt.

Outstate
Michigan

Production

Hori zontal
{ 9 0 0 0 TPY)

£
Product

Location

A c tiv ity

STD. KCL

Saskatoon

STD. KCLk

k

168,563

70,678

239,241

75,413

75,413

39,293

114,706

- 0-

-0 -

NA

100,000

49,431

NA

- 0-

- 0-

NA

75,000

37,073

NA

- 0-

- 0-

NA

100,800

100,800

NA

-0 49,431

- 0-

37,073

- 0-

100,800

262

168,563

Table E-4.

(c o n t 'd . )

Purchased
Newc

Total
Use

Product

Location

A c tiv i ty

Bulk blended
fe rt.

Outstate
Mi chi gan

Production

V e rti cal
(9000 TPY)

Bulk blended
fe rt.

Outstate
Mi ch i gan

Production

Horizontal
(2500 TPY)

Bulk blended
fe rt.

Outstate
Michigan

R e t a i1ing

—

Dry
products

Michigan

R e t a i1i ng

...

-0 -

-0 -

NA

-0 -

Anhydrous
ammonia

Mi chigan

R e t a i1ing

—

-0 -

-0 -

NA

-0 -

Liquid
products

Michigan

R e t a i1i ng

---

-0 -

-0 -

NA

-0 -

Type

C onstraint3

123,168

-0 -

111,983

01db

123,168

107,432

NA

-0 -

111,983

53,717

aL im itin g q u an tity fo r OLD f a c i l i t i e s during th is year.
bTotal capacity from previous years a f t e r adjustments fo r physical d e p reciatio n.
cTotal capacity of f a c i l i t i e s purchased during th is year.
^Not allowed.

230,600

-0 -

165,700

e E-4.

( c o n t 'd .)

g
Ammonium polyphosphate liq u id ( 1 0 - 3 ^ 0 )

^Ammonium polyphosphate liq u id (11-3 7-0 )
^Normal superphosphate.
^R u n -o f-p ile t r i p l e superphosphate,
*

'Granular t r i p l e superphosphate.
^Run-of-mine potassium c h lo rid e ,
1/

Standard potassium c h lo rid e .
Ov

^Granular potassium c h lo rid e ,
mCoarse potassium c h lo rid e .

Table E-J.

T r a n s it i o n constraints and levels of u t i l i z a t i o n fo r Year 5 ( i n tons)

Total
Use

01db

Purchased
NewC

1+1,1*07

1+1,1+07

10,574

-0 -

-0 -

NAd

-0 -

C entrifugal

9,035

1,529

NA

1,529

Production

Centri fugal

94,562

94,562

24,691

Central
Michigan

Production

Pi ston

-0 -

-0 -

NA

-0 -

Anhydrous
ammon i a

Gulf Coast

M f r 's .
storage

Cyrogeni c

9,108

9,108

NA

9,108

Anhydrous
ammoni a

Midwest

M f r 's .
storage

Cyrogenic

1,529

1,529

NA

1,529

Anhydrous
ammonia

Central
Michigan

M f r 's .
storage

Cyrogenic

36,51+1

36,541

N i t r i e acid

Gulf Coast

Production

Medium pressure

Type

Product

Location

Acti vi ty

Anhydrous
ammonia

Gulf Coast

Production

Centrifugal

Anhydrous
ammon ia

Gulf Coast

Production

Pi ston

Anhydrous
ammonia

Midwest

Production

Anhydrous
ammon i a

Central
Michigan

Anhydrous
ammon i a

Constrai nt

-0 -

a

-0 -

51,981

119,253

15,251

51,792

NA

-0 -

(cont'd.)

Type

o
CLcr

Table E-5.

Purchased
Newc

Total
Use

Location

A c tiv i ty

N i t r i c acid

Midwest

Production

Medium pressure

-0 -

-0 -

NA

-0 -

Ammon i um
ni t r a t e

Gulf Coast

Production

N e u tra liz a tio n
evaporation

-0 -

-0 -

NA

-0 -

Ammon i um
n itra te

Midwest

Production

N eu trali zation
evaporation

-0 -

-0 -

NA

-0 -

Amnion i um
ni t r a te

Gulf Coast

M f r 's ,
storage

Bui k

-0 -

-0 -

NA

-0 -

Non-pressure
N -solution

Midwest

Production

Blending

-0 -

-0 -

NA

-0 -

Non-pressure
N-solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

Low-pressure
N -solution

Midwest

Production

Blending

-0 -

-0 -

NA

-0 -

Low-pressure
N-solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

N-mfg.
solution

Gulf Coast

Production

Blending

-0 -

-0 -

NA

-0 -

N-mfg,
solution

Midwest

Production

Blending

-0 -

-0 -

NA

-0 -

Constrai n t3

266

Product

Tabic E-5,

(cont'd.)

b

Purchased
Newc

Total
Use

Product

Location

Act i v i t y

N-mfg,
so lution

Gulf Coast

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

N-mfg,
solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

Urea

Guff Coast

Production

Gas separation

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Ammonium carba­
mate s lu rry

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Water
absorption

-0 -

-0 -

NA

-0 -

Urea

Midwest

Production

Gas separation

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

M f r 's ,
storage

Bui k

-0 -

-0 -

NA

-0 -

Elemental
phosphorus

F lo rid a

Production

E le c t r ic
furnace

-0 -

-0 -

NA

-0 -

White phos­
phoric acid

Central
Michigan

Production

Furnace
process

-0 -

-0 -

NA

-0 -

Green Phos­
phoric acid

F lo rid a

Production

Wet
process

Type

Constraint9

202,212

Old

202,212

58,275

260,487

Table E-5.

(cont'd.)

Total
Use

0 ld b

Purchased
Newc

-0 -

-0 -

NA

-0 -

Rubber-lined

-0 -

-0 -

NA

-0 -

Production

Ammoniation

-0 -

-0 -

NA

-0 -

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

Midwest

Production

Ammoniation

-0 -

-0 -

NA

-0 -

U -3 7 -0 f

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

NSP9

F lo rid a

Production

Cone mixer

-0 -

-0 -

NA

-0 -

NSP9

Central
Michigan

Production

Cone mixer

-0 -

-0 -

NA

-0 -

NSP9

F lo rid a

M f r 's .
storage

Bulk

-o -

-0 -

NA

-0 -

R-O-P TSPh

F lo rid a

Production

Cone mixer

-0 -

-0 -

NA

-0 -

R-O-P TSPh

Midwest

Production

Cone mixer

1^,214

-0 -

NA

-0 -

Type

Constraint

Production

Wet
process

F lo rid a

M f r 's .
storage

10-3^0®

Midwest

10-3^0®

Product

Location

A c t i v it y

Green phos­
phoric acid

Midwest

Green phos­
phoric acid

a

268

yo
1

i

Table E-5.

(cont'd.)

Total
Use

. a
Constraint

01db

Purchased
Newc

Bulk

-0 -

-0 -

NA

-0 -

Production

Rotary drum
granulator

-0 -

-o -

NA

-0 -

F lo rid a

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

0 1 ammon i um
phosphate

F lo ri da

Production

Slurry
ammoniati on

-0 -

-0 -

NA

-0 -

Diammonium
phosphate

Mi dwest

Production

S lurry
ammoniati on

-0 -

-0 -

NA

-0 -

Di ammon i um
phosphate

Central
Mi ch i gan

Production

S lurry
ammoniation

-0 -

-0 -

NA

-0 -

Diammoni um
phosphate

F lo rid a

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Monoammon i um
phosphate

F lo rid a

Production

S lurry
ammoniation

Monoammonium
phosphate

Midwest

Production

S lurry
ammoniation

Product

Location

Acti vi ty

R-O-P TSPh

F lo rid a

M f r 's .
storage

Granular
TSP'

F lo rid a

Granular
TSP1

Type

192,716

-0 -

192,716

-0 -

77,779

NA

270,h95

-0 -

Table E-5.

(cont'd.)

u

Type

Purchased
Newc

Total
Use

Product

Location

A c tiv ity

Monoammoni um
phosphate

F lo rid a

M f r 's .
storage

Bulk

Rock
phosphate

F lo rid a

Production

Gri ndi ng

-0 -

-0 -

NA

-0 -

Super phos­
phoric acid

Midwest

Production

Thermal

-0 -

-0 -

NA

-0 -

R-O-M KCLJ

Saskatoon

Production

F lo ta tio n

2 k , 292

-0 -

NA

-0 -

R-O-M KCLJ

Saskatoon

M f r 's .
storage

Bui k

-0 -

-0 -

NA

-0 -

STD. KCLk

Saskatoon

Production

F lo ta tio n

-0 -

-0 -

NA

-0 -

STD. KCLk

Saskatoon

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Gran. KCL*

Saskatoon

Production

F lo ta tio n

Gran. KCL1

Saskatoon

M f r 's .
storage

Bulk

Coarse KCLm

Saskatoon

Production

F lo ta tio n

C onstraint6

107,323

01 db

107,323

1*3,825

151JW

•

191,267

67,739

259,006

86,318

86,318

1*3,217

129,535

-0 -

-0 -

NA

-0 -

270

191,267

Table E-5.

(cont'd,)

Type

01db

Purchased
Newc

50,000

-0 -

NA

-0 -

<*Q—

-0 -

NA

-0 -

37,500

-0 -

NA

-0 -

-0 -

•Q*

NA

-0 -

50,400

NA

50,400

205,681

118,162

323,843

Product

Location

A c tiv i ty

Granulated
mixed f e r t .

Central
Michigan

Production

TVA continuous

Granulated
mixed f e r t .

Outstate
Michigan

Production

TVA continuous

Granulated
mixed f e r t .

Central
Michigan

M f r 's ,
storage

Bui k

Bulk blended
fe rt.

Central
Michigan

Production

Horizontal w/
ro ta ry drum

Bulk blended
fe rt.

Outstate
Michigan

Production

Horizontal
(9000 TPY)

50,1+00

Bulk blended
fe rt.

Outstate
Mi chi gan

Production

V e r tic a l
(9000 TPY)

205,681

Bulk blended
fe rt.

Outstate
M1ch i gan

Production

Horizontal
(2500 TPY)

Bulk blended
fe rt.

Outstate
Michigan

Reta i 1i ng

—

Dry
products

Michigan

R e t a i1ing

—

Constraint

-0 -

128,041

-0 -

a

-0 -

128,041

-0 -

NA

59,081

NA

Total
Use

-0 -

187,122

-0 -

Table E-5.

(c o n t 'd . )

Location

A c tiv i ty

Type

Anhydrous
ammon i a

Mi chi gan

R e t a i1i ng

...

■

Liquid
products

Mi chi gan

R e t a i1i ng

...

-0 -

C onstraint3

Otd^

Total
Used

01

1
0
1

Product

Purcbased
New0

NA

-0 -

-0 -

NA

-0 -

^Total capacity from previous years a f t e r adjustments fo r physical d e p re c ia tio n .
°T o tal capacity o f f a c i l i t i e s purchased during th is year.
^Not allowed.
eAmmonium polyphosphate liq u id ( 1 0 - 3 V 0 ) .
^Ammonium polyphosphate liq u id (1 1 -3 7 * 0 ),
^Normal superphosphate.
^R u n-o f-p ile t r i p l e superphosphate.
'Granular t r i p l e superphosphate.
-*Run-of-mine potassium c h lo rid e .

ZLz

^ L im it in g q u a n tity f o r OLD f a c i l i t i e s during t h i s year*

Table E-5.

(c o n t'd .)

^Standard potassium c h lo rid e .
^Granular potassium ch lo rid e .
mCoarse potassium c h lo rid e .

K)
'• J

Table E -6 .

T ra n s itio n constraints and lev els o f u t i l i z a t i o n fo r Year 6 ( i n tons)

Type

Total
Use

01db

Purchased
Newc

31,701

11,172

42,873

-0 -

NA

-0 -

-0 -

NA

“0-

Product

Location

A c tiv ity

Anhydrous
ammonia

Gulf Coast

Production

Centri fugal

Anhydrous
ammonia

Gulf Coast

Production

Pi ston

-0 -

Anhydrous
ammon i a

Midwest

Production

C entrifugal

-0 -

Anhydrous
ammon!a

Central
Michigan

Production

C entrifugal

Anhydrous
ammonia

Central
Michigan

Production

Pi ston

-0 -

-0 -

NA

-0 -

Anhydrous
ammonia

Gulf Coast

M f r 's .
storage

Cyrogeni c

-0 -

-0 -

NA

-0 -

Anhydrous
ammonia

Midwest

M f r 's .
storage

Cyrogenic

-0 -

-0 -

NA

-0 -

Anhydrous
ammonia

Central
Mi ch i gan

M f r 's .
storage

Cyrogenic

^5,623

45,623

16,806

62,429

N i t r i c acid

Gulf Coast

Production

Medium pressure

-0 -

-0 -

NA

-0 -

C onstraint3

31,701

104,149

104,149

25,741

129,890

Table E-6.

(c o n t 'd .)

. a
Constraint

01db

Purchased
Newc

Medium pressure

-0 -

-0 -

NA

-0 -

Production

N eu trali zation
evaporation

-0 -

-0 -

NA

-0 -

Midwest

Production

N e u tra liz a tio n
evaporation

-0 -

-0 -

NA

-0 -

Ammon i um
ni t r a t e

Gulf Coast

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Non-pressure
N -solution

Midwest

Production

Blending

-0 -

-0 -

NA

-0 -

Non-pressure
N-solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

Low-pressure
N -solution

Midwest

Production

Blendi ng

-0 -

-0 -

NA

-0 -

Low-pressure
N-solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

N-mfg.
solution

Gulf Coast

Production

Blending

-0 -

-0 -

NA

-0 -

Product

Location

Acti vi ty

N i t r i c acid

Midwest

Production

Ammon i um
n itra te

Gulf Coast

Ammonium
ni t r a t e

Type

Total
Use

275

Table E -6,

(c o n t 'd .)

Total
Use

Type

C onstrain t3

01db

Purchased
Newc

Production

Blending

-0 -

-0 -

NA

-0 -

Gulf Coast

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

N-mfg,
solution

Midwest

M f r 's .
storage

Tank

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Gas separation

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Ammonium carba­
mate s lu rry

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

Production

Water
absorption

-0 -

-0 -

NA

-0 -

Urea

Midwest

Production

Gas separation

-0 -

-0 -

NA

-0 -

Urea

Gulf Coast

M f r 's ,
storage

Bulk

-0 -

-0 -

NA

-0 -

Elemental
phosphorus

F lo rid a

Production

E le c t r i c
furnace

-0 -

-o -

NA

-0 -

Product

Location

A c t i v it y

N-mfg,
solution

Midwest

N-mfg,
solution

Table E-6.

(c o n t 'd .)

Location

A c tiv ity

Type

White phos­
phoric acid

Central
Michigan

Production

Furnace
process

Green phosphoric acid

F lo rid a

Production

Wet
process

Green phos­
phoric acid

Midwest

Production

Wet
process

Green phos­
phoric acid

F lo rid a

M fr 's .
storage

e
10-34-0'

Midwest

10-34-0*

11-37-0'

Constraint3

-

0-

200,097

Old^

-

0-

200,097

Total
Use

0-

NA

-

60,390

260,487

-

0-

-

0-

NA

-

0-

Rubber-1i ned

-

0-

-

0-

-

0-

-

0-

Production

Ammoniat ion

-

0-

-

0-

NA

-

0-

Midwest

M f r 's .
storage

Tank

-

0-

-

0-

NA

-

0-

Midwest

Production

Ammoniation

-

0-

-

0-

NA

-

0-

Midwest

M f r 's .
storage

Tank

-

0-

-o -

NA

-

0-

NSP9

F lo rid a

Production

Cone mixer

-

0-

-

0-

NA

-

0-

NSP9

Central
Mi chi gan

Production

Cone mixer

-

0-

-

0-

NA

-

0-

11-37-0

f

277

Product

Purchased
New

Table E-6.

(c o n t 'd .)

Total
Use

01db

Purchased
Newc

-0 -

-0 -

NA

-0 -

Cone mixer

-0 -

-0 -

NA

-0 -

Production

Cone mixer

-0 -

-0 -

NA

-0 -

F lo rid a

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Granular
TSP*

Flo rid a

Production

Rotary drum
granulator

-0 -

-0 -

NA

-o -

Granular
TSP'

F lo rid a

M f r ’ s,
storage

Bulk

-0 -

-0 -

NA

-0 -

Diammonium
phosphate

F lo rid a

Production

S lurry
ammoniat i on

-0 -

-0 -

NA

-o -

Diammonium
phosphate

Midwest

Production

S lurry
ammoniation

-0 -

-0 -

NA

-0 -

Di ammon i um
phosphate

Central
Michigan

Production

S lurry
ammoniat ton

-0 -

-0 -

NA

-0 -

Di ammon i um
phosphate

F lo rid a

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Type

Product

Location

A c tiv ity

NSP9

F lo rid a

M f r 's .
storage

Bulk

R-O-P TSPh
U
R-O-P TSP

F lo rid a

Production

Midwest

R-O-P TSPh

C onstraint

a

Table E-6.

(c o n t'd .)

Type

Purchased
Newc

Total
Use

Product

Locati on

A c tiv ity

Monoammonium
phosphate

F lo rid a

Production

S lurry
ammoniation

Monoammon i um
phosphate

Midwest

Production

S lurry
ammoniation

Monoammon t um
phosphate

F lo rid a

M f r 's .
storage

Bulk

Rock
phosphate

F lo rid a

Production

Grinding

-0 -

-0 -

NA

-0 -

Super phos­
phoric acid

Midwest

Production

Thermal

-0 -

-0 -

NA

-0 -

R-O-M KCLJ*

Saskatoon

Production

F lo ta tio n

-0 -

-0 -

NA

-0 -

R-O-M KCLJ

Saskatoon

M fr ’ s.
storage

Bulk

-0 -

-0 -

NA

-0 -

STD. KCLk

Saskatoon

Production

F lo ta tio n

-0 -

-0 -

NA

-0 -

STD, KCtk

Saskatoon

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

Gran. KCL1

Saskatoon

Production

F lo ta tio n

Constrai n ta

223,610

-0 -

120,244

01 db

223,610

-0 -

120,244

46,885

NA

30,904

270,495

-0 -

151,148

204,259

204,259

54,747

259,006

279

*

Table E-6.

(c o n t 'd .)

Product

Location

A c t!v i ty

Gran. KCL1

Saskatoon

M f r 's .
storage

Bulk

Coarse KCLm

Saskatoon

Production

F lo ta tio n

Granulated
mixed f e r t .

Central
Mi ch igan

Production

Granulated
mixed f e r t .

Outstate
Michigan

Granulated
mixed f e r t .

Type

Constrai nt

96,825

a

01db

Purchased
Newc

Total
Use

96,825

32,710

-0 -

-0 -

HA

-0 -

TVA continuous

-0 -

-0 -

NA

-0 -

Production

TVA continuous

-0 -

-0 -

NA

-0 -

Central
Mi chigan

M f r 's .
storage

Bulk

-0 -

-0 -

NA

-0 -

8u1k blended
fe rt.

Central
Michigan

Production

Horizontal w/
ro ta ry drum

-0 -

- 0-

NA

-0 -

Bulk blended
fe rt.

Outstate
Mi chi gan

Production

Horizontal
(9000 TPY)

-0 -

-0 -

NA

-0 -

Bulk blended
fe rt.

Outstate
Michigan

Production

V e r tic a l
(9000 TPY)

Bulk blended
fe rt.

Outstate
Michigan

Production

Horizontal
(2500 TPY)

129,535

280

287,109

-0 -

287,109

-0 -

87,131+

NA

37^,243

-0 -

*

Table E-6.

(c o n t'd .)

Constraint

a

Purchased
Newc

Total
Use

Product

Location

A c tiv ity

Type

Bulk blended
fe rt.

Outstate
Michigan

R e t a i1ing

—

Dry
products

Mi chigan

R e ta i1i ng

—

-0 -

-0 -

NA

-0 -

Anhydrous
ammonia

Michigan

Reta i I i ng

—

-0 -

-0 -

NA

-0 -

Liquid
products

Michigan

R e t a i1i ng

—

-0 -

-0 -

NA

-0 -

143,555

01db

143,555

43,567

^Total capacity from previous years a f t e r adjustments fo r physical d e p reciatio n .
CTotal capacity of f a c i l i t i e s purchased during th is year.
dNot allowed.
eAnronium polyphosphate liq u id (1 0 -3 4 -0 ).
^Ammonium polyphosphate liq u id (1 1 -3 7 -0 ).
9Normal superphosphate.

281

aL im itin g q u an tity fo r OLD f a c i l i t i e s during th is year.

187,122

Table E-6.

(c o n t 'd .)

^R u n -o f-p ile t r i p l e superphosphate.
'Granular t r i p l e superphosphate.
■^Run-of-mine potassium c h lo rid e ,

k

Standard potassium c h lo rid e ,

^Granular potassium c h lo rid e .
mCoarse potassium c h lo rid e .

to

00

to

APPENDIX F

The T r a n s i t i o n

Y ears

Table F - l .

Product use summary fo r the tr a n s itio n years'

(in tons)

Product

Year 2

Year 3

Year 4

Year 5

Year 6

Anhydrous ammonia

172,327

172,473

172,619

172,763

172,763

N i t r i c acid

5,147

3,432

1,716

-0 -

-0-

Ammonium n i t r a t e

6,729

4,486

2,243

-0-

-0 -

Nitrogen manufacturing solution

9,640

6,427

3,213

-0 -

-0 -

Elemental phosphorous

1,591

795

-0 -

-0 -

-0 -

242,603

249,688

256,774

260,487

260,487

6,746

3,373

-0 -

-0-

-0 -

R u n -o f-p ile t r i p l e superphosphate

53,687

35,793

17,894

-0 -

-0 -

Diammonium phosphate

59,586

42,709

25,833

-0 -

-0 -

170,321

201,070

231,823

270,495

270,495

59,323

39,551

19,772

-0 -

-0 -

179,704

209,469

239,241

259,006

259,006

20,000

10,000

-0 -

-0 -

-0 -

Granulated mixed f e r t i l i z e r s

148,308

98,887

49,431

-0 -

-0 -

Bulk blended f e r t i l i z e r s

245,699

288,543

331,400

374,243

374,243

Wet process phosphoric acid
Furnace process phosphoric acid

Monoammonium phosphate
Run-of-mine potassium chloride
Granular potassium ch loride
Coarse potassium ch loride

Table F - h

(c o n t'd .)

Product

Year 2

Year 3

Year It

Year 5

Year 6

N supplied

H i , 932

H I ,932

H i , 932

H I , 932

H I , 932

P2 O5 supplied

H O , 650

H O ,650

H O , 650

HO , 6 5 0

HO ,650

K^Q supplied

155,H i

155,H i

155,H I

155,AH

155,H I

+78 Z

^For years 0 and 1, see Appendix A, 1970 Actual and Constrained Optimum, resp e c tiv e ly .

Table F-2,

Anhydrous ammonia product flow

O rig in atin g
location

Act i v ! ty

Gulf Coast

Production

Centri fugal^

Gulf Coast

Producti on

Cent ri fugal

Midwest

Production

Centri fugal

Central
Mi chigan

Product ion

Central
Michigan

Terminating
location

Year 2

Year 3

Year 4

Year 5

Year 6

(new) 10,522

10,044

11,050

10,574

11,172

64,246

57,655

49,580

41,407

31,701

—

11,315

8.053

4,791

1,529

Centri fu g a l*

—

(new) 86,244

19,101

21,012

24,691

25,741

Product ion

Centri fugal

^

-0 -

77,620

86,186

94,562

104,149

Gulf Coast

Mf r 's .
storage

Cyrogenic

------------

36,431

27,324

18,216

9,108

-0 -

Midwest

M f r 's .
storage

Cy rogen i c

-----

6,118

4,588

3,059

1,529

-0 -

Centra]
Michigan

M f r 1s.
storage

Cyrogenic^

-----

(new) 19,972

12,603

13,865

15,251

16,806

Central
Michigan

M fr 's .
storage

Cyrogenic

---

-0 -

17,975

27,320

36,541

45,623

Gulf Coast

Transportation

Barge

38,337

40,375

42,414

42,873

42,873

Type

—

4*

F lo ri da
ni
nrnHurp rc*

-0 -

Table F-2.

O rig in atin g
location

(c o n t1d . )

Type

A c tiv i ty

Terminating
locat ion

Year 2

Year 3

Year 4

Year 5

Year 6

1,732

-0 -

-0-

-0-

-0 -

-0-

Product
tra n s fe r

On-site

Midwest
producers

5,197

3,465

Centra]
Mich igan

Product
tra n s fe r

On-site

Michigan ^
producers

1,738

869

Central
Michigan

Transportation

Truck

Farms

84,506

95,852

107,198

119,253

129,890

Farms

Applicat ion

—

—

127,055

127,764

128,473

129,890

129,890

Gulf Coast

Transportation

Rail

Mi chigan
terminal

36,431

27,324

18,216

9,108

-0 -

Mi dwest

Transportat ion

Rail

Michigan
terminal

6,118

4,588

3,059

1,529

-0 -

Michigan
termi nal

T ransportat i on

Truck

Farms

42,549

31,912

21,275

10,637

-0-

^These f a c i l i t i e s
2

represent new investment.

Diammonium and monoammonium phosphate producers.

^ N it r ic acid, ammonium n i t r a t e , nitrogen manufacturing so lu tio n s , and diammonium and monoammonium
phosphate producers.
4

Diammonium phosphate and granular mixed f e r t i l i z e r producers.

2 36

Mi dwest

Table F-3.

N i t r i c acid product flow

O rig in atin g
locat ion

A c t i v it y

Midwest

Production

Medi urn
pressure

Midwest

Product
tr a n s fe r

On-si te

Type

Terminat ing
locat ion

—

Midwest
.
producers

Year 2

Year 3

Year 4

Year 5

Year 6

5 .H 7

3,432

1,716

-0 -

-o -

5,147

3,1*32

1,716

-0 -

-0 -

Year 2

Year 3

Year 4

Year 5

Year 6

6,729

It,486

2,243

-0 -

-0 -

6,729

4,486

2,243

-0 -

-0 -

^Ammonium n i t r a t e producers.

Table F-4.

Ammonium n i t r a t e product flow

Ori ginating
location

A c t i v it y

Mi dwest

P roduct i on

N e u tra liz a tio n
evaporation

Mi dwest

Product
tr a n s fe r

On-site

Type

Terminating
1oca t i on

—

Midwest
^
producers

Nitrogen manufacturing solutions producers.

Table F-5-

Nitrogen manufacturing solutions product flow

O rigin atin g
locat ion

Act i vi ty

hi dwest

Product i on

Blending

Mi dwes t

Transportation

Rai 1

Type

Terminating
location

—

Michigan ^
producers

Year 5

Year 6

3,213

-0 -

-0 -

6,427

3,213

-o -

-0 -

Year 3

Year 4

Year 5

Year 6

1,591

795

-0 -

-0 -

-o -

1,591

795

-0 -

-0 -

-0 -

Year 2

Year 3

Year 4

9,640

6,427

3M o

Year 2

^Granular mixed f e r t i l i z e r producers.

288

Table F-6.

Elemental phosphorous product flow

O rig in a tin g
location

A c t i v it y

F lo rid a

Product ion

E le c t r ic
furnace

Flori da

Transportat ion

Rai 1

Type

* White phosphoric acid producers.

Terminating
location

—

Michigan j
producers

Table F-7.

O rig in atin g
location

White phosphoric acid product flew

A c t i v it y

Type

Central
Mi ch i gan

Product ion

Furnace
process

Central
Mi chIgan

Product

On-s i te

—

Michigan j
produce rs

Year A

Year 5

Year 6

3,373

-0 -

-o -

-0 -

3,373

-0 -

-0 -

-0 -

Year 2

Year 3

6 ,7 «

6,7^6

289

^Diammonium phosphate producers.

Terminat ing
location

Table F-8,

Green phosphoric acid product flow

Termi nating
locat ion

A ct!vi ty

Florida

Production

Wet
j
process

—

Flori da

Production

Wet
process

—

Flori da

Product
tra n s fe r

On-si te

F lo ri da

T ransportation

Barge

Type

Year 2

Year 3

Year 4

Year 5

Year 6

(new) 111,918

50,948

56,044

58,275

60,390

130,685

198,740

200,730

202,212

200,097

F lo rid a
producers

240,133

248,225

255,952

260,487

260,487

Midwest
producers

2,471

1,463

822

1

^These f a c i l i t i e s

2

represent new investment.

Diammonium and monoammonium phosphate producers.

-0 -

-0 -

29 0

O rig in atin g
location

Table F-9*

O rig in a tin g
location

R u n -o f-p ile t r i p l e superphosphate product flow

A c tiv i ty

Terminating
location

Type

Year 2

Year 3

Year 1+

Year 5

Year 6

*>9,851

33,522

16,617

-0 -

-0 -

3,836

2,271

1,277

-0 -

-0 -

1
F lo rid a

Production

Cone mixer

Midwest

Production

Cone mixer

F lo rid a

Transportation

R ail

Michigan j
producers

*>9,851

33,522

16,617

-0 -

-0 -

Midwest

Transportation

Rail

Michigan j
producers

3,836

2,271

1,277

-0 -

-0 -

^Granular mixed f e r t i l i z e r producers.

—

Table F-1Q.

Diammonium phosphate products flow

A c t i v it y

F lo rid a

Production

S lurry
ammoniation

Central
Mi ch igan

Production

S lu rry
ammoniation

F lo rid a

Transportation

R ail

Farms

A p p Iica t ion

Central
Michigan

Transportation

F lo rid a

Michigan
terminal

Type

Terminating
lo cation

Year 2

Year 3

Year

—

51,666

38,7^9

—

7,920

k

Year 5

Year 6

25,833

-0 -

-0 -

3,960

-0-

-0 -

-0 -

23,729

15,820

7,909

-0 -

-0 -

---

35,856

26,889

17.92U

-0 -

-0 -

Truck

Farms

7,920

3,960

-0 -

-0 -

-0 -

Transportation

Rai 1

Michigan
terminal

27,937

22,929

17,921*

-0 -

-0 -

Transportation

Truck

Farms

27,937

22,929

17,921+

-0 -

-0 -

—

Michigan j
producers

^Granular mixed and dry blended f e r t i l i z e r producers.

292

O rig in a tin g
location

Table F - l l .

Monoammonium phosphate product flow

O rig in a tin g
location

Acti vi ty

F lo rid a

Production

S lu rry
j
ammoniation

—

F lo rid a

Production

S lurry
ammoniation

—

F lo rid a

M f r 's .
storage

Bulk1

—-

F lo rid a

M f r 's .
storage

Bulk

—

F lo rid a

Transportation

Rail

Farms

Appli cation

F lo rid a

Transportation

Rai 1

Michigan
terminal

Transportation

Truck

Type

Terminating
location

Year 2

Year 3

Year 4

Year 5

Year 6

103,980

57,732

63,510

77,779

46,885

66,341

143,338

168,313

192,716

223,610

39,286

36,218

39,846

43,825

30,904

59,946

80,317

93,998

107,323

120,244

132,309

155,380

178,459

201,530

201,530

38,012

45,690

53,365

68,965

68,965

Michigan
terminal

38 ,012

*6,69 0

53,365

68,965

68,965

Farms

38,102

45,690

53,365

68,965

68,965

(new)

Qutstate
^
processors

...

—

^These f a c i l i t i e s represent new investment.
2
Dry blended f e r t i l i z e r producers.

(new)

Table F-12.

Run-of-mine potassium ch loride product flow

O rig in a tin g
location

A c tiv ity

Saskatoon

Production

F lo ta tio n

Saskatoon

Transportation

R ail

Type

^Granular mixed f e r t i l i z e r producers.

Terminating
location

—

Michigan j
producers

Year 2

Year 3

Year 4

Year 5

Year 6

59,323

39,551

19,772

-0 -

-0 -

59,323

39,551

19,772

-0 -

-0 -

Table F—13-

Granular potassium chloride product flow

A c tiv ity

Saskatoon

Production

F lo ta tio n

Saskatoon

Production

F lo ta tio n

—-

Saskatoon

M f r 's ,
storage

Bulk1

—

Saskatoon

M f r 's .
storage

Bulk

—

Saskatoon

Transportation

R ail

Michigan
terminal

Saskatoon

Transportation

R ail

Outstate
2
processors

Michigan
terminal

Transportation

Truck

Farms

Appli cation

Terminating
location

Type

—

1

Year 2

Year 3

Year 4

Year 5

Year 6

69,632

64,246

70,678

67,739

S k,7k7

110,072

145,223

168,563

191,267

20k , 253

2,489

35,717

39,293

<*3,217

32,710

82,554

64,155

75,413

86,318

96,825

66,314

76,307

86 ,300

86,293

86,293

113,390

133,163

152,941

172,713

172,713

Farms

66,314

76,307

86 ,300

86,293

86,293

—

66,314

76,307

86,300

86,293

86,293

—

'These f a c i l i t i e s represent new investments.
^Ory blended f e r t i l i z e r producers.

(new)

(new)

295

O rig in a tin g
location

Table F-H f.

Coarse potassium chloride product flow

O rig in a tin g
location

A c t i v it y

Saskatoon

Production

Farms

Appli cation

Saskatoon

Transportation

Ra i 1

Michigan
te rm in a l

T r a n s p o r ta tio n

Truck

Type

F lo ta tio n

Terminating
location

k

Year 2

Year 3

20,000

10,000

-0 -

-0 -

-0 -

20,000

10,000

-0 -

-0 -

-0 -

Mi ch igan
terminal

20,000

10,000

-0 -

-0 -

-o -

Farms

20,000

10,000

-0 -

-0 -

-0 -

---

—

Year

Year 5

Year i

Table F-15.

Ori gi nating
location

Bulk granulated mixed f e r t i l i z e r product flow

A c tiv i ty

Type

Terminating
location

Year 2

Year 3

Year 4

Year 5

Year 6

Production

7VA
cont i nuous

—

148,308

98,877

49,431

-0 -

-0 -

Central
Mi ch igan

M f r 's .
storage

Bulk

—

111,231

7l+, 158

37,073

-0 -

-0 -

Central
Michigan

Transportation

Truck

Farms

11+8,308

98,877

49,431

-0-

-0 -

Farms

Appli cation

mmm

—

11+8,308

98,877

49,431

-0 -

-0 -

297

Central
Michigan

Table F-16.

O rigi nati ng
location

Bulk blended f e r t i l i z e r s product flow

A c t i v it y

Type

Terni n a t ! ng
location

k

Year 5

Year 6

151,200

100,800

5 0 , 1+00

-0 -

M i,099

97,65lf

107,1+32

118,162

87,131*

-0 -

39,689

123,168

205,681

287,109

Year 2

Year 3

201,600

Year

Outstate
Michigan

Production

Horizontal
(9000 TPY)

...

Outstate
Michigan

Production

V e r tic a l
,
(9000 TPY)

—

Outstate
Michigan

Production

V e r tic a l
(9000 TPY)

—

Outstate
processors

Transportation

Truck

S a te ]1i t e
o u tle ts

122,850

1M*, 271

165,700

187,122

187,122

Outstate
processors

Transportation

Appli cators

Farms

122,850

1Mi, 271

165,700

187,122

187,122

S a t e l1i te
o u tle ts

Product i
hand!ing

---

—

22,050

1+8,826

53,717

59,081

1*3,567

S a te l1i t e
o u tle ts

Product
handling

—

—

100,800

95,M+5

111,983

128,01+1

11*3,555

S a t e l1it e
o u tle ts

Transportation

Farms

122,850

1 Mf, 271

165,700

187,122

187,122

Farms

A pp lication

—

2*15,699

288,51*3

3 3 1 , 1*00

37M1+3

37i*,2i+3

Appli cators

—

^These f a c i l i t i e s represent new investment.

(new)

(new)