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2004 Plant Management Network. Accepted for publication 14 January 2003. Published 1 March 2004.

An Economic Assessment of the Global Inoculant Industry

Peter W. B. Phillips, Professor, NSERC/SSHRC Chair in Managing Knowledge-based Agri-food Development, University of Saskatchewan, 51 Campus Drive, Saskatoon, Canada S7N 5A8

Corresponding author: Peter W. B. Phillips.

Phillips, P. W. B. 2004. An economic assessment of the global inoculant industry. Online. Crop Management doi:10.1094/CM-2004-0301-08-RV.

Abstract The inoculant industry represents a relatively small but potentially important part of the increasingly competitive global agri-food sector. This paper analyses the nature of the inoculant industry and its relationship to the global agri-food sector in order to identify the scale of the economic impacts of the industry and the distribution of those benefits between the innovators, producers (by location and type of product produced), and consumers.

The inoculant industry represents a relatively small but potentially important part of the increasingly competitive global agri-food sector. Inoculants -- as either a substitute or complement to the use of commercial or non-commercial fertilizers -- have the potential to increase the productivity and profitability of field crops, enhance food production of vital staple foods, support social progress in many underdeveloped countries, and moderate environmental effects of

commercial agriculture. Fertilizers, especially nitrogen and phosphates, are one of the most important inputs used in the global agri-food industry. The FAOSTAT (1) reports that between 1960 and 2000, the annual world use of nitrogen fertilizer increased from 13 to 89 million tons N, a seven-fold increase in 40 years. Phosphate fertilizer consumption rose less, but still reached 36 million tons in 2000. The inoculant industry, initially involving nitrogen-fixing rhizobia bacteria, has been around for about 100 years but has increased in importance as new formulations have been developed and marketed to growers. Inoculants have the potential to create global economic and welfare gains, as the technology is highly effective with legumes, which are estimated to contribute about 20% of worldwide food protein (2). This is especially important for consumers in less well-developed nations, where legumes comprise a significant share of nutritional requirements. Meanwhile, the recent development and introduction of phosphate-solubilizing Penicillium fungus inoculants has broadened the potential market. The new inoculants show significant incremental gains in efficiency when applied to wheat and canola crops, and may have unique potential especially in marginal growing areas. They are currently applied on only a small area, but have significant potential for growth. There have also been efforts to develop inoculants that will bolster the immunity of plants to various insect pests, but little information is available on how extensively these products are used.

The Inoculant Industry The inoculant industry currently involves three discrete types of technologies: nitrogen fixing rhizobia, phosphate-solubilizing Penicilliumfungi, and insecticidal inoculants (while these inoculants have been identified as available, there is little available evidence of the extent of their use) (6). These technologies are either adjuncts to or substitutes for other sources of fertilizers or pesticides. They are applied most often as part of a fertility and pest management program for crops. Nitrogen inoculants were first identified more than 100 years ago and have been increasingly adopted in recent decades. The inoculants work through application of rhizobia bacteria, which colonize legume roots, start to multiply, and infect root hairs, causing the root cells to swell and form nodules. These nodules pull nitrogen from the air and convert it into a form the plant can use. A well-inoculated pea crop can fix up to 80% of its nitrogen needs from the air (or up to 120 lb

of nitrogen per acre). Inoculation can achieve better nutrition than with simple application of nitrogen fertilizers because fixed nitrogen is often the easiest form of nitrogen for plants to use. Given the many different rhizobia that can work on different plants, their ability to fix nitrogen without further inputs, and the extensive history and experience with the technology, there has been widespread adoption and use in many markets around the world. Four commercial companies produce the bulk of the nitrogen inoculants used in North and South America and Europe (Becker Underwood, Philom Bios, Nitragen, and Agrobiotics), and numerous public and community producers operate throughout Asia. Although phosphate inoculants are reported to have been developed and used in the Soviet Union decades ago, the first commercial phosphate inoculant for use in non-legume crops was introduced only in 1991. In 1996, the first combination phosphate and nitrogen inoculant was available for use on legume crops. These inoculants are live micro-organisms which, when added to the soil or applied to the seed, help growing plants take up phosphate from the soil reservoir more efficiently. Phosphate inoculants have been approved for use on wheat, canola, pea, lentil, chickpea, dry bean, alfalfa, sweetclover, mustard, and faba bean. Phosphate inoculants are especially active in cool soils. They supply an immediately available source of phosphate to emerging seedlings, which expands the root system, increasing the potential for a high crop yield; plants with a larger root system have the ability to fight off, or at least compensate for a variety of stresses like drought, disease, salinity, weeds, and pests and are more likely to experience increased uniformity of crop emergence, development, and maturity. Currently there is only one commercial producer of phosphate inoculants in North America (Philom Bios), and there is a possibility of some continuing production in Russia. Given the nature of the industry -- with extensive use of nitrogen inoculants but only limited use of phosphate inoculants and an unknown level of use of insecticidal inoculants -- the rest of this article focuses on the nitrogen inoculant market. Table 1 presents data that suggest there were approximately 400 million acres of legume crops that are suitable for the use of nitrogen and phosphate inoculants; approximately 20% is in North America, 20% in South America, and most of the rest in Asia.

Table 1. World wide legume crop acreage suitable for inoculant use, averages for 1996-2002 (millions acres).

North Legume crop Pea, lentil, broad bean, and vetch Chickpea, cowpea, pidgeon pea, and Barbara bean Dry bean Soybeans Groundnuts Pulses, nes Total 6 73 2 0 86 1 America 4

European Union 3

South America 1

Rest of world 25 Total 33



0 1 0 1 5

12 55 12 8 86

42 45 45 8 223

60 173 58 17 400

Source: Authors calculations using data from (1).

There are no definitive estimates of the extent of adoption of nitrogen inoculants. The author interviewed a number of current and past market participants in Saskatoon in March 2003 to gather estimates of the extent of adoption. The prevailing view was that there are two discrete markets. The Americas and Europe tend to be viewed as the primary commercial market, supplied by the four largest commercial firms, while the Asian market tends to be served by community, university, or state-owned enterprises. Adoption rates (Table 2) range from approximately 95% for peas, lentils, and chickpeas in North America and Europe, to 10 to 40% in Asia. Adoption tends to be highest for peas, lentils, and chickpeas and lowest for dry beans and other pulses.

Table 2. Estimated adoption rates for nitrogen inoculants, 2002 (% market share). North Legume crop Pea, lentil, broad America 95% European Union 75% South America 10% Rest of world 35%

bean, and vetch chickpea, cowpea, pigeon pea, and Barbara bean Dry bean Soybeans Groundnuts Pulses, nes 20% 15% 50% 10% 20% 15% -10% 25% 25% 25% 10% 25% 20% 40% 10% 95% 95% -35%

Source: Author interviews with multiple industry sources in Saskatoon, Canada, January-March 2003.

Applying the adoption rates in Table 2 to the average acreage of pulses in Table 1 gives us the estimated total acreage of inoculant use in various regions in Table 3. Given the highly competitive nature of the nitrogen inoculant industry, none of the firms were keen to divulge their market shares. As such, this data should be viewed as a notional estimate of the current scale of the industry. The data suggests that while the soybean market does not have the highest adoption rates, it contributes the single largest share of the market. Regionally, the four leading firms share approximately one third of the market -- in the Americas and Europe -- while the non-commercial market in Asia accounts for approximately two thirds of applications.

Table 3. Estimated total current inoculant acreage (millions acres by region). Legume crop Pea, lentil, broad bean and vetch chickpea, cowpea, pigeon pea and Barbara bean Dry bean 1 0 3 10 15 1 0 0 20 21 North America 4 European Union 3 South Rest of Total 15

America world 0 9

Soybeans Groundnuts Pulses, nes Total

11 1 0 18

0 0 0 3

14 3 1 21

9 18 1 67

34 22 2 108

Source: Authors calculations using Tables 1 and 2.

This baseline data can now be combined with some other market factors to estimate the aggregate and relative impacts of the technology on innovators, producers, and consumers.

Theoretical Approaches to Valuing Technologies Economists estimate the returns to an activity in a somewhat different way than many others (5). In the simplest case, where there are competitive supply and demand markets, the gains to any activity are the resulting increased consumer or producer surplus (Fig. 1). Consumer surplus is the amount consumers might pay if every unit of the product was auctioned separately, but dont have to pay because everyone pays the single, market clearing price (this is the triangle on Fig. 1 bounded by the downward sloping demand curve, the y-axis, and the horizontal line through the market-clearing price, Po). Producer surplus measures the returns (profits) to producers that can deliver the product at a lower cost than the market clearing price (equal to the triangle on a graph bounded by the upwardly sloping supply curve, the y-axis, and the horizontal line through the market clearing price, Po). Industry accounting efforts would totally ignore consumer surplus and, depending on their assumptions, might also ignore part of the producer surplus. Hence, economic analyses tend to estimate larger impacts with more widespread distribution of effects than accounting analyses.

Fig. 1. Estimating the economic impact of inoculant use.

Innovations to production technologies within existing product markets, such as inoculants, can be assumed to increase productivity (output per unit of input) and therefore to shift the supply curve out, such that higher quantities will be offered at each potential price level. Inoculants are assumed to reduce costs in proportion to the volume produced, which tends to rotate the supply curve down and to the right by a proportionate amount, with the old and new supply curves intersecting at the y-axis (Fig. 1). Without any shift in the demand conditions (i.e., inoculants do not affect consumers valuation of the legume crops), the shift in the supply curve will both increase the equilibrium supply and lower the equilibrium price (Po to P1). The aggregate gains to inoculant use are the triangle bounded by the two supply curves and the demand curve, which will always be positive (although some value in the fertilizer market could be lost due to inoculant use). Both consumers and producers have the potential to gain. Consumers could gain because they consume more at a lower average price; their consumer surplus rises by the area bounded by the y-axis between the original and new equilibrium prices (Poand P1) and the demand curve (area a+b+c in Fig. 1). Producers can either gain or lose from an innovation. Producers gain the surplus represented by the area between the two supply curves and the new equilibrium price (P1) but lose the area bounded by the y axis, the old supply curve, and the old and new market clearing prices (Po and P1) -- equal to area d-a in Fig. 1. Thus, it is a matter of estimation whether producers gain more from the technology than they lose from the lower prices. Unambiguously,

one could argue that producers who do not adopt the technology would inevitably lose due to lower prices. Ultimately the share of the returns producers and consumers receive depends on the relative slopes (elasticities) of demand and supply. Three discrete outcomes are possible. First, if the supply curve is flat, with constant returns to scale in the production of the product, all of the benefits of innovation will go to consumers. Second, if the demand were perfectly flat or elastic (e.g., producers are price takers as in commodity markets) then all of the returns to innovation would go to producers. If, as is more normal, there are decreasing returns to scale and a negatively sloped demand curve (as in Fig. 1), then the benefits will be shared between producers and consumers. Thus, theory suggests that the aggregate impact will be a function of the level of adoption and the impact on yield, while the distribution of benefits will be divided between owners of the technology, farmers using the technology, and consumers of the resulting legumes, while nonadopting producers will lose.

Economic Impact This section discusses the absolute and relative benefits and costs of the use of nitrogen inoculants in the legumes market. It is important to note that given the competitive nature of the industry there is no available summary data to use as inputs to the analysis. As such, the following results should be treated as representing orders of magnitude rather than absolute, definitive point estimates. Aggregate and relative impact on farmers. Farmers are a vital part of the analysis, as they are the key to adoption of the technology. A number of factors influence the average producers decision about whether to adopt the technology or not. In the first instance, farmers look at the comparative costs and direct returns expected from alternative production systems. Given that inoculants are non-drastic innovations (i.e., they are not unambiguously better than all alternative systems), the inoculant industry has to share some of the returns from the technology with producers to get them to adopt inoculants. Farmers ultimately gain or lose depending on the extent to which they adopt the technology and the returns from adopting and using inoculants. Industry reports suggest that sustained adopters have the potential to gain about twice their input costs, much in the form of higher yields

or replacement of inoculant for commercial nitrogen. Inoculants appear to fix between 44 lb/acre and 290 lb/acre, depending on the crop (2). Assuming that the average crop fixes approximately 100 lb/acre, the 108 million acres would replace or equal about 12 million tons of nitrogen, equal to about 13% of current nitrogen used globally each year. Assuming inoculants raise yields for users (or lower costs and thereby divert acreage from other crops) by an average 7%, and given the relatively high adoption rates in peas, lentils, dry beans, and soybeans in some markets, one would expect to see modest and variable increases in world production in related products, ranging up to 3% in recent years in some crops (Table 4).

Table 4. Estimated change in production resulting from inoculant use (assuming 7% yield gain). Inoculant acreage (million Legume crop Pea, lentil, broad bean and vetch chickpea, cowpea, pigeon pea and Barbara bean Dry bean Soybeans Groundnuts Pulses, nes 15 34 22 2 0.44 1.10 0.44 0.44 1.1 2.6 1.7 0.1 1.7% 1.3% 2.6% 0.7% 21 0.44 1.6 2.5% acres) 15 Base Yield (tons/acre) 0.66 Gross change in output (million tons) 1.2 % change in global output 3.2%

Source: Authors calculation using (1).

These higher levels of production work to depress world prices. Extending work done in related markets, one could conservatively assume that every 1% increase in supply would lower prices in

the range of 1 to 3%. Thus, there are two offsetting effects: higher yields for adopters and lower prices for all producers. Table 5 shows how this affects both adopting and non-adopting farmers. Assuming yields rise on average 7% from inoculant use, farmers could expect gross returns of between US$4 and US$13 per acre. Two different costs would have to be deducted from this for adopters. First, farmers have to pay directly between US$1 and US$2 per acre to access the technology. Second, the cumulative impact of all those producers using inoculants would add to global supply, which would work to lower market prices. Assuming a 1% increase in production lowers prices by 1% on average -- a relatively conservative assumption, given that a 1% increase in soybean production lowers prices by 2.9% (4) -- one could expect lower global prices to translate into price declines of between US$0.42 and US$4.06 per acre, depending on the crop. Thus adopters could expect net returns from inoculant use of production of between US$1.41 and US$8.60 per acre.

Table 5. Adopter and non-adopter returns to inoculant use (assuming 7% yield and 1% decline in prices for each 1% increase in output). Value of yield gain Adopter returns/acre Pea, lentil, broad bean, and vetch Chickpea, cowpea, pigeon pea, and Barbara bean Dry bean Soybeans Groundnuts 8.51 12.75 4.25 1.34 1.67 1.25 2.08 2.48 1.58 $5.09 $8.60 $1.41 -$2.08 -$2.48 -$1.58 6.38 1.16 2.30 $2.93 -$2.30 Payment for tech Lower Non-

price/acre Adopter adopter

(US$/acre) (US$/acre) (US$/acre) net/acre net/acre A 8.77 B 1.45 C 4.06 A-B-C $3.26 -C -$4.06

Pulses, nes






Source: Authors calculations using data in Tables 1 through 4.

Non-adopters, in contrast, will suffer modest declines in revenues as higher production volumes lower producer prices. Thus, the use of inoculants lowers their net revenues between US$0.42 andUS$4.06 per acre. Table 6 shows that, in aggregate, the gains to adopting farmers, while significant for them, are not cumulatively large enough to offset the aggregate loses to all producers from the lower market prices. Assuming adopters yields rise 7% and prices decline in direct proportion to supply rising (e.g., 1:1), then the above analysis suggests adopters in aggregate would gain US$506 million and non-adopters would share loses of US$656 million. On net, producers would lose US$150 million. If the price responsiveness remains at 1:1, then changing the expected yield impact from inoculants would redistribute the benefits as noted in Table 6, but would not change the aggregate net loss.

Table 6. Aggregate farmer returns from inoculant use (assuming prices decline 1% for every 1% increase in aggregate output). Average yield gain Net aggregate gain to all adopting farmers (US$ millions) Net aggregate loss to all non-adopting -$469 farmers (US$ millions) Total aggregate impact to all farmers (US$ millions) Source: Authors calculations. -$150 -$150 -$150 -$656 -$937 5% $319 7% $506 10% $788

The assumption about the price responsiveness is critical. As noted in Table 7, as price impacts are muted, the absolute losses faced by non-adopters decline and the adopters absolute gains

rise. Similarly, as prices become more responsive (i.e., decline more as output rises), absolute loses rise and non-adopters losses mount.

Table 7. Impact of price sensitivity on farmer returns (assuming 7% yield gain). % price change versus % output change Net aggregate gains to adopting farmers (US$ millions) Net aggregate loses to nonadopting farmers (US$ millions) Total aggregate impact to farmers (US$ millions) Source: Authors calculations. +769 +300 -150 -619 -1088 0 -338 -656 -994 -1331 0 +769 -0.5 +638 -1 +506 -1.5 +375 -2 +325

Finally, based on the distribution of inoculant use (Table 8), one can estimate that approximately 16% of the net aggregate gains to adopting producers would go to North America, 19% to South America, and 62% to Asia. The rest of the worlds producers would share the net aggregate losses realized by non-adopting producers.

Table 8. Distribution of inoculant use by region. North America Europe South America Rest of World 16% 3% 19% 62%

Source: Authors calculations from Tables 3.

Impact on innovators. Given that innovating companies are both the major investors in the technology and potential major beneficiaries of the returns, it is important to calculate and include innovators monopolistic or oligopolistic profits in the total calculation of the returns on the technology (3). Their returns depend crucially on the industrial structure and the presence or absence of barriers to entry (such as patented technologies or dominant brand names). Fully competitive markets, with no barriers to entry or exit, would leave no returns in the hands of producers above what is necessary to sustain their long-term use of land, labor, and capital. As competition decreases, abnormal profits can occur. Another study estimated that innovators captured between 37% and 50% of the gross benefits generated by Roundup Ready soybeans (4). The inoculant industry likely lies somewhere in between the two results. In the first instance, the manufacturers and distributors of the inoculants are generating gross revenues of between US$1.50 and US$2.25 per acre of inoculant use, which generates gross revenues for the four leading firms in the Americas and Europe between US$60-75 million per year. There is some evidence that the not-for-profit nature of the market in Asia, combined with the potentially lower quality or greater variability of quality of the rhizobium on offer, result in somewhat lower gross returns per acre there. As a result, gross revenues in the rest of the world are estimated to be in the range of US$75 million. Given the highly competitive nature of the nitrogen inoculant business, and the apparent limited barriers to entry, one would expect that the returns on capital invested will not be excessive. The returns to the much smaller phosphate inoculant trade may be somewhat better, as there is only a single company offering that product in North America. Finally, given that the four competing private companies which dominate the commercial inoculant trade are headquartered in North America (and most of their production is located in Canada or the USA), it is likely that most of the profits from the commercial trade accrue to North America. For completeness, one should ideally examine the impact on the broader fertilizer and insecticide business, as some inoculants substitute for commercial chemicals while some complement them. While it is beyond the scope of this paper to quantify those impacts, they should be kept in mind because the inoculant profits may simply be a substitute for fertilizer profits and not net additions to social welfare. Perhaps more importantly, the presence of a

competitive inoculants industry could make the chemical sector more competitive, which could generate new and larger benefits to both producers and consumers. Impact on consumers and the marketplace. The largest beneficiaries have been and are likely to continue to be consumers. As production rises, prices fall, generating savings for those who buy the resulting foods. Studies of other yield-enhancing innovations have shown that consumers could anticipate capturing at least half of the benefits and could gain up to 80% or more under certain conditions. As legumes make up a larger share of the diet of people in lesser-developed countries, much of the consumer benefits will be exported from the core growing areas: North America and the Southern Cone of South America (e.g., Argentina, Chile, Uruguay, and Paraguay)to the main consuming areas. Given the nutritional value of crops supported by inoculants, the technology offers potentially large social gains that, while hard to quantify, may be significant for developing economies. The aggregate benefits to consumers will vary depending on both the average yield gain that can be expected and by the sensitivity of prices (Table 9). The consumer gains would range between US$656 million and US$1.31 billion, depending on yield gains. Similarly, if prices become more sensitive and responsive to production gains, consumer benefits would rise. Assuming a 7% yield gain, relatively inelastic prices would generate only $0.9 billion while highly elastic prices could double that gain. Although the numbers seem large, when divided by those who consume pulses, the average gains are small. If the gains were distributed among the entire world population, the benefits would range between US$0.15 and US$0.38 per year per person. As per capita consumption rises, so would those net consumer gains (up to a range of US$1 - 2 per year in many developing countries).

Table 9. Gross consumer returns from inoculant use. Variability based on average yield gain Average yield gain Consumers gain (US$ million) 5% $656 7% $919 10% $1313

Variability based on different price sensitivities % price change versus % output change -1 -1.5 -2

Consumers gain (US$ M)




Source: Authors calculations. Variability based on different price sensitivities (assuming 7% average yield gain).

Finally, given that about 89% of the consumption of pulses is in developing countries (Table 10), the consumer benefits would flow there. While the average gains of US$1 to 2 per person per year appear minor, they could be significant in countries with low annual average per capita incomes. The World Bank estimates that almost 900 million people in 2000 earned less than US$1.08/day (7); many of those consumers are relatively large consumers of pulses.

Table 10. Distribution of pulse consumption, 2000. Developed Countries Developing Countries Source: FAOSTAT, 2003. 11% 89%

Overall distribution of benefits. Table 11 puts together the analysis to show the relative gains and losses of inoculants. The most striking result is that consumers gain the equivalent of all of the net benefit if one assumes modest price sensitivity. As a result, the net gains realized by the inoculant producers (equal to between 12 and 23% of the total benefit) and adopting producers (ranging from half to 60% of the generated welfare) are entirely offset by the losses by nonadopters.

Table 11. Relative distribution of benefits and costs of inoculant use (assuming prices decline 1% for every 1% increase in aggregate output). Average yield gain Innovators 5% 23% 7% 17% 10% 12%

Consumers Adopters Non-adopters Source: Authors calculations.

100% 49% -71%

100% 55% -71%

100% 60% -71%

As one would expect, this distribution is highly dependent on the assumptions about price sensitivity (Table 12). As prices become more responsive to supply gains (e.g., drop more relative to production gains), the consumers relative share rises while the adopters relative share declines and the non-adopters relative losses mount. Hence, price sensitivity simply transfers resources between producers and consumers, without changing the absolute net welfare gain. Similarly, non-adopters lose more as prices become more responsive.

Table 12. Relative distribution of impacts (depending on price sensitivity). % price change versus % output change Innovators Consumers Adopters Non-adopters Source: Authors calculations. 0 17% 0% 83% 0% -0.5 17% 50% 69% -36% -1 17% 100% 55% -71% -1.5 17% 151% 41% -108% -2 17% 200% 27% -145%

Other Considerations About Inoculants Economic analyses offer considerable insight into the impact of technologies, but they can at times be narrow and constricting. There are two considerations that are worth further exploration. There is evidence that, while inoculant technology has the potential to contribute to the commercial success of producers around the world, it also could contribute directly to stabilizing

and extending production of vital protein crops in marginal areas. This would improve the welfare of many who are not normally beneficiaries of new technology. These potential gains may require a change in policies and incentives in many countries; developing countries in particular have had variable experiences with inoculants, which could hinder more extensive adoption of the technology. The inoculants industry, national governments, and international aid agencies may need to work together in three areas. In the first instance, there are undoubtedly a number of formal or informal barriers both to international trade in inoculants and to foreign direct investment by the inoculants firms in many developed countries. More could be done to liberalize international markets. Second, given the nature of the product -- with highly specific applications to crops and limited vitality of the bacterium or fungi -- there is a critical need to develop international standards for the global inoculant business. Ineffective or inappropriate inoculants have the potential to dampen growth in the market. Industry, with some support from government, may find some value in developing more uniform rules for the trade. Finally, most developing markets, where the potential is perhaps greatest, are missing key structures for commercial success. In particular, developing nations often have limited or constricted input markets due to anti-market rules or weak transportation or financial systems. Furthermore, many countries have inefficient output markets (sometimes due to taxation), which stifle innovation and technology adaptation and adoption. While these problems are not unique to the inoculants business, resolving them would unleash some of the technologys potential in developing markets. Equally important, the technology has the potential to lessen global agricultures dependence on commercial nitrogen and phosphate fertilizers, which require significant quantities of energy to produce (2). Approximately 99% of the global nitrogen supply is produced from ammonia and the cost of feedstock accounts for two thirds to three-quarters of the total cash cost of producing ammonia. In some developing countries, the use of natural gas for ammonia production accounts for a large proportion of national gas consumption. In India, for example, this proportion is roughly 40% compared with the global average of 5 to 6% of the total gas demand. In the present economic climate, preferential treatment for fertilizer producers is often hard to acquire or maintain, which often constrains the optimal use of fertilizers. Keep in mind that inoculants fix between 44 lb/acre and 290 lb/acre, depending on the crop (2). If crops inoculated fix approximately 100 lb/acre, the 108 million acres using inoculants would replace 12 million tons of nitrogen, equal to about 13% of current nitrogen used globally each year, thereby significantly reducing energy consumption. Phosphate inoculants are also easy on the environment, as they

enhance the efficiency of phosphate fertilizer (a non-renewable resource) while requiring little energy to produce, store, or transport. In short, inoculants, which either replace or enhance the efficiency of commercial fertilizers, could be an important contribution to optimal food production. This could both contribute to a lessening of pressure on global energy markets and minimize production of environmentally damaging greenhouse gases. In this context, there would be value in considering whether the sector would be eligible for a benefit from greenhouse gas credits. No one entity would likely have any incentive to undertake negotiations and to manage credits, but collectively the industry could have some benefit. Any resulting benefits could be used for pre-commercial or non-competitive research or market development.

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