The U.S. Elasticity of Import Demand for Potash

Abstract To sustain its agricultural output, the U.S. relies heavily on imports of potash. Using two different methodologies, this study finds that U.S. import demand falls by approximately four percent in the short run and nine percent in the long run for a 10% rise in the potash import price. Price transmission with leading exporter Canada is imperfect, with U.S. prices rising only 7.7% in the short run when Canadian prices rise by 10%. The findings suggest that policies such as import tariffs would raise costs for U.S. agricultural producers because there are few potash substitutes.