Fertilizer use in Ethiopia has nearly quintupled since official elimination of direct input subsidies in the early 1990s. During this time, policies
changed from liberalization, with both private and public sector participation, to a government monopoly over imports along with exclusive
marketing through farmers’ cooperatives. This article presents estimates of detail costs and margins in the value chain, econometrically derived
profitability and yield responses, as well as costs of the government’s fertilizer promotion policies. Results suggest that (a) irrespective of the
methods of calculation, fertilizer use in major cereal is profitable; (b) while there is no official subsidy program, fertilizer promotion has involved
large fiscal costs—estimated at US40millionperyearsince2008;and(c)therehasbeenamismatchbetweengovernment’spolicytargetsandtheeffectivefertilizerdemand,resultinginlargecarryoverstockwithestimatedimplicitcostsofUS30 million per year during 2008–2011. Areas of
policy attention, value chain improvements, and ongoing efforts to improve for fertilizer use and profitability are discussed.JRC.H.4-Monitoring Agricultural Resource