Fertilizer forecasting can be divided into three stages complementary to each other, i.e. (i) assessment of potential, (ii) forecast of demand and (iii) forecast of sales. To the government the first two stages are significant. To marketing organisations, the second and third stages are relevant. The government wishes to know the gap between potential and demand to determine what it needs to do to transform part of the potential into effective demand. A company wishes to know what the effective demand is and what share of it can be met through the company's sales.
As regards the technique employed, forecasting methods fall into one of four basic approaches:-
measurement of potential through need-oriented or agronomic method
time series analysis and projection
causal models
qualitative approach.
By its nature, the first approach is for the long term and is essentially idealistic. It tells us what fertilizer demand could be and not what fertilizer demand is likely to be. The second approach relies on historical data to analyse and discern demand patterns to forecast the future, the assumption being that the future is a continuation of the past. Reliable data for several years is essential for this approach. The third approach seeks to establish a cause-effect relationship between fertilizer demand and other independent variables in the marketing environment, eg. with reference to amount of credit, fertilizer-produce price ratio, rainfall, etc. As in the case with the time series method, past data is important to assess the effect of these factors on demand. The second and third methods cannot be used when we wish to forecast the future of a product that has no history or is in such an early stage of development that no pattern or trend is discernible. Fertilizer consumption in many developing countries is in such a situation. The fourth approach uses qualitative information, including expert opinion, to forecast demand. This approach may or may not consider the past. Qualitative approaches are used when information is scarce or is unreliable, as in the elementary stage of the product life cycle. These conditions being characteristic of fertilizer markets in developing countries, qualitative techniques are very useful. Use of human judgement combined with rating systems turn qualitative opinions into quantitative tools for forecasts.
