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horizon. So, as price forecasts move away from 1995, the uncertainty associated with
those forecasts increases (1." \it and Pindyck, 1994).
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VIII-6
There is little douat that global demand for food, fueled by both the large and
expanding global population and the rapid industrialization occurring in areas where much
of the world's population lives, will be increasing for the foreseeable future. Demand for
food will not decline in the near or distant future unless a global catastrophe occurs.
However, as Searls (1992) noted. near-term demand for potash products as
food-producing fertilizer is far from certain.
The Wiener piS method used in this study does not allow for any d;astic yearlo-year-planned
upward (or downward) non-random movements in these commodity
prices. This is a conservative approach that is based on several factors which impact the
national and global demand for fertilizer. Farm productivity in the United States has been
increasing slowly but steadily since 1965 along with the use of fertilizer inputs.
However, the use of agricultural inputs relative to all other inputs in the United States
agricultural process (e.g. labor and capital equipment such as farm machinery) has
remained steady since 1985 (Economic Report of the President to Congress, 1994). Stable
domestic demand for potasfl-based fertilizer prodUCts is a likely feature of the potash
market for at least the near future. Searle (1992) notes that future demand increases are
likely to come from outside the U.S.
Although the world population is rapidly increasing, passage of international and
regional treaties such a' General Agreement an Tariffs and Trade (GATT) and the
North American Free 'j ;~de Agreement (NAFT\) may have a negative impact on
agriculture subsidies around the world. Stabilization or rolling b, of agricultural
subsidies in countries such as Japan may have a stabilizing (or negative) impact on global
demand for potash-based fertilizer products. Certainly, the near future for potash prices
(despite the historical upward trend in per tor :aduct prices) is uncertain; the more
distant future is uncertain by definition.
This is not to say that potash operations are not profitable On the contrary, all
evidence seems to indicate that potash operations in the Carlsbad area have been
profitable over the years. However, the circumstances summarized above point to the
notion that prediction of an upward trend in potash prices is difficult to substantiate given
current market conditions.
It is important to note that the Wiener process approach was selectedafter analysis
of Eddy County historical confidential potash price data provided by the New Mexico
Bureau of Mines & Mineral Resources.
Capital and operating coste
Capital costs used ir . is report for a new shaft or plant were provided to the
NMBMMR by area operat· as were data concerning monthly operating cOSts. These