Friday, May 27, 2016

Defeating a progressive candidate helps consumers

As the Presidential election process was underway in Argentina, farmers hoarded their crops waiting for signs that the pro-market candidate would win and follow up on his promise to eliminate the 30% export tax on corn and wheat instituted by his "progressive" rival.

He won, and the $13b hoard of corn is flooding the U.S. market, and Argentine farmers have increased their corn plantings by 40% in the last minutes of the planting season.

Corn prices in the U.S. are likely to fall, as are the proteins that rely on corn feed (poultry, pork and beef).  Consumers benefit.  

HT:  Thomas Landstreet, (Forbes article)


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  2. I never really looked at Agriculture from an economics standpoint, but this post is a great example of how suppliers, in this case farmers, can control the market. The farmers took a risk by hoarding their crops until the pro-market candidate won, and it paid off. Not only did it benefit the farmers by decreasing the export tax, it also benefits the consumers. This win-win scenario will help get the agriculture market back to equilibrium.
    Suppliers need to understand how their control of the market affects their industry, and I think the farmers made the right choice, whether they thought about the effects on the industry or not (Froeb et al, 2016). This decision by the farmers may have been done in self-interest to avoid paying the 30% export tax, but the outcome benefits the entire market.
    As we learned in Chapter 8, changes in price lead to changes in quantity demanded (Froeb et al., 2016). Since there will be a larger supply of agricultural products, the high demand will be met. In addition, since prices are likely to drop since farmers are able to increase their supply at a lower cost, it is very possible the demand will increase as well, but only to the point where equilibrium is reach. As noted in Thomas Landstreet’s article (2015), “prices of everything from corn, soybeans, wheat, hay… and land values will all revert to their long term mean price levels”.

    I know I’ll be happy to see the lower costs of beef and pork.