Why is fruit/vegetables so cheap despite the time and resources needed to produce them?
In: Economics
As someone who lives in one of the most expensive cities in the world (NYC) and yet routinely buys perfect apples, strawberries and blueberries for $1 a pound or less in my neighborhood market (and if I wanted bananas for 39 cents a pound and seedless grapes for .99 a pound and…) I too have wondered about the economics of this.
Noting that the berries are not always this cheap, but when they are in season, we will buy 10-20 pounds at a time and freeze them. Blueberries have been (3) 6oz containers for a dollar for the past 2 weeks. Strawberries tend to peak at 50 cents a pound in the early summer.
I feel like a lot of the responses in this thread miss something or are just in a very different situation than my country.
In Italy farmers invest to cultivate lets say tomatoes, they invest 50k hoping they’ll earn positive from the investiment, thing is that supermarket chains or big corps have a clever strategy, they know when tomatoes(in this example) are going to rot, so they present themselves to the farmers when they fear they could lose both earnings and harvest, so they’re forced to sell at whatever price, this leads to sell off even at 5 cents per kilo even the famous pachino tomatoes, because “that or nothing”.
This also leads to farmers ghost hiring(not legal) immigrants at low cost to contain costs, this is called caporalato.
This way supermarket can sell cheap and the times when vegetables and fruit are not cheap is because of transport costs(not that alone), for example in sicily tomatoes cost much less than let’s say in Milan, because usually tomatoes are produced and exported from south of italy to north, tomatoes in sicily cost 1 euro per kilo, in milan 5 euro per kilo.
Also important to note that fruit and vegetables are NOT cheap everywhere. In Australia, certain vegetables are insanely expensive compared to the states…and if there’s a drought, forget it.
Depending on where you live, the real answer is that many agricultural products are heavily subsidized and sold so cheaply that they can barely turn a profit.
[removed]
Cheap relative to what? Meat and dariy? Meat and dairy require fruit/vegetables/grains as an input and is very inefficient at converting those calories into the final product.
Just to add on to this: a lot of crops in the US are subsidized. So even if they’re expensive to produce, the consumer still gets a low price because the government pays for it.
[removed]
Economies of scale. Due to large overhead costs (equipment, land, etc) being present in farming even at low volumes, but being relatively stable as production grows, that overhead cost shrinks when calculating cost per unit as production increases.
Let’s say you have a $100k tractor to plant corn. If you plant 1000 stalks of corn, the cost of that tractor is allocated as $100k/1000 units, or $100/unit. If you plant 1 million stalks, your cost per unit shrinks to $0.10/unit in terms of operating that tractor, presuming you have the land to do it already and all else stays equal with the tractor.
Mass production farms capitalize on this significantly, but building these economies of scale takes time and investment. This is why there is a saying that farming only pays off by third generation if you’re starting fresh (pun intended, awww yeeeaahhh).
A whole lot of it is mechanized and automated to a degree. And farmers use migrant labor paid almost nothing to do the labor intensive parts.
Latest Answers