Thursday, October 6, 2011

Supply and Demand

                There have been countless times in my life when I have witnessed a person talk about the economic  “theory” of “supply and demand” in absolute awe, as if standing before some famous idol or relic. Personally, I have never been so struck by such a simplistic analysis of economics, but then again, and I admit this quite freely, I have spent little time contemplating economics in general. I would more prefer to screw my thumb to the table for enjoyment, but I digress.
                Supply and demand… what is it? The answer is quite simplistic actually. Let’s take a bag of fresh, local organic spinach as the example. It all starts with the supply. If there is a small amount of fresh, local organic spinach available and there is great demand for that fresh, local organic spinach, the value of that fresh, local organic spinach raises. If there is a large amount of fresh, local organic spinach and low demand for that fresh, local organic spinach, the value of the fresh, local organic spinach lowers. It should be quite easy to figure out the other possibilities by deduction at this point.
                So where does that get us? More specifically, where does that get us in the world of fresh, local organic vegetable production? Nowhere. Here I shall elucidate a little. Over the ten years I have been producing organic vegetables in and selling to Carroll County, Maryland, the demand for the organic produce is quite large in comparison to what is actually produced. Now any true capitalist would be making “bank” selling that produce, as the saying goes, realizing the rule of “supply and demand”. The equation would look like this: small supply + large demand = “bank”. But that is not at all how it actually works. And before I move on, the possibility of an oversaturation of organic produce is almost non-existent. Therefore, the approach to pricing to follow is not one led by fear of future competition. (But here I seem to have added one form of complexity that “supply and demand” does not. I have digressed again.)
                My intent has always been to offer organic produce at prices similar to conventional produce in the stores, which as any successful organic farmer knows, is idiotic. However, that has always been my “intent”. The reality of farming organically has caused me to raise some prices to justify the extra difficulties involved. But, nonetheless, I have continued to try to offer my organic produce at a “fair” value to the “local” customer. The reason for this, mainly, is for the customer to realize what a great deal they are getting by purchasing from my local organic farm. For if they purchase directly from me, that relieves me from having to travel with the organic produce to far off places willing to pay the higher prices justified by the extra effort in farming organically, thus also incurring travel expenses. When taking into account all the factors of travel, etc., the lower prices charged for selling locally has tended to be worth it. And the customer gets produce day fresh, which will have much more flavor and last quite a while longer than anything that can be purchased in a store.
                “Supply and demand” will scoff at this approach, for sure. The point for “supply and demand” is to make the most money while the supply is small, before the competition arrives that will force the prices down due to the now greater supply. And it is precisely here where I come up upon the wall I refuse to scale. That wall needs to be destroyed. What wall is that? The wall of “supply and demand” when it comes to fresh, local organic produce! Oh, I realize that the words I write are quite blasphemous, at least to those who hold ideology to be more important than actual reality… but I have digressed yet again…
                Before I relay my thoughts on the previous paragraph, I will describe one example of “supply and demand” that occurred recently at the farmer’s market. And the example this time is… fresh, local organic spinach! How perfect! About a month or so ago, I harvested a few bags of organic spinach from Field 1. This was the result of an experiment to see if I could get spinach to grow during some of the hot months when spinach is definitely not available locally. To explain, spinach loves colder weather and abhors the heat. In the heat, seeds will not germinate and the plants, that is, if the seeds had actually sprouted, bolt, which means those plants immediately grow to produce seed stalks instead of the delicious leaves. However, as the result of my multiple years of experience growing organically, I suspected that I could trick the seeds to germinate in the heat of the summer, and then keep them somewhat cool in order to produce those delectable leaves. I had success, albeit very minimally. Nonetheless, that which was harvested was brought to the Downtown Westminster Farmer’s Market to sell.
                So, there I was at the farmer’s market with fresh, local organic spinach, a product VERY much in demand, and absolutely for certain, I held the only supply. The demand I have known for many years, for customers constantly ask me whether I have spinach regardless of the month or season, and as soon as I set the bags out on the table, they tend to be purchased instantly. So, again, there I was with fresh, local organic spinach. What should I charge? I thought. And this was when I decided to test the law of  ”supply and demand”.
                When the first lady approached my stand, a long time customer of many, many years, she asked if I had anything new that week. “Spinach,” I replied. “Really?” Her interest was piqued, for she knew that spinach that time of year was… unheard of!  “How much?” she asked. “150 dollars.”
                It was quite a hearty laugh that followed that rather serious reply of mine. But why was that? Supply and demand dictates that since I had THE ONLY fresh, local organic spinach anywhere around, since the supply was so thin, and the demand was so incredibly great, $150 was surely not too great a sum to request for a product that would normally sell for $5.
                When the next customer approached the stand hearing that I had fresh, local organic spinach for sale, she laughed at the $150 price tag as well. Hmm. It seemed to be a trend. Why did that price evoke laughter? Then, Regina, who is the owner/baker of The Farmer’s Daughter, sent her very young son over to my booth to say she would like a bag and asked how much. Since her booth is just across the center aisle from mine, I could hear her son tell her the price. “I’m almost willing to pay that,” she stated. Progress! Of course, since Regina is a business woman, she gets the “supply and demand” rule, BUT, for her as well as the others mentioned, the price eventually settled upon was the normal $5. (As a small aside, my neighbor, Kirk, has suggested that if I had asked for $100 I probably would have gotten it. Perhaps I was a bit TOO greedy…)
                Alas, there goes my vacation to the… Riviera. Who am I kidding? I may as well say the Riviera is going to vacation at Nev-R-Dun Farm. There is an equal chance of that happening. (Digressions, digressions…)
                The point that I am attempting to make here is that when it comes to farming fresh, local organic produce, “supply and demand” should have nothing to do with the pricing. To take such an approach would be to sacrifice integrity, and one does not get into farming fresh, local organic produce if one does not stand by one’s integrity! The situation described above was, while true, as in it actually happened, it was all in jest… and the customer’s knew that. Those customers realize that I sell my produce for fair prices, and they also realize how hard I work to deliver those goods.
                That said, the prices that I ask for my fresh, local organic produce is actually not as random as it may sound at this point of this entry. The value placed upon those crops is a mathematical equation that takes into account all that goes into producing those crops, most of which is labor. Since I am also not one of the greedy types, I do not place the value of my actual physical labor at… a billion dollars, like many CEOs of colossal companies do for sitting behind desks, or perhaps golfing. No, such an approach… to food is ludicrous. And yet, somehow, those CEOs of Big-Agriculture still make those billions even from the cheap produce found on supermarket shelves!
                Ah, but I do not want to get into all of that. The stand that I wish to make, that is to disintegrate that looming wall of “supply and demand” in regards to fresh, local organic produce is to simply state, that all I ask is for the customer to pay me for that produce’s actual worth, as in, to pay for the effort that went into producing it. And this is where “supply and demand” comes in. If it is mid-August, and tomatoes are stacked high on every farmer’s table at the market, don’t expect for the value of the tomatoes I have to sell to diminish due to a burgeoning supply. It still takes the same amount of effort to produce those tomatoes. Tomatoes are a perfect example of where “supply and demand” can kill a farmer’s efforts. And we farmers must stand united in our approach to this situation. Instead of lowering prices to “get rid” of excess tomatoes, stand proud, and sell those tomatoes for what they cost you to produce them! Food, especially fresh, local organic produce should not be subjected to such silly whims as “supply and demand”. It takes too much effort!
Finally, if “supply and demand” truly dictated the value of tomatoes this year at the market, when a hurricane, followed by a relentless tropical storm, followed by extremely low temperatures for the end of summer/beginning of fall fell upon the local farms, the price for a fresh, local organic tomato… if you could find one… would surely be $150!

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