Japan Prices: Classic Example of Supply and Demand Challenges:

 https://the-japan-news.com/news/article/0006978131 

Veggie prices plunge in Japan as restaurant industry slumps amid pandemic

Article:

Vegetable prices have dropped significantly, making consumers happy but vexing farmers and retailers.

The price falls are attributable to favorable weather conditions leading to good harvests and a slump in the restaurant industry amid the novel coronavirus pandemic.

At the beginning of December, lettuce was selling for ¥58 per head and Chinese cabbage was going for ¥138 a head at Shinjuku Yaoya fruit and vegetable shop in Shinjuku Ward, Tokyo. Both prices are more than 40% lower than normal rates.

“The vegetables I buy on a daily basis have gotten cheaper,” a homemaker in her 60s said. “It helps.”

However, vegetable sales are sluggish. Due to the spread of the coronavirus, sales to restaurants and other businesses, which account for 10% to 20% of total sales, have stagnated while households have become more frugal.

Ideas and Analysis:

This is a classic example of supply and demand. Its not just an economics idea but a very common situation in business. 

An economy is very complex as are different kinds of markets within an economy. While one part of a market, such as consumer buying of vegetables might be good for consumers, but not so good for restaurants who buy fruit and vegetables because less people are going to restaurants.

Whenever there is a surplus due to favorable or good weather there is usually more products than maybe the market can handle or sell. As such producers want to get something so they lower their prices to try and sell as much as they can.

The opposite of course is true if there was a not so a good growing season and there is a shortage of products. So in this case producers will increase their prices in order to try and maintain an certain amount of profit they might have received in a normal year of production.

Of course consumers for the most part always want lower prices and producers always want higher prices. So that is the struggle that always takes place in a market economy. 

Consumers of course don't always get what they want and producers of course don't always get what they want. So a market, in many cases, is always in compromise between what the consumer wants and the producer wants. 

The virus situation of course has exaggerated normal market situations. 

Consumers, because of fear of job losses and income challenges, have become even more frugal than usual. Consumers of course are always looking for sales or bargains but now more than ever.

And then add in the challenges related to restaurants which then exaggerates the agriculture market even more.

If you then add in a surplus growing season the challenges for producers become even more difficult.  

Article:

“No matter how much we discount them, vegetables aren’t selling well,” said Hidetoshi Aramaki, senior managing director of Shinjuku Yaoya’s operator.

Leafy greens, in particular, do not last long. Stores are forced to sell them at a discount all at once if there is excessive stock. On Wednesday, Shinjuku Yaoya even gave away about 500 heads of lettuce for free.

The wholesale median price of lettuce fell 61% during the Nov. 20-26 period compared with the same time frame a year ago, according to Ota Market in Tokyo. Prices have fallen across the board, with a 58% decrease for Chinese cabbage, 35% for cabbage and 16% for daikon radishes.

According to an Agriculture, Forestry and Fisheries Ministry analysis, the price falls have been brought about by oversupply as no typhoons made landfall for the first time in 12 years and the food services sector has been hit by declining demand.

Ideas and Analysis:

Agriculture producers in a market economy are usually "price-takers" meaning they take the price or prices that is offered to them at auctions etc where they sell their products or in a similar cases.

If the buyers at auctions and similar market situations know there is a surplus of produce the know they can offer a price that is lower than a normal market situation and the producers have no choice but to accept it. 

In a normal market situation you might think a surplus might be a good thing meaning there is now more to sell and more potential sales and profits.

But in any situation, no matter the product; cars, clothes, of whatever is being sold usually the producers have estimated how much of a product they can sell so they only produce what they think they can sell and or produce what they can make a profit on.

Toyota and Nissan are not going to over produce but only produce what they think the market can handle. 

The same for Uniqlo and so on. They, for the most part, only produce what they think the market can handle.

Of course we know markets are not perfect and consumers/buyers can easily change their ideas and opinions on what they want to buy, and as such sometimes producers can over produce because their projections or estimates were more than the market wanted. Of course then we all the sales of products from time to time.

But the agriculture market usually is not able to as easily predict what is going to happen in a market in the future, or not as easily.

Did any producers of vegetables really know exactly what would happen related to the summer growing season or the virus situation? Most likely very few did and even if they accurate weather predictions, how many producers can adjust their harvest to really meet exact demands in the market? Probably not many.

Article:

Vegetable-producing areas have been plagued by the price falls.

“If prices get any lower, we can’t make a profit,” said an official of JA Hainan in Makinohara, Shizuoka Prefecture, an area of lettuce production. “There’s the risk that some farmers will stop farming if prices continue to drop.”

■ Meat prices on the rise

On the other hand, prices for domestically produced chicken and pork are likely to remain high. According to the agriculture ministry, the wholesale price of chicken thigh was ¥654 per kilogram in Tokyo in November, about 12% higher than in the same month last year. The wholesale pork price was 16% higher at ¥531.

Poultry is a relatively differentiated item, with domestic products for home use and imports for business use. Decreased demand from the food services sector is unlikely to push down the price of domestic meat products.

In addition, poultry is usually frozen in summertime when demand drops, in order to stock up for use in the winter. This year, however, poultry sales for home use have been upbeat even in the summer as more consumers did their own cooking amid the pandemic. Already low inventories are believed to be a factor in prices remaining high, according to a meat wholesaler.

Japan is also experiencing a spike in cases of highly pathogenic avian influenza. The impact of the bird flu is limited for now, but there are concerns that prices could rise further if shipments are delayed.

Ideas and Analysis:

And then there there are those products that maybe are not influenced very much by changes in market conditions. 

Especially if there is not a lot of competition and especially if there is not a lot of competition from imports. So domestic products can remain high because there is not enough competition to force down prices.

In this case the consumers become "price-takers" meaning they accept the higher prices and or the seek out "substitute" products that might be at a lower price. 

But then market condition can cause an increase in demand even though prices are higher than consumers want but the accept the higher prices as a given and just buy as usual.