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The poor Aussie strawberries

By Luke Tan
web posted October 1, 2018

Needle in strawberryIf strawberries had needles in them, who would eat them? Precisely why demand for those sweet juicy fruits has fallen drastically. When videos and images surfaced online showing sewing needles in Australian grown strawberries, people started buying less of strawberries due to fears of contamination. Issues of health and hygiene were raised, and demand fell sharply. What happened as a result of this scare were further reaching than that though. Not only did it made prices drop, but it also lowered the quantity supplied, and left surpluses.

Firstly, the scare caused the demand to fall and prices to drop. Although the product was essentially unchanged, since it was only the singular strawberry in a thousand that had a defect, the demand for it fell sharply. The fear that those fruits could contain hidden pins in them caused a shift in preference. Some supermarket chains stopped all imports of strawberry from Australia as a precautionary measure, but also to preserve brand name and ensure high quality. Quantity demand was less than quantity supplied, and a surplus was created. Quite immediately after it came out in the news, the strawberries at my local market went on sale for a very cheap price.

Secondly, it lowered the quantity supplied. Prices had fallen so low that it did not make sense to transport the strawberries to the stores and keep them chilled. The cost of selling it exceeded the price it was sold for, so that it was actually cheaper to destroy the strawberries. Many Australians were touched by the poor farmers who had to destroy their strawberries or let them rot, and many companies are advertising strawberry smoothies to help reduce surplus. However, even for those farmers who could get buyers, they had to sell them cheaply. The total industry of A$160 million took a toll from the scare, with sales going down by 10%.

With low demand, it is no surprise that there are huge surpluses of strawberries. Many the farms have to deal with the extra fruits, although a lot is simply going to waste. Despite the Australians efforts to eat more strawberries, many farms are on the brink of collapsing. Although there should technically be a price where all the strawberries could be sold, in the real world they cut off all purchase all at once, leaving the supplier high and dry. For example, I am sure people would eat strawberries for 50 cents a punnet, but since this fruit is very fragile and needs a lot of care, the cost of keeping it from rotting is too high.

In order to curb the spread of the crisis, the Australian government has put tighter export controls. While it may be with good intentions in mind, they should note its opportunity cost. Who will be pay for the tighter controls? Presumably, it is the government and thereby the taxpayers. Of course, it must also make sense to prevent this crisis from recurring by instituting more stringent checks. However, this is really an increase in the cost of production. Supply would shift to the right, and quantity demanded will fall. This will probably hurt the farmers more since demand for strawberries is probably elastic. I would think that since the demand can fall so rapidly with so few cases, people are not that excited about eating strawberries.

The issue of the poor Australian strawberries is a sad case of what happens in an economic sense during a food scare. A few pranksters have been said to have caused the whole thing after one or two real cases. Unfortunately, it devastated the industry, hitting especially hard the smaller farms. So, help the Aussie farmers and eat their strawberries! ESR

Luke Tan is a high school student studying AP Macroeconomics. © 2018 Luke Tan.

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