As the world is aware, scorching heat and massive drought
has strike the United States in mid-2012. This natural disaster has brought
nothing but devastation as it covers almost 60% of the continent U.S.
Rumour has it saying that the price of several goods will
increase in the year 2013 due to this crop-damaging weather that will have an
effect on the supply and demand of the country. The good news is that not all
the price of goods will be increased.
Meat and dairies which are normally consumed
Ever wondered why the
government increases the price of goods?
Well, the Americans survive by consuming mainly more on
meat, poultry and dairy products. The U.S Department of Agriculture have said
that these are the items that the price will increase due to the drought in the
range of 3% to 4%. How so? The drought will cause the grass to wither which is
the reason why cows have a little to eat while grazing. Farmers will either
have to spend more by using other alternatives to feed the cows or by selling
off their cows to earn a living. Farmers who spend more will then result to a
higher cost of sales where customers will then have to pay.
Implication of drought in front of a family farm in Lovilia, Iowa
Meat and poultry has the largest effect as most of their
feed prices represent the biggest part in their cost production. Corn, soybeans
and other commodities are not considered as an exception in this case. Fields
dry out and crops wither across most of the country’s midsection. These items
are also soared in anticipation of tight supplies after meat and poultry. Farmers
will have to pay more to feed their livestock in order to produce more. This
will cause the price to increase in the production of these goods.
A farmer standing in a withering field in July 2012
Fruits and vegetables on the other hand do not have a big
impact compared to the products mentioned above as they are irrigated even in
normal weather. Price of process food on the other hand is less affected as the
cost of production does not take up much compared to the transportation and
marketing cost. Therefore the demand for these goods by the consumer would not
be an issue as there will be sufficient supply by the country.
The never ending demand of consumers is one of the things
that the industry can’t run away from. Demand is “the desire and ability to
consume certain quantities of a good and service at certain prices at a particular
point of time” while supply is “the quantity of goods and services willing to
be produced by firms or offered for sale at a particular time or particular
place at alternative prices”. So since the supply is limited, the price of
goods needs to be increased in order to ensure the continuity of goods for the
benefit of the consumers.