lOS—Lancaster Farming, Saturday, February 4,197 S
Supply dictates
By Jerry Webb
University of Delaware
NEWARK, Del. - It’s a
basic fact in agriculture that
it only takes a little too much
of something to make a big
difference in price. For
example, the economic
experts say a five per cent
oversupply will cut prices 10
to 20 per cent and affect
profits even more
drastically. And on the other
side of the coin, a short crop
can actually result m im
proved farm income.
While this seems contrary
to logic, it is a fact. It would
seem that if you have more
of something to sell, it would
yield more money. As an
individual farmer and for a
given price per bushel this
might be true, but when all
farmers start selling wheat,
or com, or soybeans, the
total supply has to be con
sidered.
Here’s where a very im
portant economic law comes
into play. The law of
diminishing demand says
that if a great quantity of
something is thrown on the
market, it can be sold only at
a lower price. How much the
price must be lowered varies
with the commodity. For
most farm goods, a sizable
pnce drop is necessary to
move just a little more. But
for sports cars, or some
other luxury items, a small
price cut could drastically
increase sales and the added
volume would more than
make up for that cut.
When you stop to think
about it, this relationship is
fairly easy to see. Con
sumers can use only so much
wheat regardless of the
price. In a normal year,
they’re getting about all the
wheat they want. Then when
an extra five per cent comes
along the price on all wheat
drops, just to market that
little bit extra.
On the other end of the
scale is a situation where if
the crop is short, the price
will rise considerably.
Consumers need bread and
they’re willing to pay for it.
Most agricultural goods
are like wheat. If the supply
is a little short, the price
jumps a lot. And if the supply
is long, the price drops. The
size of the price change in
response to the supply is
the key. In the case of wheat
or com or soybeans, this
shift can be great enough to
cause a higher total income
from a less than normal
crop-or seriously depressed
prices from a small over
supply.
In past years, an un
favorable growing season
has been a blessmg in
disguise. The short crop
boosts price. Price tunes
supply yields total income. A
farmer who sells 10,000
bushels of com for $2.25 a
bushel is better off than one
who sells 11,000 bushels for
$2.00-assummg production
costs are the same in both
cases.
The trick in this economic
hocus-pocus is to make the
situation work for the far
mer each year instead of
against him. Various
organizations have tried to
control farm output by
pouring milk on the ground,
burning crops, burying baby
pigs, and so on. For the most
part these farm level control
programs have not worked.
You see, agriculture is
perhaps the last vestige of
pure competition. Anyone
who wants to farm and who
can get some land,
machinery and supplies, can
go into business. And
whatever he produces will be
sold at some price.
By himself, this farmer
has virtually nothing to say
about price and no effect on
the market. He can’t raise
the price by holding his crop
nor is he denied a market at
RIGID OR SWINGING
Pull 3 bolts to convert from rigid to swinging im
peller paddles on the Jamesway Volumatic® II silage
distributor-unloader. The big-capacity 26" dia. im
peller has a convenient easy-access lift-off top.
We also install cattle feeding, ventilating, and
manure-handling systems.
AGRI-EQUIP.
RD2, Farmersville, Ephrata, PA
717-354-4271
ROY O. CHRISTMAS
ROl (Shartlesville) Hamburg, PA 19526 ERB & HENRY EQUIP., INC.
215-562-7218 or 215-488-1904 22-26 Henry Avenue
New Berhnville, PA
215-367-2169
I. G.’s AG. SALES
Rt 113,80 x 200,
Silverdale, PA
215-257-5135
SHOW EASE STALL CO.
573 Willow Rd
Lancaster, PA
717 299-2536
price to farmer
some price when he’s ready
to sell.
Pure competition can be a
very difficult game with
each farmer doing his very
best to grow and sell as
much as he can. By
definition, he hopes for a
bumper crop for himself and
the plague for all other
growers. Sometimes his
over-zealous productivity is
his own undoing. For
collectively, these millions
of farmers make up the total
supply picture. This in turn
sets the price. If total output
is greater than demand, the
individual farmer suffers.
That’s just what happened
this past marketing year.
After several years of
strong demand and
favorable prices, supply has
finally outstripped demand.
And fanners are reaping the
impact of low prices on three
of their major grain crops all
LANDIS BROTHERS INC.
1305 Manheim Pike
Lancaster, PA
717-393-3906
DEPENDABLE MOTORS
Honey Brook, PA
215-273-3131
HENRY S. LAPP
RDI, Cains, Gap, PA 17527
in the same marketing averaging as they
period. their taxes this
No doubt farmers are That’s small console
doing a lot of income it is something.
HOG PRODUCER;
Get Top Price for
Your Hogs at JK J
New Holland *
Sold in sorted lots the auction way. See tl
weighed and sold and pick up your check.
S/HE EVERY MOMMY MO AJVL
♦ NEW HOUAND SALES STABLES, INI
I Phone 717-354-4341
I Daily Market Report - Phone 717-354-721
I Abe Diffenbach, Manager
717-442-8134
M. S. YEARSLEY & SON
114 E. Market St.
West Chester, PA 19380
215-696-2990
HARRY L. THOOP
Rt. 1 Cochranville, PA 19330
215-593-6731
J.M. HORST SERVICE CO.
Box 231
Quentin, PA
717-274-1242
i. A. SWOPE
Box 121, R.D. (1
Myerstown, PA
717-933-4758