DS-Lancaster Farmlhg Saturday, November 2,1985
Laws of supply and demand
America’s farmers are facing a
basic economic truth as they
harvest their crops this fall - that
farm prices are determined by
supply and demand. So the more
they harvest, the worse they will
do financially.
It’s a basic fact of fanning that a
little too much of something makes
a big difference in its price. And
since we already have an ample
supply of most farm commodities,
including com, soybeans and
wheat, bumper crops are causing
low prices and severe farm losses.
The economic experts say a five
percent oversupply will cut prices
10 to 20 percent and affect profits
even more drastically. And on the
other side of the coin, a short crop
can actually result in improved
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 corn, or
soybeans, the total supply has to be
considered.
Here’s where a very important
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 ’'frith the
commodity. For most farm goods,
a sizable price 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 could more than
make up for the cut.
Farm
Talk
! Jerry Webb
When you stop to think about it,
this relationship is fairly easy to
see. Consumers 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
percent 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
oversupply. In past years, an
unfavorable growing season has
been a blessing in disguise. The
short crop boosts prices. Price
times supply yields total income. A
farmer who sells 10,000 bushels of
corn for $3 a bushel, is better off
than one who sells 12,000 bushels
for $2 - assuming production costs
are the same in both cases.
The trick in this economic hocus
pocus is to make the situation work
for the farmer 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 vestage of pure
competition. Anyone who wants to
SYRACUSE, NY - Three top
officers were re-elected by the 18-
member board of directors of
Agway Inc. October 25, im
mediately following the farm
cooperative’s 21st Annual Meeting
in Syracuse, NY.
Re-elected were Richard Croner,
Berlin, PA, chairman of the board;
Richard C. Call, Batavia, NY, vice
chairman; and William A. Hiller,
Fayetteville, NY, president and
chief executive officer.
Croner, who operates a dairy
farm in partnership with his son,
has served as Agway chairman
since 1982. A member of the Agway
board since 1964, he is a graduate
of The Pennsylvania State
University and was named a
Pennsylvania Master Farmer.
Call, re-elected vice chairman,
operates a dairy and crop farm in
partnership with his brother, Bob.
A member of the Agway board
since 1973, he is a graduate of
Cornell University.
William A. Hiller, re-elected
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
some price when he’s ready to sell.
Pure competition can be a very
difficult game - 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 in
dividual suffers. That is obviously
the case this fall.
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Agway officials reelected
president and chief executive
officer, was first named to the post
on July 1,1981. He joined Agway in
1951 and has held managerial
positions throughout the
organization. As Agway’s top
management officer, he heads a
system with consolidated sales of
$4.1 billion in fiscal 1984-85.
A native of Stroudsburg, PA,
Hiller graduated cum laude from
Upper lowa University and holds a
master of science degree in
agricultural economics from The
Brandt agent named PA’s
WYOMISSING HILLS - Tressie
Caton has been named “The
Pennsylvania Farm and Land
Realtor of the Year.” The award
was presented to her by Past
President of the Farm and Land
Institute Charles Taylor, at the
Annual Pennsylvania of Realtors
Convention, in Hot Springs,
Virginia.
Tressie is the Manager of Rich
Brandt Farm Real Estate which
covers a 12-county area in Penn
sylvania. She is responsible for
bringing a multi-million dollar
agriculture business to Penn
sylvania which will employ over 50
people.
Tressie is the Secretary-
Treasurer of the Pennsylvania
Farm and Land Institute for 1985
and has been re-elected for 1986.
She was directly responsible for
the Institute’s increase in activity.
The membership of Penn
sylvania’s Chapter had a 75%
increase for 1985.
Tressie is a graduate of the Real
Estate Institute. The award is
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Pennsylvania State University.
One new director and five u.
cumbants were elected to three
year terms on the 18-member
Agway board of directors. R fr
elected were: Richard C.
Batavia, NY; Eugene Freund,
East Canaan, CT; Ralph H. Reg.
ner, Pine Grove, PA; Frederick a.
Hough, Augusta, NJ; Christian F
Wolff, Jr., Millville, PA.
Elected to his first term on the
board was Vyron Chapman of
Cassville, NY.
Tressie Caton
bestowed for outstanding per
formance and is not necessanlj
awarded annually.
T " WILKES BARRE
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