Vegan Baby Killers

[Kidlicious]

Originally posted by lord of the mark
an example of price related hunger

http://news.bbc.co.uk/2/hi/africa/4176700.stm

Note, Oxfam now seems to focus more on political issues, and has less information on the details of hunger.

The thing is that high prices don't mean decreased consumption. They only mean that there is a decrease in supply (costs of production). So if consumption of beef results in higher average production costs then you could say that consumption of beef results in less consumption of beef feed by people. What do you know about the costs of production?

[lord of the mark]

Originally posted by Kidicious


I don't want to pretend to know more about the specific industry than I do, but the sort of situation that you describe can't last.

edit: It's a disequilibrium condition.

if the farmer is losing money in the long term, even with a land price at zero, (or higher, when there are other non-ag uses with value, like near a city) then yes, its a disequilibrium, and the land will leave production, thats correct.

I doubt that say, a 10% decline in grain prices would lead to a significant number of farms being long term money losers with land valued at zero. Certainly not enough to mean no net decline in the price of grain.

what you are suggesting is that the supply of grain is perfectly elastic with respect to price, so that the price is not effected by changes in demand. While thats THEORETICALLY possible, I dont think it applies in this particular market.

Study more about elasticity and inelaticity of supply, my son

[Kidlicious]

Originally posted by lord of the mark
what you are suggesting is that the supply of grain is perfectly elastic with respect to price, so that the price is not effected by changes in demand. While thats THEORETICALLY possible, I dont think it applies in this particular market.

Study more about elasticity and inelaticity of supply, my son

I'm not suggesting that. In fact I agree that the supply of grain will not change in the short run. You should have taken that implication when I said that a short run price decrease would result. The fact is, however, that the demand for grain is going to increase in the long run as population increases. Therefore the price will return to a new equilibrium situation. One, where the price is the same as it was in the original condition.

[lord of the mark]

Originally posted by Kidicious


The thing is that high prices don't mean decreased consumption. They only mean that there is a decrease in supply (costs of production). So if consumption of beef results in higher average production costs then you could say that consumption of beef results in less consumption of beef feed by people. What do you know about the costs of production?

is it even worth trying to parse this?

Im positing a shift in the demand curve in developed countries (everyone in NA wakes up one day and listens to Ludd, and becomes a vegan) this reduces the quantity of beef demanded at ANY given price (the demand curve has shifted to the left). Assuming a standard supply curve, Im assuming SOME beef producers at the margin will reduce production or go out of business. This does happen, in the real world. This will mean a decrease in the demand curve for inputs into the beef business (Such as corn) it will be offset by increases in demand for grains and legumes, as consumers will buy more vegetable proteins instead, but this will still result in a net decrease in demand for corn and soy at any given price, since beef cattle are inefficient converters (And I will assume that the various grains and legumes are easily subsituted at the farm level, which is a different question)

The lower demand for grain, (derived in part, from the demand for meat) WILL result in lower prices of grain, UNLESS the supply of grain is perfectly elastic, which is unlikely.

[lord of the mark]

Originally posted by Kidicious


I'm not suggesting that. In fact I agree that the supply of grain will not change in the short run. You should have taken that implication when I said that a short run price decrease would result. The fact is, however, that the demand for grain is going to increase in the long run as population increases. Therefore the price will return to a new equilibrium situation. One, where the price is the same as it was in the original condition.

all supply curves are more elastic in the long run than the short run. The supply curve of grain is unlikely to be completely elastic in the long run.

The population increase would occur anyway. and so can be treated as exogenous.

Unless you are claiming, a la Malthus, that any decrease in the price of grain will simply lead to an offsetting increase in population. Which I think is not a correct demographic model, any more.

[Kidlicious]

Originally posted by lord of the mark


is it even worth trying to parse this?

Im positing a shift in the demand curve in developed countries (everyone in NA wakes up one day and listens to Ludd, and becomes a vegan) this reduces the quantity of beef demanded at ANY given price (the demand curve has shifted to the left). Assuming a standard supply curve, Im assuming SOME beef producers at the margin will reduce production or go out of business. This does happen, in the real world. This will mean a decrease in the demand curve for inputs into the beef business (Such as corn) it will be offset by increases in demand for grains and legumes, as consumers will buy more vegetable proteins instead, but this will still result in a net decrease in demand for corn and soy at any given price, since beef cattle are inefficient converters (And I will assume that the various grains and legumes are easily subsituted at the farm level, which is a different question)

The lower demand for grain, (derived in part, from the demand for meat) WILL result in lower prices of grain, UNLESS the supply of grain is perfectly elastic, which is unlikely.

This isn't the issue. The issue is whether or not the price can stay low. The only way producers can maintain the same supply at lower prices is if their costs are lower. Got lower costs?

[KrazyHorse]

Why would they need to maintain the same supply?

[Kidlicious]

Originally posted by lord of the mark
all supply curves are more elastic in the long run than the short run. The supply curve of grain is unlikely to be completely elastic in the long run.

Deary. Forget about long run supply for a moment. The long run price is determined by the average cost of production plus normal profit.

Now the quantity consumed is determined by how many people are willing and able to consume at that price.

Elasticity is not an issue.

The population increase would occur anyway. and so can be treated as exogenous.

Of course. I didn't mean otherwise. You must have missed my point. I'm not sure how to say it another way. When the population increases (having nothing to do with the price of grain) the supply of grain will not increase. Therefore the price will increase.

[Kidlicious]

Originally posted by KrazyHorse
Why would they need to maintain the same supply?

Well if the supply decreases the price is going to increase.

[KrazyHorse]

Originally posted by Kidicious


Well if the supply decreases the price is going to increase.

wow. It's like you don't even understand the supply-demand curve.

[Kidlicious]

Originally posted by KrazyHorse


wow. It's like you don't even understand the supply-demand curve.

[lord of the mark]

Originally posted by Kidicious

Deary. Forget about long run supply for a moment. The long run price is determined by the average cost of production plus normal profit.

The average cost of production for the MARGINAL producer, Kid.

Agriculture aint like manufacturing. You cant assume all producers have the same or even similar costs of production. Land varies tremendously in productivity.

Most grain land in the US, at least, is much more productive (ie has lower average costs) than the land at the margin. This is reflected in the price of that land.

A 10% drop in price would reduce the revenue of all farmers. But the ones not at the margin - the inframarginal producers - would see their profit decline, but they would continue to be profitable (again not counting cost to buy land, which is not relevant for this analysis) and would continue to produce. Marginal producers would drop out, until the remaining marginal producer did just breakeven economically (price = average cost)

[lord of the mark]

folks confuse supply and quantity supplied. Demand and quantity demanded.

A decrease in supply WILL increase price. I havent posited a decrease in supply (IE a shift in the supply curve)

[lord of the mark]

IF you assume that there is one average cost of production applicable to all farmers, IE that all farms are equally productive, IE that the supply curve is flat, IE that supply is perfectly elastic, THEN it is quite correct, that a shift in demand will NOT lead to a change in price, but the system will reequilibrate at the same price.

Kids analysis is correct, but starts from an absurd assumption.

[Kidlicious]

Originally posted by lord of the mark
Marginal producers would drop out, until the remaining marginal producer did just breakeven economically (price = average cost)

Unbelievable! This is what I've been saying except that the producers with the higher average costs will not sell their farms but wait for demand to increase.