Who drives the supply and demand curve?
TRYING to determine who drives the market forces in Fiji from grassroots level can often be a tenuous activity if one does not have the facts or data to support their arguments.
But arguably as far as economics is concerned, market forces at the end of the day are determined by the consumer or customer.
If we talk about fresh produce at the markets for instance, overproduction will see a reduction in prices and low production or supply will see the opposite effect.
The consumer’s decisions most of the time would be dependent on price, quality or convenience of the product.
Cost will obviously be a major factor as far as the common Fiji customer at the market place is concerned.
Presentation and convenience are often also major factors in determining consumer decision.
Studies conducted on the basic food items a normal Fijian household go for indicate the increase in consumption of rice and bread as a staple diet as opposed to taro, kumala and cassava. (Fiji Domestic Market Study, Sept 2011)
Reasons given were preparation problems and time as key reasons for the declining rates of consumption.
From producers, suppliers to those who will actually deal with the customers, the one main challenge they have is to lure the customers to buy their produce. If farmers continue to invest in quality crops, then it will go far down the chain.
If the middleman continues to demand for quality from farmers the result will be the same, and if vendors invest also in presentation and quality, customers will make their decision in half the time as soon as they enter the market place.
Packaging
There is the always the option of vendors making their products more presentable and prepared in a way so that the customer does not spent too much time and energy to cook it.
Perhaps, this could mean more value adding to the produce but does not necessarily have to be measures that will cost them more.
For instance;
1) They can be cleaned thoroughly.
2) Stalked neatly according to size and type.
3) Or even peeled and readily packed in low-cost plastic bags ready for the pot.
These are things vendors or producers can look at to pull customers away from imported produce which is often made and packed ready for the pot.
For the fast moving urban society, who are the customers who spend most at the markets, (as they do not have land to plant their own), convenience and time is paramount.
Middleman
Many do not realise that the middleman in terms of business poses a major influence on the supply and demand curve in terms of dictating quantity to which markets and its prices.
At the end of the day, the prices that vendors sell to customers from their shelves at the market are determined upon the negotiated prices when they procure the supplies from the middleman.
These daily transactions between farmers or suppliers and middleman continue to play a major economic activity for the rural sector. There is an argument that perhaps there should be legislation in place to determine the parameters with which a middleman should function.
Head of the Fiji Fresh Produce Association and long-time exporter Sam Foy said that many do not realise the influence the middlemen pose on the cost of the products at the point of sale.
In some ways they also determine or influence the customer’s decisions. Mr Foy added that vendors were often at the mercy of these middlemen who posed unreasonable prices on produces.
“These vendors then in order to make a profit have to sell at a higher price,” he said.
“I believe there should be legislation in place to determine the roles of middlemen.”
Fifty-five-year-old Jagdish Prasad is a well known vegetable farmer in Korovou, Tailevu who has been in the business for 30 years.
He owns a 20 acre piece of land along Deepwater Road and plants various vegetables and root crops from tomatoes, eggplant, variety of beans, cabbages and tubua.
He owns stalls at Korovou market but supplies both the Nausori and Suva markets on a weekly basis. “At the end of the day, it’s the customers who determine the market forces which then drives the supply and demand trend, but this is greatly determined by the prices and quality of the goods.
“This is an area which is still quite grey in Fiji as there is no control in it and middleman are the ones who dictate this area between the farmers and point of sale,” Mr Prasad said. He said most middlemen they dealt with tell them what people want more and what was hot in the market, but also added that seasons also played a big part in determining what they supplied to the markets.
Next week: The middle-man business
* This is a weekly contribution from the Fiji Export Council.