The global climate change has drawn worldwide concern as they are more aware of its potential impacts and consequences particularly to the agricultural sector. As the world experiencing a severe drought condition, impacting the harvest production such as other staple corps to decrease. An article by the Natural Resource Defence Council says that the drought has definitely affected the supply of crops as the plant needs water to grow well. Subsequently, lack of water resources, makes corps hard to grow as well as make the already grown crops became dried. As a result, there will be short supply on food while demand keep increasing as food is a basic needs.
SITUATION ANALYSIS
In United State, it
shows that the supply of foods has decreasing rapidly because of drought, as a
result, the current situation will cause the supply curve to shift leftward
(Crutchfield, 2013) Supply is the
quantity of goods and services firms
willing to produce or offered for sale at a particular time or particular place
at a certain price (McConnell
et al. 2012, p.51). As shown in the Diagram 1
and 2, though supply is decreasing, it is totally on opposite for demand as it
kept on increasing as foods are basic necessity. A demand is effective if the desire and ability
of consumer to consume certain quantities of goods and services at a certain
prices at a particular point of time. After analysing, the current situation
shows that the demand curve will shift rightward as food are a needs for people
to be able to live.
Hence
the curve will look as below when the market effects of simultaneous changes in
supply and demand :
 |
1) Shifting of supply to the left as less product are being product in result the supply to decrease.
2) Demand will shift to the right indicating that demand is still high despite less product are being supplied.
As
foods are the basic needs, there will still be a higher demand for other staple
corps. Producers will take this opportunity to increase the price to generate
higher profit which leads to price elasticity of demand equal to zero. An elasticity is a measure of the sensitiveness
of people to changes in economic variable (McConnell
et al. 2012, p. 14). Price elasticity of
demand is measuring the relationship between percentages change in quantity
demanded over the percentages change in price. According to Times article,
price of groceries in United State was increased by up to 50% as a result of
the drought conditions. The situation
was fairly inelastic because consumers accepted the price changes as the goods
are of necessity (Sanburn, 2012). A
perfectly inelastic demand occurred when consumers are insensitive towards the
price changes although it increases drastically.
As seen in Diagram 4, the original price (P0) move up to a new price (P1) indicating there’s increasing in price, but the demand line (red line) remain unchanged. This shows that, a change in the price brings about no change in the demand.
A
shortage towards corps might occur if the situation on going. A shortage is
when consumer is willing to buy more than what the producer is willing to
sell. It occurs when the market price is
lower than the equilibrium price while the demand is higher. According to The Guardian article, drought has definitely a threat to food supply in the Middle
East as it is hard for the producer to produce enough food because of the dry and
damage corps (Vidal, 2013). As a result,
supply decrease, but the demand keep on increasing as food are basic
necessities.
According to an article from The Wall Street Journal 2012, the current situation shows that there is a shortage for both corn corps and soybeans because of the
drought. Supply will drop as there will be a decrease in production of both
goods, leading to demand-pull
inflation. Demand-pull inflation
occurs when excess demand that could not be met by its supply thus forcing the
price to increase. Analyzing the article in paragraph 4, it says that if
there are a healthy
supplies, shortage and demand-pull inflation will not occur. With healthy supplies of rice and wheat plus low oil price it will not affect the price to increase. However,
if the shortage of productions
persist and depends on
rice and wheat as their supplementary foods, the shortage of supply might took
place eventually toward the supplementary foods and lead price
increase for the goods (Pleven, 2012).
FINDINGS AND CONTROLS
Diagram
6 shows a market equilibrium happens when the supply (red line) intersect the
demand (orange line) showing it equal between quantity supply and quantity
demanded.
The
climate change that occur could cause an effective maximum price or also known
as a price ceiling. A market equilibrium is a situation where quantity supply
is equal to quantity demanded with no tendency for price to either increase or
decrease. A price ceiling sets the maximum legal price a seller may charge for
a product or a service. A price which is higher than what is set by the
government is considered illegal; while price at or below the ceiling is legal.
This is to prevent the supplier engaging in charging outrageously high price
for limited goods (Hammond,2008) (Taylor,2006).
For
example, in order to maintain the price of a certain good, the government
imposed a price ceiling of RM10 by giving subsidies due to excessive demand.
Hence, price of the goods can be controlled and is beneficial to the consumers
as well as to contain inflation's.
RECOMMENDATIONS
The public
is concerned as to how food crisis can be averted in the future. Article from Voice of America stated that a simple method that had been use in Nigeriens where the community
had come together and built very simple holes in the land so that they could
plant seeds and fertilize them so that when it rains, the seed don’t wash away,
and they have a better chance of growing more food (Lewis, 2012). They did this
even before the drought as they already expecting the heat wave. Alternatively,
the use of modern technology should be in used. Forbes highlighted few methods using the technology
that can help when situation like this occurs with lower production cost leads to lower price goods for consumer (Perlut,2012). Energid Technologies harvesting system
that automatically finds and removed fruit at a lower cost than manual
harvesting and Visual Robotics that
will use stereo vision-based robots to picks, prune and other tasks on
specialty crops (Perlut,2012).Another method that has been use in South Korea where they use investment and industrial relationship method (Elgin, 2012) . Presently more Korean money is being used to farm undeveloped
lands in places like Australia, to
further enhanced land fertilization. Korean ownership in Australian farmland has reportedly more than doubled
within the last twelve months since August (Elgin, 2012).
CONCLUSION
Food crisis due to drought can be averted by educating consumers to used substituted goods
as well with more use of modern technologies. For example, instead of eating rice we can
substitute it with bread. This can prevent the consumer from demanding for just
one particular
goods and can shift it to another
substitute goods.
In conclusion, there are still ways and means that
the crisis can be handle provided the right measure and steps is taken by the
authorities concerned and consumers at large.