11/17/2004

Tomatoes in Short Supply

Three hurricanes, an irregular rainy season, and pests have contributed to a shortage of tomatoes. The largest producers of tomatoes in the country are: Florida, California, and Mexico. Each state has had their problems with disasters that have constrained the output of tomatoes. According to the Agriculture Department the average consumer demands 18 lbs. of tomatoes a year. Much of the 18 lbs are provided through restaurants that use to the tomato as a side ingredient in a wide array of dishes. Restaurants and grocery stores are faced with the dilemma of accommodating customers without the rich resource of ripe tomatoes. Not only has the price quadrupled from last year, but the supply is poor. The quality of the tomatoes are very poor, apparently the high selling price has provoked farmers to deliver premature tomatoes to a market that is in high demand. Many large restaurant chains are being forced to alter marketing decisions and promotions do to the rash of tomato shortages. Some full service restaurants are faced with the tough decision of weather to absorb the price increase, divert the price to the consumer or find some sort of alternative to the tomato. Safeway a large grocery chain has absorbed some price but has shared the increase with the consumer as well. Much of Safeway’s produce is supplied by greenhouse agriculture; the ratio is usually around fifty percent. Since the shortage of supply Safeway has had to outsource as much as seventy percent of its supply from greenhouse suppliers. The Subway sandwich chain has provided posts inside their stores letting customers know that some sides may not be available do to market complications.

2 comments:

Maudi said...

Shortages of Tomato's is a big problem especially for those resturants that use a lot of Tomato, in the preparation of their food. This particular shortage is a classic example of what can happen to the price of a commodity when there are not very many substitutes.

Dr. Tufte said...

-2 on StevePadilla2's post for a misspelling and no link.

-1 on Maudi's comment for multiple spelling errors.

Folks ... you missed the Managerial Economics here. What does it mean when Safeway ends up eating most of the price increase? It means that their demand is very elastic, and they don't expect consumers to buy tomatoes if they raise the price.