Baconpocalyse! Is it true?

In September 2012, (Tuttle, 2012, http://business.time.com/2012/09/28/so-about-that-unavoidable-bacon-shortage-you-can-stop-freaking-out-now/) United States of America faced shortage in pork and beef where it is caused by the natural disaster where the drought condition had become severe day by day. Farmers themselves understand that they have to endure with the change of weather that harms their plantation of corns. Corns are basically the feedstock for the pigs and cows, and with the price of corn rising, farmers tend to increase the price of pork and beef to cover their cost, or either way to close down the business and start something new, but how much would they increase the price?

According to the article, shortage of pork and beef is happening, but is it really happening? Well, basically pork is not facing shortage. Scarcity of supply till there is no more bacon to be found or sold, it’s impossible, because what they are really facing is the rise of price of corn crops where it disturbs the farmers to still raise the pigs with such a high cost. This will bring to the extent where too many buyers with too little supply of pork and beef which in the end causing shortage.

The drought that’s happening now has really become a big issue to the world’s corn industry as they cannot grow the corn, affecting as well the farming industry as corns are the main sources of food for the pigs and cows. In this situation, it will bring changes to the supply of pork to the market. Supply is defined as the various amounts of a good that producers are willing and able to have the availability for sale at a specific periods. It will lead to a decrease in supply as it corns are necessities to the farmers. The supply curve will shift to the left, S2 from S1. The cost of production will then decrease as the supply decreases leading the business into the diseconomies of scale. 

In every market, it will be a time when it needs to be at equilibrium knows as the market equilibrium.  Market equilibrium is the situation where the market price has reached to a certain level where the quantity demanded and quantity supplied is equal. So, in order to achieve market equilibrium, the previous market equilibrium is at point e, well the new market equilibrium is point a, on the demand curve, the point e has to move backwards which means decreasing the quantity demanded, and the supply curve to shift to the left to point a, from S1 to S2, where the supply increases. At point a, the new market equilibrium is formed. Therefore, reducing the quantity demanded and increasing price of the pork in the market to have equality among the quantity demanded and the quantity supplied. 

The measurement of how much a quantity demanded of a good is reacted to the change in price of a particular good is known as the price elasticity of demand.

Price elasticity of demand is differentiated into three types which are elastic, inelastic and unit elastic. An elastic demand is the changes in quantity demanded that the change in quantity demanded is larger than the change in price, therefore Edp > 1. Whereas, an inelastic demand is the change in quantity demanded does not hold a big responsiveness of change of price, finalizing it to the results of Edp < 1. Finally, a unit elastic demand is the change of quantity demanded equals to the change in price where Edp = 1.

The elasticity of the farmers towards the pork is an elastic demand. This is because of its availability of close substitutes. Farmers can take in for example chicken or goats where the food they eat are wheat and grass, the prices are held fixed as compared to corn as it is increasing. The quantity of the wheat and grass sold will increase drastically while the quantity of corn sold to drop drastically.

Time horizon is another determinant for the elastic demand of corn, as goods tend to have a more elastic demand over a longer period of time as it elapsed. In a situation like this, the drought may occurred at anytime is an unexpected event. The farmers had to suffer with their corn crops being affected badly. The time frame for the drought is short and lesser than a year causing the demand for corn to be elastic.

In a business, business owners care for their revenue. Total revenue is the value paid by buyer addition to the value of obtained by sellers of a good. Total revenue = Price x Quantity. In comparison with the elastic demand and the inelastic demand, the differences are that in an elastic demand the total revenue falls whereas in an inelastic demand, the total revenue increases. In other words the revenue of the farmers for corn, will decrease drastically whereas the total revenue of the substitutes increase drastically.

In conclusion, the drought that has brought havoc not only towards the country but also no benefit towards the farmers and the consumers in the market. The consumers will have to tag along with the consumers by having to pay a higher price for pork and other food prices or to go for substitutes like wheat. The research team has to find up with some technology that may enhance the watering for corn for this type of situation. Subsidies or provision of aid to the farmers by the government would really help a lot.