Agricultural market
The agricultural market is a market in which the market participants exchange agricultural products for payment of the agricultural price.
General
The agricultural market is a sub-market of the consumer goods market . Market participants of the agricultural market are on the supply side , the farmers and agricultural production economy as producers , as buyers act of trade ( wholesale and retail ) and consumers . In a broader sense, the market participants also exchange agricultural machinery , but as agricultural technology these must be included in the capital goods market. As market prices in the agricultural market in the strict sense - which is described below - functions of agricultural prices . As an equilibrium price, this leads to market equilibrium when the supply of agricultural products is completely covered by demand . Correspondingly, there is a market imbalance if there is an excess supply / demand gap or an excess supply / demand demand in the agricultural market.
Market structure
The supply on the agricultural market results from agricultural production , which is very seasonal due to the weather . If natural disasters (such as drought , pests or floods ) lead to poor harvests , the supply drops immediately, whereby a supply gap with constant demand leads to rising agricultural prices. Conversely, good weather conditions, increased productivity or state agricultural subsidies for agriculture can lead to an excess supply ( overproduction ) that cannot be sold (“ Butterberg ”, “ Milchsee ”). The result is a drop in prices for the agricultural products concerned.
In this context, three peculiarities of the agricultural market emerge, namely the mostly poor shelf life of agricultural products, the climatic zone- dependent producibility of most agricultural products, and the inverse elasticities on the agricultural market. The latter can be explained by the fact that the manufacturers pursue the goal of securing their income , which deviates from the corporate goal of profit maximization . The agricultural supply is inversely elastic if, in the event of a fall in the agricultural price (e.g. due to a shift in demand or imports ), agricultural production does not decline but continues to rise; the demand for agricultural products is inversely elastic if, when prices rise, demand does not decrease but continues to increase. There is therefore a deliberately anti-market reaction to price movements. This shows that low agricultural prices usually do not lead to higher demand because, for example, the demand for butter is met and does not only increase because of the low butter price ( market saturation ). If, for example, there is a supply surplus on the dairy product market that causes milk prices to fall, inverse supply behavior implies that dairy farmers increase their herd of cows in order to compensate for their loss of income due to falling milk prices. However, this market behavior is only economically rational if the additional revenue generated from it at least covers the additional cost of the purchase price of the cows. That is why agricultural production in particular tends to overproduce internationally. These agricultural surpluses are the supply surpluses on the agricultural markets. The instability of the agricultural markets and their relatively high price flexibility is therefore not only due to a low elasticity of the demand for agricultural products, but is also due to the inelastic supply.
The agricultural market has a low supply elasticity , at least in the short term . The inelastic supply is due, on the one hand, to the weather conditions that cannot be influenced (crop failures) and, on the other hand, to the long period between the investment decision and the availability of agricultural products and often long ripening times. A coffee bush, for example, does not produce the first yields until five years after planting, the maximum is only expected after ten to twelve years.
Different climatic zones mean that not all agricultural products can be produced all over the world. While stockings could theoretically be made anywhere, bananas only thrive in the tropical to subtropical western Pacific region , Asia and Africa . Western industrialized countries have to import them, their degree of self-sufficiency is always 0%.
Market regulation
For these reasons, the agricultural market is classified as a non-functioning market, so that the state intervenes in the context of its agricultural policy through agricultural protectionism and market regulation . This is done through intervention prices ( minimum or maximum prices ), with which the state intervenes as a buyer or seller within the framework of state interventionism, or through production quotas that determine the maximum or minimum quantities of agricultural products to be produced.
In September 1959, for example, the surplus of sugar on the world market increased to 12.6 million tons, which caused Cuba, with its further 3.52 million tons of sugar, to experience serious export difficulties. In March 1961 - before the Cuban Missile Crisis began - the United States reduced Cuba's sugar quota to zero, which amounted to a ban on imports of Cuban sugar. In today's EU there was a sugar quota from July 1968 to September 2017 due to the sugar market regime . So that the sugar quota was not undermined, the production of any substitute goods even had to be quoted. The EU's sugar quota system initially extended to isoglucose and later to inulin . This reduced the incentives to develop new products and production processes through product innovation in order to undermine the sugar quota. The milk quota as a regulation of the amount of milk had to be introduced after there had been an EEC-wide supply surplus before July 1978. A benchmark system of the market regulation law prescribed a quota for milk production since 1979 . The EEC introduced the first milk quota in April 1984 and continued it until April 2015. A state intervention price was introduced for by- products such as butter ( Butterberg ), so that state intervention agencies had to take over storage with corresponding storage costs . The intervention price is a minimum price for the producer, with which he can calculate. In this context, EU law differentiates between the production quota, which affects the individual company, and the limitation of the total production of an EU member state by the guarantee threshold .
Commercial objects
Sub-markets of the agricultural market are crop production and animal production . Commercial objects of crop production are agricultural products made from crops such as vegetables , grain , fruit , tobacco or wine . Animal production includes the keeping of farm animals such as domestic chickens , domestic cattle , domestic pigs or sheep and goats .
Agricultural products from direct and indirect production are traded on the agricultural market:
- Direct production : agricultural products that are sold immediately after harvest . They are not mixed with other products and are usually marketed after only minor further processing. These include vegetables such as cabbage , potatoes , salads or onions and fruits such as apples , pears or strawberries .
- Indirect production : agricultural products that cannot be sold or used immediately after harvest. They are first mixed with other products or processed and only then marketed as a marketable end product . These include cocoa beans , coffee beans , edible fats and oils or wine . Farm animals can be used to obtain natural products such as eggs , milk , cheese or animal fats or processed into meat .
The agricultural market does not include fishing (with edible fish as a product) and forestry (with timber as a product). In contrast to this economic delimitation, Article 38 (1) TFEU provides that fisheries and the products of the first processing stage that are directly related to them also belong to agricultural products.
Legal issues
From Art. 38 (1) sentence 1 TFEU it follows that the national agricultural markets (consisting of plant cultivation , animal husbandry and fisheries ) are combined into a single market that encompasses all EU member states . The most important goals of European agricultural policy are summarized in Art. 39 TFEU: increasing productivity , securing supplies ( security of supply ), stabilizing agricultural markets and ensuring a fair standard of living for farmers.
Agricultural markets in the EU
The common agricultural policy of the EU is also based on the basic idea that a free internal market with agricultural products can not be realized without dirigistic interventions with regard to the income situation of farmers. In January 1962, an agreement was reached on a uniform price setting for most agricultural products, the preference for EU agricultural products, the stabilization of the income situation of farmers and the establishment of a guarantee fund for agriculture. In December 1969 an agreement was reached on the financing of the common agricultural policy. A first agricultural reform in 1983/1984 ensured that there were production quotas for some agricultural products (such as the milk quota) and price guarantees for surplus products were no longer applicable. A fundamental agricultural reform was followed in May 1992 and brought in the crop production changes for cereals, oilseeds and legumes; In animal production , the reform focused on beef production.
Economics
From an economic point of view, the agricultural market in agricultural states is of particular importance because it controls the entire economic structure here . Even in industrialized countries , however, the agricultural market plays a special role because of its strategic importance, because with its agricultural products it covers the basic human need for food like no other market . Therefore of particular importance to the security of supply, especially in supply crises , the self-sufficiency by the highest possible self-sufficiency rate is intended to ensure.
In Europe, field management usually only allows one harvest per year, which means that a critical revenue and cost structure is given. Outside Europe, on the other hand, extensive land use is possible with correspondingly lower unit costs (wheat in the USA and Canada, cattle breeding in Argentina and the USA). The tendency towards mass production according to the law of mass production (with fixed cost degression ) leads to the formation of large agricultural enterprises that can better exploit economies of scale . Characteristic here is the factory farming , in contrast, is the ecological agriculture .
Individual evidence
- ↑ Georg Blass / Franz J. Lammert, Allgemeine Wirtschaftslehre , 1974, p. 39
- ↑ Georg Blass / Franz J. Lammert, Allgemeine Wirtschaftslehre , 1974, p. 39
- ^ Martin Gester, Minimum Price Systems in Agricultural Foreign Trade , 1963, p
- ↑ Michael Fritsch, Market Failure and Economic Policy , 2018, p. 301
- ↑ Dirk Piekenbrock, Gabler Kompakt-Lexikon Volkswirtschaftslehre , 2009, p. 6
- ↑ Hans Heinrich Herlemann, Fundamentals of Agricultural Policy: Agriculture in Economic Growth , 1961, p. 96
- ↑ Werner Pepels (ed.) / Paul Ammann, B2B-Handbuch Operations-Management , 2009, p. 40
- ↑ Werner Lachmann, Development Policy , Volume 3, 1994, p. 83 f.
- ^ Rafaël Govaerts (ed.), Musa - World Checklist of Selected Plant Families of the Royal Botanic Gardens, Kew Science
- ^ University of Rostock , Scientific Journal of the University of Rostock: Society and Linguistic Series , Volume 11, 1962, p. 624
- ↑ Christian Grimm, Agricultural Law , 2004, Rn. 380
- ↑ Urs Egger, Agricultural Strategies in Various Economic Systems , 1989, p. 171 f.
- ↑ Karl-Werner Hansmann (Ed.), Europa 1992 , 1990, p. 9
- ↑ Dirk Piekenbrock, Gabler Kompakt-Lexikon Volkswirtschaftslehre , 2009, p. 6
- ↑ Karl-Werner Hansmann (Ed.), Europa 1992 , 1990, p. 10
- ^ Karl-Ernst Detering, Wi (e) der den economic nonsense! , 1995, p. 80
- ^ Karl-Ernst Detering, Wi (e) der den economic nonsense! , 1995, p. 80 f.
