Agricultural Economics

Figure 1Wine grape price in Australia

(Source: Riverina wine grapes marketing board, 2017)

Some of the reasons due to which grape price decline in the Australia are given below.

Weak economic condition of USA and UK: Weak economic condition of the USA and UK market heavily affect the wine grape price in the Australia. It must be noted that USA and UK are the nations that are heavily affected by the economic crisis (Australian wine, 2017). Due to economic crisis business conditions become uncertain and business firms start curtailing their workforce and due to this reason unemployment rate get increased in the both nations. Due to elevation in the unemployment rate people spending power get reduced and this affects the demand of the grapevine in the UK and USA. Due to less demand and high supply price of the grape wine fall sharply in the both market and profitability of the business firms decline sharply. It must be noted that USA cover 27% market share of total exports of gape wine that happened from the Australia market. Apart from this, 35% market share of grape wine is covered by the UK market. Both markets declined and due to this reason and due to increase in supply price of grapevine declined.

Unstable agriculture condition: Unstable agriculture production is one of the other reason due to which price of grapevine keeps of fluctuating consistently in the market. It can be observed that due to change in climatic conditions production also get changed and due to variation in supply of grapes price of same also fluctuate in the market.

Oversupply of product: Oversupply of the product in the market is the one of the main reason due to which price of grapevine decline in the market consistently. It must be noted that there must be equality in the demand and supply of the product (Oog, D., 2017). If demand is less and supply is high then in that case price of the commodity decline and due to this reason reduction is observed in the price of grapevine.

Change in taste: Change in the taste is the one of the basic reason due to which price of grapevine declined in the Australia and traders earn less profit in their business. It must be noted that there are different variety of the grapevines in the market and with passage of time people preference also get changed. Due to this reason demand of grape wine also get affected in the market and this is the reason due to which less demand  and elevation in supply price of grape wine reduced sharply in past few years. Thus, it can be said that change in taste, oversupply of product, unstable agriculture conditions and weak economic condition are the one of the main reason due to which grape wine price reduced in past decade.

PART B

Explain how the supply and demand affected the the prices of products

International factor impact on the prices of agricultural commodity are as described below-

Weather conditions-  It has been seen that most of commodities are internationally traded that majorly include agriculture products. Therefore, the production of these goods are highly depends on the weather conditions of a country. It can be said that there is a sudden happen of changes in the climatic condition of a any country. It involves that there is rainfall are inadequate or draughts are might impact on the agriculture products availability all over the world market. Thus, there is an causes of scarcity and commodity of agriculture prices are to be pushed northwards.Get best assignment writing services from us.

Economic and political conditions- There is an on another international factor that may highly impact on the agriculture products is only due to economic and political condition of any country. It will impact where these agricultural commodities are produce as well as consumed (Lenzen and et, al., 2012). Therefore, there is an example of Iraq in which there is a Gulf war that are majorly producer of oil. Thus, the prices of oil are changes or fluctuating frequently. Moreover, the condition of economic of country is might weak for that major reason it will minimize the spending or purchasing of customers. Thus, it will leads into the fallen into demand of buyers and there will be fluctuation of prices.

Government policies- The another international factors is that changes in the government policy it is due to impact of import or export cost to the purchaser or seller which have a great impact on the prices of agriculture commodity. For instance, the government of UK increasing the price of import of edible oil that will proportionally impact on the price that is increase and vice versa.

The above factor may impact on the demand and supply if there is any changes in the price of agriculture commodities are describe below-

Changes in the price of agriculture commodities due weather conditions( Increase)

There is shortage of commodity products due to scarcity of agriculture products raw material. In that particular situation, it will directly of equally impact on the demand and supply of the agriculture commodities (Johnson,2013). The producer of product are not willing to supply the agricultural products in these events. It will increase in the price of mention product so, the consumer will purchase at higher prices and it will also impact on the demand that will be reduce from the previous particular time period.

Conclusion

It can be explained from the above figure is that the price of change in the agriculture is that it will be increase that directly shift the supply. The price of increase will directly shift the demand of the particular agriculture products that will be inelastic.

REFERENCES

• Johnson, H.G., 2013. International Trade and Economic Growth (Collected Works of Harry Johnson): Studies in Pure Theory. Routledge.
• Lenzen, M.,  and et, al., 2012. International trade drives biodiversity threats in developing nations. Nature, 486(7401), pp.109-112.
• Online
• Oog, D., 2017. [Online]. Grape production in Australia. Available through :< http://www.fao.org/docrep/003/x6897e/x6897e04.htm>. [Accessed on 2nd April 2017].
• Australian wine, 2017. [PDF]. Available through :< http://www.wfa.org.au/assets/noticeboard/Coles-Report.pdf>. [Accessed on 2nd April 2017].
• Riverina wine grapes marketing board, 2017. [Online]. Available through :< http://www.wgmb.net.au/index.php/products/utilisation-price-surveys>. [Accessed on 3rd April 2016].

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