MICROECONOMICS OF WHEAT PRODUCTION

MICROECONOMICS OF WHEAT PRODUCTION

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Pork Production

Commodity Description

Pork is one of the most preferred meat in the UK due to its white meat characteristics and the value it has to the body (Keeton and Dikeman, 2017). It is the meat of a domestic pig and is favored compared to the red meat. Denmark is the largest supplier of pork meat in the UK, having many individual farmers in the area. The gestation period of a pig depends on the breed kept. In the UK, the wild boar is the most common one, with a gestation period of 115 days, which is shorter compared to the Javan Warty Pig. The feed given to the pigs determines the time at which the pig will gain weight to reach the market requirement. A pig is slaughtered for pork when it gets to 60kgs. This weight is the most recommended; however, it may be a little bit less considering the market. Pork is traded in the London stock exchange.

Pork can be sold as raw meat or may be processed to make other products such as pork sausages, luncheon meat, and hot dogs (Iske, Morris and Kappen, 2016). It may be eaten unprocessed but cured in products such as smoked pork, ham, and bacon. It has a high protein content and fat hence help in the growth and development of consumers. It is also high in minerals and vitamins such as thiamine, zinc to aid in brain and immune system. Vitamin B12 and B6 help in blood and red blood cell formation and also improve brain function. Besides, it contains phosphorus and iron that is essential in body growth and maintenance.

Commodity Prices

According to the agriculture and horticulture delivery board, pig prices have been in the increase, especially between mid-2019 and February 2020. In April 2019, pig prices were at 139 sterling pounds, and by December 2019, the prices had risen to 162 sterling pounds (Pork.ahdb.org.uk, 2020). Currently, the price is at 162.82 pounds per kilogram. The drastic change within one year is extreme, with a difference of 23 pounds. The change in the price was because of the African Swine Fever, a severe viral disease that affected the farmers and killed most of the pigs being reared, mainly in Denmark (Taylor et al., 2020). The individuals who practice swine farming had to shift to other animal farming; hence the supply of pork meat went low. Also, the animals became resistant to the drugs that were used to prevent and cure this disease; thus, most of them succumbed to death. Due to low production that consequently caused less supply, pork prices rose from March, and until now, it has still maintained at 162, which is high compared to early 2019.

Low production with high demand in the market consequently impacts the prices, which leads to competition for the available product. Challenging weather conditions also affected the production of pork in the UK. High temperatures slow growth of pigs hence changing supply and lowers the quantity of the product in the market. High temperatures also reduce pig’s fertility; therefore, less production of pork that affect market supply (Loeb, 2019). Low or high outputs affect prices of pork in the market. The production level is influenced by many factors that affect prices profusely.

Reasons for and effects of price changes

In March 2019, the prices of pork went high from 138 to 162 sterling pounds due to the outbreak of African swine disease. Because the infected animals were not safe for consumption, the supply of pork reduced in the market (Hopkins and Terazano, 2020). This effect means a shift of supply shifted to the left, decreasing the quantity and increasing the price.

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A shift in the supply may either increase or decrease or decrease the prices. As seen from the diagram, the original price in the market is P1, with a quantity of Q1, which is formed with the demand D1 and supply S1. As supply shifts to the left to S2, it decreases the amount of pork to Q2 and also increases the price to P2. The African Swine disease causes the change in supply to the left, hence reducing the quantity and increasing cost (Bowman et al., 2013). This impact occurs with the constant demand for the same product.

Shifts in demand either increases or decreases the price of products in the market. A right shift in demand increases both the quantity of the product and price in the market. This is because when there is high market demand, production increases; hence the market reacts by increasing the price. This is because people are willing to purchase more of the product. A leftward shift means a decrease in demand for pork. It causes the quantity to decrease, and the price also drops.

Changes in the price of pork are caused by production changes, government regulations, and economic factors (Stępień and Polcyn, 2016). Pork production is affected by the quality of feed they eat as this determines the weight they will gain hence the time they will get to the market. Government regulations, such as having price controls, also determine the prices of the product. The controls ensure that the prices are not too high for the consumers nor too low for the producers. High temperatures also affect production hence reducing the supply of the product in the market. The cost of production also determines the prices set. High costs increase the price.

Government interventions

Production of pork or pig farming continued even after the outbreak of the disease due to the government putting regulations on smallholder farmers to register their animals and have laws on feeding the pigs (Wasley, Heal and Smaith, 2018). The rules were a way to ensure that the disease does not spread to other areas of the UK. The disease profoundly affected areas of China; hence there was the prevention of export products from outside the country to prevent bringing in the disease. Also, for farmers who undertake extensive farming, the government provides subsidies to the farmers, to support the large-scale farmers and increase production. Such subsidies and support affect the quantity and prices of the product.

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According to the above diagram, an increase in subsidy has the effect of increasing the quantity of the product in the market and decreasing the prices. The pork farmers receive price P2 while the rest is covered by the government. The subsidy provided by the government is shown by P2, P1 Q1D, Q1S.

During the disease period, such government subsidy is beneficial to farmers as they use it in their production. This may be through providing safe feed free from the disease to the pigs by each farmer (Jurado et al., 2018). The disease is spread through contact by an infected animal or through the consumption of meat with infection; therefore, preventing these ways of spread ensures the animals are safe.

However, the success of this subsidy was also a challenge as people evaded from the purchase of pork for fear of consuming contaminated meat. Farmers, too, were worried about losses that may occur due to the disease hence had shifted to other forms of farming. The disease has a high rate of mortality, which may make farmers lose a lot.

Evaluation

China is the highest consumer of pork in the world, and the UK is one of the leading exporters of pork to China. Therefore, pork farming has a high demand across the globe; hence is sustainable. Animal products are profoundly affected by diseases but having disease control steps may ensure that the product production and supply is maintained throughout the years (Bornett, Guy, and Cain, 2003). Consumption of processed and smoked sausages is also high, especially for breakfast. This is evidence that there is a high demand for the product.

However, some religious communities do not consume pig products. This is a challenge to its long-run success in situations where the population grows. Also, production areas will be restricted to areas that the Muslims do not inhabit. The areas may be conducive for pork production, but since the community’s religion prohibit its consumption, they may not allow the farming to occur in their area (Fuseini et al., 2017). Nevertheless, the current high demand eventually requires high supply; hence production must increase.

Government OF UK, has regulations on pig production, how to handle and transport them. These regulations ensure that the product that gets to the market is safe for consumption. Subsidies have ensured that the prices are not too high for consumers. However, the effect of the disease was huge and still reflects current prices; the government is trying to support farmers, to increase production hence get a reduction in the rates.

Changes in the supply of wheat affect the prices, which may make consumers opt for other sources of animal protein such as beef. There are beef sausages, and people may decide to consume them for breakfast rather than the pork. To avoid this, the government needs to support pigs’ farmers by providing disease prevention methods, subsidies, and lands to practice farming. The support will encourage more farmers to practice pork farming hence increase production, which increases supply in the market, leading to decreased prices.

References

Bornett, H., Guy, J. and Cain, P. (2003). Journal of Agricultural and Environmental Ethics, 16(2), pp.163-186.

Bowman, A., Froud, J., Johal, S., Leaver, A. and Williams, K. (2013). Opportunist dealing in the UK pig meat supply chain: Trader mentalities and alternatives. Accounting Forum, 37(4), pp.300-314.

Pork.ahdb.org.uk. (2020). EU Reference Price. [online] Available at: https://pork.ahdb.org.uk/prices-stats/prices/eu-reference-price/ [Accessed 24 Feb. 2020].

Fuseini, A., Wotton, S., Knowles, T. and Hadley, P. (2017). Halal Meat Fraud and Safety Issues in the UK: a Review in the Context of the European Union. Food Ethics, 1(2), pp.127-142.

Hopkins, V. and Terazano, E. (2020). African swine fever drives up European pork prices. [online] Ft.com. Available at: https://www.ft.com/content/5d6a2c8a-eab5-11e9-85f4-d00e5018f061 [Accessed 24 Feb. 2020].

Iske, C., Morris, C. and Kappen, K. (2016). Influence of pork and pork by-products on macronutrient and energy digestibility and palatability in large exotic felids. Journal of Animal Science, 94(9), pp.3738-3745.

Jurado, C., Martínez-Avilés, M., De La Torre, A., Štukelj, M., de Carvalho Ferreira, H., Cerioli, M., Sánchez-Vizcaíno, J. and Bellini, S. (2018). Relevant Measures to Prevent the Spread of African Swine Fever in the European Union Domestic Pig Sector. Frontiers in Veterinary Science, 5.

Keeton, J. and Dikeman, M. (2017). ‘Red’ and ‘white’ meats—terms that lead to confusion. Animal Frontiers, 7(4), pp.29-33.

Loeb, J. (2019). Defra taking action to prevent African swine fever in the UK. Veterinary Record, 185(5), pp.124-125.

Stępień, S. and Polcyn, J. (2016). The phenomenon of cyclical fluctuations on the pork market – global perspective. Management, 20(1), pp.382-396.

Taylor, R., Condoleo, R., Simons, R., Gale, P., Kelly, L. and Snary, E. (2020). The Risk of Infection by African Swine Fever Virus in European Swine Through Boar Movement and Legal Trade of Pigs and Pig Meat. Frontiers in Veterinary Science, 6.

Wasley, A., Heal, A. and Smaith, E. (2018). Intensive farmers get £70M in government subsidies in two years. Bureau of Investigative Journalism. [online] Available at: https://www.thebureauinvestigates.com/stories/2018-12-28/intensive-farms-get-70m-subsidies [Accessed 24 Feb. 2020].