Strawberries... a good choice for vegetables farmers to switch to?

          According to Wong in The Star Newspaper Online dated on 9^th October 2009, vegetables farmers in Cameron Highland are switching to strawberries nowadays due to better demand and stable prices. There is a certain extend that this statement is true.

          Referring to the diagram above, when more farmers (number of suppliers) in Cameron Highland switch to strawberries, the supply of strawberries will increase and the supply curve will shift to the right (S1 to S2). The quantity demanded will decrease but the demand remains the same. The equilibrium price, which is the price at which the quantity demanded equals to the quantity supplied will also decrease. In other words, the statement by Wong is not really correct as the price won’t be stable when more vegetables farmers switch to plant strawberries.

    In Malaysia, strawberries are well known grown in Cameron Highland because of it ‘s climate that is suitable for the growing of strawberries. However, director Faizal Parish from Global Environment Centre (GEC) claims in The Star Newspaper 26 February 2007 that the maximum temperature in the highlands had climbed between 2 degree Celcius and 3 degree Celcius in the last 25 years due to the clearing of forests and over-development. In other words, the temperature will continue to rise as time goes by. This will greatly affect the production of strawberries which will decrease the supply of strawberries (from S2 back to S1). So, even though vegetables farmers in Cameron Highland are switching to strawberries, it does not mean that they will earn more as their strawberries planted might not have the superior quality that consumers want.

Besides that, the demand might be better as people are more health conscious nowadays. Credits to the media, more and more and advertisement about health had shown highly encourage people to consume more fruits and vegetables. For instance, one of the articles in The Star newspaper on 3^rd September 2012 states that the Health Ministry had conducted a national morbidity survey. They found out that about 90% of adult Malaysians do not eat enough vegetables and fruits, which might be the reason why colorectal cancer is increasing rapidly. Imagine if you are reading that particular article, aren’t you mentally affected by it? I bet you will be consuming more vegetables or fruits. So, logically, the demand for strawberries will increase as strawberries are fruits.

However, the demand of strawberries also depends on consumers’ income. When the income increases, consumers will buy more of most goods and when income decreases, consumers will buy less of most goods. Why do I state that “most” goods? It is because an increase in income does not lead to an increase in demand for “all” goods. The demand for normal goods increase as income increases but the demand for inferior goods decreases as income increases. Assuming that strawberries are normal goods, so the demand of strawberries increases when consumers’ income increase. But how much will the demand for strawberries increase? This depends on Income elasticity demand, which in this case, the measure of responsiveness of the demand for strawberries to a change in income, while other things remaining the same. In other words, income elasticity demand can be calculated by dividing percentage change in quantity demanded by percentage change in income.  The answer can fall into three ranges. Greater than 1 (normal good, income elastic), positive and less than 1 (normal good, income inelastic) and negative (inferior good).

It can’t be denied that the demand for strawberries also depends on the prices of related to strawberries. When the relative price (opportunity cost) of strawberries rises, consumers seek substitutes for it. A substitute is a good that can be used in place of another good. In this case, the substitutes for strawberries can be other fruits such as apples, oranges, pears, bananas, or even vegetables. The substitutes for strawberries can also be other berries such as blueberries, blackcurrants, cranberries and etc., depending on how close the substitute is. The closer the substitutes for strawberries, the more elastic are the demand for it. Depending on how you classify strawberries; whether it’s a necessity or luxury. A necessity has poor substitutes and is crucial for us. So, a necessity generally has an inelastic demand. On the other hand, a luxury usually has many substitutes. So a luxury is generally has an elastic demand.

If the price of the substitutes for strawberries increases, consumers will purchase less of the substitutes and more of strawberries but if the price of the substitutes for strawberries decreases, consumers will purchase more of the substitutes and less of strawberries. In short, we need to predict what will be the price of the substitutes in the future to determine the demand of the goods. I consider this as risky though as the future looks bleak and is very uncertain. We can never estimate or predict the price of substitutes.  

 Nevertheless, even if the farmers know that the price of the substitutes will increase in a period of time, for instance, tomorrow, that cause the demand of strawberries to increase, they can’t do anything to increase the supply of the strawberries in such a short time. In other words, they can’t change the number of strawberry plants in the short run after all the technologically possible ways of adjusting supply of strawberries have been used. For strawberries, long-run supply is elastic and perhaps perfectly elastic. This is because for the farmers, the long run is the time it takes new strawberry plants to grow to full maturity to harvest – about 3 to 4 months.

  In conclusion, the statement by Wong is partially incorrect but I can’t deny that part of her statement is correct.