The price of vegetables

26 Apr 2017

Veges supermarket display2

Wet and wild weather inevitably brings enquires about whether or not the price of vegetables will increase in New Zealand.  But the real determinant of the price of vegetables is how much demand there is, and can the supply keep up.  It is a simple equation; less supply and more demand pushes prices up, and more supply and less demand sends prices down. This is true with export as well as domestic supply.

So if rough weather causes a shortage of supply and demand remains high, prices can increase. From a grower’s point of view, this is an important scenario; if you have less to sell, unless you can make more for what you sell, you are putting your financial survival at risk.

We have to remember that growers are usually price takers, not price makers; they do not set the price they get for their vegetables. If their vegetables go to a wholesale market, then the price is determined at the market. If they supply direct to retail the price is determined by the retailer, but that price is often based on what the wholesale market’s current price is. So despite bad weather, if demand is down, price will also be down.

Then there is one final ingredient – does the increased price actually getting back to the grower.  All too often, an increased price at retail does not find its way back to the grower, which means the grower has less income with which to run their business, resulting in financial issues.

So wet and wild weather that reduces the amount of vegetables a grower can supply is not good financially for growers. It often means increased costs, loss of planted crops and less return even if price increases are passed on.

Prices for fresh fruit and vegetables will increase and decrease with supply and demand. This is a normal dynamic and may not be weather dependent. If there are less growers planting a particular crop, then there will be less supply and if there is demand, increased prices. Commercial vegetable gardens being lost to houses will also push up prices as there will be less supply. 

But compared to the cost of all other groceries, with the exception of exotic produce, vegetables are one of the least expensive grocery items.

So the next time there is a weather event or your vegetables cost more than they did a few days ago, ask yourself: is the grower making any more money than they normally would? Because the answer is probably no.

-       Mike Chapman, CEO