How Supply and Demand Affect Farmer’s Profitability?

Ines Marjanovic

Agronomy Expert

In a highly competitive market, every farmer is chasing his own opportunity for success. Not only are farmers striving to produce high yield and deliver quality crops to the market but also, sell their goods and finally, achieve higher profit. Farmers are therefore faced with a challenge to survive on the market.

‘’In a highly competitive market, every farmer is chasing his own opportunity for success.‘’

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The Relation Between Supply and Demand

Supply is a term that describes the number of goods or services that all producers are ready to offer on the market at a given period and price. On the other hand, demand refers to the number of goods or services that customers are ready to buy at a given period and for a certain price.

‘’The relation between supply and demand will determine the market price of goods or services.’’

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Regarding the relation between supply and demand, a farmer should know two important things:

1. The relation between supply and demand will determine the market price of goods or services

What does this mean for a farmer? For example, in a case where a farmer sets a low price, the demand for his product or service will increase. Oppose to that, if a farmer sets a price which is too high, the demand will decrease.

2. The market price will determine the supply and demand of products or services

If the market price is high, the interest of producers for a certain product or service will increase. In other words, the supply will increase. Also, if the market price is low, the interest of consumers increases, which means that demand increases.

‘’The market price will determine the supply and demand of products or services.’’

 

Let’s Find a Balance Between Supply and Demand

Supply and demand, as well as market prices, will rise and fall until they achieve a balance, which is called market equilibrium. For example, if orange prices are too high, most consumers will choose another fruit at a more affordable price. As a response to declining sales, farmers will have to lower the prices until the demand for oranges increases again. When the demand for oranges is balanced with the supply, the market is at its equilibrium.

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In a market that is not controlled, supply and demand dictate the market price of goods or services, as well as the flow of sales. By doing so, this basic economic law directly affects farmer’s profitability, and therefore the success of his business.

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If we look at the big picture, supply and demand regulate the entire market competition. For this reason, every farmer driven by a profit should keep up with the current situation on the market and turn the information provided by a supply and demand into profit.

 

 

Text sources: NDSU