Impact of Commodity Prices on Agriculture Industry

Impact of Commodity Prices on Agriculture manufacturingCheryl CrispoQuestion 1(i).If thither is a shortage in workers in the rural sector, wages will amplify to attract and keep staff. This causes a transplant in both the derived and capital show curves occurs upward and to the left thereby decreasing quantity and increase price. The limiting in prices on turn is reflected in both derived supply and primary supply curves atomic number 18 shown downstairs in Figure 1. The margin is non probatively altered amid the retailer and the farmer as it is sh ared between them (University of New England, 2014, pp. 10 Annotated Notes).Figure 1 Change in Labour CostsThe primary demand and derived demand curves are not affected by the change in labour (input) price.Question 1(ii)Retail margins should be considered to have a greater margin for a number of reasons. Firstly, retailers whitethorn have anticipate price changes and have already elevated their price so a sm completely incr ease fag be absorbed readily and bill costs would be low. Secondly, cost increases may immediately be passed on to consumers whilst cost flows are not passed on for a period of time. Lastly, the buy power of the retailer is much stronger than an individual farmer (or possibly notwithstanding an industry agent) this may force the farmer to accept a press down price increasing the retailers margin.Question 2The AECL is a voluntary scheme for egg nurturers in Australia (Australian Egg Corporation Limited). The AECL is attempting to utilise its membership in a engagement arrangement by encouraging their members to decrease the supply of eggs to market. The Australian Consumer and Competition Commission frown on cartel type arrangements as they are anti- private-enterprise(a) and are attempting, illegally, to control supply.Non-members deal steady take a shit as many eggs as they wish without this restriction. This in turns encourages members of the cartel to produce much t han or break the rules to remain competitive in the market.Question 3The article outlines a number of chance on copes in respect to future productiveness of the Australian outlandish sector. inquiry and DevelopmentIt has been noted that the level of publicly funded research and development into agricultural commodities has decreased over the past few decades. Research and development is preponderant to the ever increasing demand for agricultural commodities to fuel an ever increasing population in the long run. Methods to improve technology to decrease issue costs, increase yields, and possibly more importantly to improve the effect on the environs and manage the risk of climate change.This improvement may imply improving the efficiency of the farm i.e. using the less inputs to obtain an akin volume of output or altering the size of the farm so that scale efficiecieces seat be utilised.With scarcity of resources such as land, pee and besides crop choice, the choice of co mmodity being produced with limited resources of necessity to be researched and evaluated drought resistant crops, irrigation or other methods that will produce high yields, do not provide excessive externalities to the environment that also cam stand up to the changing climate of Australia need to be considered.Research and development comes at a significant cost, but the returns on the investment can be up to 40%. This research comes also at a significant time cost the time fatigued on finding new employment methods can be precise extensive, take a long time to implement (depending on the action life cycle) and even longer time to have the outcome really realised.Resource competitionAs with all resources, there is a finite amount of resources for ware whether it be available land, labour or capital, there will unendingly e competition to achieve the highest amount of good from a resource.If an employee can receive better wages working in the mines, then agricultural labour will shift as more employees leave for other industries. The wages of the existing (and new) agricultural workers will increase and the number demanded will decrease.From the farmers point of view, if a particular commodity is receiving a higher net price, the decision will be made to produce the commodity that will provide the greater profit, whether it be husk, beef or mining or a combination of all three to maximise the profit to the farmer.The higher prices received by mining is a significant factor in farmers choosing mining over agriculture. The mining resource godsend has also led to the Australian dollar being valued more highly in foreign exchange markets. Other sectors have not faired so well with this boom they may receive a decrease prices for house servant commodities in the international markets.The Environment and mode ChangeClimate change, and the environment in general, is a very complex, misunderstood, controversial and political issue that will plague the agr icultural industry for many years to come. Its true do cannot be measured readly for example, has the effect on agriculturall output been due(p) to climate change, poor management or a cyclical or unexpected series of events naturally occurring in natire?As mentioned previously, research and developmemt can assist farmers to improve the technical efficiency of farms but is often not included in productivity calculations. The risk from the environment can be mitigated (i.e. floods, drought, pests etc.) but these risks need to be established before work begins.Is it noted that figures within the article were devoid of climate change effects externalities both positive and negative were also excluded. It appears that even though the environment is pivotal to agricultural production the long term effects are not taken into consideration. Therefore standard productivity calculations appear to be biased towards production inputs and only partially represent the actual productivity of the farm in question.The Total Factor of Production (TFP)The TFP figure can be misleading if all factors of production are not considered as a whole. An individual farm may produce multiple commodities (i.e. wheat and cattle) to doversify their risk and maximise profit. The TFP measure does not segregate the factors of wheat production and the factors of cattle productin the technology such as irrigation systems, skilled (or unskilled) labour, farm equipment (tractors), texture / feed storage may habe dual purposes. By isolating limited on-farm functions only a partial analysis can be organise there may be significant interdependencies between the commodities (i.e. the land may be left fallow for 1 season to allow the awe to fertilise therefore the land is regenerated and fertilised and less chemicals are required at one time planting resumes on this land).The standard TFP equation does not indicate from where the productivity gains (losses) originate from it is only a measu re of how much is changed. There are a number of aspects to consider, as mentioned previously, including scale and technical inefficiencies. The farmer can review the output to establish whether with the resembling inputs, that outputs could increase. Secondly, the farmer could also research, ecoomtrically, that the aforesaid(prenominal) output could be achieved by having a smaller land size.upper limit output is not always best when the quality is not at an acceptable standard. As farmers are profit maximisers they need to look deeper into their production methods to improve their profits and efficiency.International EfficiencyProductivity is undoubtedly of the closely significant issues in internatopnal competitiveness. Resource usage both on the domestic and internatoomal stages, is to use inputs efficiently within the agricultural sector so as to maximise revenue, but also keep the resources in the hands of farmers not other industries.In comparison to other sectors in the ec onomy, from 198-2011 agriculture has been the highest fruit rate by far. It is interesting to note that the growth rate for all sectors has been steadily decreasing since 1986 with a few minor exceptions. Has the lack of Australian research and development in these sectors contributed to only 0.9% increase over 25 years?It is also clear that the methods of evaluating productivity need to be taken into consideration when reviewing or analysing productivity data. The two institutions mentioned, ABS and ABARES are using difference performance criteria and sectoral data. When analysing different domestic and international segments, the performance criteria should be the same to avoid potential analysis errors.ConclusionCommodity prices will always be volatile it is the nature of agriculture. It is noted that government intervention, that has been prevalent in the past, may not be necessary to maintain adequate fodder supply.The future of Australian agriculture is healthy, however st eps must be take to ensure that appropriate and targeted research and development is increased kinda than removed to ensure an adequate food supply but also ensure that the resources required are not depleted through transferrance to other industry or through environmental degradation.