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Sample Article Critique From The Australian Financial Review



EssayChat / Sep 20, 2018

The article chosen for analysis was Farmers warn weekend rain won't stop drought-related food price rises by Brad Thompson. The main talking points within the article are concerns like food prices being low right now because farmers are trying to make as much money as they can and are selling livestock etc at a low cost due to one of the most devastating droughts in recent history. The drought is affecting both crops and livestock because feed is in shortage from lack of water to grow corn and wheat and animals cannot be sustained without proper food and water. The article also implies that consumers are very sensitive to the price of food and gas because these are considered essential and daily use consumables. This is the biggest financial hit that the agricultural industry has taken in a long time and there is little hope in the near future for relief. Fresh water shortages are plaguing the region and extend beyond Australia but also to areas of the United States and Canada where record droughts have also been recorded due to high temperatures and long periods without rain.

Article CritiqueThe underlying theoretical economic concepts discussed in the article show that supply is down and demand still high. Consumer behavior has shown that with less supply and consumer demand at a constant, the price of food will soar if the drought continues. Consumer behavior toward food prices will be to consume the lowest price items because the inflation of prices will affect other economic areas of their lives and there are other markets such as oil that the consumer will also rely on. Also, producer behaviors and costs is what the article aims to explain in terms of consumer behaviors that have brought on a downward trend. Farmers are currently selling livestock to the meat industry at rates that are almost overwhelming and releasing their dairy products for well under market value to sustain their own economic well being. As quoted in the article: "National Farmers' Federation president Fiona Simson said on Sunday that it was inevitable that grain shortages and higher water prices in horticulture would lead to an increase in food prices." (Thompson) The shortage of water is a major concern because it not only provides crops the ability to grow but also keeps the animals alive. These consequences will most certainly cause a downward trend and force an adaptation on the production side. The changes that will take place in the long run are unpredictable at the moment and can only be speculated.

The related policy issues pertain to government policy in that there should be mandatory drought assistance/insurance for farmers and agricultural industry workers. Local municipalities could also provide agricultural incentives related to taxes paid on property etc to relieve the economic struggle of the farming community when supply experiences a shortage due to conditions beyond the control of the producers. A natural disaster, if you want to call it that, or simply an "act of God" should not be a punishable offense that only farmers should bear and the consumer unfortunately will never respond to this and will always keep the demand for meat and grains constantly high. There could also possibly be a sort of ration system in the short term just so that demand is met without making the producer carry the majority of the financial loss because although there is an inflation in price it is not quite enough to be considered a recession by any means so the consumer will not feel the burden as heavily.

The critique of this article is that is was informative as to what is happening now due to the drought in terms of consumer food supply but the article only looks at the coming fiscal quarters and not into the long run but, this could be due to the uncertainty that surrounds this issue. The article displays the current situation where demand does not grow while supply is low but remains at a constant (like gas) meaning the cost is driven up but demand continues to stay high so consumers will cut spending in other markets to make up for their financial losses on their essentials. The article also does not look at other factors of loss the farmers experience because due to these conditions, many are most likely shutting down or hemorrhaging money to try to keep their land, just because a drought exists does not mean the farm stops running.

This article is very recent and can be looked at as a kind of scary forecast into what the upcoming trend on the graph will be based on unit costs during the shift in supply and demand. Unit costs will most definitely rise for consumers but the producers will be selling at all time lows. The dangerously low supply of water could also begin to affect other aspects of consumers lives but that is yet to be seen and the prediction shows that the outcome is going to depend on a force which we cannot always measure with certainty: the weather. Outsourcing feed and water etc is always an option but usually a last resort because that will drive cost up even more on both sides which is not desirable.

This article was very relevant to what all consumers at each financial level will experience in the coming months, some will be hit harder than others and the article aimed to be a kind of warning. There is no preparation for a situation like this, only to be patient and wait for the market to achieve equilibrium again or close to it. Food and water are essential to human, plant and animal life and if the current market does not change then the government is going to have to step it up and alleviate some of the burden and make significant changes. The government is likely the only entity that will be able to implement solutions that would bring fresh water back into communities for people and livestock, giving the agricultural industry from collapsing.

References

afr.com/business/rain-too-little-too-late-to-stop-droughtrelated-hit-to-family-food-budgets-20180826-h14isw

Thompson, B. (2018). Financial Review - Business, Finance and Investment News. [online] Financial Review.


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