What happens when you’ve got too many nuts, and not enough people to sell them too? Easy… you lower the price! That’s the price mechanism in a nutshell…
This is exactly what is happening in the US nut market. Since the beginning of the year, the global spread of Covid-19 has had a devastating effect on the demand for nuts, as bulk buyers such as airlines, hotels, and restaurants have cancelled massive orders and new demand has completely dried up.
Alongside the fall in demand many nut producers in the US have also experienced a particularly large harvest this year, the combination of which has resulted in a huge oversupply.
Nut suppliers are therefore being forced to dramatically lower their prices in order to try and sell-off their large surpluses. The US almond industry for example, accounting for 80% of global production, has seen a 38% reduction in price since January this year.
Whilst nut producers are confident that they will be able to sell-off their supplies, the decline in price will have a significant effect on the revenues within the industry this year.
Q1. What is meant by the term supply?
Q2. Explain why the demand for nuts has decreased so significantly.
Q3. Draw a diagram to show the impact of Covid-19 on the market for nuts in the US.
Q4. Explain the relationship between price and revenue.
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