One of our oldest friends farms in Zambia. I thought I had tomato problems but I have lifted this from a Zambian newspaper (he has, after all, cannibalised and republished a post on exit strategies), where he sets out at length tomatoes and the troubles they bring.
Tomato Song
There is an idea in some academic circles that markets are wiser than the people who play in them; that they find the “intrinsic” value of things; that they serve as the guidance mechanism for the economic rocket, leading us passengers to fantastically prosperous places. This idea, which is based upon oversimplified models of market workings, and which is propped up by a form of secular religious devotion, should have taken a fatal beating when the recession took hold. Many of the world’s markets had basically become bubbles, defined by the ever increasing need for new capital to pay off old capital and interest, technically known as a “Ponzi” condition. When the new capital was suddenly unforthcoming, the bubbles popped and recession ensued. But despite that experience and the abject dependence of the world economy upon government intervention for its survival, the notion that “market forces” rule OK seems to be making a comeback, in Zambia as elsewhere. It needs another beating up and I will give it my best shot. I am going to deal with one of the simplest and bubble-proof of markets: that for tomatoes in Zambia and its vicinity.
First off: how much does it cost to produce a tomato (perhaps this has some bearing on its intrinsic worth and its price)? You have to give me several bits of information to get an answer to this question of which “When is the tomato in question to be produced?” is the most important. Being perishable a tomato has to be produced close to the time it goes on the market (unless you add much cost with cold storage and ripening facilities and so on). The cost of growing a tomato, other things being equal, varies greatly across the average year. In the early-to-mid dry season its cost is low because there are few pests and diseases and generally plentiful and cheap irrigation water. As conditions get drier and hotter in the late dry season pest control and irrigation costs, including management costs go up. The cycle repeats in the rainy season, with the early period being pretty cheap and tolerant of poor management, but the latter part can be extremely difficult, with high humidity and consequent assaults by fungal and bacterial diseases.
So the first thing you must accept is that there is a seasonal cycle in cost of production even in the best of years, and therefore there tends to be a seasonal cycle in the price the consumer must pay at the end of the chain. This should not be problematic but in practice it is. When citizens wish to complain about their suffering they cite the changing prices of basic commodities: if tomatoes happen to be on the increase for seasonal reasons, then the increase in their price will be duly cited as evidence of government incompetence and cruelty. Indeed, there is a famous Zambian pop song – “Tomato Balunda” by the artiste called Twice – that does exactly that. When the price comes down again in line with the seasonal cycle, Twice does not cut a second song “Hooray for the price of tomatoes and our wise government”. So there is a political dimension even to the laws of nature; and at one point the UNIP government introduced price controls on the producer and retail prices of tomatoes to try, King Canute style, to stabilise them and stop all the singing. The result was disastrous. The Price Controller first set the producer price too low for the season and caused a severe shortage (which resulted in very high black market prices); he then adjusted the price upwards by too much and farmers started offloading surpluses on NAMBOARD which that organisation then doused in diesel to stop them being recycled.
In addition to regular seasonal changes there are climatic shocks, such as frosts or floods that wipe out crops. These of course add to the variability (and give more inspiration to musicians).
So far we have just been talking about cost of production. Is this the same thing as the price at the farm gate (given some allowance for profit)? Over the long term, on average, the price to the farmer and the cost of production are intimately related. But from day to day or month-to-month the producer price and the cost may diverge widely. There many devils dwell amongst the details. Every new vegetable grower quickly learns that there will be times when the price is way below cost (if indeed it is even worth marketing the crop) and there will be times when that the price is well above cost. These divergences are the result of good old supply and demand combined with imperfect knowledge.
Farmers do not have perfect information about what other farmers are doing or planning. It is easy for farmers to get into a situation, collectively, where too much is being harvested at one time (price drops) and too little at another (price rises). A particular model of production variability is “cobwebbing”. The price of tomatoes is high; lots of farmers are inspired to plant; four months later the tomatoes are ready for picking and there are too many of them; so the price drops; farmers are negative about the crop and their capacity is anyway tied up so they do not plant more tomatoes; four months later there are too few tomatoes again and the price rockets skywards; and so it goes on until Armageddon supervenes or until enough growers learn the basic rules of economics and go “countercyclical” – planting when prices are low and abstaining when they are high. You will sometimes hear cobwebbing described as the “pig cycle” because of a classical analysis applied to the pig industry in West Africa .
As a new tomato grower long ago I noticed – as all growers do – that the middlemen seem to make all the money. I would plant, irrigate, spray etc. and then sell a kilo at, say, 20 ngwee to some marketeers in Chilenje. They would promptly retail the same kilo at 40 or even 50 ngwee. I resolved to be the Henry Ford of the industry and provide affordable tomatoes to the masses. I went into partnership with an entrepreneurial wholesaler/retailer calling himself “Lord Dicks the Great A. C. D. Manda”, who had a stall in Chilenje market. One morning I lent him a Landrover and ton of tomatoes and off he drove. I remember it clearly: he was sporting a top hat and had the demeanour of the Cat in the Hat. He reappeared later in the day, as dejected as an undertaker whose client has miraculously woken up and absconded from his coffin, with a few broken planks from the tomato boxes and some nasty dents in the vehicle. What had transpired was as follows. He had set up his cheaper tomato enterprise and started selling well under the prevailing market price (say 30 ngwee on the example above). The market committee, which is those days was effectively the same thing as a branch of the ruling party UNIP, observed and discussed him for some time. They then lifted his table, his unsold tomatoes, himself – and the Landrover! – and tossed them all over the two metre wall surrounding the market. It took him some while – during which he survived by selling UNIP membership cards – before he was allowed back into the marketing business. I last heard of him when he was taken to court by a fellow tomato grower over an unpaid debt. Apparently the magistrate asked the grower: “How can you sue such a nice fellow? Don’t you have enough money already?”
After the Lord Dicks episode I made a more careful study of the retail side of the business and discovered a couple of things. First, all the markets in Lusaka (save Cha Cha Cha) worked as welfare societies for party members in good standing. Prices were accordingly fixed at a level where everyone could get a reasonable “welfare payment” and price cutting was forbidden. Second, given the steadfast refusal of Zambians to accept a weekly paid wage there was (and still is) a monthly cycle in customer liquidity; leading inevitably to a lot of business being done on credit, mid-month, for repayment at month end. And, with defaults, credit is expensive; and the last thing anyone wanted was Lord Dicks and I siphoning off the repayment stream around pay day.
I do not know of any actual tomato business that has “gone Ponzi”, at least for very long. But the Agriflora export horticulture company that took over one of my farms certainly did. At some stage it came to need ever increasing quantities of fresh finance to make up for the inability to clear outstanding accounts from its current income stream. As I have explained before, the incentives for both the client and the financier to “stick it out” rather than pull the plug are strong, and the bubble only burst when a reported US$30 million had been blown.
OK, so markets are pretty funny but they are cleverer than a certain Price Controller I could name – and probably better than any price controller you could imagine. But they are very far from perfect.
Finally, what is the intrinsic value of a tomato? There is no such thing, its value is what you can get for it. You may think there is some measurable quality – such as nutritional content that could serve as an objective measurement of value. But if you do the sums you find that the value of nutrients in a tomato is laughably low – you could pack more on to a pill the size of a Panadol using maize and soya flour for a small fraction of the price. And anyway, people prefer the low solids fruit (e.g. in my day “Moneymaker”) to the high solids (e.g. Roma). What about taste then? Any vegetable breeder will tell you that the punters do not care about taste: the most popular fruit these days are fibrous and taste of a close approximation to nothing. That leaves appearance then?
Yes, appearance it seems is what sells fresh produce. It must look symmetrical, rosy red, turgid and eminently graspable. If I were not a hard scientist I would allude to one Sigmund Freud whose basic thesis is that all attraction is made up of forms of sexual attraction. But I will have nothing to do with that Viennese voodoo man.
