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Bananas

December 20th, 2006

I just ate my first banana since cyclone Larry. My intertemporal elasticity of substitution for bananas is too high (at least for time periods of a year) to justify buying them at $12/kg, but the sight of some lovely bananas at $8/kg was too much temptation for me.

This reminds of the story about Evelyn Waugh told (IIRC) by his son Auberon. Bananas had been unobtainable in England during the War, and Auberon and his two siblings had grown up hearing about this marvellous fruit. The first shipment after the War arrived and the government of the day (the only seriously socialist government in British history) decreed that every child in the country should have one. Waugh senior claimed his family’s allocation of three, cashed in the family ration of sugar and cream and ate the lot in front of his children.

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  1. SJ
    December 20th, 2006 at 23:28 | #1

    My intertemporal elasticity of substitution for bananas is too high

    Someone needs to have a “Stern” word with you, John. ;)

  2. December 21st, 2006 at 09:03 | #2

    That Waugh bloke sounds like even more of a stingy prick than his cousin Steve.

  3. Bill O’Slatter
    December 21st, 2006 at 09:07 | #3

    Totally agree on bananas except there is no replacement ( smoothie without a banana ?) , so intertemporal elasticity of substitution must be the incorrect technical term. Fortunately they are now down to $5.88 kg ( in the big retailers ) in Perth so poor people can now get their banana(and requisite potassium) fix.

  4. December 21st, 2006 at 09:32 | #4

    Bill – “Totally agree on bananas except there is no replacement ( smoothie without a banana ?) ”

    I have been having mango smoothies which are just as good.

    JQ – The question I have is probably because I have very little knowledge of economics so please forgive me if is very obvious.

    Why do $8.00/kg bananas seem cheap? When they were $2.00/kg there is no way I would have bought them however, I will after I have SEEN $12.00/kg bananas. What I am getting at is that my buying decision rests on my observation of higher prices so a lower price seems cheaper so I buy. If for instance I had been living outside Australia for the last 2 years and I left before bananas went to $12.00/kg would I still buy $8.00/kg bananas because I had not seen the $12.00/kg bananas.

    Does this sort of thing rest entirely on the opinion of the buyer? And if so how can that be expressed in a equation that will work in all situations?

  5. December 21st, 2006 at 10:37 | #5

    I haven’t bought any bananas since the cyclone either despite them being one of my favourite fruits. I got six at $5.99 a kilo and ate the whole lot in a few hours. Delicious.

    Ender – I read somewhere a few weeks ago, as bananas were coming back on the market, that they may never drop below $4 or $5 a kilo again. Fruit and vege prices are going ever higher with many varieties now luxury items.

  6. December 21st, 2006 at 10:45 | #6

    Ender, I suspect that the search model would explain your scenario fairly accurately. Before the cyclone, if youy saw bananas priced at $2.00/kg, you would not have purchased them because you would have expecyted to be able to get them much cheaper elsewhere. The expected net benefit from further search was high. However, after the cyclone, with prices sometimes as high as $12.00/kg, if you see them priced at $8.00/kg you will buy them if your total vasluation is at least that high because the expected benefit from further search is low.

  7. December 21st, 2006 at 11:10 | #7

    Well, I guess we can all get a decent smoothie now.

  8. Aidan
    December 21st, 2006 at 11:13 | #8

    I bought some just outside of Innisfail last weekend, within sight of the brand new roofs of the town, at $4 a kilo. Very fresh too! What surprised me was that there were still many signs of damage in the town some 9 mths after Larry.

  9. stephenl
    December 21st, 2006 at 11:54 | #9

    A fruit juice shop that I sometimes buy at insists on putting way too much banana for my taste in various mixtures, despite my pleas. During the great banana crisis things suddenly changed and I could buy drinks with only the faintest hint of banana befouling the other fruits. Alas, it seems the glory days are over.

  10. brian
    December 21st, 2006 at 16:04 | #10

    I noticed on a news report that Taiwan..a great banana producer ,has a current suplus of more than 200,000 tons of Bananas!!!!
    Why can’t we have some. We have no problems with destroying our clothing and footwear industries in the name of Free Trade,so why not Import Taiwanese bananas. I know people will talk about exotic diseases,but if we had NO banana industry that wouldn’t matter.
    I suppose the reasons is Nth. Q”Land banana growers vote National…is that it??
    I say go for the imports/ By the way they are currently 75 cents a Kilo in
    N.Z. which imports them from Fiji. Now that’s a place that needs help
    ..and what happens in another Cyclone this years destroys the crop in Nth. G’Land again?
    The Logic of the Markets says that the way to go,.. perhaps thge banana growers could be retrained grow cut flowers ?

  11. crocodile
    December 21st, 2006 at 19:10 | #11

    Brian, I believe it has something to do with not importing any foreign bugs along with the bananas.

  12. rog
    December 21st, 2006 at 20:23 | #12

    Gee, what a bunch…

  13. December 22nd, 2006 at 00:19 | #13

    We really only have Auberon Waugh’s word to sustain the allegation of Evelyn’s scandalous banana guzzling episode. Son Alexander is inclined to believe Auberon’s account. But he points out that Auberon was a jam tart hog. So perhaps his story should be taken with a grain of salt because there is no honour amongst sweet thieves.

    One of the things his book tries to do is to redress the myth of Evelyn as a horrible father – a myth Bron did much to encourage in his autobiography, Will This Do?

    Notoriously, Bron claimed that Evelyn, after the war, had made all his children sit round and watch while he scoffed their banana rations with cream and sugar.

    “Amazing how that sunk into the public consciousness as a sheer grotesque example of Evelyn Waugh’s evil as a father,” says Alexander. But he points out that Bron’s first memory of his father was of Evelyn coming home from the war, and his siblings rushing out from tea to greet him. Bron took advantage of the moment to clear the table of jam tarts and stuff as many as he could into his pockets.

    Alexander believes that the banana story was true: “He was a very greedy little boy, and he definitely would have remembered the bananas and he definitely would have resented them. But my point in the book is that you cannot trust the testimony of a very greedy jam tart thief, who would rather have a jam tart than meet his father.”

  14. December 22nd, 2006 at 09:01 | #14

    The issue with bananas is a unique one, because all Banana plants are clones grown from runners.

    Unlike most diseases like wheat rust where a certain percentage of plants have genetic resistance, a single case of blight could wipe out every last Banana in Australia.

    The bananas we eat today are a different strain to the ones eaten 40 years ago, which were a different strain again to the ones eaten 50 years before that.

    The reason? The first 2 were made practically extinct by a single fungal disease. Every banana crop in the world was wiped out within a decade.

    Even now scientists predict that the current Cavendish bananas have about 10 years left in them before they disappear too. So eat them while you can.

  15. December 22nd, 2006 at 09:02 | #15

    The issue with bananas is a unique one, because all Banana plants are clones grown from runners.

    Unlike most diseases like wheat rust where a certain percentage of plants have genetic resistance, a single case of blight could wipe out every last Banana in Australia.

    The bananas we eat today are a different strain to the ones eaten 40 years ago, which were a different strain again to the ones eaten 50 years before that.

    The reason? The first 2 were made practically extinct by a single fungal disease. Every banana crop in the world was wiped out within a decade.

    Even now scientists predict that the current Cavendish bananas have about 10 years left in them before they disappear too. So eat them while you can.

  16. December 22nd, 2006 at 09:45 | #16

    The contempt for quarantine and a preservation of biodiversity, which seems to be held by some, amazes me.

    Our education system is clearly deficient, or we would not have adults with seemingly nil comprehension of the consequences of a quarantine breach.

  17. derrida derider
    December 22nd, 2006 at 11:40 | #17

    But Yobbo and satp, what have concerns for biodiversity got to do with whether we should allow bananas into Oz? A loss of Australia’s Cavendish bananas is not going to affect worldwide biodiversity (it’s not as though they’re native to us), and there’s got to be a decent argument that we’d be better off letting consumers get their bananas at 50c a kg from poor countries like Fiji, in the same way we’re better off letting them make our underwear.

    In this particular case a quarantine breach would only do what free importation would do regardless of quarantine issues – give us cheap bananas (and many more varieties) while eliminating the Australian banana-growing industry. This is good for all Australians except a few banana growers, who occupy rich tropical land that is quite capable of growing other crops and who could be quite easily compensated anyway. Not to mention that it will be good for Fijians, Filipinos and Indonesians.

    I thought you two were in favour of capitalism.

  18. David
    December 22nd, 2006 at 12:10 | #18

    2001 Banana Industry Stats: Crop worth $408 million at farm gate. Accounted for approximately 4.75% of QLD total agricultural production and for Far North QLD it about $334 million which equates to was around about 42% of the total farm gate production in that area. ABS AgStats

    A hint biosecurity outbreak generally impacts on more than one species (i.e. in this case won’t just affect bananas) It’s the impact on the other species which is generally the problem especially the harm to native species. By the way there were 22 identified pests studied by Biosecurity Australia in 2004 concerning the current application for trade from the Philippines.

  19. Razor
    December 22nd, 2006 at 15:47 | #19

    Prof JQ, you are a tight-wad. On the money you earn, you didn’t need to stop buying Bananas. I have eaten Bananas for the whole time.

  20. Nabakov
    December 22nd, 2006 at 17:22 | #20

    Razor, you gotta remember he’s got several kids, a major two-up jones and three mistresses to support.

  21. SJ
    December 22nd, 2006 at 19:56 | #21

    Nabakov Says:

    Razor, you gotta remember he’s got several kids, a major two-up jones and three mistresses to support.

    Don’t forget that John also has to fund most of the vast left-wing conspiracy, and that he has to rely on the RWDBs to pay his salary. Hoo boy, if one of the RWDBs withdrew his support, the whole thing could collapse.

  22. Seeker
    December 22nd, 2006 at 21:15 | #22

    A hint: biosecurity outbreak generally impacts on more than one species David

    There it is, you beat me to it. These things don’t occur in isolation. Any introduced disease that wipes out the bananas is quite likely to interact with and adversely affect other species, both other important introduced agricultural crops, and existing native ecosystems.

    Australia is one of the very few nations on earth that has some hope of maintaining good quarantine. I am in strongly in favour of high level biosecurity, we’ve already got enough environmental problems as it is.

    Razor, you gotta remember he’s got several kids, a major two-up jones and three mistresses to support. Nabakov

    Not to mention all those shady radical anarcho-lefto-enviro-fascist causes to anonymously fund… ;-)

  23. Brian Bahnisch
    December 23rd, 2006 at 00:04 | #23

    We’ve been eating bananas all the way through the shortage because my missus gets up every Saturday morning and goes to the West End markets. There a farmer from northern NSW has been selling them for $6/kg. But if you showed up after 6am there were long queues.

    Sadly the West End markets will soon be no more.

    In September I was inspired to have a bit of a look at the quarantine issues associated with bananas. On the information available to me then it seemed inevitable that the banana industry was for the chop, and Howard should have known this when cyclone Larry hit.

    When the Philippines take us to the WTO and win, as seems inevitable, we really won’t have much choice. I haven’t heard anything further on the issue. Perhaps David, who seems a man of knowledge, can help us out as to where it’s at.

  24. December 23rd, 2006 at 00:57 | #24

    dd, you should know that the major flaw with “could be compensated” arguments is the human fallibility whereby the compensation doesn’t happen (apart for face saving gestures and promises that somehow – pun intentional – never really bear fruit).

  25. Brian Bahnisch
    December 23rd, 2006 at 09:42 | #25

    PML, you are right, of course. There was a report on the industry in the 1990s that found:

    Australian consumers would be better off if we had no banana industry, better off if we imported all our bananas and �paid all the banana growers to sit on the beach for the rest of their lives.�

    You have to ask yourself how this could happen. By levying a tax on the sale of imported bananas and paying ex-banana growers to do nothing?

    No need to ask, because it wouldn’t happen.

    The point I was trying to make in the post I linked to (as well as point out what an appalling mess our quarantine/trade policies are in) was that cyclone Larry presented an ideal opportunity for Australia to get out of the industry. Instead Howard made promises that help would be given to get the farmers back into it. The politics were just too hard. But realistically he was only putting off the inevitable, which is rather cruel. Anyway that’s what I think, and I would be pleased to be persuaded that I’m wrong.

  26. December 24th, 2006 at 07:05 | #26

    DD: I Don’t know where you get the idea that I agree with SATP on the quarantine issue. I was just showing off how much I know about Bananas.

    I’d be quite happy to buy imported bananas. And probably even happier to just go live in the Phillipines and eat their bananas and ogle their women.

    To be honest though I haven’t eaten a banana for about 2 years and haven’t really missed them. I just eat other fruit instead.

  27. December 24th, 2006 at 09:04 | #27

    DD: I don’t know where you get the idea I am a believer in capitalism. Or that I agree with Yobbo on anything. I was just showing a (seemingly uncommon) desire to keep nasty biological pests out of my country.

    However I do have the last two paragraphs in common with Yobbo.

    I would be perfectly happy to lay on a Phillipine beach, eat their bananas & ogle their women.

    Not sure how long since I ate a banana, but it would be years. I have nothing against them, I just don’t eat them.

  28. Will De Vere
    December 24th, 2006 at 18:04 | #28

    Everyone loves bananas – only perverts & weirdos don’t – so I’ve been watching the Banana Index closely and have even bought some recently, but it amazes me that almost 25 years after I left the tropical & very poor nation in which I grew up, Australian bananas STILL taste too sweet. The taste of the home country is still securely wired in place.

  29. December 24th, 2006 at 19:34 | #29

    Given the territory grows ‘nanas too and they weren’t touched by Cyclone Larry I think the whole Banana thing is a croc.

    That said I also feel that Free Trade ignores Quarantine and similar biohazard risks.

  30. Seeker
    December 25th, 2006 at 01:09 | #30

    Given the territory grows ‘nanas too… Vee.

    Good theory, except:

    The NT produced 2180 tonnes in 2005.
    Source: http://www.nt.gov.au/dpifm/news_media_archive_article.cfm?newsid=172&ws=1

    The total Oz market throughput of bananas in 2005 was 264 583 tonnes.
    Source: http://www.abgc.org.au/pages/industry/bananaIndustry.asp

    In 2005 [pre-cyclone Larry], Queensland accounted for approximately 95 per cent of the 20.4 million cartons of bananas produced.
    Source: http://www.horticulture.com.au/librarymanager/libs/45/Banana_Annual_Industry_Report(1).pdf

    There is simply no way that the NT could have even come close to covering the loss of the Queensland crop due to cyclone Larry. Even combining all of Australia’s non-Queensland banana output wouldn’t come anywhere near filling the deficit.

    The NT also has serious problems with Panama disease (TR4 strain), which has dramatically curtailed its banana production since 2001. Panama disease affects the Cavendish strain of bananas, which accounts for about 95% of bananas grown in Oz (and I think a similar percentage of the world’s bananas), and it is likely to wipe out this strain globally. The hunt is on for new strains with better disease resistance, with CSIRO involved in this research.

  31. Seeker
    December 25th, 2006 at 01:12 | #31

    Let’s try that last link again:

    http://www.horticulture.com.au/librarymanager/ libs/45/Banana_Annual_Industry_Report(1).pdf

  32. Seeker
    December 25th, 2006 at 01:13 | #32

    I give up, it’s too late.

  33. David
    January 2nd, 2007 at 10:35 | #33

    Been on holidays and I don’t turn on the computer when I’m having a break.

    The Latest from Biosecurity Australia is that the report is due early Feb. Please exuse the link format as I’m lazy.

    http://www.affa.gov.au/content/output.cfm?ObjectID=521E64B2-FE1A-479F-8D8EBCADAEFAEF82

    I remember talking to people at Biosecuity Aus back in 2000 about this study when I did a demo from them on some of the stuff I was working on concerning Banana Skipper.

    I have had a yarn to a few people concerning shifting resources post a biosecurity outbeak (e.g. citrus canker) and according to my sources there is sigificant time delay in the reallocation to another industry and in a lot of cases its years before something productive is done with the property. The time delay in learning how to produce under an alternative farming system, the capital costs and the overdraft are too much for a large number of producers.

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