Carpe Diem

Thursday afternoon links

1. How Investors Can Join the 3-D Printing Revolution – there are three publicly traded 3-D technology companies – 3D Systems (DDD), Stratasys (SSYS) and Proto Labs (PRLB), and all are trading at record highs. (HT: Strider Elass)

2. Eagle Ford Shale oil production up 70% in November from a year earlier, this could be bigger than the Bakken in North Dakota.

3. Food fight: Florida growers accuse Mexican farmers of “dumping” tomatoes in the US at less than the cost of production for the last 16 years. Q: How do the Mexican growers stay in business for that long if they lose money on every tomato sold in the US for more than a decade?  As they say, “you can’t make that up on volume,” which is rising significantly. So Mexican growers lose money on every tomato sold in the US, and keep escalating their losses by increasing output?

4. Markets in everything: Speaking of tomatoes, here’s a new “ketchup presser,” which helps you get all of the ketchup out of a packet.

5. Cuban blogger Yoani Sanchez writes that for many years, Cubans have only had access to three hours of TV per day from Cuban State TV.

6. American Chemistry Council flip-flop (edited):  “After endorsing increased exports of natural gas last week, the American Chemistry Council reversed course this week, saying it had come to understand views of its member companies had “evolved” regressed towards protectionism on the sensitive subject.”

7. UK study last year found that female teachers give male students lower grades, and similar evidence was found recently in the US.

30 thoughts on “Thursday afternoon links

  1. “How do the Mexican growers stay in business for that long if they lose money on every tomato for more than a decade? ”

    i think there may be a bad assumption here. who says they lose on every tomato? that would imply that the whole business is export.

    let’s consider an example:

    if Mexican growers serve the mexican market and overproduce, the price elasticity of tomatoes may cause a serious issue.

    they have limited shelf life etc and so a glut could really drive prices down, perhaps below marginal cost.

    if they are glutted but wish to keep domestic prices high (and profitable) they ship some of the crop overseas.

    in so doing, they stay profitable at home and as an enterprise.

    it’s basically price fixing in the local market.

    such a policy might even be rational if the shipments lose money if that loss would be less than, say, the loss on rent/mortgage payments etc from letting the ground lie fallow.

    one could argue that the whole industry might be better off it it just reduced acreage, but that depends on how volatile tomato crop size is as being unable to serve the total demand could be expensive and you would need to net out the p/l equation over multiple periods to get the optimal long run choice.

    • As one who cooks often, always look for Mexican tomatoes. They taste like tomatoes and not red waterbags. I have read, but cannot confirm, that Mexican tomatoes are vine-ripened, not ripened via ethylene gas; whether that is true or not – they simply taste better. Maybe THIS is why they outsell Florida-grown.

    • Why are tomatos, which are really fruits, classified as vegetables?

      Because of a U.S. Supreme Court ruling in 1893.

      The ruling affirmed the collection of tariffs on imported tomato products.

      Plaintiffs in the case sued to recover tariffs they paid on imported tomatos from the West Indies. The Supremes ruled that street vendor venacular put tomatos in the vegetable camp. The guvmint kept the tariff money and plaintiffs lost their fruit moniker.

    • “… wish to keep domestic prices high (and profitable)…”

      yes, we know that Mexico is so much richer than the US that they are able to pay premium prices for tomatoes that no one in the US could afford.

    • if they are glutted but wish to keep domestic prices high (and profitable) they ship some of the crop overseas.

      There seems to be a lot of dodgy logic here, Morganovich.

      A bumper crop that floods the market with tomatoes is a good thing because it actually reduces the marginal cost of production (production costs do not increase to produce more tomatoes). If overproduction is a problem, then you’d think Mexican growers would have sorted out their glut issues over the (at least) two decades they’ve been doing this.

      Further, your scenario implies a lot of collusion between commercial tomato growers and collusive agreements never work all that well between competitors. Also, tomatoes cost virtually nothing to grow in your front garden (these aren’t DVD players). Why would Mexicans allow themselves to be gouged that way by commercial tomato growers? If domestic prices are held too high, people will start growing their own.

      Finally, even if domestic tomato prices could through various elaborate and coercive mechanisms be held above the natural market price, blessing the Mexican growers with such rents, why would they give up any part of that profit by selling tomatoes at below marginal cost to the U.S. market? Do Mexican tomato growers love Americans so much they want to give us this wonderful gift?

      • actually methinks, that’s not really true.

        planting may cost the same, but harvesting, processing, transport, and selling costs do rise.

        the issue is one of price elasticity as well. perishable goods tend to have high price elasticity.

        thus, if there is demand for 100 tomatoes, and you have 100 price might be $1. if you have 110, price might drop to 80c as everyone fights to get rid of their supply before they go bad.

        alternately, you may have supply agreements with retailers. a store may want X pounds of tomatoes and be hesitant to buy more due to fears of having inventory go bad. if you have more and no ready buyer, you seek new buyers. that includes export and once you have the tomatoes in hand, you would rather get something for them rather than nothing, even if that something is less than you paid to produce them. after all, you already paid the costs. you want to get somehting for it.

        there’s nothing collusive or coordinated about that. it’s just individual producers all facing a similar issue.

        there are lots of ways that you can wind up wanting to unload product below cost. it happens all the time in lots of industries.

        your argument about people growing their won seems like a real stretch. first, you assume they have land. second, you assume that they have the time. third, you assume the price is so high that they value their time and energy at less. third, tomatoes take months to grow. you can’t just decide to jump in and do it today.

        all that would really have to happen here is that growers in mexico find themselves with more product that they can sell locally and seek to get whatever they can for the remainder. this happens in apparel all the time.

        they are not giving anyone a gift. they made an outlay and want to get as much back for it as they can.

        we used to take advantage of this all the time with ticket scalpers for sf giants games.

        you roll down to the ballpark during the 2nd inning and can often get scalpers to sell you tickets at well below what they paid and way under face value.

        they paid $50 for a ticket that will, in 2 hours, be worth zero. that money is gone. they spent it. better for them to take $25 than nothing, no?

        that’s how perishable inventory works.

        it’s rational for a tomato grower to take $1 as per his distribution agreement for 90% of his crop rather than sell all of it to the same guy for 80c. it’s rational to then take the last 10% and sell it, even at a loss, if he can do so without affecting the price of the other 90%, by, for example, exporting it.

        you seem to be assuming a lot of things that i did not say here. you do not need any collusion or coercion for this to happen. it’s just the sum of rational micro decisions.

        • the bottom line here is this:

          if mexican tomato growers are really selling at a loss in the us year after year, then there is likely a reason it makes sense. if there were not, they would be going out of business or would stop. there are possible states of a market where it would make sense.

          do we know if they are true? no, or at least i don’t, but such a state COULD exist. such things happen all the time when firms overproduce or misjudge a market.

          of course, the other possible explanation is that the us farmers are simply lying or wrong about this claim and the tomatoes are not actually being sold below cost, which i certainly would not rule out.

          • of course, the other possible explanation is that the us farmers are simply lying or wrong about this claim and the tomatoes are not actually being sold below cost

            That’s my vote

  2. Speaking of tomatoes, here’s a new “ketchup presser,” which helps you get all of the ketchup out of a packet.

    This is really a testament to how wealthy we are. Previous installments of the “markets in everything” series have focused on 3rd world inventions (which, don’t get me wrong, are fascinating). They focus on getting the necessities as cheap as possible: water, light, heat. Today’s focuses on an uniquely 1st World problem: leaving the ketchup in the packet. Our basic needs are meet so efficiently that our creative energies are turned towards ketchup packets.

    • Jon

      Our basic needs are meet so efficiently that our creative energies are turned towards ketchup packets.</i."

      Is this a great country, or what? :)

      • It’s amazing, Ron, when you really think about it:

        We have an entire industry dedicated to storing all the stuff that doesn’t fit in our house (storage units).

        I have a device in my pocket that can access all the knowledge of Mankind. I use it to look at pictures of cats and get into arguments with strangers.

        It is -11 degrees at night, but I am nice and toasty because of a blanket THAT HEATS UP.

        How wealthy are we?!

        • We have an entire industry dedicated to storing all the stuff that doesn’t fit in our house (storage units).

          Good point. Hadn’t thought of that one. When, in all of history before now, has “too much stuff” been a problem for so many people?

          How wealthy are we?!

          Very. I’m going to stop bitching for the next 30 minutes.

  3. Re the issue of natural gas exports, its a question of who looses, the producers or the chemical manufactures and the consumers of the us in terms of electric prices, as well as the environment if higher gas prices lead to a switch back to coal. No matter which way you decide on these some us residents will loose. Mercantilism says export those goods with the highest value add, not raw materials where possible, so you don’t export natural gas, but rather the chemicals you can make from them. Of course mercantilism is out of favor but it still is a valid economic strategy.

    • Quote from Lyle: “Of course mercantilism is out of favor but it still is a valid economic strategy.”

      Using violence and coercion to rob consumers is not and economic strategy. It’s a political tool of the state to benefit a special interest.

      Perhaps next you explain the validity of slavery.

  4. Of course mercantilism is out of favor but it still is a valid economic strategy.

    It’s a great strategy unless you’re a consumer, but who cares about those dirtbag serfs?

    • But if you keep your job in the chemical industry instead of it going overseas because of the export of gas you win. In any case how do lower electric rates hurt the consumer. The idea is that the price of the raw material is lower domestically, so the producer of the raw material looses but all the users of the raw material gain. This strategy is sort of the opposite of protective tariffs. So how does the consumer loose with lower prices for the raw material. (now if one assumes everyone does it, the US still comes out ahead, as it is more self sufficient in resources than a lot of other countries)

      • lyle-

        mercantilism may benefit a select few, but it ALWAYS results in a net deadweight loss for the society that has imposed a tariff.

        it is not a “valid” economic strategy. it is political cronyism that reduces overall welfare by shifting benefits to a concentrated few by taking from the many while losing some of the money in the process.

      • “The idea is that the price of the raw material is lower domestically, so the producer of the raw material looses but all the users of the raw material gain”

        Sir, if the producer loses the producer at some point will stop producing. Then there is no raw material to give the consumer which by my understanding, makes prices rise rather quickly.

        Both are in the same canoe. The paddle is so generously let had or taken by the bureaucratic do-gooders

      • But if you keep your job in the chemical industry instead of it going overseas because of the export of gas you win.

        Maybe not. Don’t let “overseas” get in the way of sound economic thinking. You must believe that politicians can make better economic choices than markets.

        In any case how do lower electric rates hurt the consumer. The idea is that the price of the raw material is lower domestically, so the producer of the raw material looses but all the users of the raw material gain.

        There’s no reason to believe either electric rates or the price of raw material would be lower. Supply and demand dictate price.

        So how does the consumer loose with lower prices for the raw material. (now if one assumes everyone does it, the US still comes out ahead, as it is more self sufficient in resources than a lot of other countries)

        So division of labor, absolute advantage, and comparative advantage aren’t important anymore?

        In a world where each country is self sufficient, people in the US will have to learn to live without new aluminum, among other important minerals. We will pay $10/ea for bananas – when you can even find them, we can’t physically produce all the oil we consume so we will do a lot more carpooling. There’s lots more.

        I don’t know why you would want to live in a world like that, and I sure don’t. Do you really think losing the least can be called “winning”?

  5. writes that for many years, Cubans have only had access to three hours of TV per day from Cuban State TV“…

    I wonder if their kids do better in school because of that?

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