Inquiry regarding the handling of vegetable price fluctuations in the aftermath of typhoons, torrent, and other natural disasters, and the impact of Typhoon Toraji on the supply and demand for vegetables in Chinese Taipei
Case:
Inquiry regarding the handling of vegetable price fluctuations in the aftermath of typhoons, torrent, and other natural disasters, and the impact of Typhoon Toraji on the supply and demand for vegetables in Chinese Taipei
Key Words:
to drive up prices, typhoon, natural disaster
Reference:
Fair Trade Commission Decision of August 9, 2001 (the 516th Commissioners' Meeting)
Industry:
Fruit and Vegetable Wholesaling (4412)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. Following Typhoon Toraji, the premier instructed the Council of Agriculture to closely monitor the status of and movements within the agricultural produce market to ensure normal domestic vegetable supplies and prevent individuals from driving up vegetable prices through monopolistic practices. The Council subsequently collected information to determine whether there were individuals using the typhoon disaster to act in concert to manipulate vegetable prices in violation of the Fair Trade Law（FTL）. 2. The Fair Trade Commission （FTC）was able to determine the following: (1) Northern Taiwan: When the Taipei wholesale fruit and vegetable market opened on 30 July 2001, vegetable prices were on average 30% higher than on 28 July, with tomatoes and leafy vegetables experiencing the steepest price increases. Regarding types of produce, the leafy vegetable prices soared by more than 200% as the typhoon's most severe impact was on those regions producing leafy vegetables. As rising prices prompted farmers to rush produce to market and transportation links returned to normal, prices in vegetable auction markets subsequently dropped roughly 20%. (2) Taichung Region: Because of close proximity to major vegetable producing areas in Yunlin and Changhua counties, as well as supplementary local production, local suppliers procure directly from producers so there were no deficiencies on the supply side. Meanwhile, with abundant supplies of frozen vegetables, retail price movements in supermarkets were negligible. (3) Changhua's Hsihu fruit and vegetable market: With the heavy damage done by Typhoon Toraji in each of Changhua County's vegetable producing areas, even with local farmers rushing produce to market, there were 140 metric tons less vegetables available on the Hsihu vegetable market on 31 July 2001 than on the preceding day. (4) Hsiluo fruit and vegetable market: Torrent brought by Typhoon Toraji flooded virtually all of the vegetable fields in the Hsiluo area, with actual losses amounting to more than half of the cultivated area. In addition to typhoon damages sustained in flatland growing regions, Nantou County, a major domestic producer of high-mountain and cold weather vegetables, suffered massive landslides, which prompted a sharp decline in supplies of such produce. With the sharp decline in supplies of all kinds of vegetables, demand outstripped supply and prices also skyrocketed in producing regions. When markets opened after the passage of the typhoon, prices for all types of vegetables surged. (5) Volume retailer vegetable prices remain steady: Vegetable prices among volume retailers, who keep prices low by buying and selling in volume, rose less than at supermarkets, but still rose 10% to 20% due to the effect of wholesale price hikes in producing regions. Promotional prices for vegetables advertised in volume retailers' direct marketing flyers, however, remained the same as the advertised price. (6) Monitoring on market trading quotations of the Taipei Agricultural Produce Distribution Corp. before and after the typhoon indicated a slight upward trend in vegetable prices prior to the typhoon (28 July), peaking on 31 July. After 1 August, however, relevant vegetable prices began to show a sustained declining trend. (7) Distribution Section of the Farmers Service Department of the Council of Agriculture: Because of their perishable nature, fresh vegetables cannot be stored for any substantial length of time. In the event they cannot be sold within the short-term, those holding inventories suffer losses. Fluctuations in vegetable prices during this typhoon (Toraji) disaster were a product of fluctuations in supply and demand. (8) Distribution Section of the Central Taiwan Offices of the Council of Agriculture: Wholesale vegetable prices in producing regions are gradually returning to pre-typhoon stability. Price fluctuations in these areas were largely within the range of 10%. From the vegetable distribution point of view, fluctuations in or around the 10% range are considered within the range of normal supply and demand fluctuations. Thus it is difficult to attribute such fluctuations to concerted action by certain individuals to drive up prices. (9) Taipei Agricultural Produce Distribution Corp.: In general, a rise of around 20% in vegetable prices is a common impact of typhoons and it generally takes about two to three weeks for the market to stabilize and return to pre-typhoon levels. Prices for medium- and long-term leafy vegetables have already begun to decline, with some vegetable prices now lower than pre-typhoon levels. Short-term leafy vegetable prices have yet to return to pre-typhoon levels, however, overall average prices are beginning to show signs of stabilization. 3. From the above analysis it is apparent that, prior to the arrival of a typhoon, the general public, mindful of possible impending shortages, begin hoarding vegetables as vendors in relevant markets begin raising prices in reaction to increased market activity. Prices may begin gradually rising in a number of markets within on day. After the typhoon passes and as information on agricultural losses in the affected areas becomes clearer, vegetable prices rise rapidly in the short-term. Amid rising prices, however, farmers begin rushing their produce to market and as normal transport links are restored, wholesale auction markets gradually regain ample supply for trading. Also, as fresh vegetables are unsuited to storage for any length of time, with improper storage incurring losses, prices for some vegetables begin to stabilize within a week after the typhoon. For other types of vegetables that may have suffered heavier storm damages, it may be several weeks before prices begin to return to normal as new supplies reach the market, which is basically a problem of supply and demand fluctuations. 4. Concrete measures for dealing with vegetable price fluctuations in the wake of subsequent typhoons, torrent or other natural disasters: (1)With respect to agricultural produce markets: (i) Prior to typhoons, torrent or other natural disasters: First monitor and collect market trading information data from the website of the Taipei Agricultural Produce Distribution Corp. (covering the country's largest vegetable wholesale district); then observe the actual overall situation by continuing to collect basic vegetable price information from the Hsiluo Fruit and Vegetable Market (Chinese Taipei's largest leafy vegetable collection and distribution center), the Hsihu Fruit and Vegetable Market (Chinese Taipei's largest root vegetable (tuber) collection and distribution market), and the Taipei Agricultural Produce Distribution Corp. (covering Chinese Taipei's highest vegetable demand area). (ii) Following a typhoon, torrent or other natural disaster: Continue to collect market information from the above-mentioned markets, the Taipei City Department of Market Management and collect relevant media reports to gain an accurate picture of the latest agricultural produce sales trends. (2)With regard to the competent authorities for agricultural policy: Maintain close contact with the Agricultural Produce Sales and Distribution Section of the Council of Agriculture's (COA) Farmers Services Department, the Agricultural Produce Sales and Distribution Section of the COA's Taichung office and the Taipei City Department of Market Management and adopt relevant supply and demand stabilization measures based upon a firm understanding of the provided information by agricultural policymaking authorities. (3) Initiatives to handle the situation: (i) Correspond with the competent authorities for agricultural policy and the Ministry of the Interior's National Police Administration and seek assistance in the gathering of evidence against of individuals engaging in price manipulation. (ii) Where market conditions are observed as requiring special measures, all relevant distribution markets, volume retailers, and supermarkets shall be visited to get a better understanding of the market situation. Summarized by Chen, Chun-Ting; Supervised by Cheng, Chia-Ling