This is probably old news to you, but it's a great example of a competitive market at work. The winter in the United States was unusually harsh. Cold temperatures gripped a good part of the nation, and Florida was not exempted by old man winter. In fact, the weather was so harsh that the tomato crops in Florida were severely damaged.
Fresh tomatoes are in short supply because of the unusual spell of freezing temperatures that hugged Florida in January. The cold temperatures that dented citrus production also destroyed roughly 70% of the tomato crop in Florida, which is the largest source of U.S.-grown fresh tomatoes this time of year.
Reggie Brown, executive vice president of Florida Tomato Growers Exchange, a Maitland, Fla., trade group, said Tuesday that a 25-pound box of tomatoes is trading for $30, compared with $6.45 a year ago.
Some restaurants have been told they would have to spend up to $45 for a box of tomatoes in recent days. "Doesn't matter though, because there isn't anything to sell," said Mr. Brown, who calculates the state's shipments are running at about 30% of normal.
A decrease in supply drives prices upwards, even in the tomato market.
A back-of-the-envelope calculation on the elasticity of demand yields an estimate of -0.23 for the market for tomatoes - the market for 25 pound boxes of tomatoes, actually. I used 30% as the percent change in quantity demanded and I calculated the percent change in price using the arc elasticity formula and $30 and $6.45 as my price numbers. It tells us that for every 10% increase in price, the quantity of 25 pound boxes of tomatoes demanded falls by about 2.3%.
Obviously some farmers have seen their revenues fall because of the harsh winter. But assuming my calculations are correct, the inelastic demand for 25 pound boxes of tomatoes tells us that, cumulatively, the revenue earned by tomato growers is higher than if the winter had been a normal one.
This short supply is likely only a short-run phenomenon. In southern Minnesota, where I live, gardeners and farmers will begin planting tomatoes in a week or two. The plants will start bearing ripe fruit by late August. I usually keep harvesting until late September or early November.
The article goes on to mention that some Florida tomato farmers are afraid that they will lose permanent market share to growers in Mexico. That is a legitimate concern. But from a market-wide consumer perspective, it's a good thing that we don't have all of our tomatoes in one basket, so to speak. The fact that we have other options besides Florida keeps at least some supply of tomatoes flowing to our homes during this time of year. For people like me who love tomatoes, that's a very good thing even if it may mean headaches for some domestic producers.