Storm damage, and the price of kūmara and potatoes

The New Zealand Herald reported earlier this week:

The price of some vegetables like kūmara and broccoli has doubled since Cyclone Gabrielle swept through New Zealand and decimated vast areas of crops.

Customers should get used to the higher prices, which could linger until after next year’s harvests, some supermarkets say...

At Auckland greengrocer Point Chev Fresh on Tuesday, assistant manager Manni Singh said he had never seen such a big increase in such a short time.

“The kūmara price has gone up to $9 a kilo,” Singh said.

“Normally, we were selling it for $4.50.”

Why has the price of kūmara gone up so much? The effects of storm damaged kūmara on the market for kūmara can be explained using the supply and demand model (that my ECONS101 class will cover later this trimester). This is shown in the diagram below. The kūmara market was initially in equilibrium, where demand D0 meets supply S0, with a price of P0 and Q0 kūmara is traded. Storm damage reduces the amount of kūmara available to harvest, decreasing supply to S1. This increases the equilibrium price of kūmara to P1, and reduces the quantity of kūmara traded to Q1.

The consumer response to higher kūmara prices will likely cause the price of other root vegetables to increase as well. Potatoes are a substitute for kūmara. If the price of kūmara has increased, that makes potatoes a relatively cheaper alternative, and , some consumers will switch to potatoes. The effect on the market for potatoes is shown in the diagram below, where the market is initially in equilibrium with a price of PA, and a quantity of potatoes traded of QA. Consumers switching to potatoes increases the demand for potatoes from DA to DB, increasing the equilibrium price of potatoes from PA to PB, and increasing the quantity of potatoes traded from QA to QB.

Even consumers who don't like kūmara, and prefer potatoes, are likely to be affected.