The Price System: Quinoa Economics

Jul 25, 2013 • Demand, Supply, and Markets, Developing Economies, Economic Growth, International Trade and Finance, Labor, Macroeconomic Measurement, Thinking Economically • 378 Views    No Comments

Why aren’t we eating more quinoa (keen-wah)?

Let’s just start with a NASA quote:

“While no single food can supply all the essential life sustaining nutrients, quinoa comes as close as any other in the plant or animal kingdom.” Essential amino acids, high protein content compared to other grains, major source of vitamins like E, B2, it has calcium, potassium, probably reduces osteoporosis, breast cancer…there is still more. We can just say that quinoa is good for us.

And that is a part of the problem.

A health food with “cachet,” quinoa has caught on in certain foodie circles with upscale stores like Whole Foods and pricy health food cafés selling it. On the other hand, only in one granola bar from Kellogg’s, quinoa has not yet made it into mass produced snacks and cereals.

On the supply side, Andean farmers from Peru and Bolivia are traditional growers. And yes, they have increased their acreage with Bolivia almost doubling quinoa cultivation from 240 to 400 square miles.

But in the US, few farmers have switched. Colorado growers who planted quinoa had problems with resiliency, weeds, heat and cold. They also discovered that bankers were not willing to loan money for a chancy crop when they could fund corn or sugar or wheat. And predictably, a quinoa friendly transportation infrastructure from US farm to market has not yet developed.

So, what do you get when you have a miracle food loved by astronauts, lots of demand from affluent consumers and limited supply?

You get imports increasing from 7.3 million pounds in 2007 to almost 60 million pounds now. And you get price tripling from 2006 to 2011. A classic price system story, the market for quinoa reflects demand and supply shifts that placed it in an elite position.

The result? Quinoa is not an everyday staple.

Quinoa Markets

Sources and resources: The Washington Post provided an excellent overview of quinoa markets and their impact on the price system and this Guardian article ideally complemented it. However, for perfect demand and supply side reality checks, I recommend this detailed description of US growers’ problems and this discussion of world demand.

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