Price Inflation of the Acai Fruit

Price Inflation of the Acai FruitT suitable of Contents (Jump to)1. Introduction2. Overview of Acai merchandise3. Relevant Economic Model4. Critical Analysis5. Conclusion bring up1. IntroductionThe Acai is a species of palm tree, its product generally known as Acai Berry. It grows in the main in the river side of Amazon of brazil nut. The growth is rich in calories, calcium, vitamin A, C, amino acid, antioxidant and some much important nutritious contents. This come exit show the sparing reason behind the steep wrong hike and what measures thunder mug be taken to set upon against this bell hike. I will also try to explain the rationale behind the proposed measures. partition two of this exercise will describe the grocery scenario of Acai output in Brazil, percentage three will contain relevant economic model, section four will depict critical analysis of key arguments and lastly a conclusion will be drawn.2. Overview of Acai MarketThe Acai payoff mainly grows in t he Brazilian ara of Amazon River basin. Traditionally the fruit occasion to cover major portion of diet of indigenous Amazon good deal. It was traditionally a food item for poor tribe. Due to its steeper nutrient value the fruit has caught epochal attention of International consumers. As a result the fruit has establish a super food in US and international grocery store in recent days. From a giffen ethical Acai Berry has now become a super food. The miraculous food of Acai fruit consumption in last three decade named opportunities for immature product pathways and transformation industries.Sharp rise of this product price is explained by the conjecture of request. Due to Acai berrys nutrient values, higher demand by Brazilian consumers and international demand Acai price has gone up significantly in past a few(prenominal) years. Even after significant price augment demand for Acai berry did not decrease. This is may be the reason of its nutrient value. As the willi ngness to pay did not decrease price of this product is continually increasing.Figure-1 Increase in Price due to growing in demandTable-1 Per capita GDP (PPP) of Brazil and the USACountry treasureBrazil$ 12,100USA$ 52,800Source The World Fact Book, CIAAcai Roots, a Brazilian company based in California, estimates the size of the US retail market for acai products to range between USD70 million to USD100 million. (Goddard, P. 2010)Acai trees usually produce fruit in three to five years of plantation. Trees produce fruit twice in a year. As Acai can be save produced in a specific climate (climate like river basin of Brazilian Amazon). It has a control supply against the rising demand.Acai is now also growing in labor union Queensland of Australia, tropical forest of Malaysia, South Florida, Puerto Rico, and Hawaii.A survey by JD billet and Associates late last year (2013) found that American consumers are Optimism, they plain seek value for their money, Brand conscious, Au where foreticity-seekers, Purpose-driven, and Mature.Currently Brazil is experiencing a consumer look that America experienced post-WWII period of the 1950s and 1960s. Brazilian sales are growing four times faster than the U.S. Retail sales in the emerging market nation are increasing at 7 to 8% a year. At the same time America is only experiencing retail sales growth of about 2%. Result is summarized from a inquiry report of Boston Consulting Group (BCG)3. Relevant Economic Model change magnitude demand for Acai berry has created economic opportunity for umteen economic agents. As a result of increased demand Acai cultivation has now become commercial and umteen big commercial producers has now entered in to the market to raise the supply of Acai berry. tiptopior technology and cultivation process has been diligent to increase the supply of Acai berry. No doubt that supply of Acai has increased in recent past but demand for this product has increased many folds than the supply. As a result supply force failed to bring atomic pile the price of Acai. Figure-2 Increase in Price due to greater increase in demand than increase in supplyDue to Acai fruits global increased demand topical anaesthetic producers of Brazil are now under presser of increasing the supply of this fruit. As this fruit requires a specific environment to grow, local producers are not being able to match with the demand of this product. As a result as theory of supply suggests price of Acai fruit has gone up significantly (prototype scenario is depicted in figure-2).Because of its higher demand producers now can change high price for the product hence higher profit margins for the local producers and separates. supposition of completion suggests super principle profit attracts more new entrants into the market. Super normal profit attracted many new producers and some corporations in to Acai work and processing patience. However, as described in figure-2, demand has increase more than t he increase in supply. As a result price of Acai is politic in climbing stage. barely superior technology, mitigate scientific fruit process can atomic number 82 to a greater supply of Acai fruit which may create downward pressure on price.As transnational companies are now a player in Acai fruit industry they can exclude the small local producers from the industry. MNCs can do so because they piddle better supply-chain management, they can enjoy economies of scale hence put down cost of production.4. Critical AnalysisExclusion of local small producers will have a negative effect on Brazilian economy. virtually of the producer may need to switch from Acai production to some other(a) crops. As a result their household income may fall. If their household income waterfall then the overall level of welfare of the local people will also decrease due to fall in income. On the other hand, engagement of grand corporations and MNCs into the Acai production and processing industry m ay lead to economic development of the local community as well as Brazil overall. This is a paradox.One negative effect has stroked already that is riddance of local poor indigenous people from the consumption of Acai fruit. Acai fruit employ to be a major part of the local indigenous people is past, but increased price of Acai fruit has cut down those local indigenous people as its consumers.To me, this is a great paradox whether elimination of small local producers of Acai will have negative effect on Brazilian economy or not. If the economic benefit of inclusion of large and multinational corporations in to Acai production suppresses the negative effect only then the welfare state of local small producers will not hamper.The brass of Brazil may take some remedial measure to combat against the increase price of Acai and work toward supply enhancement. Some of the suggestions areTo tug against price hikeTariff on Acai fruit exportQuota agreementThese trade barrier will lead t o less export of Acai from Brazil and local customer can enjoy Acai fruit will lesser price. Usually trade barriers used to protect local producers and local customers. But use of trade barriers to protect local consumers and producers is a negative slit in todays free gentleman economy.For increasing supplyBrazilian giving medication can come up with few projects which will work for inventing better technology and production process so that the local producers can use superior production and processing system at lower price. These types of projects can lead to increase in Acai fruit supply, which will definitely create downward pressure on Acai fruit rising price.5. ConclusionAcai fruit is a rainforest fruit that grows in river basin of Brazilian amazon. By the last decade the fruits demand has gone significantly producers have failed to catch adequate supply. Price of raw materials has gone up by many folds, suitable lands for growing Acai fruit is now becoming scares, increas ing solid ground demand for its nutrient value have led to enormous price hike. As the industry is not perfectly competitive, a super normal profit is exist in the industry. And economies of scale, higher raw materials price have excluded some small local producers from Acai production. Subsequently local indigenous people have lost their major diet which is beyond their reach. Increasing world demand, shortage of supply, and abnormal price hike in last few years, all these are now debatable issues, and prime policy concern.ReferencesBrasileiro, A. 2009, Superfood Promoted on Oprahs Site Robs Amazon Poor of Staple. Retrieved from http//www.bloomberg.comGoddard, P. 2010, Brazil fruit juice production fuels drinks export. International News ServicesHepburn, C. 2006, Regulation by prices, quantities of both a review of instrument choice. Oxford Review of Economic policyKrugman P. Obstfeld M., 2008, International Economics Theory and Policy, 8th edition, Pearson International Edition Menezes, E., Deliza, R., Chan, H. L., Guinard, J.-X. (2011). Preferences and attitudes towards aa-based products among North American consumers. Food Research InternationalMuniz-Miret, N., Vamos, R., Hiraoka, M., Montagnini, F., Mendelsohn, R. (1996). The economic value of managing the aa palm (Euterpe oleracea Mart.) in the floodplains of the Amazon estuary, equivalence, Brazil. Forest Ecology and ManagementSamuelson A P Nordhaus D Wiiliam, 2010, Economics, nineteenth edition, McGraw-HillWord Count 1295 excluding table, graph and reference