Produce More to Make Less, What’s the Deal?

I’ve learned since very young to make more money, you need to work harder and produce more.  The logic seems so simple and straightforward that even a very young child is able to understand.  The logic seems as fundamentally sound as one plus one equals two.

Applying the same reasoning to farming, you would think an exceptionally good season with weather conditions that enable record crop production should translate directly to record revenue and profits for the farmers.  This is what I, and I think also most other people, believed until I took the Economic AP class.

Economics AP class taught me that projecting results from an individual case study and drawing conclusion for a much broader group can sometimes lead you to a wrong conclusion. This happens so often that economists even gave it a name known as “The Fallacy of Composition”.  In economics, market behaviours can produce unintended consequences such that one plus one can sometimes produce a different result.

In farming [Ref: Chapter 3 of Economics Textbook], a bountiful harvest of a crop can shift its supply to the left in a Supply-Demand graph, increasing overall all supply of crop in the market.  The farmers will be selling more crops but at a lower price.  In addition, I also learned from [Ref. Chapter 20, pg. 360 (TR) & 363 (Large Crop Yield) of Economics Textbook] that since most farming crops typically operate in the inelastic part of the demand curve, an increase in crop yield can actually result in a reduction of Total Revenue (TR) received by the farmer!  This is shocking!

I’d always though farmers were praying for a good harvest.  Now I know better.  Now I know they were actually praying for the opposite.