Why Are Kiwis So Cheap?

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I’ve been eating a lot of kiwis lately. At the corner deli near my home, I can buy three for $1. They are delicious. Unless the stickers are lying, they come from New Zealand. At 33 cents apiece, a New Zealand kiwi costs less than the price of mailing a letter to the East Side. (And believe me, I consider a first-class stamp one of the greatest bargains ever.) How on earth can it cost so little to grow, pick, pack, and ship a piece of fruit across the world?

To make fruit matters more complicated, I can buy one banana (also imported) and one kiwi for about the same price as one apple, which may well have been grown as near as upstate New York. I talked about banana economics here; but the kiwi made me even more curious.

So I wrote to Will Masters, an agricultural economist at Purdue and co-editor of the journal Agricultural Economics.

Most economists, as I’m sure you know, reply to such queries in verse, and Will is no exception:

Damn supply and damn demand:
Why cheap hogs and costly ham?
Bargain wheat, expensive flour,
The oldest villain’s market power.

Just one seller makes us nervous,
Like that U.S. Postal Service:
They may offer bargain prices,
But who disciplines their vices?

Middlemen have long been blamed
For every market that’s inflamed,
Yet better explanations come
From many a Hyde Park alum.

Modern views from Chicago-Booth
Give a nuanced view of truth,
Steven Levitt and John List
Made each of us a freakonomist.

We let data speak its mind
No matter what Friedman opined
And find the price of fruit and veg
To be driven by the market’s edge.

Like the tail that wags the dog,
Marginal thinking clears the fog:
Sellers, buyers, traders too,
Interact and prices ensue.

A kiwi costs 33 cents
Simply because no one prevents
Another farm or New York store
From entering and selling more.

In contrast apples may be dear,
For reasons that will soon be clear:
Picking them’s below our station,
To lower costs we need migration.

Bananas have a different story,
Seedless magic, breeder’s glory,
Cheap to harvest and to ship,
Who cares if workers get paid zip?

Each crop’s method of production,
Where it grows and how it’s trucked in,
Satisfies some needs quite cheaply
While other costs will rise more steeply.

A buyer’s choices matter too,
For nonsense stuff like posh shampoo,
Prices are not down to earth,
The more you pay the more it’s worth.

Behavior is as behavior does,
Maybe some things are “just because,”
Much of life’s a mystery,
A habit due to history.

For prices, though, it’s competition
Plus tariffs set by politicians,
That determines whether we see
Such delightfully cheap kiwi.

Bravo.

[Addendum: A few commenters, and several other e-mail correspondents, wrote to say that I should really be referring to kiwifruits and not kiwis, since the latter — especially in the headline — could easily be mistaken to describe parsimonious New Zealanders rather than their furry little fruit. But I am an American, and in America we call the furry fruit “kiwi,” just as our Australian friend Justin Wolfers calls a beet a “beetroot.” So while I appreciate your efforts to improve my language, I believe it’s best in this case to let things stand.]


jonathan

Add in that Kiwi can be harvested hard and shipped hard which lowers cost because you don't have to pick ripe and ship ripe.

Also add in that most apples go to juice. This is a huge part of the equation.

Add in that apples come in varieties. I like Braeburn. My wife likes Granny Smith. My daughter prefers Royal Gala or Fuji. I'm not talking of old, rare types but typically available at the market apples. My regular supermarket carries 6-10 kinds of apples. That raises cost, both in handling and of course in production because we don't have a standard apple. Kiwis mostly come in one form, though you'll occasionally find a golden one - which costs more.

Hughes

The kiwifruit's correct name is the Chinese Gooseberry but it was remarketed as kiwifruit when the kiwis started selling them abroad.

It seems the Chinese make everything cheaper.

Merus

As an Australian, I am legally obligated to disparage our eastern and backwards neighbours at any opportunity, but even I wouldn't sink to calling them third-world. They have a minimum wage in New Zealand, like many Western countries, and so the question of why the kiwifruit is so cheap can't be explained that way.

Jeff Eberhard

In response to the ? about pints of Guinness in Dublin - all the bars sell them for ~$5-$6, not just the tourist traps - the alcohol taxes in Ireland are high. Even at the grocery store a bottle of Guinness will cost you ~$2.50.

Even weirder things happen here in Texas - a Shiner Bock (made in Shiner, TX) is considered an import at most bars... and it's made in Texas.

Mike

The comparison to poastage doesn't really make sense. Kiwis aren't shipped individually to your door, they are shipped around in large crates. The costs of shipping don't scale linearly. It costs 44 cents to mail a single page letter but a book with hundreds of pages can be sent for a few dollars. A large portion of the cost of mail is to pay the infrastructure to deliver to every home in the US

jo

you're comparing apples and oranges when you compare kiwi's and stamps. (hee, hee) they're two different products.

that's like comparing the gallon of milk i bought yesterday to the airline ticket i purchased last week. gee, 1 ticket = 55 gallons. crazy!

i hear you, brother. recession has hit us all hard, even economists.

Garth

Kiwis - or kiwifruit - are lots cheaper in New Zealand at the moment. I saw a road side stall selling them for NZ$0.49 per kilo. Which at around 10 fruit per kilo works out to 1c US each.

The difference in price is the shipping cost, and the perceived / luxury / novelty value in the States. People there must be willing to pay more, and think that 33c each is a bargain.

The growers had problems earlier in the season with a big hail storm through the major growing areas, which I had thought would have raised prices on export grade kiwifruit. But it obviously didn't cause as much damage as they said at the time.

Heidi

Just giving applause to Will for penning this verse. Excellent stuff.

Imad Qureshi

I was going to say exactly what Mike #25 said. One piece of small letter is sent to an individual address whereas 1000's of kiwis packed in one truck are sent to one location and then again distributed in bulk. Ask for one kiwi to be mailed to you and you'll see what it costs.

Eric Crampton

@#3: NZ still has free agricultural markets; that's why we're rather upset by the ramped-up US dairy subsidies. Y'all are killing whatever good vibes were being put out after the last election. Don't make us take back Flight of the Conchords as retaliation.

Kiwifruit here sells for about $1/kg (=$0.30 US per pound) during picking season.

Tom

There was a bumper crop of kiwifruit in New Zealand this season. That's got to have something to do with it.

DL

Eric,

It's called the negociant system and is prevalent all over the world. Why you dismiss the adding of oak chips and barrel aging, it is this process that makes fine wine what it is.

Mike

"Is this just Ireland capitalizing on tourists' purchasing of its homeland drink?"

Many items ascribed to a source are more expensive there than anywhere else. To take another Irish example, Aran sweaters are much more expensive when bought on one of the Aran Islands than in Dublin - exactly same garments (most of which are factory made, not handknitted).

Zoe

Everything is expensive in Ireland, and Dublin more so. In Galway, Guinness is about $3.60, whereas in Dublin it's routinely $5. Prices don't go down, because people will pay them. They usually go up after 11pm as well.

BSK

Kip @13-

"The poem makes it sound like cheap labor is part of the equation- is labor really so cheap in New Zealand though? I've always thought of New Zealand and Australia as being very "western", despite their location on the globe."

Are you implying that there are no exploited workers in the West? We certainly have sweat shops here in America. And there are exploited laborers up and down South and Central America. By "West" did you mean "white"?

Dismal Soyanz

@#14 Mike Symons

There is no cross subsidisation between durable goods imports and exported horticulture produce.

Kiwifruit are exported via pallets and thence into refrigerated cargo ships. Durable goods come into NZ via container ships. There might be the import of refrigerated foods into NZ but if anything the "subsidy" would work in favour of the imports. Zespri, the company though which NZ exports its kiwifruit, is more likely to be the charterer of the boats and may defray the cost of charter by selling (cheaply) space on the boats for their return trip to NZ.

Thomas

As an Irishman I can tell you Helen that a pint is more expensive in Ireland because of brutal taxes over 100% on alcohol sales to try and curb drinking. Dublin is more expensive than the rest of the country though because of rental prices. A normal price of a pint of Guinness is between 4 and 5 euro. (Its the cheapest draft beer in Ireland because of a slight tax reduction)

Jeff

I believe the cost of shipping in cargo containers (which may be a substantial fraction of the overall wholesale cost) is based more on volume than on weight. Those $.33 kiwis are equivalent to $1 oranges. Higher margins attract more players, driving prices down.

Anna

If you like regular kiwis, you will love the Gold kiwis!! Instead of the green flesh, it's more yellow/gold. They're so delish.

Michelle

I read the weirdest thing the other day--that some apples are shipped to China to be waxed and polished and then shipped back. o_0

I guess that could explain some of the price differential.