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.]


Anonymous

Many students travel to Australia and New Zealand on work permits and pick fruit at very low wages. This probably helps drive prices down.

Gavin

Merus from the West Island is correct, there is a minimum wage in NZ but seasonal labour (yes it has a "u" in it), at special rates, is imported from the pacific islands for picking and packing fruit.
Other factors contributing to the low cost are the superb supply chain skills of the zespri staff, free/open markets which drive out cost and the very good management of post harvest sites many of whom have well developed "Lean" strategies and energy management systems.
Not sure how anyone can put a price on a pint of Guinness, not even poetic economists!

Henry

Kind of makes you wonder how Professor Masters answers more banal questions.

Jillian

Thanks, Merus @23... and you didn't even mention sheep either. You'd better be careful you don't get pulled up for treason!

If you've ever tried to grow kiwifruit ("kiwis" are either small, flightless birds or New Zealanders - growing them is a bit trickier) you will know that the end result is either far too much kiwifruit or no kiwifruit at all. I'm guessing we currently have the former...

Joe Torben

The reason Kiwis are so cheap is that transportation on ship is so incredibly cheap nowadays. The invention of the standardized container is by far the most underrated invention of the last century, and quite possibly of all times.

Without it, most overseas imports would easily double in cost, and some would increase even more.

steerpike

Don't count on them being cheap for ever. The US has put tariffs on kiwifruit in the past to protect US growers - ironic as the Californian industry was started with kiwifruit vines from New Zealand.

On March 11 the California Kiwifruit Commission sent a letter to President Obama asking him to ""show his support and exercise strong leadership by asking American consumers and retailers to buy only California-grown kiwifruit."

New Zealand can grow, pick and export a kiwifruit for 33 cents without export subsidies and with minimum wage protection so American consumers get the benefit of one of the most healthy fruit around. Let us hope protectionism does not rise again in the nation that preaches free trade.

David

Here in New Zealand they cost about 95 New Zealand cents (currently 60 cents US) for a kilo (2.2 pounds). Thats a lot of kiwis. There is also a variety with yellow fruit that tastes even better but probably doesn't ship well. Farmers are compaining about the low prices.

Paul Johnson

My father is a kiwifruit grower and he's getting paid to get rid of his crop this year.

We do get cheap kiwifruit in our supermarket but quite often they're quite low quality compared to the 1st (export) grade fruit and 2nd grade fruit.

ukdan

3& 24 the guiness thing might have had something to do with the relative strength of the pound & euro.

we have pretty high alcohol taxes in the UK so I don't think its that.

it could be that the pubs in dublin are owned by independents and thus buy guiness in small quantities, say a dozen barrells a night, whereas the pubs you visited in Scotland may have been owned by breweries who were able to buy guiness in bulk quantities.

2GBP for a pint of guiness is ridiculously cheap anywhere in the uk, in london where rents are higher you're more likely to pay 4GBP which in 'normal' times was about 6 euros but is now about 4.50 euros.

I would say rents in dublin are likely to be slightly lower than london, much higher than scotland in general and slightly higher than edinburgh.

Mike

We might all consider buying locally grown fruit. You know? But, ironically, it is better for the planet for The Eastern U.S. to eat kiwi fruit from NZ then CA because trucking kiwi from CA puts out far more CO2 than ocean shipping from NZ. Wine is the same too except, the lowest CO2 wine for the east coast is from France or, your local winery. There are more wineries than ever on the East coast now. Google your state name + wineries.
Check out the amazing chart in a recent National Geographic magazine on wine and CO2.

christy nelson

Colin, you don't think Fedex and DHL and UPS and so on are competition for the US Postal Service? I do. And e-mail is the strongest competitor in the world when it comes to the simple letter.

chris

Here in Townsville, a regional city on Australia's north-eastern coast, local stores are selling Kiwifruit from Italy (if you believe the stickers) at prices significantly lower than fruit from New Zealand. Since I like Kiwifriut this a great situation - but I wonder about the economics of it all.

Geraldine

Remember also the exchange rate!
In '08 NZ farmers cried ruin, they were paid $NZ 45 for their export lamb, the NZ dollar being worth about .79 US.
This year, they crowed to receive $NZ90 due to the NZ dollar diving to .50 US. There are horticultural labor visa's available to almost any nation, due to a shortage of NZ seasonal labor. Now many Chileans and Brazilians as well as some Eastern Europeans harvest in orchards. Definitely the minimum wage makes it worth their while to pay their airfare, and the fee for this visa.

Sbard

#9

It gets even weirder than that. Like fabless semiconductor companies, there exists IP-only wineries. You can buy grapes from a contract grower, have them shipped to a custom crush facility for crushing and aging, and have the wine bottled by a contract bottler. In this case, the only actual assets the "winery" owns are the label design they put on the bottles and possibly a recipe.

Rhys Lewis

As a New Zealander, I was offended by the title, but amused by the article.

NZ does have no subsidies, and low tariffs. It was a hard adjustment at first (1980s), but now everyone enjoys the cheap 'kiwis'.

NZ's exports are of greater spatial volume to imports, so containers usually come _in_ to the country empty, not out.

We have some very innovative packing technology companies here. If you buy an american apple it was probably packed and sorted by a machine designed in New Zealand.

I once posted a grapefruit from one end of New Zealand to the other by writing the address on with a marker pen and putting a stamp on it. It arrived in perfect condition.

Hyrum

The price of food is set buy the government. It has nothing to do with supply and demand.

Vern

One reason why kiwi's are cheap is that our fruit pickers are paid by how much they pick and not paid an hourly wage also the exchange rate comes into play one usd = 1.59nzd. you can get a kilo for around $3

Svend

A friend's friend had to move
from Aarhus,Denmark to
New York for a new job.

He asked on the harbor, how he
could ship his furniture and stuff
to New York. They tolled him to
just load his stuff into a specific container. and that it would cost
him 500 DKr. Now thats cheap
it actually cost him more to rent
a van to move the funiture down
to the habour.

So if your can fill a container
of stuff such as kiwis, it is rather
cheap per kiwi.

Bryan

I'm an American, too, and we always call it "kiwi fruit." Because a "kiwi" (without the "fruit") is a flightless bird. Or somebody from New Zealand. You guys are just sloppy with the language in New York. :-)

James 65

Eric Jones: That's what a winery is. If you want to see a place where they also grow the grapes you have to visit a vineyard.