The Price of Caviar
The Price of Caviar
Caviar, the roe of a sturgeon, is among the most expensive food in the world. Selling up to 35,000 dollars per kilogram, it is a delicacy that is used in high-end Michelin star restaurants. However, during the 1950s, caviar wasn't this crazy. It was so cheap and widely available that farmers were using them to feed livestock, or leaving them on the beach to spoil. The reason why caviar prices spiked directly relate to the essential economic concept of demand and supply.
After the Soviet Union collapsed in the early 1990s, poaching and pollution destroyed sturgeon stocks in the Caspian, a major source of caviar export. In addition, in the mid-1990s, the Convention on International Trade in Endangered Species began to impose steadily constricting quotas. By 2006, it recommended a complete ban on commercial fishing for sturgeon in the Caspian. With the supply greatly limited, the price of Caviar skyrocketed. Now, sturgeon farms have been established in the US, France, Bulgaria, Italy, Israel, Madagascar, and even Saudi Arabia, with China being the largest producer in the world. The current global market of caviar varies between $350m and $500m.
The Caviar market for the past 50 years has experienced a decrease in supply, due to heavy poaching, pollution and the fact that Sturgeon takes at least 10 years to be harvestable. As the demand curve suggests, the decrease in supply will result in an increase in equilibrium price, thus the increasing scarcity has greatly increased the price of modern caviar. The excess demand causes the price to rise and quantity demanded to decrease. The caviar industry is unique because of the time Sturgeons require to produce caviar. This resulted in no caviar are produced after the 2006 ban, where wild sturgeon caviars are banned from the market. The production only resumed after 2016, where farmed caviars are introduced to the market, after 10 years of sturgeon farming. With more and more sturgeon farms being established across the globe, hopefully we are able to see a change in price in this delicacy.
Caviar, the roe of a sturgeon, is among the most expensive food in the world. Selling up to 35,000 dollars per kilogram, it is a delicacy that is used in high-end Michelin star restaurants. However, during the 1950s, caviar wasn't this crazy. It was so cheap and widely available that farmers were using them to feed livestock, or leaving them on the beach to spoil. The reason why caviar prices spiked directly relate to the essential economic concept of demand and supply.
After the Soviet Union collapsed in the early 1990s, poaching and pollution destroyed sturgeon stocks in the Caspian, a major source of caviar export. In addition, in the mid-1990s, the Convention on International Trade in Endangered Species began to impose steadily constricting quotas. By 2006, it recommended a complete ban on commercial fishing for sturgeon in the Caspian. With the supply greatly limited, the price of Caviar skyrocketed. Now, sturgeon farms have been established in the US, France, Bulgaria, Italy, Israel, Madagascar, and even Saudi Arabia, with China being the largest producer in the world. The current global market of caviar varies between $350m and $500m.
The Caviar market for the past 50 years has experienced a decrease in supply, due to heavy poaching, pollution and the fact that Sturgeon takes at least 10 years to be harvestable. As the demand curve suggests, the decrease in supply will result in an increase in equilibrium price, thus the increasing scarcity has greatly increased the price of modern caviar. The excess demand causes the price to rise and quantity demanded to decrease. The caviar industry is unique because of the time Sturgeons require to produce caviar. This resulted in no caviar are produced after the 2006 ban, where wild sturgeon caviars are banned from the market. The production only resumed after 2016, where farmed caviars are introduced to the market, after 10 years of sturgeon farming. With more and more sturgeon farms being established across the globe, hopefully we are able to see a change in price in this delicacy.
This article is really interesting because it shows the impact of having supply reduced on the price. I was wondering if this will happen for common necessities such as oil and water if the supply is reduced, as people generally need these to have a decent quality of life. This is similar to Korean ginseng, which is also very expensive because it takes lots of time to produce, so Korean ginseng is also viewed on by many people as a luxury food. I feel like luxury foods are much more susceptible to the economy than other necessities, and if the economy suffers, then these commodities will be the first to see its price drop.
ReplyDeleteI believe that a dramatic decrease in the supply of subsidies will have a devastating effect on the economy and society. Unlike caviar, something that people don't necessarily need, subsidies such as oil and water's demand will skyrocket as it's supply decreases. Without government intervention, the price could easily become unaffordable to most middle and lower class families. Take the Irish Potato Famine for an example. The shortage of potato due to diseases had a long term effect on the Irish economy decades after the incident was over, which exemplifies the level of economic trauma the famine had on the Irish economy of that time.
DeleteI think an interesting thing to consider about caviar is why it is so popular. Caviar is like the luxury Chanel bag of the food industry. Other examples would be truffles or gold flakes. These products are considered high-end and more associated with the upper class because those people are able to afford these foods. Obviously these items are pricey because of the way its manufactured or cultivated, etc. however, the price drives up even further because of the advertisement it receives. The concept is called, "conspicuous consumption" which defies the law of supply and demand. People are basically buying these products to prove their wealth and socio-economic status.
ReplyDeletehttps://www.nytimes.com/2014/11/23/upshot/conspicuous-consumption-yes-but-its-not-crazy.html
That is a good point. It is really interesting to see a parallel in the fashion industry with brands such as Supreme, Gucci, and other high-end retailer of that fashion. As you have mentioned, conspicuous consumption are used as their advertising technique, similarly to how caviar and truffle is viewed as a high-end product, branded clothing has also became a sign of wealth and elitism to some. However, it is worthy to note that often time these products does not have a high cost of manufacture, it is the company who limit the supply of their products to appeal to high-end consumers.
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