It's the Subsides, Baby

One of the interesting things aboutproduce in New York City is that produce in Chinatown is incredibly inexpensive.

Given that these markets exist almost entirely separately from the massive conglomerates that make up agribusiness in the United States, it begs the question, how do they compete with these massive economies of scale?

Actually, they deliver comparable (and better) product for less because there are no economies of scale.  The agricultural behemoths do not make money by delivering less expensively.  They make money by using their scale to dictate prices.

To put it bluntly, they are able to extract monopoly rents, and it is only by virtue of government subsidies, both agricultural subsidies that favor large agribusiness concerns and salutary neglect of US antitrust laws:

Produce prices at your local Chinatown are likely a fraction of what they cost at other supermarkets, and if you've wondered why, you're not alone. In an investigative report for the Wall Street Journal reporter Anne Kadet admits she always assumed the low prices were a reflection of subpar produce. But a deeper investigation of New York's Chinatown with author Valerie Imbruce led her to the opposite conclusion, and reveals the hidden truths behind the neighborhood's fruit and vegetable supply chain.

Imbruce, who's researched the Chinatown produce economy for over a decade, is the author of From Farm to Canal Street: Chinatown's Alternative Food Network in the Global Marketplace. In the Journal she distills to Kadet the real reason Chinatown can keep prices low: "Chinatown's 80-plus produce markets are cheap because they are connected to a web of small farms and wholesalers that operate independently of the network supplying most mainstream supermarkets." While most of the rest of New York's markets get their produce from the Hunts Point Market in the Bronx, Chinatown sellers work directly with small neighborhood warehouses. Since they're operating in close geographic proximity, they can get fresh produce throughout the day from wholesalers, and therefore don't need a store with refrigeration or a lot of storage space.

The Wall Street Journal article gives more examples:

………

Ms. Isaac, a teacher’s assistant, lives way up in the Wakefield section of the Bronx, but she is one of the many New Yorkers who frequent Chinatown for fruits and vegetables. “The food is fresher,” she said, “and Chinatown is way cheaper.”

I never gave Chinatown’s crowded produce markets a chance; I figured the prices were cheap because the selection is all C-grade bok choy and yesterday’s bananas.

Wrong again! I toured the markets with Valerie Imbruce, an economic botanist who spent more than a decade researching the community’s produce supply chain. She even wrote a book on the topic, “From Farm to Canal Street: Chinatown’s Alternative Food Network in the Global Marketplace.”

Her discovery: Chinatown’s 80-plus produce markets are cheap because they are connected to a web of small farms and wholesalers that operate independently of the network supplying most mainstream supermarkets.

No one there is paying the multimillion dollar salaries of big AG CEOs, and so you find better, and cheaper produce.

What you find is a bit more variable, so one day, there might be a surfeit of strawberries, and the next none at all, but in terms of the bottom line, price, it is clearly a more efficient system.

It's almost as if cutting the MBAs out of the process makes things run more efficiently?

Hoocoodanode?

H/t Matt Stoller.