The grain price war and food companys
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by TheBlackAdder
The grain industry is doing a terrific job of lowering prices and is a very very competitive market at the moment. Grain is leading the way to cheaper products for all Australians through the work of responsibe GMs out to improve the wellfare of eAustralians and make a small profit in doing so. Q1 goes for $0.5 or less and Q2 sells regularly at $0.8. Companys that sell for more are generating huge stockpiles and making no profit because they simply arn't competitive. This forces GMs to figure out how to sell for lower and still make a profit, the answer, lower wages. The grain industry's price war is on the forefront of curbing inflation, or is it?
Unfortunatly most food companys are not passing the savings on to the public. Food company GMs are making a killing while working Australians suffer and this is doing nothing to curb inflation. I am a capitalist, I believe in GMs running their company how they want and making a profit, but when RM prices drop 20% the savings should be passed onto the public. I see Q1 food selling for over $1 when they can do cheaper, and most distressing of all two Q2 companys selling for over $4!
Some food companys are doing the right thing and I congratulate them for it, but I don't see any GMs standing up and leading the way by lowering their prices substantially. Lower food prices means cheaper everything so this really needs to happen. I urge all food GMs to lower your prices for Australia's sake, and for all of you who think "so what, no one else is" simply lead and the rest will follow. So do it to lower inflation, cheaper food, cheaper wages and most importantly, cheaper gold 😉
Inflation looks like it makes us richer but it doesn't, do the right thing.
TheBlackAdder
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Interesting view on Capitalism...
This is one of its inherent dangers and I must agree that it benefits no-one (except certain greedy pigs).
Anyhow, a good article and one that all GM's should take note of.
hmm good article. those of u GM's who r struggling to make a cut in money, plz turn towards the food business. there is a high demand for good q food and im sure the business is laid back.
and to add to broads comment dont go to moving theres enough companies already 😛
so true @2 food is a rip off
Huhh... you seem to forget that you need to pay decent wages or nobody will work for you to produce those "cheap food". So finding the right balance of wages and selling price * volume is not so easy.
If you have low wages you will have a high worker turn around so it means more time to manage your company: this is something that not all can do in REAL-life. On the contrary having high sell with lower volume COULD mean higher return and permits higher wages with less GM involvement.
Like in real-life I also would like to have house or cars costing 1$ but it is simply not possible.
Spatlabor, I'm not saying all the GMs should go out of their way to sell for super cheap prices, however if the cost to produce their goods drops significantly, as it has, the savings should be passed on. Nothing has changed in the way they manage their companys.
A very small profit on grain. I make a penny per unit of grain I sell on the open market. But hey, it's the price I pay to stay competitive. There was a time when I could charge more and make a decent 15% profit. But that's a time when there was trivia decoders.
As for my food company. It makes money hand-over-foot. I feel bad about selling my food at a whopping 20% mark-up. But then I look at what my competition charges and I'm way undercutting their price. If only they wouldn't steal away my best workers, I could produce more Vegemite to feed the hungry, dutiful workers making their way up to the upper echelons of society.
Most of our grain has now switched to the export market due to low margins but with an eye on the Aus market to ensure constant supply back home.
Dr Zeuss
Chairman of Brass Razoo Grain
Our raw material cost is a much lower factor of production than wages. We have to pay higher wages to retain people that come to work every day, increase their skill level thus their productivity level, and maintain or increase their wellness level. They must eat higher quality foods, own a house, or get gifts to do this.
Raw materials go down 20% and that has a very small reflection in a profit margin. Wages keep going up, not down.
Look at many of these companies with real low prices. Most of their workers never show up to work. I would guess they don't make much money. Then look at the companies with slightly higher prices, almost all of their workers show up everyday. I am guessing they are paid well.
Keep in mind gifts cost 2.60! That only raises your wellness 1! And gifts always seem to be sold out.
Houses also seem rather expensive for the wellness you get out of it. I bought a "used" Q2 house for 7 gold. That's about 335.93 AUD. I would have to work for 1 month making 10 AUD a day to pay that off. And that doesn't even factor in food costs. At 5 AUD it would take more than 2 months to pay for it.
I think gifts and houses are causing inflation.
John
"and to add to broads comment dont go to moving theres enough companies already 😛"
and stay away from weapons! lol
Actually the way I see it the grain market at level q2 is currently totally stuffed. No way grain companies are making money at current rates but the market keeps going down anyway coz they need to keep money flowing in.
There is an urgent need now for us to have a trade agreement that allows bulk exports of q2 grain at reasonable pricing, or for companies to merge or for some to go broke faster.
If all the companies try to move up to q3 - the same thing will happen there. Having said that, I believe the margins in q2 food must be spectacular at the moment. Enjoy it while it lasts, GM's
I think the real problem is that THIS is NOT the real world.
I am new to eRepublik. So, I got myself the highest paid job and I buy the cheapest food. But to maintain my wellness, it would be better if I buy high Q foods. Problem, I can't afford it. So, I'll have to get a better paid job when my skills have gone up. I could do it the easy way and get Gold, but I refuse to because I entered the real world with nothing and so I do here.
Why can't I afford higher Q foods. In the real world, we have a family income of about 60k net. We buy high Q foods (equiv to Q3 here) and we spent about 20% of our income on that. Here, I am forced to spent 30-50% of my income on low Q foods.
Worst of all, I can't buy Q2 foods at all at the moment. And even if, I wouldn't be able to buy more than 2 or 3 units. So, if I am not able to buy Q2 foods when I run out, I have to do with Q1. But I work at Preclimax, a Q2 company. I lose 2 wellness each day! With Q1 food I can only restore 1.1 In the real world, I'd be able to buy from my employer directly 🙂
Basically, in order to keep my wellness up, I have to progress in my job, earn more money, buy higher Q foods and gifts ... That's why Preclimax workers are leaving. Not because the wages are too low or so. Because higher Q products are not afforable on these wages.
So, something for the GM's to think about: In Germany, the Aldi brothers made huge money with a simple concept. They kept there prices down, made minimum margins, more people bought their products and they made their profits through the quantities they sold. So why not pay good wages, employ as many people as possible (if the wages are good, they'll come!), produce as much as possible and sell that for the lowest price possible (with very little margin). More people will buy your products. You'll make your profit and if tou invest that into higher wages, you'll be able to produce more and sell more ...
Kiwiana,
I agree with many things you stated. One problem with this game is that the companies have a set max production level of only 10 workers. I am guessing that may be set by our government but I do not know for sure.
I have a company and as soon as I surpassed the max level my total production dropped drastically.
I also refuse to pay real money for gold or wellness. There are enough ways to earn more money.
My best suggestion for you for now would be to work at a Q1 company for a few days till your skill level is high enough for a better paying job. This will also help your wellness level.
When you get your 5 Gold for reaching level 6 you should buy a Q1 house. That alone will give you 1 wellness a day.
John
we need more Q2 and Q3 and Q4 food...plz upgrade ......
Remember that we recently experienced a population boom . There are simply more consumers in the market .
Senator Bilbarus
"I am guessing that may be set by our government but I do not know for sure."
Nope. Its set by the erepublik admins.
John, perfectly right, I should have stayed in a Q1 company and eat Q1 food ... But I didn't imagine that Q2 foods would suddenly become such a rarity. *smirk*
Anyway, I think here we've got a "bug" in the game and where it doesn't stack up against RL. If I work a low-skill job at Skoda (a Czech automobile company that works in conjunction with VW), Volkswagen itself or Porsche doesn't make a difference in my wellbeing. Would I climb up the career ladder I'd start to see difference in my payment package and the recreational facilities that are offered by the company. Here, it has a huge impact already on low-skill jobs.
As I said in my previous comment, I think a lot of the issues we experience are caused by the fact that this is not real life and we can't apply the same rules. Hopefully, I get now an extra experience point from the developers *cough*
I hope I survive long enough to experience the GM side as well! I'll probably have to quit my current job as soon as I can ... sorry!
RM Diamonds are causing Gifts to go for ALOT higher rates... Please blame the RM diamond industry for this... not the gift companies... (As I am a gift company owner and dont really make ANY profit...)
Forgot to mention that of course IRL the higher Q company the better they look after their workers ... Opposite to eRepublik.
@KickJr Corp. Nobody blamed the gift industry that their prices were to high or said they make huge profits 😮) John only stated that gifts and houses which have a positive effect on everyone's wellbeing are not cheap. He didn't go into details to why. But he's right. Those prices (caused probably by RM prices) cause us newbies to go for the better paid jobs and therefore increase production costs in the other sectors and so on .... But Australia doesn't have inflation according to the economy fact sheet for Oz. Something smells strange here!
@Kiwiana I really like your comments 🙂
I also agree that a Q4 company should decrease LESS the wellness than a Q1. This would be nearer real-life.
For the person who said a drop in RM prices doesnt make much difference heres a theoretical.
Say your company is Q1 food, you sell food for $1 and have 100 daily productivity. You buy RM for 0.50, it costs you $50 per day in RM. Your profit is 100-50-wages or 50-wages
Now if you buy RM for 0.40 your profit is 60-wages, and extra $10 per day. If you keep wages the same as they were and sell your food for $0.90 you make the same profit as before. Thats a big difference in price.
i see a dMoI 😉
This is where boycotts would come in place!
@Kiwiana - So you'd like to buy cheap Q2 food from your employer? That can be arranged. You just have to log in at half past midnight PST, which I guess is server time though I'm uncertain, when I stock the shelves with the daily bread.
CQL
geez Kiwi, your speaking some good sense m8 😉 ye dont believe some of the stuff that goes on here. unfortunately the admins didnt put as much tweaking into the economy system for erepublik as they make ppl think. plain and simple right now. the bigger a country gets, the more into economic ruin it moves towards. at a certain point they will have so many companies selling at such a low price that they wont make ne profits and just end up bankrupting a majority of companies. the cure for this? well hard to explain 1 rly. but mostly depends on cooperation and communication between companies and the citizens it is a part of.
Blackadder: Lowering both wages and prices causes deflation. With deflation the reduced prices in RM, and potentially food, doesn't matter, since the consumers will have less money.
That is why I haven't lowered my employees' wages and I don't intend to do it either. I have chosen not to lower my grain prices because I didn't know if the decreasing prices were something temporary. Now I know it isn't temporary, due to decreased wages. I will hence set my price after the market.
Maybe we need more Diamond companies. Again, the law of supply and demand.
John
@Crazy Quilt Lady - Last night I saw Q2 food just before the end of the eRep day. So I'll be patient today! Unfortunately we bought a house IRL yesterday at your suggested time 😉
@Broadside - The closer I look at how things work around here the more I get the impression that you actually have to rely on price fixing agreements and a lot of communication between companies, people and government. So hopefully eRep won't grow too much, otherwise you'll just loose overview and won't be able to do that anymore.
But I certainly believe boycotts won't achieve much neither IRL nor here. I think a lot will be regulated by the market. If you take Blackadder's calculation for example and just say there are 4 equal companies paying you between 1.01 and 1.20 a day and asking between 0.90 and 1.00 for their products. Any "normal" person would of course go for the company that pays 1.20 and buy the food for 0.90 If we say the company that pays 1.20 makes a deficit, will crumble at some stage. Let's assume a company that asks for 1.00 for their products and pays just 1.01 will also fail over the longterm (if you apply a stagnant population). Less people are buying the products, so they just pile stock and production costs and the workers will run away. I go with Marx and Engels on that one, it all comes down to a healthy balance and time will sort between sensible and bad entrepreneurs!