Managerial Economics: Long Run Prospects of Farms in Singapore

This report provides a comprehensive analysis of the long-run prospects of farms in Singapore, focusing on the economic factors influencing the agricultural sector. It begins with an executive summary and an introduction that highlights the reduced agricultural presence in Singapore by 1987 and its reliance on imports. The report then delves into the market structure of Singapore's farms, characterizing it as highly competitive with numerous suppliers, and discusses both the short-run and long-run performance of these farms, including profit margins and market entry/exit dynamics. It also explores the impact of increasing demand and the potential for increased prices in the long run. The report further examines the impact of technology and government initiatives on the farming sector. The report concludes with recommendations for suppliers entering the market, emphasizing the importance of considering the long-term performance of the industry. The report uses figures to illustrate perfect competition and short and long run scenarios. Finally, the report uses several references from various sources to support its findings.

ECONOMICS1
Managerial Economics
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

ECONOMICS2
Executive summary
This report accounts and presents the state of farming in Singapore by illustrating the previous
and current performance of the sector. The paper illustrates that, by early 1987, the agricultural
sector of Singapore was heavily reduced. It also illustrated that only 2075 registered farms were
in the area. Further, the report indicates that Singapore's farms have a competitive market
structure made up of very many food suppliers. The paper also illustrates the performance of
Singapore's farms in the short where agricultural farms in Singapore make high profits which are
not normal or make losses. In addition, the report illustrates that the increase in demand for farm
products, in the long run, will increase the prices of the agricultural products. Also, the paper
provides various recommendations for entering the market of agricultural product, where it
indicates that, suppliers should first consider the long term performance of farming so as to enter
the market.

ECONOMICS3
Table of contents
Executive summary...................................................................................................................................2
1.0 Introduction.........................................................................................................................................4
2.0 Type of Market Structure for Farms in Singapore...........................................................................4
3.0 Farms in Singapore in the Short Run................................................................................................5
4.0 Farms in Singapore in the Long run..................................................................................................6
5.0 Conclusion............................................................................................................................................7
6.0 Recommendations................................................................................................................................8
References..................................................................................................................................................9

ECONOMICS4
1.0. Introduction
The aim of this paper is to clearly provide a report about the state of farming in Singapore. In this
case, it is noted that the agricultural sector of Singapore was heavily reduced by early 1987.
During that year, there were only 2075 registered farms that covered an area of 5,030 acres
which equates to 2.5 acres of land per farm. Before modernization, agriculture was mostly done
in Orchard. As time passed on, farms in the area begun disappearing and Singapore started
depending on imports (World Economic Forum 2012). The main agricultural products of
Singapore included food crops such as rambutans, mangosteens, and durian, flower crops, and
fish. As a result of the limited land in Singapore for farming caused by the high population,
farmers in the country have embarked on using technology to practice agriculture. In this way,
Singapore is using modernized technology to grow crops on top of houses and in the sky with the
assistance of modern farming technology. Singapore has developed 6 agro-technology parks
made up of 200 plus farms which produce a variety of products such as eggs, livestock,
vegetables, aquarium, fish, and many others. Singapore’s agro technology parks are made-up of
high mechanized tools which lead to increased production (Watanabe et al 2009).
2.0 Type of Market Structure for Farms in Singapore
The market structure of Singapore is highly competitive with very many suppliers. As a
result of not being in the position to produce more food, Singapore has reported to importing
food products making it the largest importers of processed food and agricultural products. The
consumption rate of agricultural products in Singapore is expected to raise as a result of the
increased income of the people and a rising rate of visitors in the area. The major retails of food

ECONOMICS5
products in Singapore include, petrol stations, convenience stores, large retailers, and traditional
stores, but retail outlets taking the lead in the supply of food products (UNCTAD 2009).
However, the market structure of Singapore's food products experiences various challenges such
as; limited growth of retail stores, the weak market for staples, high expenses incurred to market
new products, high cost involved in maintaining the company's position and shares and many
others. The reduced prices for agricultural products in Singapore are as a result of limited
customer as compared to the number of suppliers (Shi and Chavas 2011). Being a competitive
market structure, Singapore's farm's customers opt for cheap products because they are well
versed with the prices of the products. In addition, there is a free market for agricultural products
in Singapore, this means that suppliers are free to enter or exit the industry. The feasibility of
Singapore’s farms will be determined in the long run as the costs increase. This means that the
country will be in the position to make high profits in the long run (USDA 2009).
As a result of the small market for agricultural products in Singapore, the competition
will continue being intense. Despite the increased competition for agricultural products from
different online grocers, strong sales are expected at supermarkets in the coming years as a result
of the strong marketing strategies used. Therefore, this will lead to higher prices for agricultural
products, more consumer willingness to purchase the good quality products, the desire for buy
food products at their homes and an increased desire for people to cook as a result of different
cooking shows done on social media and television. By 2025, Singapore's farming industry is
expected to be so competitive as compared to the current state as a result of the developed
technology to market, and grow crops.The statistics of Singapore's "Department of Statistics and
Research" of 2018, the sales of retail hypermarkets and supermarkets increased by 2.5% as

ECONOMICS6
compared to the previous year. Also, the sales of beverage and food services decreased by 1.2
percent in 2018 (Porto et al 2011).
Figure 1: Perfect competition
https://www.economicshelp.org/microessays/markets/perfect-competition/
3.0 Farms in Singapore in the Short Run
In the short run, agricultural farms in Singapore make high profits which are not normal
or make losses. In the short run, the demand for food products low in Singapore and this affects
the price of farm products. Therefore, the "average revenue curve" depends on the level of
demand (Karantininis et al 2010). As a result of many suppliers of farm products in a limited
market, most of the incompetent farms will be outcompeted due to the high costsof operation
Currently, Singapore heavily depends on import products as a result of the small farms in the
region which can’t support the high population. However, in the long run, farms are expected to
expand and imports will reduce giving rise to the home markets or products. Also, the short term
profit margins made by farms in Singapore may affect force them to leave the market in the long
run (Setiawanet al2012).

ECONOMICS7
Figure 2: Short run
http://www.economicsonline.co.uk/Business_economics/Perfect_competition.html
As a result of constant market prices for every unit of farm products sold, the Average
Revenue curve becomes the MR curve for Farms in Singapore in perfect competition. In the
short run, profit maximization of firms is at Q2 and Marginal cost (MC) is equal to Marginal
Revenue (MR). Therefore, the output generates farms a total profit of (px Q). This is as a result
of high total revenue exceeding the total cost hence making an abnormal profit (SAC 2012).
4.0 Farms in Singapore in the Long run
As a result of the free market of farms in Singapore, very many suppliers are forced to
enter the market in the short run but due to various factors, they will fail to maintain their market
structure leading to their collapse in the long run (Sugimoto and Ichiro 2011). In addition, the
increase in farm products in the short run will force the unit prices of goods, in the long run, to
reduce where every farm in the markets make normal profits. In the long run, an increase in the
demand of farm products will increase the prices forcing the demand curve to shift upwards
hence forcing them to make abnormal profits. In the long run, consumer spending on agricultural

ECONOMICS8
products is expected to rise by 2020-2025, at an average of five percent considering the local
currency. As a result of an export-dependent economy, Singapore's importation of food products
will continue creating an opportunity for United States exports in the future. (Fernandez et al
2011)
Figure 3: long run
https://www.economicshelp.org/microessays/markets/perfect-competition/
According to the figure above, an increase in the cost in the long run will force the
Average Cost Curve (AC) to increase lending (AC< AC). At the moment firms will start making
losses hence forcing them to leave the industry leading to reduced supply of farm product hence
increased prices (Markelova et al 2009.).
5.0 Conclusion
The decline of agricultural products in 1987 was associated with the high population of
the people that led to reduced land for farming but as a result of farming technology, the sectors
have been improved. Improved farming technology has given rise to modern fish hatching

ECONOMICS9
techniques and organic urban farming. The limited land in Singapore has now been utilized for
agriculture (Varian, H.R. (2010). Also, the Competitive market structure of Singapore has
created chances of new suppliers in the market as there is "free entry and free exit." Currently,
Singapore is considered as the largest importer of agricultural products and processed food but
with the advancement of technology, this is expected to change. More so, the low prices of
agricultural products in Singapore has been understood to be as a result of very suppliers in the
market (Lim, 2015). However, a prediction of the future increase in the area's population may
lead to increased consumption hence higher prices. In a short time, the agricultural products of
Singapore's farms face high competition leading to losses and abnormal profits for some
suppliers. However, suppliers of agricultural products, in the long run, will earn normal profits
for their products (Reardon et al 2009).
6.0 Recommendations
Considering the future market structure of Singapore's farm products, there will be
increased sales of agricultural products in the country. In addition, most of the farms will
withdraw during the short run giving a chance for the strong ones to take over the market.
Therefore, suppliers are encouraged to take part in the supply of agricultural products because
the prices are expected to rise (Jongwanich 2009). Also, supplies are advised to consider the
nature of the market structure in the long run. For example, suppliers are encouraged to invest in
agricultural products when the demand increases as this will help in increasing their earnings.
Therefore, for someone to involve him or herself in Singapore’s farming, he or she should not
consider the short performance of the industry but rather its long-run performance (Porto et al
2011).

ECONOMICS10
References
Fernandez-Stark, K., Bamber, P., Gereffi, G., 2011. The Fruit and Vegetables Global Value
Chain: Economic Upgrading and Workforce Development. Center on Globalization, Governance,
and Competitiveness, Duke University
Jongwanich, J., 2009. The impact of food safety standards on processed food exports from
developing countries. Food Policy 34 (2009) 447–457.
Karantininis, K., Sauer, J., Furman, W. 2010. Innovation and integration in the agri-food
industry. Food Policy 35 (2) 112–120.
Lim, L, Y, C.2015. "Fifty Years of Development in the Singapore Economy: An Introductory
Review". The Singapore Economic Review. 60 (03):
1502002. doi:10.1142/S0217590815020026. ISSN 0217-5908
Markelova, H., Meinzen-Dick, R., Hellin, J., Dohrn, S., 2009. Collective action for smallholder
market access. Food Policy 34 (1) 1–7.
Porto, G., N. Chauvin, and M. Olarreaga, 2011. Supply Chains in Export Agriculture,
Competition, and Poverty in Sub-Saharan Africa. World Bank: Washington, D.C.
Reardon, T., Barrett, C., Berdegue, J., Swinnen, J., 2009. Agrifood Industry Transformation and
Small Farmers in Developing Countries. World Development,
doi:10.1016/j.worlddev.2008.08.023
SAC, 2012. Power in Agriculture: A Vital Report on the Future of Farming. Oxford Farming
Conference.

ECONOMICS11
Setiawan, M., Emvalomatis, G., Lansink, A.O., 2012. The relationship between technical
efficiency and industrial concentration: Evidence from the Indonesian food and beverages
industry. Journal of Asian Economics, doi:10.1016/j.asieco.2012.01.002.
Shi, G., and J. Chavez, 2011. The Effects of Vertical Organization on the Pricing of
Differentiated Products. Journal of Agricultural and Resource Economics 36(3):448–464
Sugimoto, Ichiro.2011. Economic Growth of Singapore in the Twentieth Century.
p. 299. ISBN 9814317918.
UNCTAD, 2009. World Investment Report: Transnational Corporations, Agricultural Production
and Development. UNCTAD, Geneva
USDA. (2009). Global Food Markets Industry Structure. http://www.ers.usda.gov/Briefing /
GlobalFoodMarkets/Industry.htm
Varian, H.R. (2010). Intermediate microeconomics: a modern approach. New York, NY: W.W.
Norton & Co.
Watanabe, M., Jinji, N., Kurihara, M., 2009. Is the development of the agro-processing industry
pro-poor? The case of Thailand. Journal of Asian Economics 20 (4) 443–455.
World Economic Forum.2012. "Global Enabling Trade Report"(PDF). Archived from the
original (PDF)