A commodity (let's say a vegetable like squash or tomato) that is grown in Mexico and transported to the US and is being sold at 1.29/lb.
After about a month when the commodity has less than 2 weeks of shelf life it may be sold at .69/lb and then discarded after another week.
1) Why would the store not further discount these items at let's say .30/lb to clear the complete stock? ( I understand it is so as not to let the global/US prices of the commodity go down.)
2) Is wasting better for the store than to sell it at a discount?
3) Even if customers stop buying fresh commodity and start to wait until the price goes down to .30/lb. Isn't it economically profitable to the store to actually sell it than waste it ?
Food waste arises from preferences, incentives, and constraints. Retailers have time and other resource constraints which implies that it simply will not be worth it to sell every last item of food in every instance. It can be said that there is an economically optimal amount of food waste. Economic intuition suggests that it is more likely to be economically optimal to waste food when:
- There is greater demand for freshness, appearance, etc. (likely correlated with higher incomes)
- Store shelf space is limited and can be used more effectively to increase profit (such as with new products and/or product line extensions).
- Food prices are lower relative to transportation costs, storage costs, etc.
- Food preserving technologies (e.g., infrastructure, refrigeration, food additives, etc.) are more expensive or less available.
At each and every phase of the food production, distribution, and consumption chain, calculations are made in which the benefit of preventing/limiting food waste simply isn’t high enough to merit the effort.