Sunday, January 27, 2013

HOLY COW!! Bovine smuggling from India to Bangladesh has increased dramatically. Read here what "the beef" is between these two countries...

When quantity demanded of a good is greater than quantity supplied of a good the price of that good tends to increase, especially if there are supply-side exogenous variables that prevent a re-balancing to the previous market equilibrium price.

Bangladesh loves beef.  They love it so much that they consume all they can produce domestically and STILL want more. 

Neighboring India has cows every where.  However, they are sacred and it is illegal to export them across the border.

A vibrant smuggling industry has popped up to transport cows from India to Bangladesh.

Because the trade is illegal, those suppliers (smugglers) engaging in the activity are incurring significant "transaction costs" for each smuggled cow over and above the cost if the trade was legal.

They have to pay bribes along the way PLUS they need to be compensated for the risk they are taking by engaging in an illegal activity. 

Hence the cost of each additional cow (the Marginal Cost) smuggled over the border is going to be significantly higher than a legally traded cow.

So, the additional cows brought over the border, over and above the ones already supplied domestically in Bangladesh, are going to require a higher market price to make it worth it for the smugglers.

If enough consumers (Demanders) of beef are willing and able to pay a higher price for the beef, smugglers are willing and able it increase the quantity supplied at that higer price.

Smugglers were not willing (although they were able, I suppose) to supply more cows at the lower price--too much risk, little reward.

There was movement ALONG the Beef Supply curve in this market in response to the increase in demand. The Quantity Supplied of Beef did not increase at the previous price, which would have indicated an increase in the Supply of Beef and a shifting of the supply curve to the right.

Now I want a Cheeseburger. Gotta go get some lunch...

Cow smuggling ... it's how Bangladesh gets its beef
Beef is a delicacy in Bangladesh, but Hindu-majority India refuses to sell their sacred cows. The demand is so high, however, that a dangerous $920 million cow smuggling trade has popped up

The country's meat producers estimate that slaughterhouses need up to 3 million cows every year to feed Bangladeshi appetites, and to help meet demand, Bangladesh is eyeing neighboring India. Cows are everywhere in India, but the cow is considered holy in the Hindu-majority country. In fact, slaughtering cows is banned in many Indian states, and New Delhi refuses to export them.

That refusal hasn't done much to deter the demand for beef in Bangladesh, however. In fact, say officials in Dhaka, beef has become so valuable it's spurred a dangerous cow smuggling trade across the India-Bangladesh border.

More than 2 million cows are smuggled from India to Bangladesh every year and most of the illegal trade takes place through the Indian border state of West Bengal, says Bimal Pramanik, an independent researcher in Calcutta, India.

“Bangladeshi slaughterhouses cannot source even 1 million cows from within the country. If Indian cows do not reach the Bangladeshi slaughterhouses, there will be a big crisis there,” says Mr. Pramanik

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