Value of the Food Dollar Is Shrinking for Farmers — Why We Should ‘Give a Fork’
June 5, 2024 An Australian vegetable grower appeared on the evening news late last year explaining that he was going to abandon his 80 acres of zucchini, eggplants, and tomatoes, and likely stop farming. He blamed retailers for charging consumers too much and paying him too little.
Getting squeezed by rising costs of production while buyers were not paying enough to cover those increases was too much to bear. Especially when seeing what retail customers were having to pay for that produce.
The Queensland Fruit & Vegetable Growers association responded with a social media campaign, #WeGiveAFork. They wanted to educate consumers, retailers, and legislators about the two-edged sword facing producers.
Following a community forum with growers, they first asked for a commitment from “the federal government for an armistice on any government legislation, regulation, and policy changes that will drive up costs for growers and consumers.”
A Universal Problem: Passing the Buck
Certainly, there are differences between the Australian and U.S. food systems. But it seems that the concern is the same. Even if the government finds issue with those supermarkets Down Under and levies fines and/or creates new regulations, the retailers will eventually find a way to make the customer pay.
The story sounds like the common gripe between growers and retailers here that retailers could increase demand and move more produce if only they would lower the prices to reflect what they pay farmers for it.
It’s not that simple because there are few instances where farmers do sell directly to a grocer. All those other steps to get farm products from farm to store add value to the product and what the retailer ultimately pays, and what the consumer pays.
Shrinking Share of the Food Dollar
The USDA Economic Research Service (ERS) released its annual update of their Food Dollar Series around the same time the Aussie story appeared. It included a graphic illustrating how a consumer dollar spent on food is divided among the various industries that get it from seed to plate. Not surprisingly, the farmers’ portion of that dollar continues to shrink, and predictably, concerns about farmers not getting a fair share started to appear.
In 2022, farm share dropped to just 7.9 cents. It caused the same reaction about 20 years ago when it first fell below 20 cents, down from the high around 22 or 24 cents a decade earlier when the food dollar debuted.
The common reactions are to question how farmers can survive, to pay all their bills, getting only 8 cents, or lamenting why retailers can’t pay farmers more for their products.
The food dollar, however, doesn’t show what farmers (or the trucker, retailer, or any of the others) are paid for their products or services. Rather it illustrates what each sector contributes to the ultimate value that the consumer pays.
Most don’t understand that subtle difference, but Sam Pearson gets it! His reaction to one posting of the Food Dollar graphic by American Farm Bureau’s Terri Moore on LinkedIn was, “Look at all that opportunity to 12X my farm income and even the list of skills and infrastructure I need to achieve it, thank you Terri!!!
Yes! If you want to capture more of the consumer dollar for food, you have to take on some, or all, of those other layers. Whether it’s the logistics and delivery provided by the wholesaler and trucker, processing/packaging the raw product into a different form, direct-marketing via some retail outlet, or even opening a restaurant to serve your produce (the food service segment), that’s what the consumer is ultimately paying for.
Little did I know…
When celebrating my new job years ago, the chef-owner stopped by to ask if we were enjoying our meals. Somehow the conversation led to a discussion of my new role as a county agent working with vegetable growers, which apparently triggered something.
“You need to figure out why eggplant costs so much!” he exclaimed.
Maybe his tirade about how much the winter vegetables were costing him to make a pan of moussaka was the seed that started my need to understand the farm-retail price spread. If I had known about the ERS Food Doller before that conversation, I would have had a better answer than to promise that prices would likely come down the next summer when eggplant supplies moved further north.
The farmer’s small portion of the food dollar is not the significant cause of high food prices that consumers, chefs, and retailers, like to blame. There are a lot of steps between farm and plate, and everyone adds a bit more value on its way to the end user. The next time you hear someone complaining about the price of food, especially if they’re saying that farmers are getting rich because of it, kindly point out that if they ‘Give A Fork’ they should be thanking the farmers for how little their fresh produce actually costs!
As Moore from Farm Bureau puts it, “If you appreciate affordable food, it’s important to understand what makes it possible.”
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