Why farmers reap only 7.8 cents of every dollar
For every dollar consumers spend on food, only 7.8 cents goes to farmers — a record low that reflects shifts in how Americans eat, according to the Department of Agriculture.
Where once consumers cooked most of their meals at home, they’re now buying just as many at cafes and restaurants. And while shoppers were once content to husk their own corn and slice their own apples, they now buy those foods — and thousands of others — pre-husked, pre-sliced and otherwise processed.
Economists say those trends, coupled with low commodity prices, caused farmers’ share of consumer food spending to fall 1.2 cents in 2016, reaching the lowest point, adjusted for inflation, since USDA began the measure in 1993. (It’s the latest year for which data is available).
While falling share doesn’t hurt farmers, necessarily, it does expose the long-term, macro trends that shape the supply and cost of food.
“This measure basically asks, ‘what value was added at each stage of the process?’“said Patrick Canning, a senior economist at USDA. “Long-term, we definitely see the farm share trending down over several decades.”
Even a simple food, like an ear of corn, takes a long journey to get to consumers’ plates.
Before that corn is planted, farmers buy seeds, fertilizers and farm equipment to get it in the ground. Once the corn is grown, it must be picked, packed, sorted, stored and shipped to grocery stores and restaurants — and each of those steps incurs labor and logistical costs.
USDA’s food dollar series, which tracks average annual consumer expenditures in retail food stores and restaurants, attempts to break down which steps cost the most, relative to the final value of food.
In each of the past four years, farmers’ share has dropped sharply. The relative importance of farms, agribusinesses (such as seed and fertilizer suppliers), packagers and processors have also fallen slightly since 1993.
Canning cautions that it’s difficult to tease out individual causes. Higher transportation costs, which impact many crops, might have a lesser impact on produce from California, which is frequently consumed closer to the farm.
In general, however, economists agree that a recent dip in commodity prices, driven by a surplus of corn, soybeans and milk, has pushed the farmers’ share down in the short-term. There has also been a separate, long-term erosion of that share over the second half of the last century, thanks to growing consumer demand for convenient, ready-to-eat foods.
According to USDA, just over half of all consumer food dollars are spent at restaurants and other food service places, compared to 44.3 percent in 1994. Farmers receive a smaller share of awayfrom-home “food dollars” because the price of restaurant meals includes additional preparation, service and marketing.