Farmers get just 7.8 cents of every US dollar spent on food

In each of the past four years, the farmers’ share has dropped sharply.

  • Caitlin Dewey The Washington Post
  • Saturday, May 5, 2018 4:08pm
  • Nation-World

By Caitlin Dewey / The Washington Post

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. In 2016, agribusiness saw two cents of every food dollar, according to USDA.

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, cafes and other food service places, compared to 44.3 percent in 1994. Farmers receive a smaller share of away-from-home “food dollars” — roughly 2.4 cents, on average — because the price of restaurant meals includes additional preparation, service and marketing.

“That was the other shoe to drop,” said John Newton, the director of market intelligence at the American Farm Bureau Federation. “The on-the-go consumer leads to farmers getting a smaller share of the food total.”

On top of that, over the past decades, Americans have also embraced an incredible range of processed and prepared foods, from frozen pizzas and rotisserie chickens to meal-replacement bars, meal kits and riced vegetables. That trend is likely to accelerate, USDA predicts, because millennials buy proportionally more prepared foods than past generations.

While Canning has not studied the long-term effects of processed foods on farmers’ share of food spending, he said he suspects it represents a significant “structural change.” He points to the popularity of pre-husked, shrink-wrapped sweet corn, which costs three to four times the price of corn consumers shuck themselves.

Farmers get only 16 to 17 cents of each dollar spent on that corn. They might get 60 cents of the old-fashioned version.

The farmers’ share falls even more dramatically for more processed products: Farmers average five cents on a five-dollar box of cornflakes, according to estimates by the National Farmers Union.

“At some point, even for food at home, you started to get more and more processing of food post-harvest,” Canning said. That processing adds to the final retail cost of food, he said, but that money goes to food manufacturers — it doesn’t trickle down to the farm level.

None of this hurts farmers, per se. But it does mean that, as consumers pay more for food, many farmers are failing to capture that “added value” themselves. It’s an issue that has long troubled Stewart Smith, a Maine farmer who previously served as a senior economist at USDA and on the Joint Economic Committee of Congress.

Smith argues that, in a food system where farmers and consumers are separated by so many middlemen, farmers will never gain a bigger piece of the pie — even if the pie itself is growing. There are too many steps in the industrial food supply chain, he said, where large processors, retailers and restaurant chains can pad their margins.

Instead, he has advocated for alternative systems — such as farmers markets, community supported agriculture and regional sourcing — that move the supply chain back toward the farm. On his Lakeside Family Farm in Maine, Smith grows 30 different fruits and vegetables on 150 acres, which he supplies directly to Hannaford grocery stores. He also does basic processing in-house, such as peeling and cutting baby carrots.

Smith’s share of those carrots, and the other produce he grows, is far more than 8 percent.

“Alternative food systems tend to keep a larger share of consumer expenditure in the farming sector,” he said.

Talk to us

More in Nation-World

FILE - Britain's Queen Elizabeth II looks on during a visit to officially open the new building at Thames Hospice, Maidenhead, England July 15, 2022. Buckingham Palace says Queen Elizabeth II is under medical supervision as doctors are “concerned for Her Majesty’s health.” The announcement comes a day after the 96-year-old monarch canceled a meeting of her Privy Council and was told to rest. (Kirsty O'Connor/Pool Photo via AP, File)
Queen Elizabeth II dead at 96 after 70 years on the throne

Britain’s longest-reigning monarch and a rock of stability across much of a turbulent century died Thursday.

A woman reacts as she prepares to leave an area for relatives of the passengers aboard China Eastern's flight MU5735 at the Guangzhou Baiyun International Airport, Tuesday, March 22, 2022, in Guangzhou. No survivors have been found as rescuers on Tuesday searched the scattered wreckage of a China Eastern plane carrying 132 people that crashed a day earlier on a wooded mountainside in China's worst air disaster in more than a decade. (AP Photo/Ng Han Guan)
No survivors found in crash of Boeing 737 in China

What caused the plane to drop out of the sky shortly before it was to being its descent remained a mystery.

In this photo taken by mobile phone released by Xinhua News Agency, a piece of wreckage of the China Eastern's flight MU5735 are seen after it crashed on the mountain in Tengxian County, south China's Guangxi Zhuang Autonomous Region on Monday, March 21, 2022. A China Eastern Boeing 737-800 with 132 people on board crashed in a remote mountainous area of southern China on Monday, officials said, setting off a forest fire visible from space in the country's worst air disaster in nearly a decade. (Xinhua via AP)
Boeing 737 crashes in southern China with 132 aboard

More than 15 hours after communication was lost with the plane, there was still no word of survivors.

In this photo taken from video provided by the Ukrainian Presidential Press Office, Ukrainian President Volodymyr Zelenskyy speaks to the nation in Kyiv, Ukraine, Sunday, Feb. 27, 2022. Street fighting broke out in Ukraine's second-largest city Sunday and Russian troops put increasing pressure on strategic ports in the country's south following a wave of attacks on airfields and fuel facilities elsewhere that appeared to mark a new phase of Russia's invasion. (Ukrainian Presidential Press Office via AP)
Ukraine wants EU membership, but accession often takes years

President Volodymyr Zelenskyy’s request has enthusiastic support from several member states.

FILE - Ukrainian servicemen walk by fragments of a downed aircraft,  in in Kyiv, Ukraine, Friday, Feb. 25, 2022. The International Criminal Court's prosecutor has put combatants and their commanders on notice that he is monitoring Russia's invasion of Ukraine and has jurisdiction to prosecute war crimes and crimes against humanity. But, at the same time, Prosecutor Karim Khan acknowledges that he cannot investigate the crime of aggression. (AP Photo/Oleksandr Ratushniak, File)
ICC prosecutor to open probe into war crimes in Ukraine

U.N. human rights chief Michelle Bachelet confirmed that 102 civilians have been killed.

FILE - Refugees fleeing conflict from neighboring Ukraine arrive to Zahony, Hungary, Sunday, Feb. 27, 2022. As hundreds of thousands of Ukrainians seek refuge in neighboring countries, cradling children in one arm and clutching belongings in the other, leaders in Poland, Hungary, Bulgaria, Moldova and Romania are offering a hearty welcome. (AP Photo/Anna Szilagyi, File)
Europe welcomes Ukrainian refugees — others, less so

It is a stark difference from treatment given to migrants and refugees from the Middle East and Africa.

Afghan evacuees disembark the plane and board a bus after landing at Skopje International Airport, North Macedonia, on Wednesday, Sept. 15, 2021. North Macedonia has hosted another group of 44 Afghan evacuees on Wednesday where they will be sheltered temporarily till their transfer to final destinations. (AP Photo/Boris Grdanoski)
‘They are safe here.’ Snohomish County welcomes hundreds of Afghans

The county’s welcoming center has been a hub of services and assistance for migrants fleeing Afghanistan since October.

FILE - In this April 15, 2019, file photo, a vendor makes change for a marijuana customer at a cannabis marketplace in Los Angeles. An unwelcome trend is emerging in California, as the nation's most populous state enters its fifth year of broad legal marijuana sales. Industry experts say a growing number of license holders are secretly operating in the illegal market — working both sides of the economy to make ends meet. (AP Photo/Richard Vogel, File)
In California pot market, a hazy line between legal and not

Industry insiders say the practice of working simultaneously in the legal and illicit markets is a financial reality.

19 dead, including 9 children, in NYC apartment fire

More than five dozen people were injured and 13 people were still in critical condition in the hospital.

15 dead after Russian skydiver plane crashes

The L-410, a Czech-made twin-engine turboprop, crashed near the town of Menzelinsk.

FILE - In this March 29, 2018, file photo, the logo for Facebook appears on screens at the Nasdaq MarketSite in New York's Times Square. Facebook prematurely turned off safeguards designed to thwart misinformation and rabble rousing after Joe Biden defeated Donald Trump in the 2020 elections in a moneymaking move that a company whistleblower alleges contributed to the deadly Jan. 6, 2021, invasion of the U.S. Capitol. (AP Photo/Richard Drew, File)
Facebook, WhatsApp, Instagram in hourslong worldwide outage

Something made the social media giant’s routes inaccessable to the rest of the internet.

Oil washed up on Huntington Beach, Calif., on Sunday, Oct. 3, 2021. A major oil spill off the coast of Southern California fouled popular beaches and killed wildlife while crews scrambled Sunday to contain the crude before it spread further into protected wetlands. (AP Photo/Ringo H.W. Chiu)
Crews race to limited damage from California oil spill

At least 126,000 gallons (572,807 liters) of oil spilled into the waters off Orange County.