The farmer’s share of a $1 food purchase has been steadily decreasing to just 14.5% of the total, according to USDA data. This provides a compelling clue about why food production has been strained, and correspondingly, why food cost inflation is out of control.
Profit Shift to Huge Retailers
Increasingly sophisticated supply chains continue to shift profits away from farmers to the huge retailers selling their crops and proteins. Maybe if farmers were paid like they were in the past, they would have enough funds to reinvest in capacity-increasing initiatives. Conversely, with farmers receiving a steadily declining portion of the profit pie, they are more likely to close shop, cutting our food supply & increasing our food costs.
Notably, a larger portion of a $1 food purchase is going to restaurants (food services that take the largest bite out of the buck) and advertising expenses as Americans become less familiar with their kitchens.