Only about 16 per cent of the money spent on groceries makes its way back to the farmers in developed nations like Australia.
- Farmers are getting a smaller percentage of the money spent on groceries than they used to
- Australia’s farm gate value is expected to hit a record $66 billion in the 2020-2021 year
- A researcher says farmers are still making a profit
New research from Cornell University found that the share of money spent on groceries worldwide that ends up in the hands of farmers had decreased over the past 50 years and was likely to continue to fall.
The paper found that for high- and medium-income countries, about 16 to 38 per cent of money spent on groceries went to farmers, with wealthy countries like Australia and the USA at the bottom end of those figures.
Cornell University’s Dr Miguel Gomez said in that time food prices had risen and more businesses were taking a cut than before.
“If you look at this 50 years ago, (the farmer’s share of consumer spending) was about 40 to 50 per cent in most countries and today it’s just 16 per cent. Prices of food have increased with inflation,” he said.
Not all bad for farmers
However, Dr Gomez said this was not necessarily bad news for farmers.
“Many years ago, the share of value that went to farmers was much higher, because we didn’t have all the services that the food system provides today,” he said.
“Today we have we have processes to improve the quality of food, we have processes to extend the shelf life.
“We have foreign products travelling longer distances, we have consumers willing to pay for additional services such as better packaging, food reaches locations where it’s convenient for consumers to consume, and also supermarkets are increasing services to consumers.”
Farm gate value to hit record high
Australia’s farm gate value — the market value of a product minus the selling costs — is expected to hit a record $66 billion in the 2020-2021 year, up 8 per cent from last year, according to the Australian Bureau of Agricultural and Resource Economics (ABARES).
That is being driven by high livestock prices and a near record winter crop, however the total volume of livestock exports is still forecast to fall due to livestock producers rebuilding their herds and flocks from the drought.
The bureau predicts Australia’s farm gate will fall only slightly to $65 billion in 2021-2022.
Dr Gomez said consumers wanted to know more about where their food came from, but also where their money ended up.
“What consumers need to understand is that there are many intermediaries in the food supply chain, many businesses that generate employment, that generate value, that generate convenience.”
Dr Gomez said this led to better quality products, with better packaging, that all added value to the food being consumed.