Fresh Produce Supply Chain
Describe the supply chain from farm to consumer for fresh produce in order to provide insight into the competitive differentiation of the produce market and provide background information for a potential investment in the direct-to-consumer product sector.
Agricultural Supply Chain
- The basic food supply chain consists of food being grown by the farmer and then harvested and sent to a processor. Then the processor packages the product and ships it to a distributor. The distributor sells the product to many different retailers. The retailers then sell it to the consumers.
- On average, food served in the US has traveled about 1,500 miles from farm to plate.
- By selling direct-to-consumer, farmers can drastically reduce the miles the food travels before it reaches the consumer. For example, when comparing lettuce sold in a terminal market vs a farmers market, the lettuce sold in the terminal market traveled over 2,000 miles and the lettuce sold in the farmers market had traveled about 100 miles.
Farm Share of Food Dollar
- According to the USDA, in 2017 the farmer only received 14.6 cents for every dollar spent on food, while the rest of the dollar (85.4 cents) went to marketing.
- This was further broken down by the USDA: Farm production accounted for 7.8 cents, Food processing for 15 cents, packaging 2.3 cents, transportation 3.5 cents, wholesale trade 9.1 cents, retail trade 12.6 cents, foodservices 36.7 cents, energy 3.8 cents, finance and insurance 3.2 cents, advertising 2.6 cents, and other 3.4 cents.
- This is a record low for farmers, brought on by the trend towards eating out, towards having "value-added" products (like pre-cut squash), and low commodity prices.
- If farmers do some of the processing in-house, or opt for direct-to-consumer marketing channels like farmers markets, they can keep a larger share of the food dollar for themselves.
Proposed next steps:
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As the initial research uncovered plenty of complexities in the food supply chain and farm share of the food dollar, we recommend a deeper dive into each aspect. For each, we would focus on the difference between our current global food supply system and the direct-to-consumer system.