Farmers are receiving a smaller portion of consumer spending on food as modern food systems increasingly allocate costs toward value-added processes like transport, marketing, and processing. This shift significantly influences how food prices respond to agricultural climate policies, with wealthier countries benefiting from buffered consumer price changes while poorer nations face greater challenges due to farming costs’ dominance in food pricing.
In high-income countries, farmers receive less than a quarter of the money spent on food, compared to over 70% in Sub-Saharan Africa, where farming costs constitute a larger share of food prices. This disparity highlights the different ways food systems function globally. As economies develop and food systems industrialize, farmers’ share of consumer spending known as the “farm share” is projected to decline further. In wealthier nations, processed products like bread, cheese, and candy dominate the market, where raw ingredients make up only a small fraction of the total cost. Most of the price is attributed to processing, retail, marketing, and transport. Consequently, consumers in these countries are shielded from farm price fluctuations caused by climate policies, such as taxes on pollution or restrictions on land expansion. However, this also underscores the limited earnings of farmers.
To better understand these dynamics, researchers analyzed the full food value chain, extending their assessment beyond farm costs to include grocery stores, restaurants, and canteens. By studying food price components across 136 countries and 11 food groups, they uncovered how climate policies aimed at reducing agricultural emissions impact consumers. Their findings reveal that the long supply chains characteristic of modern food systems buffer consumer prices from drastic increases, especially in wealthier nations.
Under ambitious climate policies with strong greenhouse gas pricing on farming activities, the impact on consumer prices by 2050 would be significantly smaller in wealthier countries. For instance, in these nations, consumer food prices would rise by a factor of 1.25, even if producer prices increased by 2.73 times. In contrast, lower-income countries would experience a consumer price increase of 2.45 times, while producer prices would rise by 3.3 times. Although the consumer price increase in poorer countries is less pronounced than the rise for farmers, it would still make it more difficult for many people to afford adequate and nutritious food.
Despite these challenges, climate mitigation policies do not necessarily need to result in hardship for low-income consumers. By using revenues from carbon pricing to support vulnerable households, these groups could experience improved financial stability despite food price inflation. Climate policies, while challenging in the short term for consumers, farmers, and food producers, are essential for securing the long-term resilience of agriculture and food systems. Without such policies, the impacts of unchecked climate change such as crop failures and supply chain disruptions could drive food prices even higher.
To facilitate a smoother transition, climate policies should incorporate mechanisms to support producers and consumers, including fair carbon pricing, financial assistance for vulnerable regions, and investments in sustainable farming practices. These measures are critical for ensuring that agricultural systems remain robust in the face of climate change, safeguarding food security and affordability for future generations.
