A recent study conducted by the Potsdam Institute for Climate Impact Research (PIK) has revealed that farmers are receiving a decreasing share of what consumers spend on food, due to the modern food system’s emphasis on value-added components like processing, marketing, and transportation. This disparity in farm share percentages across different regions highlights the diverse functioning of food systems globally. In high-income countries, farmers receive less than a quarter of food spending, while in regions like Sub-Saharan Africa, farming costs make up over 70 percent of food prices. The researchers project that as economies develop and food systems industrialize, farmers will continue to receive a smaller proportion of consumer spending.
The team of scientists at PIK utilized a combination of statistical and process-based modeling to assess food price components across 136 countries and 11 food groups. By examining the entire food value chain, including prices of food consumed at home and away from home, they were able to uncover how climate policies impact consumers differently based on the wealth of countries. While climate policies aimed at reducing emissions in agriculture may lead to concerns over rising food prices, the researchers found that long supply chains in modern food systems can buffer consumers from significant price increases, especially in wealthier countries.
Under ambitious climate policies with strong greenhouse gas pricing on farming activities, consumer food prices in wealthier countries are projected to be 1.25 times higher by 2050. In contrast, lower-income countries would experience a more significant impact, with consumer food prices rising by a factor of 2.45. Despite these potential food price increases, a prior study by PIK demonstrated that if revenues from carbon pricing were utilized to support low-income households, these households could be net better off despite inflation in food prices.
The study emphasizes the necessity of ambitious climate policies to safeguard agriculture and food systems in the long run, despite potential short-term challenges for consumers, farmers, and food producers. Without effective mitigation measures, the impacts of unabated climate change, such as crop harvest failures and supply chain disruptions, could lead to even higher food prices. To ease the transition towards sustainable farming practices, the researchers recommend incorporating mechanisms such as fair carbon pricing, financial support for vulnerable regions and populations, and investments in sustainable agriculture. By implementing these strategies, the food system can adapt to the changing climate while ensuring food security for all.