The Journey from Farm to Fork
Every meal you eat is the culmination of a complex journey through multiple organizations, transactions, and transformations. The agribusiness supply chain — the network of businesses and activities that bring food from producers to consumers — is one of the most intricate logistical systems in the modern economy. Understanding this system is essential for anyone working in agriculture, whether you're a farmer trying to capture more value, a food business navigating regulations, or a sustainability professional implementing traceability systems.
Yet for many participants, especially primary producers, the supply chain remains opaque. Farmers often don't know where their products end up or what price they ultimately command. This information asymmetry isn't just frustrating — it's economically significant, contributing to the persistent problem of value capture at the farm gate.
The Seven Stages of the Food Supply Chain
While every commodity has its peculiarities, most food supply chains follow a similar structure with seven distinct stages:
1. Input Suppliers
Before farming even begins, producers must purchase inputs: seeds, fertilizers, pesticides, animal feed, veterinary medicines, fuel, and equipment. The input supply sector is highly concentrated, with a handful of multinational corporations dominating markets for seeds, agrochemicals, and genetics. This concentration gives input suppliers significant pricing power, and input costs typically represent 40-60% of a farmer's total production costs.
2. Primary Production
This is where farmers, ranchers, and growers cultivate crops and raise livestock. Primary production is the most fragmented stage of the supply chain, with millions of individual producers worldwide. This fragmentation is precisely why farmers often have limited bargaining power with buyers. While production is distributed, the assets required — land, equipment, livestock — are capital-intensive, creating high barriers to exit even when returns are poor.
3. Aggregation and First-Level Trading
Most food commodities are produced in small quantities by individual farms but consumed in large quantities by processors and retailers. Aggregators bridge this gap, collecting products from multiple producers. This might be a grain elevator, a livestock auction, a dairy cooperative, or a fresh produce packhouse. Aggregation is where the first major value capture often occurs, as aggregators can exploit information asymmetries and transaction costs.
4. Processing and Manufacturing
Raw agricultural products are transformed into food products ready for consumption or further manufacture. A wheat farmer's grain becomes flour, then bread. A dairy farmer's milk becomes cheese, yogurt, or ingredient products. Processing adds significant value but also concentrates market power — there are far fewer flour mills than wheat farmers, and far fewer cheese manufacturers than dairy producers.
5. Distribution and Logistics
Processed products move through distribution networks involving warehousing, transportation, and logistics coordination. This stage is increasingly dominated by specialized third-party logistics providers and has become more complex with the rise of cold chain requirements and food safety regulations. Distribution costs vary enormously depending on product perishability, required storage conditions, and geographic distance from production to consumption.
6. Retail
Supermarkets, restaurants, food service companies, and online platforms sell to end consumers. Retail is highly concentrated in most developed markets, with a handful of supermarket chains often controlling 60-80% of the grocery market. This gives retailers enormous leverage over suppliers and significant ability to capture value through private label products, shelf space fees, and promotional charges.
7. Consumer
The end of the chain, where food is finally consumed. Consumer preferences drive the entire system, but these preferences are mediated and shaped by every previous stage, particularly by retailers and food manufacturers through branding and marketing.
The Farmer's Share Problem
One of the most striking features of modern food supply chains is how little of the retail price flows back to primary producers. Studies consistently show that farmers receive only 7-15% of the final retail price for most commodities. For a loaf of bread selling for $3, the wheat farmer might receive $0.25. For a $5 gallon of milk, the dairy farmer might get $0.75.
Where does the rest of the value go? Processing typically captures 20-30% of the retail price, covering the costs and margins of transforming raw agricultural products into food products. Distribution and logistics take another 15-25%, covering transportation, warehousing, and the complex cold chain infrastructure required for perishable products. Retail captures 25-35%, covering store operations, staff, shrinkage (spoilage and waste), and retail margins.
This distribution isn't inherently unfair — each stage adds value and incurs costs. However, the concentration of market power means that returns aren't determined purely by costs and competition but also by bargaining leverage. When four companies process 85% of beef cattle in the United States, when three companies control 60% of global agricultural inputs, and when five retailers control 70% of grocery sales in a country, competitive market dynamics break down.
Power Dynamics and Information Asymmetry
Supply chain power flows from three sources: concentration, control of information, and control of access to consumers. At the production stage, farmers are fragmented and have limited information about prices further down the chain. They often sell at posted prices with little negotiation leverage. Meanwhile, buyers — whether aggregators, processors, or retailers — can see prices across the entire supply chain and can shift between suppliers.
This information asymmetry has traditionally worked against producers. A wheat farmer might know local grain elevator prices but have limited visibility into flour prices, wholesale bread prices, or retail bread prices. They also lack information about the quality premiums different customers might pay or the specific end uses that might command higher prices.
How CSRD is Changing Supply Chain Relationships
The European Union's Corporate Sustainability Reporting Directive (CSRD) is fundamentally altering supply chain dynamics in food and agriculture. Under CSRD, large companies must report on their entire value chain's environmental and social impacts, including upstream agricultural production.
This creates new information flows in supply chains. Retailers and food manufacturers now need detailed data from farms about carbon emissions, water use, biodiversity impacts, and labor practices. To comply with CSRD, a chocolate manufacturer must understand cocoa farming practices, a supermarket must understand the sustainability performance of its produce suppliers, and a food service company must track the environmental footprint of its ingredient sources.
For farmers, this presents both challenges and opportunities. The challenge is the reporting burden — small producers may lack the systems and expertise to generate the required data. But the opportunity is visibility. When supply chain data must flow upstream to meet regulatory requirements, it creates natural channels for information to flow downstream as well. Farmers who can provide verified sustainability data may gain leverage and access to premium markets.
CSRD is also driving investment in traceability systems. Blockchain-based tracking, IoT sensors, and digital farm management platforms are becoming standard tools for demonstrating compliance. This infrastructure, while initially deployed for regulatory purposes, can reduce information asymmetry and enable farmers to capture more value by proving quality, provenance, and sustainability attributes.
Where Small Producers Can Capture More Value
Despite the structural challenges, there are proven strategies for primary producers to capture a greater share of supply chain value:
Short Supply Chains and Direct Sales
By eliminating intermediaries, farmers can capture value that would otherwise go to aggregators, processors, distributors, and retailers. Farmers' markets, farm shops, community-supported agriculture (CSA) programs, and direct-to-consumer online sales all shorten the supply chain. While these channels require producers to take on additional functions — marketing, distribution, retail — they can dramatically increase the farm-gate share of the consumer price to 40-60% or even higher.
Collective Action and Cooperatives
Producer cooperatives aggregate output and increase bargaining power with buyers. Successful cooperatives also capture processing and distribution margins by vertically integrating. The dairy cooperative model has been particularly successful in Europe, with farmer-owned cooperatives like Arla Foods and FrieslandCampina competing directly with investor-owned food companies while returning a greater share of value to member farmers.
Differentiation and Premiums
Commodity products command commodity prices, but differentiated products can earn premiums. Organic certification, geographic indications (like PDO or PGI status in Europe), animal welfare certifications, regenerative agriculture verification, and sustainability certifications all enable producers to exit commodity markets and access premium channels. The key is ensuring that the premium received exceeds the additional costs of certification and compliance.
Vertical Integration
Some producers capture more value by integrating downstream into processing, manufacturing, or retail. A dairy farmer might make cheese or ice cream. An apple grower might press cider. A livestock producer might operate a butcher shop. This requires additional capital and expertise but allows producers to capture processing and retail margins rather than just production returns.
Supply Chain Governance Models
Not all supply chains are organized the same way. Agricultural economists identify several governance models:
Market-based chains involve arms-length transactions with minimal coordination beyond price signals. Commodity grain markets exemplify this model. Modular chains feature standardized products with clear specifications, allowing suppliers to be switched relatively easily. Relational chains involve ongoing relationships between specific buyers and sellers, often with mutual investment in the relationship. Captive chains feature dependent suppliers with limited alternatives, giving buyers significant power. Hierarchical chains are vertically integrated, with a single company controlling multiple stages.
For small producers, relational chains offer the best balance of stability and autonomy. Building long-term relationships with specific buyers — whether processors, retailers, or restaurants — can provide market certainty and opportunities to negotiate for quality premiums. CSRD reporting requirements are likely to favor relational chains, as meeting sustainability reporting obligations is easier with stable, transparent supply relationships than with anonymous spot market transactions.
Traceability Requirements and Digital Infrastructure
The future of food supply chains is digital and traceable. Beyond CSRD, regulations like the EU Deforestation Regulation (EUDR) require companies to prove that products aren't linked to deforestation, requiring geolocation data from farms. Food safety regulations increasingly mandate farm-to-fork traceability. Consumer preferences for transparency are driving private sector investment in track-and-trace technologies.
For producers, this means adapting to digital systems. QR codes on products link to farm stories. Blockchain platforms create immutable records of provenance. IoT sensors provide real-time data on storage conditions and product quality. While implementation requires investment, these systems can also empower producers by making their practices visible to consumers and creating new opportunities for value capture through verified claims.
Conclusion: Navigating the Chain
The agribusiness supply chain is complex, concentrated, and often opaque. For primary producers, understanding where value is captured and how power flows through the chain is essential for business strategy. The traditional structure — fragmented production selling to concentrated buying — has systematically disadvantaged farmers. But change is coming.
CSRD and related regulations are creating new information flows and new leverage points. Digital infrastructure is reducing information asymmetry. Consumer preferences for sustainability and traceability are opening premium markets. And innovative business models — cooperatives, short chains, differentiation strategies — are proving that small producers can capture more value when they understand and strategically navigate the supply chain.
The key is moving from passive participation — simply selling at posted prices — to active strategy: understanding your position in the chain, investing in capabilities that increase your leverage, building relationships that reduce uncertainty, and using regulatory requirements as opportunities to demonstrate value. The supply chain will always have multiple stages, but how value is distributed across those stages isn't fixed. It's determined by power, information, and strategy.