War, floods, droughts, famine, harvest disasters, prices skyrocketing – this is beginning to sound like a contemporary version of the Four Horsemen of the Apocalypse. What is happening? To provide an outline of the issue, consider these facts: the Russia-Ukraine war, weather extremes and distribution failures are extreme event sharkening back to such a biblical reference. Outside of war and extreme weather, contemporary food production, distribution and sales deserve some attention as well. While the U.S. Department of Labor’s food-at-home index over the past 12 months rose 10 percent, the largest increase since 1981, profit margins for grocery chains now range from Kroger’s, which is 1.2 percent, to Walmart’s, which is 2.3 percent.
At the same time, Walmart’s gross margin on food (before overhead and labor) is 25 percent. Meanwhile, farmers’ income for this year was predicted (prior to the Russia-Ukraine War) to decline in real terms by 7.9 percent from 2021, although thanks to government subsidies because of the pandemic, 2021 was the best year for farm incomes since 2013. Meanwhile, Tyson Foods, the country’s largest producer of meat for grocery stores, announced a 74 percent jump in second quarter profits over the same period in 2021. Food producers are getting squeezed and food retailers seem to be wasting resources on physical space and shelf space, while suppliers are in a golden age. When such an unbalanced network meets the current range of extreme events, something has to give. And when all of that is taking place during a war of attrition, ongoing extreme weather events and distribution disruptions, food moves into an emergency condition.