James MacDonald will lead a team of experts in identifying impacts of competition along the supply chain from food retailers to farmers
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James MacDonald, a research professor in the Department of Agricultural & Resource Economics, was awarded $1.5M from the U.S. Department of Agriculture’s Office of the Chief Economist to study how the growing power of big grocery chains affects the farmers, ranchers and fishers who supply them, and what that means for food prices.
“There's a lot of economic research on competition and pricing among retail chains, people asking things like are prices higher with only two competing supermarkets instead of four,” MacDonald said. “But there’s much less research on competition along the supply chain, from supermarkets back to processors and farmers, so we're hoping to generate new knowledge to answer questions in that area.”
For example, Walmart (the country’s largest grocery seller) accounts for 23% of grocery sales, but it’s not known if that gives them the leverage to force down prices paid to farmers & suppliers, who can also sell to food service and to export markets. This project aims to answer that question and others.
MacDonald will solicit and select a team of researchers to delve into specific market sectors such as seafood, beef, fresh produce like apples or tomatoes, and cereals like rice or flour. Working under sub-grants, the researchers will focus on understanding such things as: grocery chain buying strategies (whether local or coordinated nationally; how retailer procurement practices affect producers, and when practices limit competition), what share of shelf prices reach producers; and how changes in farm prices impact consumers.
The project will culminate in a series of reports that will provide policymakers with solid evidence for making decisions on antitrust and competition policy. MacDonald’s goal is to help keep farmers profitable, grocery prices affordable, and the food supply safe.
