A tomato that costs a farmer twenty cents to grow might sell for two dollars at the grocery store. Understanding where that gap goes means understanding the supply chain - the full sequence of steps, businesses and transportation links that move a raw commodity from a farm to a finished product a consumer can actually buy. This lesson traces that path and explains why it matters for prices, food security and the volatility covered earlier in this module.

The stages between field and shelf

After harvest, a crop typically passes through several distinct stages, each run by a different business with its own costs and its own profit margin. First comes aggregation, where a local buyer or cooperative collects small quantities from many individual farms into shipment-sized batches. Then comes processing - washing, sorting, milling, canning or otherwise transforming the raw commodity into something closer to what a consumer will eventually buy. Next is transportation, often across long distances and sometimes across national borders, followed by wholesale distribution to retailers, and finally retail sale itself. Each of these stages is a business that has to cover its own costs and earn a value added margin - the extra worth it creates at that stage - which is exactly why the final retail price ends up far higher than what the farmer originally received.

Middlemen aren’t just markup

It’s easy to look at this chain and see each business in the middle - each middleman - as simply adding cost without adding value. In reality, most of these stages solve real logistical problems that neither farmers nor consumers could solve on their own. A processor turns raw wheat into flour that a bakery can actually use. A distributor solves the problem of getting a perishable product from thousands of small farms to tens of thousands of stores on a predictable schedule. Removing a stage from the chain doesn’t make its underlying function disappear - someone still has to do that work, and cutting out a middleman often just means the farmer or the retailer now has to do it themselves, usually at a cost.

Cold chains and bottlenecks

Perishable food depends on an unbroken cold chain - refrigeration maintained continuously from harvest or processing all the way to the store shelf. A single break in that chain, like a refrigerated truck breaking down in transit, can spoil an entire shipment and destroy real economic value in a matter of hours. Supply chains are also vulnerable to bottlenecks, single points where a disruption - a blocked port, a shortage of truck drivers, a single processing plant shutting down - can slow or halt the movement of a commodity even when the farms themselves are producing normally. This is a separate source of price volatility from the supply-and-demand shocks covered in the first lesson of this module: sometimes there’s plenty of a crop, but it simply cannot get to where it’s needed.

A common misunderstanding worth clearing up

Why this matters for the rest of the module

Supply chain disruptions - a bottleneck at a port, a cold-chain failure, a shortage of processing capacity - are a distinct and increasingly important source of the price volatility this whole module keeps returning to. The food security lesson later in this module builds directly on this idea, since a country’s food security depends not just on how much food it can grow, but on how reliably its supply chain can move that food from farms to people.