Part 3: Follow the Food Dollar
A three-part series by Caroline Hegstrom | April 30, 2026
When food prices go up and someone points to fertilizer as the reason, the USDA's own data tells a different story. This is the final installment of a three-part series. In Part 1, we traced nitrogen from the domestic natural gas that makes it, through the wholesale market in New Orleans, to the widening gap at the retail elevator. In Part 2, we looked at who in American agriculture actually feels this and why the most exposed farm families ran out of room to plan. Today, we follow the food dollar from the farm gate to the grocery store.
The disconnect.
If fertilizer prices are rising and farmers are under pressure, it seems reasonable to expect grocery prices to follow. But the connection between a bag of urea at the elevator and a box of cereal on the shelf is far less direct than most people assume, and in many cases, it doesn't exist at all. The cost of fertilizer lands on the farmer. It doesn't flow through to the grocery store the way the headlines imply. Understanding where your food dollar actually goes changes how you hear every headline about food prices from here forward.
The USDA Food Dollar.
The USDA publishes something called the Food Dollar Series. It tracks exactly where every dollar spent on domestically produced food goes as it moves through the supply chain. The most recent data, updated in March 2026, breaks it down like this:
Out of every dollar a consumer spends on food, the farm share, the total gross return to the farm before the farmer pays any of their own costs, is 11.8 cents. After the farmer pays for seed, fertilizer, equipment, fuel, and labor, the value added by crop producers specifically is 2.5 cents per food dollar. Down from 2.9 cents the year before.
The other 88.2 cents goes to everything that happens after food leaves the farm gate: processing takes 16.1 cents, food services takes 38.6 cents, wholesale and retail trade combined take 20.1 cents, and the rest goes to packaging, transportation, energy, finance, and insurance.
Where fertilizer actually sits in this picture.
Fertilizer is a cost to the farmer, paid out of that 11.8-cent farm share. It doesn't appear in the consumer's food dollar as its own line item; it's buried inside the farmer's already thin slice. When fertilizer costs rise, the farmer absorbs that increase. It comes out of an already negative or near-negative margin. It does not get passed through to the processor, the manufacturer, or the grocery shelf. The farmer pays it.
The USDA's own research confirms this. In 2023, the production-weighted price of corn, wheat, and soybeans fell 12.1%. Food prices that same year increased 5.8%. The two moved in opposite directions. Fertilizer costs and grocery prices are not connected the way the public is being led to believe.
What actually drives food prices up.
Diesel does. But the way diesel costs move through the system depends on where you sit in the food dollar.
Diesel is averaging around $5.40/gallon nationwide, up from roughly $3.80–$3.90/gallon before the conflict, and more than 50% higher than this time last year. The farmer pays that increase twice: once to run the equipment that plants and harvests the crop, and again to transport that crop to the elevator or processor. The farmer doesn't get to add a fuel surcharge to a bushel of corn. The farmer is a price taker; they accept whatever the market offers when the grain arrives, regardless of what it cost to get it there. Both the diesel increase and the fertilizer increase land inside the farmer's 11.8 cents of the food dollar.
On the other side of the farm gate, the math works differently. Processors, distributors, and retailers do pass their diesel costs through. Every fuel surcharge from a carrier, every freight rate adjustment, every increase in cold chain energy costs, that flows into the 88.2 cents and eventually reaches the consumer. Every $1.00 increase in diesel adds roughly $0.16–$0.20 per mile in freight costs. Carriers are raising fuel surcharges weekly. Those costs accumulate across every link in the chain between the farm gate and the checkout counter.
So when food prices rise: the farmer has absorbed both the fertilizer increase and the diesel increase on their side, with no mechanism to pass either one through. The companies between the farm and the grocery store have passed their diesel costs forward to the consumer. And if anyone points to fertilizer as the reason for higher food prices, it's worth remembering that fertilizer costs never left the farm.
Why fertilizer makes a better headline.
Fertilizer is opaque. Consumers have no reference point for what it should cost. "Strait of Hormuz" sounds foreign and alarming. "Fertilizer shortage" implies that food itself might run out. The emotional weight of that framing is enormous, and it doesn't require any data to support it, because no one outside the industry can check.
Meanwhile, the farmer absorbing the actual fertilizer cost increase isn't seeing more for the crop. Net farm income is forecast to decline this year. Farm debt hit a record high in 2025. Reports from outlets like CNN have noted that farmers aren't seeing an increase in goods sold, but consumers are seeing increases at the grocery store.
The cost of fertilizer is real. The pain it causes farm families is real. But that pain stays on the farm. It does not drive the price of a loaf of bread.
The timing problem.
There's one more piece worth understanding. The food on grocery shelves right now was grown with last year's fertilizer at last year's prices. The crops that might be affected by this spring's fertilizer spike haven't been planted yet. Any grocery price increase happening today is a diesel and transportation story, not a fertilizer story.
When food prices do rise in the months ahead, it will be worth paying attention to the reason given. If the explanation points to fertilizer, the math in this series is worth revisiting.
What's being done.
Senators Klobuchar (D-MN), Grassley (R-IA), and Baldwin (D-WI) have introduced the Fertilizer Transparency and Competition Act of 2026, with a companion bill in the House backed by Congresswoman Craig (D-MN) and Congressman Finstad (R-MN). The bipartisan support is notable. The bill would require major manufacturers to report prices and inventory weekly, replacing opacity with regular public reporting.
This is a system-level response to a system-level problem. It doesn't assign blame. It asks for data. And in a market where the spread between wholesale and retail pricing has widened from $75 to over $165 per ton in eight weeks while the underlying feedstock has barely moved, data is exactly what's needed.
The full chain.
Over the past three posts, we've traced the fertilizer story from the natural gas that makes it, through the wholesale market in New Orleans, to the retail price at the elevator, through the different types of farms that do and don't depend on it, into the financial realities of the families who got caught in the gap, and finally into the food dollar that connects, and separates, the farm from the grocery store.
The narrative we hear most often — war disrupts fertilizer, farmers suffer, food prices rise — treats those three things as one unbroken chain. The data shows they aren't. Fertilizer costs land on the farmer. The farmer's diesel costs land on the farmer too. And the 88 cents between the farm gate and the checkout counter operates on its own economics with the ability to pass its costs through in a way the farmer never can.
The actual chain looks more like this:
Three years of margin compression → depleted working capital → delayed input purchases → war-driven global price spike → spot-market farmers exposed → retail fertilizer prices inflated beyond what wholesale justifies → farmer absorbs both the fertilizer and diesel increases → and none of the fertilizer cost reaches the consumer, because the farmer has no mechanism to pass it through.
That's a more complicated story. It's also a more accurate one. And the more people who understand it, the better the questions we'll ask: of the industry, of the system, and of the next headline.
Sources referenced in this series:
- CME Group/StoneX (2025–2026): Linville on NOLA barge pricing and global replacement values
- CRU Group / Argus Media (Feb–Apr 2026): NOLA urea barge transaction data
- Profercy Nitrogen Service (April 9, 2026): Nitrogen Index, India tender, ceasefire price response
- DTN Retail Fertilizer Trends (April 22, 2026): National average retail prices
- farmdoc daily, University of Illinois (April 26, 2026): Ceasefire price impact and per-acre cost analysis
- EIA (April 21, 2026): National diesel price data
- AGDAILY / Wisconsin Farmer (April 2026): Per-acre diesel cost analysis
- USDA Economic Research Service (March 2026): Food Dollar Series, Farm Sector Income Forecast, food price and field crop price divergence
- NCGA / AgWeb / DTN (March 2026): Farmer exposure and delayed purchases
- Minnesota Farm Bureau / MPR News (March 30, 2026): Glessing interview
- CNN Business (March 23, 2026): Farmer margins and grocery price disconnect
- U.S. Senate/House Press Releases (March 2026): Fertilizer Transparency and Competition Act
This is Part 3 of a three-part series. Part 1: From Natural Gas to the Elevator. Part 2: Who Gets Hurt — and Why.
Caroline Hegstrom is the founder of Taiga Farm & Seed and The Boreal Farm, a certified organic farm in Northern Minnesota.
