Walmart Plans Grocery Push: Not Good for Small Farmers

Walmart Grocery Store

Story at-a-glance -

  • Walmart grocery stores now make up more than half of its retail sales, and the company claims it has saved customers over $1 billion while helping farmers in the process
  • However, Walmart is uniquely positioned to actually cut small farmers’ profits, by virtue of their sheer size and market power, and may ultimately be driving food prices up
  • The vast majority of food sold at Walmart comes from industrial farms or is imported from China; sourcing your foods directly from a local farmer, instead of from Walmart, is one of your best bets to ensure you're getting food that is wholesome and that is grown in a sustainable fashion

By Dr. Mercola

Walmart grocery stores make up more than half of its retail sales, an amount that's risen significantly over the past 10 years.

The rise makes sense from a business standpoint, since shoppers are still spending more on basic needs like food than they are on electronics or other household items – and Walmart’s product offerings have shifted to take advantage of that.

The retail giant is, however, claiming that its foray into foods, particularly local foods, has not only saved customers over $1 billion, but also helped farmers in the process – a claim that just doesn’t add up.

Why Walmart Grocery is Not a Boon to Small Farmers

On Walmart’s corporate web site, it claims the company is “… strengthening local farmers and economies, while providing customers around the world with long-term access to affordable, fresh food.”1

And it would superficially appear that they have made some progress, increasing locally sourced produce by 97 percent in 2011 alone (still, this only accounts for 10 percent of the produce they sell). They also tout some lofty goals, including:

  • Selling $1 billion in food sourced from 1 million small- and medium-sized farmers
  • Increasing the income by 10-15% for the small- and medium-sized farmers they source from
  • Doubling sales of locally sourced produce in the United States

Yet according to the report, Walmart grocery sales have increased than those from Kroger, Safeway, and SuperValu grocery chains combined (for a total of about 145 billion in 2011), is uniquely positioned to actually cut small farmers' profits, by virtue of their sheer size and market power.2

“To maintain its low cost provider status, WMT [Walmart] uses a two pronged approach. First, it leverages its scale to exert buying power on its suppliers and obtains a lower price for its inventory than competitors.

Second, WMT is relentless on cutting costs across its supply chain and maintaining as lean a structure as possible. By doing these two things, the company is able to pass on its savings to customers while still maintaining margins that are equivalent or higher than competitors.

To note an example, even when the U.S. grocery market was feeling the impact of food price inflation in the latter half of 2012, Wal-Mart was able to lower its grocery prices and take share from competitors who had no choice but to raise prices to maintain their margins.”

Many of Walmart’s 'Local' Farms Bring in Millions of Dollars a Year

Most people assume that when Walmart says it’s buying its produce locally, it means they’re supporting small family farms that are growing healthy foods for their communities.

But small local farmers simply can’t grow enough produce to meet Walmart’s year-round demands. So much of its local produce may actually be coming from very large farms. As NPR reported:

Of the eight farms highlighted on Wal-Mart's locally grown web site,3 five are very large farms by the U.S. Department of Agriculture's definition, with annual sales in the millions of dollars.”

Some have described Walmart’s push toward locally grown food as “industrial local,” and compared it to their pledge to increase organic foods a few years back. Grist reported:4

'They [Walmart] held true to their corporate model and tried to do organics the same way,' said Mark Kastel of the Cornucopia Institute.

For its store-brand organic milk, for example, Walmart turned to Aurora Organic Dairy, which runs several giant industrial milking operations in Texas and Colorado, each with as many as 10,000 cows. In 2007, the USDA sanctioned Aurora for multiple violations of organic standards …

[In 2011], the agency stepped in again, this time revoking the organic certification for Promiseland Livestock, which had been supplying supposedly organically raised cows to Aurora.”

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How Walmart May be Helping to Drive Food Prices Up

Of course, the lion’s share of Walmart’s groceries come not from small, local farms, or even large ones, but from industrial concentrated animal feeding operations (CAFOs). In some cases, already giant industrial meatpackers, dairy companies and food processors actually merged simply to become large enough to supply Walmart.

This consolidation has actually been blamed as one of the factors driving food prices up. Ironically, however, as food prices rise, farmers are getting paid less while the retailers … aka Walmart … are getting more:5

Grocery prices have been rising faster than inflation and, while there are multiple factors driving up consumer costs, some economic research points to concentration in both food manufacturing and retailing as a leading culprit.

Farmers, meanwhile, are getting paid less and less. Take pork, for example. Between 1990 and 2009, the farmers’ share of each dollar consumers spent on pork fell from 45 to 25 cents, according to the USDA Economic Research Service. Pork processors picked up some of the difference, but the bulk of the gains went to Walmart and other supermarket chains, which are now pocketing 61 cents of each pork dollar, up from 45 cents in 1990.

Another USDA analysis found that big retailers have used their market power to shortchange farmers who grow apples, lettuce, and other types of produce, paying them less than what they would get in a competitive market, while also charging consumers inflated prices. In this way, Walmart has actually helped drive overall food prices up,” Grist reported.

Three More Reasons to Reconsider Buying Your Food at Walmart Grocery Stores

They may have low prices, but at what real cost? If you've seen Robert Greenwald's excellent documentary, Wal-Mart: The High Cost of Low Prices, you're aware of the many social and financial problems created every time a Wal-Mart store opens in your area. For example, Penn State University researchers estimate some 20,000 American families have dropped below the poverty level due to the astounding growth of Wal-Mart between 1987 and 1998.6

And in counties where Wal-Mart stores are located, more than 15 percent of families depend on food stamps, compared to the national norm of 8 percent. Other unsettling factors include:

  1. Walmart grocery stores are linked to obesity: An additional Wal-Mart Supercenter per 100,000 residents increases average BMI by 0.24 units and the obesity rate by 2.3 percentage points.7 The researchers hypothesized that the substantial reductions in the prices of food at Wal-Mart Supercenters ends up "reducing the opportunity cost of food consumption and increasing the opportunity cost of physical activity," thereby leading to a rise in obesity rates.
  2. Walmart is the largest single U.S. importer of Chinese goods: Walmart imports over $30 billion in goods from China every year. This not only accounts for 80 percent of Wal-Mart's imports but also 15 percent of the total U.S. imports of Chinese goods.8 Not only does this drive American companies to shut down plants and move manufacturing to China, but China is now almost as well known for toxic food ingredients as they are for electronics.
  3. Walmart has promoted a distorted view of organic foods: Ever since Walmart decided to significantly increase their organic offerings, they have been bombarded with accusations of selling substandard organic food, produced at factory farms or imported from China, not grown on small, U.S. organic farms like consumers are led to believe. They've even been accused of posting signs in their stores that mislead consumers into believing that non-organic items are actually organic.

It's reasons like these why your best source of food will virtually always be from actual local farmers, not huge superstores like Walmart.

For Real Quality Food, Support Your Small, Local Farmers

If the small farmers in your area get enough support from you and your neighbors, they won’t need to worry about figuring out how to change their farming model to compete with, or appease, Walmart. If every American decided to not purchase food that comes from Walmart or CAFOs, the entire system would collapse overnight. It doesn't take an act of Congress to change the food system. All that is required is for each and every person to change their shopping habits.

Sourcing your foods from a local farmer is one of your best bets to ensure you're getting food that is wholesome and that is grown in a sustainable fashion. I encourage you to visit your local farm directly, if you have one nearby, and also take part in farmer's markets and community-supported agriculture programs.

Ask the farmers how they grow their food, bring your children so they can see it first-hand, and revel in the connection you re-establish between yourself and your source of food; it’s a connection that is in many ways a representation of life itself. You can find an ever-increasing number of "eat local" and "buy local" directories, in which local farms across the United States will be listed. The following organizations can also help you locate farm-fresh foods in your local area:

  1. Local Harvest -- This Web site will help you find farmers' markets, family farms, and other sources of sustainably grown food in your area where you can buy produce, grass-fed meats, and many other goodies.
  2. Farmers' Markets-- A national listing of farmers' markets.
  3. Eat Well Guide: Wholesome Food from Healthy Animals -- The Eat Well Guide is a free online directory of sustainably raised meat, poultry, dairy, and eggs from farms, stores, restaurants, inns, and hotels, and online outlets in the United States and Canada.
  4. Community Involved in Sustaining Agriculture (CISA) -- CISA is dedicated to sustaining agriculture and promoting the products of small farms.
  5. FoodRoutes -- The FoodRoutes "Find Good Food" map can help you connect with local farmers to find the freshest, tastiest food possible. On their interactive map, you can find a listing for local farmers, CSA's, and markets near you.