Why Farmers Don't Sell Produce Directly: The Real Tomato Cost

Why the kilogram of tomatoes stays at one euro in supermarkets

Why don't farmers harvest their crops and sell them directly to consumers at half price? This question resurfaces whenever the agricultural sector protests, and the short answer is uncomfortable: the margin on a tomato isn't in the fruit itself. It lies in the kilometers traveled, warehousing, waste, and turnover. The plan to open stores across Spain and sell tomatoes for 0.70 euros instead of one sounds like a bomb until someone asks who pays for the warehouse.

The plan for tomatoes at 0.70 euros and the 5% entrepreneur margin

The starting point is a warehouse in a major city: a center with all kinds of products where wholesalers and retailers pay the same, 30% less than at Carrefour. Farmers are paid 35% less than what that same product is worth in the supermarket, and the promoter keeps 5% of total revenue. On paper, everyone wins. In practice, no one has laid a brick.

The objection comes from volume, according to one participant: the margin isn't in selling one tomato, but in sales at scale, and building a mass distribution chain requires capital that no family farm has on hand. That is the first wall: the business isn't production, it's movement.

How much does it cost to move a tomato from the field to the shelf?

Storage at origin, transport, logistics center, distribution to sales points, well-located premises, cold equipment, staff, security, waste, accounting, and human resources. None of these items are free, and to make them competitive, one must leverage economies of scale that an agricultural cooperative cannot achieve.

A calculation circulating among participants: moving 25,000 kilograms of watermelon in a truck costs around 1 euro per kilometer, so distributing that cost per unit leaves a nearly residual surcharge. With this figure on the table, some conclude that the price difference isn't explained by the truck, but by the rest of the chain. And here the fight begins.

Why don't farmers sell directly and keep the margin?

According to some participants, they have tried: many have attempted direct-to-consumer sales and some went bankrupt; those who survive sell at prices equal to or higher than supermarkets. The reason is simple: the person who buys watermelon at the farm gate during harvest season doesn't return the next month because there is no longer any product.

There is also the cooperative route, and it is no panacea. Olive oil at cooperative prices is cited at 9 euros per liter. And in wholesale markets, national products compete with imported goods entering at prices that here don't even cover irrigation. The problem isn't just selling: it's having something to sell all year round.

The real distribution margin: a 15.4% supplier margin

Here comes the surprising figure, provided by a participant citing the press. Mercadona's main fruit and vegetable supplier reportedly declared 91 million in profit with 591 million in revenue the previous year, a 15.4% margin after expenses and taxes. This isn't the supermarket's margin, but its supplier's, and explains why, according to that same participant, private equity funds fight to buy these types of companies.

On the other side, estimates suggest distribution doesn't exceed a 6% net margin, with tomatoes multiplying their price by a hundred between the field and the table. Both figures can be true simultaneously: much of that multiplier goes to warehouses, logistics, staff, waste, and turnover. Data kills the narrative, but also the reverse.

Foreign competition and rules that aren't equal

Much of the agricultural sector's discontent points to the rules. It is argued that Spanish producers bear a minimum wage that makes no sense in agriculture, a diesel tax designed to pollute less, nitrogen limits on fertilizers, and restrictions on pesticide use. Products from third countries, they say, don't carry any of these costs.

That is the core: the complaint isn't just the price, but competing with those who play without the same constraints. According to another participant, the requested solution isn't a guaranteed price, but the ability to place production in markets with higher purchasing power without the brakes applied domestically.

With these numbers, the tomato store at 0.70 euros remains peine. The kilogram in the supermarket doesn't go down either.