The economics of food systems

The modern agri-food sector is evolving and dynamic. Its market structure is better described as oligopolistic than competitive. This chapter provides a framework for understanding the agri-food sector. The basic premise is that innovations trigger change and entrepreneurs who control innovations must design supply chains to profitably implement their innovations. Establishing a supply chain can require new arrangements for acquiring inputs or selling outputs. These arrangements can include vertical integration, contracting, existing markets, or new markets. The establishment of supply chains is constrained by credit and resource availability and risk considerations. Through learning and technological change, supply chain operations may improve over time, and they often expand across locations and products. Modern agri-food supply chains may produce multiple products, including food, bioenergy, and biochemicals. Changes in regulations and economic conditions may lead to creative destruction, driving the evolution of the industry.