Retail Price Information
Bureau of Labor Statistics
 Retail prices
 “Market Basket”
Economic Research Service
 Farm to retail margin
 New Retail Series
Retail Prices, All Pork, Jan 2001 - Aug 2002
$/Lb.
$3.00
$2.90
$2.80
$2.70
$2.60
$2.50
$2.40
$2.30
$2.20
$2.10
New ERS
Old BLS
JU
L
Y
M
A
R
M
A
JA
N
O
V
N
SE
P
JU
L
Y
M
A
R
M
A
JA
N
$2.00
$/Lb.
$3.30
Retail Prices, All Beef All Grades, Jan 2001-Aug 2002
$3.20
$3.10
$3.00
$2.90
$2.80
$2.70
$2.60
New ERS
Old BLS
JU
L
Y
M
A
R
M
A
JA
N
O
V
N
SE
P
JU
L
Y
M
A
R
M
A
JA
N
$2.50
Alternative Measures of Farmer’s
Share of Food Dollar

Market basket approach
» Farm value of a constant bundle of goods
» Doesn’t allow substitution
» Higher farmer share

Marketing bill approach
» Total food value / total farm value
» Captures changes in price relationships
and consumption patterns
Impacting farmer’s share





Degree of processing
Perishability
Seasonality
Transportation cost
Bulkiness in relation to value
Farmer’s Share by
Commodity
Eggs
Beef
Chicken
Milk
Pork
Cheese
Flour
58%
56
54
42
37
34
28
Potatoes
23%
Margarine
24
Lettuce
18
Frozen dinner
12
Canned tomato
9
Bread
6
Corn Flakes
6
Farm to retail margins




Farm to Wholesale
Wholesale to Retail
Farm to Retail
Difference between retail,
wholesale, and farm prices
measured in the same units
Marketing Margins or Spreads


Measures price difference
Includes profits and costs for
all marketing functions
performed after it leaves the
farm.
» assembling, processing,
transporting, and retailing
Calculating Farm - Retail Margin





Value of Choice YG 3 steer at feedlot
Value of Choice boxed beef delivered
to city where it is to be consumed
Value of Choice beef at retail counter
Adjusted for by-product value
Reading assignment
» http://www.ers.usda.gov/publications/agoutlook/dec1997/ao247c.pdf
FTR Example




Reported retail price = 2.80
Farm level price = .65
1 retail pound = 2.4 live pounds
FTR =
» $2.80 - (2.4 x .65) = $1.56
Percent of Consumer Dollar, Pork
70
60
50
40
30
20
10
91
J92
J93
J94
J95
J96
J97
J98
J99
J00
J01
J02
J-
J-
90
0
Wholesale-Retail
Farm-Wholesale
Farm Share
Price Spreads for Beef, 1970-2001
200
180
160
Farm-Retail
120
Wholesale-Retail
100
80
60
Farm-Wholesale
40
20
0
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
$/cwt.
140
Year
Inflation-Adjusted (CPI, 1982-84=100) Price Spreads for Beef,
1970-2001
120
100
Farm-Retail
Wholesale-Retail
60
40
Farm-Wholesale
20
Year
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
0
19
70
$/cwt.
80
Price Spreads and
Marketing Performance

What do rising spreads indicate?
» Packers or retailers exercising market power
to reap excess profits?
» Growing inefficiencies in the packing sector
(economies of scale run out)?
» Rising costs of regulations (food safety, MPR)?
» Rising costs of inputs?

How will the new retail price series
impact the FTR marketing margin?
Law of One Price and Vertical
Information Flow



Market signals between segments
Profit opportunity between
segments
Price differences and processing
» Private negotiation trades
» Formula pricing
» Government price reporting