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
$2.00
Y

Y
R

R
N

N
V
P
L

L
A

A
JA

JU

JA

JU
A

A
SE

O
M

M
M

M
N

New ERS Old BLS

 Retail Prices, All Beef All Grades, Jan 2001-Aug 2002
$/Lb.
$3.30

$3.20

$3.10

$3.00

$2.90

$2.80

$2.70

$2.60

$2.50
Y

Y
R

R
N

N
V
P
L

L
A

A
JA

JU

JA

JU
A

A
SE

O
M

M
M

M
N

New ERS Old BLS

 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 58% Potatoes 23%
Beef 56 Margarine 24
Chicken 54 Lettuce 18
Milk 42 Frozen dinner 12
Pork 37 Canned tomato 9
Cheese 34 Bread 6
Flour 28 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

0
90
91
92
93
94
95
96
97
98
99
00
01
02
J-
J-
J-
J-
J-
J-
J-
J-
J-
J-
J-
J-
J-
Wholesale-Retail Farm-Wholesale Farm Share
 Price Spreads for Beef, 1970-2001

200
180
160
Farm-Retail
140
120
$/cwt.

100 Wholesale-Retail
80
60 Farm-Wholesale
40
20
0
70
72
74
76

78
80
82
84

86
88
90
92

94
96
98
00
19
19
19
19

19
19
19
19

19
19
19
19

19
19
19
20
Year
 Inflation-Adjusted (CPI, 1982-84=100) Price Spreads for Beef,
1970-2001

120

100
Farm-Retail
80
Wholesale-Retail
$/cwt.

60

40
Farm-Wholesale
20

0
70

72

74

76

78

80

82

84

86

88

90

92

94

96

98

00
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20
Year
 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