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Retail Price Information Bureau of Labor Statistics  Retail prices  “Market Basket” Economic Research Service  Farm to retail margin  New Retail Series.

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Presentation on theme: "Retail Price Information Bureau of Labor Statistics  Retail prices  “Market Basket” Economic Research Service  Farm to retail margin  New Retail Series."— Presentation transcript:

1 Retail Price Information Bureau of Labor Statistics  Retail prices  “Market Basket” Economic Research Service  Farm to retail margin  New Retail Series

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4 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

5 Impacting farmer’s share  Degree of processing  Perishability  Seasonality  Transportation cost  Bulkiness in relation to value

6 Farmer’s Share by Commodity Eggs58%Potatoes 23% Beef56Margarine24 Chicken54Lettuce18 Milk42Frozen dinner12 Pork37Canned tomato 9 Cheese34 Bread 6 Flour28 Corn Flakes 6

7 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

8 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

9 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

10 FTR Example  Reported retail price = 2.80  Farm level price =.65  1 retail pound = 2.4 live pounds  FTR = »$ (2.4 x.65) = $1.56

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14 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?

15 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


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