Farm-to-Food Price Dynamics
Randy Schnepf
Specialist in Agricultural Policy
September 27, 2013
Congressional Research Service
7-5700
www.crs.gov
R40621
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Farm-to-Food Price Dynamics
Summary
Heightened commodity price volatility since 2008—driven by major market-shifting events
including increased demand for corn under strong federal biofuels incentives, a prolonged surge
in China’s soybean import demand, and the severe U.S. drought of 2012—has generated many
questions about linkages between farm commodity prices and U.S. food price inflation from
Members of Congress and their constituents. This report responds to those concerns by
addressing the linkage between farm and retail food prices. Retail food price inflation is
addressed in CRS Report R40545, Consumers and Food Price Inflation.
Price is the primary mechanism that links raw farm commodities through the various levels of the
market system to the retail food product. The nature of price transmission between farm and retail
levels depends, in general, on the size of the farm share of the retail price and the degree of
market competition at each stage of the marketing chain. For example, the farm share represents
nearly 54% of the retail value of a dozen eggs. Similarly, it ranges from 30% to 50% for most
fresh meat retail product prices. In contrast, the farm share is only about 8% of cereal and bakery
product prices.
An array of costs is layered on top of the price of a raw agricultural commodity at each stage of
the marketing chain as it moves to the consumer. As a result, the farm share of a food product’s
price declines as it moves to the retail outlet. Since 1950, the average farm share has been
declining as a share of total consumer food expenditures, falling from about 41% in 1950 to
15.5% in 2011. This has important implications for farm-to-retail price linkages because the
smaller the share of farm value in the retail product, the smaller will be the effect of a change in
farm price on the retail price.
Economic analysis of farm-to-retail price transmission leads to three generalizations: first,
causality usually runs from changes in farm prices to changes in retail prices; second, time lags in
retail price response to farm price changes are generally months in length, even for perishables
like milk, meat, and fresh fruits and vegetables; and third, retail prices appear to respond
asymmetrically, with adjustments to increases in farm prices occurring faster and with greater
pass-through than adjustments to decreases in farm prices. This last generalization is often
referred to as “sticky” retail food prices—that is, retail prices follow commodity prices upwards
rapidly, but fall back only slowly and partially when commodity prices recede.
“Sticky” retail price behavior is supported by empirical evidence; however, economic theory does
not fully explain the observed phenomenon. Economists have noted that certain aspects of
consumer behavior, as well as store inventory management and retailing strategies, may limit
retail prices from adjusting fully to downward farm price movements. As a result, the presence of
asymmetric price transmission alone does not necessarily imply abnormal or excessive market
power.
Comparisons of price data for major food groups confirm that farm-to-retail price transmission
behaves slowly, with substantial lags and asymmetry. For example, the rise in farm prices that
occurred between 2006 and mid-2008 was substantially larger and occurred about six months
earlier than the rise in corresponding retail food product prices. Similarly, the subsequent fall in
farm prices from their 2008 peaks preceded the downturn in corresponding retail food prices by
several months.
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Contents
Introduction ...................................................................................................................................... 1
Food: A Value-Added Commodity................................................................................................... 3
Farm Share of Total Consumer Food Purchases ........................................................................ 5
Farm Share of Retail Price Varies by Food Groups and Individual Foods ................................ 8
A Closer Look at the Food Dollar .................................................................................................. 12
Marketing Bill Share ............................................................................................................... 12
Industry Group Shares ............................................................................................................. 13
Primary Factor Shares ............................................................................................................. 15
Linking Farm and Retail Prices ..................................................................................................... 16
Farm-to-Retail Marketing Margin ........................................................................................... 16
Measuring Farm-to-Retail Price Linkages .............................................................................. 17
Farm Share ........................................................................................................................ 17
Market Competition .......................................................................................................... 17
Potential Measurement Difficulties ................................................................................... 18
Farm-to-Retail Price Transmission .......................................................................................... 18
What Is Known About Price Transmission? ...................................................................... 21
Why Do Retail Prices Tend to Be Sticky? ......................................................................... 21
Incidence of a Change in Marketing Costs ....................................................................... 23
Extenuating Circumstances for Farm-to-Food Price Linkages ......................................... 24
Farm and Retail Prices Compared ................................................................................................. 24
Aggregate Price Indexes .......................................................................................................... 25
Grocer Margins ................................................................................................................. 25
Declining Real Farm Prices ............................................................................................... 26
Price Indexes for Major Food Groups ..................................................................................... 27
Figures
Figure 1. Price Indexes for Farm, Wholesale, and Retail Food Products, 2006-2013 ..................... 1
Figure 2. Value Added to Farm Products Along the Marketing Chain ............................................ 3
Figure 3. Farm Share of U.S. Food Expenditures has Declined Since 1950 ................................... 5
Figure 4. Evolution of U.S. Food Expenditures, the Marketing Bill, and the Farm Share
of U.S. Foods, 1950-2011 ............................................................................................................. 6
Figure 5. U.S. Food Marketing Bill, Real and Nominal, 1950 to 2011 ........................................... 6
Figure 6. U.S. Farm Value of Total Food Expenditures, Real and Nominal, 1950 to 2011 ............. 7
Figure 7. Farm Share of At-Home Food Dollar Is Relatively Stable Since 1993, But Has
Declined For Away-From-Home Food Dollar .............................................................................. 8
Figure 8. U.S. Food Dollar Breakout by Marketing Share, 2011 .................................................. 13
Figure 9. U.S. Food Dollar Breakout by Industry Group, 2011 ..................................................... 14
Figure 10. U.S. Food Dollar Breakout by Primary Factor, 2011 ................................................... 15
Figure 11. Hypothetical Price Transmission Following an Upward Farm Price Shock ................ 20
Figure 12. Hypothetical Price Transmission Following a Downward Farm Price Shock ............. 20
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Figure 13. U.S. Monthly Farm Price for Corn, 1930-2013 ............................................................ 26
Figure 14. Cereal Price Indexes: Farm Food Grains vs. Retail Cereals and Bakery Product
Prices .......................................................................................................................................... 29
Figure 15. Egg Price Indexes: Farm Prices Received vs. Retail Prices ......................................... 29
Figure 16. Dairy Price Indexes: Farm Prices Received for Dairy Products, PPI for
Wholesale Fluid Milk, and CPI for Retail Fresh Milk ............................................................... 30
Figure 17. Dairy Price Indexes: Farm Prices Received for Dairy Products, PPI for
Wholesale Fluid Milk, and CPI for Retail Cheese...................................................................... 30
Figure 18. Poultry Price Indexes: Farm Live Broilers, PPI for Wholesale Slaughter
Chickens, and CPI for Retail Poultry ......................................................................................... 31
Figure 19. Beef Price Indexes: Farm All-Beef (500+ lbs.), PPI for Whole Slaughter
Cattle, and CPI for Retail Beef ................................................................................................... 31
Figure 20. Pork Price Indexes: Farm All-Hogs, PPI for Wholesale Slaughter Hogs,
and CPI for Retail Pork .............................................................................................................. 32
Figure A-1. Rice Prices: Farm Rough, All-Rice versus
Retail White Uncooked Long-Grain ........................................................................................... 33
Figure A-2. Wheat Prices: Farm High-Protein Wheat versus White All-Purpose Flour ................ 34
Figure A-3. Wheat Prices: Farm High-Protein Wheat versus White Bread ................................... 34
Figure A-4. Chicken Prices: Farm Live Broilers versus Retail Fresh Whole Chicken .................. 35
Figure A-5. Chicken Prices: Farm Live Broilers versus Bone-in, Chicken Legs .......................... 35
Figure A-6. Beef Prices: Farm All-Beef Cattle (500+ lbs.) versus
Retail 100% Ground Beef ........................................................................................................... 36
Figure A-7. Beef Prices: Farm All-Beef Cattle (500+ lbs.) versus USDA Choice, Boneless
Round Roast ............................................................................................................................... 36
Figure A-8. Pork Prices: Farm All-Hog versus Retail Sliced Bacon ............................................. 37
Figure A-9. Pork Prices: Farm All-Hog versus Chops (Center-Cut, Bone-In) .............................. 37
Figure A-10. Dairy Prices: Farm All-Milk versus Retail Fresh, Whole Milk ................................ 38
Figure A-11. Dairy Prices: Farm All-Milk versus Retail Cheddar Cheese .................................... 38
Figure A-12. Egg Prices: Farm versus Retail................................................................................. 39
Tables
Table 1. Farm Shares for All Foods and Ten Major Food Groups ................................................... 9
Table 2. Average Farm Share of Selected Food Products .............................................................. 11
Table 3. Farm, Wholesale, and Retail Price Movements, 2006 to 2009 ........................................ 28
Appendixes
Appendix A. Farm versus Retail Price Comparisons for Select Food Products ............................ 33
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Contacts
Author Contact Information........................................................................................................... 39
Acknowledgments ......................................................................................................................... 39
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Introduction
Producers, consumers, and Members of Congress have all expressed strong interest in the
connection between farm prices for agricultural commodities and retail prices for food products.
Their interest and concerns were heightened in 2008, when prices for many farm commodities
rose to record highs in the first half of the year (Figure 1).1
The higher farm prices eventually worked their way through the marketing system, first to
wholesalers, then to consumers, where they translated into higher retail food prices by late
2008—U.S. retail food prices rose an estimated 6.4% in 2008, the largest annual gain since 1990.2
But the farm price rise was short-lived. Prices for most farm commodities reversed direction in
mid-2008 and declined so sharply that they had given back nearly all the rise by early 2009. In
contrast, most retail prices leveled off or declined slowly in 2009.
Figure 1. Price Indexes for Farm, Wholesale, and Retail Food Products, 2006-2013
170
160
Farm Price Index
150
140
Wholesale Price Index
100 130
2006 =
120
Retail Price Index
110
100
90
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: The Farm Price Index is the farm food commodities prices-received index from the National
Agricultural Statistics Service (NASS), USDA; the Retail Price Index is the Food-at-Home CPI from the Bureau of
Labor Statistics (BLS); and the Wholesale Price index is the Producer Price Index (PPI) for Finished Consumer
Foods from BLS.
1 Monthly farm-prices received reached then-record highs in 2008 for several major farm commodities including milk,
cattle, eggs, rice, wheat, corn, soybeans, barley, and hay; see CRS Report RL34474, High Agricultural Commodity
Prices: What Are the Issues? for a discussion of the factors behind the rise in commodity prices.
2 As measured by the Food-at-Home CPI; see CRS Report R40545, Consumers and Food Price Inflation.
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In 2011 and 2012, a similar scenario of rapidly rising farm prices (driven by tight supplies and a
severe, widespread drought in 2012) contributing to higher retail prices, played out again. And
while farm prices have receded substantially during 2013 from record highs set in late 2012 and
early 2013, retail prices have yet to show any significant decline.
These episodes of volatile farm and retail price movements have been followed closely in the
news media,3 and have generated many questions from both interest groups and Congress.
• What is the relationship between the price of raw agricultural products at the
farm and the prices of food products that consumers purchase in retail outlets or
at restaurants? Are they subject to the same economic forces?
• Is there necessarily a lag in retail price response to farm price changes and, if so,
what is the nature of that lag?
• If farm prices rise or fall by a certain percentage, will retail food prices rise or
fall by a similar amount, or are retail prices “sticky”—that is, do they tend to
follow farm prices up, but not down?
• What are the principal factors that influence U.S. food prices as commodities
move along the marketing chain from producers to consumers?
• What is the “farm share” of a retail food price and does it matter?
• What are the primary and secondary data sources for information concerning all
of the above issue areas, and how is that information used to help market
participants and policymakers make informed decisions?
Note to Readers
This is one of several CRS reports that respond to concerns about the nature, causes, and effects of farm and food
price movements. This specific report describes the linkages between farm, wholesale, and retail food prices.
A related report, CRS R40545, Consumers and Food Price Inflation, provides both background and complementary
information for the material presented in this report. It describes how aggregate food price inflation is measured and
compares recent price inflation for both At-Home (i.e., retail) purchases and Away-From-Home consumption, as wel
as by major food groups. In addition, the report briefly discusses the potential economic and food security
implications of food price changes.
Another related report, CRS Report R40152, U.S. Farm Income, describes the income outlook for the U.S. agricultural
sector based on semi-annual (February and August) USDA forecasts for agricultural production and expenses, as wel
as for farm-level commodity prices and asset values.
An earlier report, CRS Report RL33204, Price Determination in Agricultural Commodity Markets: A Primer, describes
unique characteristics of market conditions for agricultural products in general, as well as for specific types of
agricultural commodities. It also reviews both the U.S. Department of Agriculture’s (USDA’s) forecast and reporting
procedures and their relevance to commodity price formation, and the critical role of price discovery played by
futures contract exchanges.
3 For example, “Food Bill Still High? Blame ‘Sticky’ Prices,” Associated Press, ©2009 Journal Gazette and Times-
Courier, Oct. 19, 2008; Scott Kilman and Laren Etter, “Grain Costs Down, Groceries Not,” Wall Street Journal, Mar.
13, 2009; “Food Prices Continue to Rise, Despite Fall in Overall Inflation,” The Land, online, Jan. 29, 2009.
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This report examines the elements contributing to the cost of our food—from the cost of the raw
commodity at the farm, through the processing and marketing costs until it is sold to consumers.
It also reviews the nature of price transmission between farm and retail prices, and briefly
describes how food costs and marketing margins are measured by the government. In particular, it
includes a discussion of the evidence concerning “sticky” retail prices (i.e., the idea that retail
prices adjust upward quickly when farm prices rise but respond slowly, and possibly not fully, to
farm price declines). In a final section, the report uses national average price data to examine
farm-to-retail price linkages for several major commodities during the 2006-2013 period, when
volatile prices characterized many agricultural markets. In so doing, it attempts to shed light on
the evolving structure of U.S. food price formation while providing answers to the above set of
questions.
Food: A Value-Added Commodity
When a consumer spends a dollar for food at the supermarket, not all of the dollar reaches the
farmer. As the raw ingredients for retail food items move along the marketing chain from the farm
to a grain elevator or collection terminal, then on to a processor, a wholesaler, and finally to the
retail customer, an array of costs are layered on top of the price of the raw agricultural commodity
(Figure 2). These marketing costs include labor expenses for handling, sorting, cleaning, and
packaging the product, transportation charges to move the product along at each stage, and fees
for processing, storing, insuring, financing, and retailing the product (e.g., store maintenance and
utilities, refrigeration, labeling, shelf display, advertising and promotional costs).
Figure 2. Value Added to Farm Products Along the Marketing Chain
100%
Value-Added Marketing Share:
- Labor
80%
- Energy
- Transport
- Retailing
- Other
60%
100%
40%
Farm-Value
20%
Share
15.5%
0%
Farm Gate
Elevator
Processor
Wholesaler
Retail
Source: The retail share is for 2011 from ERS, Food Dollar Series, USDA, downloaded Sept. 20, 2013; at
http://www.ers.usda.gov/data-products.aspx. All other category shares are imputed by CRS.
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The farm share of the market price declines as a commodity moves from the farm to the retail
outlet and consumer. The relative importance of the marketing costs (or marketing value-added)
versus raw farm input costs varies widely across retail food products depending on the degree of
processing and transformation. For eggs, fresh meat, and raw fruits and vegetables, this marketing
chain may be significantly shorter than for highly processed products such as a box of breakfast
cereal or a ready-to-eat meal. Marketing costs can also vary by type of retail outlet—for example,
consider the differences for a farmer’s market, big box discount store, local supermarket, in-store
deli, 24-hour quick-mart, or ballpark concession stand—as some outlets include substantially
more marketing and retailing costs than others.
The consumer’s food dollar can be divided into two major components: 4
• the farm share which measures proceeds of farm commodity sales tied to a food
dollar expenditure and sold to non-farm establishments; and
• the food-dollar value-added share which is the market value added to farm
commodities that are embodied in a food dollar expenditure.
Farm Price vs. Farm Share vs. Farm Value
Note that the farm value and farm share should not be confused with the farm price. 5 The farm price represents
the value at the farm for a unit of agricultural commodity (e.g., a bushel of wheat or a pound of potatoes).
The farm share of a retail price (estimated at 15.5% in 2011) represents the value of, or costs of producing, the farm
commodities that go into a typical dollar’s worth of food. In other words, it is the retail price represented by the
amount of raw agricultural commodity needed to produce that retail product. For example, a bushel (60 lbs.) of
wheat may cost $4 at the farm, whereas a loaf of bread may cost $1 at the grocery store. The loaf of bread contains
substantial y less than 60 lbs. of wheat. ERS has estimated that a $1 loaf of bread contains about 5¢ worth of wheat.6
The farm value of a retail food product is the portion of the farm share that actual y stays with the farmer. In 2011,
ERS estimated the farm-value share at 7.9%. The remaining 7.6% (of the farm share of 15.5%) went to agri-businesses
and marketing industry groups that furnished inputs to the farm production process to produce the raw farm-gate
commodity.
ERS calculates both the farm share and market share for domestically produced foods for the
following aggregations:
• an average “total” food market basket (shown in Figure 3, including both at-
home and away-from-home purchases); 7
• ten major food groups for at-home consumption, i.e., retail purchases—beef,
pork, broiler, eggs, dairy products, fats and oils, fresh fruits, fresh vegetables,
processed fruits and vegetables, and bakery and cereal products; and
• several important individual food items (exclusively for at-home consumption).
4 The U.S. Department of Agriculture’s (USDA’s) Economic Research Service (ERS) has developed a methodology for
monitoring and reporting on the value-added nature of food prices paid by U.S. consumers. ERS, “Food Dollar Series”
and “Price Spreads from Farm to Consumer,” available at http://www.ers.usda.gov/data-products.aspx.
5 Patrick Canning, “ERS Food Dollar Series Allows an In-depth Look at Farm Level Components of the U.S. Food
Dollar,” Amber Waves, July 1, 2013.
6 Downloaded from the ERS website in 2009. ERS has since discontinued reporting the farm share for bread.
7 See CRS Report R40545, Consumers and Food Price Inflation.
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Understanding the economic forces affecting both the farm and marketing value-added shares of
the consumer’s food dollar provide useful information concerning the potential effect of a farm
price change on retail prices, and vice versa.
Figure 3. Farm Share of U.S. Food Expenditures has Declined Since 1950
50%
40%
30%
41%
20%
10%
Farm-Value Share of
Consumer Food Expenditures
15.5%
0%1950
1960
1970
1980
1990
2000
2010
Source: Derived from multiple ERS data sets: Food Expenditures and Food Dol ar Series, USDA, downloaded
Sept. 20, 2013; at http://www.ers.usda.gov/data-products.aspx.
Farm Share of Total Consumer Food Purchases
Total U.S. consumer food expenditures—for both at-home and away-from-home food—have
expanded rapidly from about $102 billion in 1970 (Figure 4) to nearly $1,139 billion (in nominal
dollars) in 2011.8 However, a substantial portion of the increase in consumer food expenditures
has been attributable to general price inflation rather than an increase in the volume of foods
purchased. A breakout of farm and marketing shares (Figure 5 and Figure 6 ) suggests that most
of the price inflation has occurred in the marketing bill rather than the farm share.
8 CRS has combined the new ERS Food Dollar Series (which covers 1993 to the present) with data from the original
ERS marketing bill data series (despite the different methodologies underlying the two series) to be able to make
generalizations concerning the U.S. food marketing bill over an extended period of time.
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Figure 4. Evolution of U.S. Food Expenditures, the Marketing Bill, and the
Farm Share of U.S. Foods, 1950-2011
$1,200
Billions
$1,000
Total Consumer
Food Expenditures
$800
$600
$400
Marketing Bill
$200
Farm Value
$0
1950
1960
1970
1980
1990
2000
2010
Source: Derived from multiple ERS data sets: Food Expenditures and Food Dol ar Series, USDA, downloaded
Sept. 20, 2013; at http://www.ers.usda.gov/data-products.aspx.
Figure 5. U.S. Food Marketing Bill, Real and Nominal, 1950 to 2011
$1,000
$ Billions
Nominal Dollars
$750
$500
1982-84 $s
$250
$0
1950
1960
1970
1980
1990
2000
2010
Source: Derived from multiple ERS data sets: Food Expenditures and Food Dol ar Series, USDA, downloaded
Sept. 20, 2013; at http://www.ers.usda.gov/data-products.aspx.
Notes: Nominal consumer expenditure data are deflated by the al -item CPI (1982-84 = 100), BLS.
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• The U.S. food marketing bill rose from $69.2 billion in 1970 to $963 billion in
2011 (Figure 5)—i.e., costs for marketing services such as transportation,
processing, and retailing have grown in both nominal and real terms.
• In contrast, the farm value of consumer food expenditures has been rising in
nominal terms, from $32.7 billion in 1970 to $176.3 billion in 2011, but has been
slowly declining in real terms from a peak in 1973 (Figure 6).
Figure 6. U.S. Farm Value of Total Food Expenditures, Real and Nominal,
1950 to 2011
$180
$ Billions
Nominal Dollars
$120
$60
1982-84 $s
$0
1950
1960
1970
1980
1990
2000
Source: See source and notes for Figure 5.
• In addition to a decline in consumer outlays real terms, the farm share of
consumer food expenditures also has fallen by more than half, falling from 41%
in 1950 to 15.5% in 2011 (Figure 3).
This means that U.S. farmers have been receiving an increasingly smaller share of what
consumers pay for many retail food products over time. However, this should not be
misconstrued to suggest that marketing costs are too high, or that farmers’ well-being has
declined. These statistics do not address either of those issues. Marketing services expand in
direct response to consumer demand for more marketing services, which, in turn, occurs for a
variety of reasons.9
A breakout of the farm share for At-Home-Food (i.e., retail grocery and food outlets) and Away-
From-Home-Food (e.g., restaurants and other purchased ready-to-eat foods) expenditures reveals
9 For more information, see the discussion under “Consumer Income and Expenditures,” in CRS Report R40545,
Consumers and Food Price Inflation.
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that the market-value-added component of Away-From-Home-Food expenditures has been rising
substantially faster than for At-Home-Food expenditures (Figure 7).
• The farm share for At-Home-Food expenditures has been relatively stable in the
range of 22% to 24%, whereas the farm share for At-Home-Food expenditures
fell from 10.5% in 1993 to 3.9% in 2010.
Figure 7. Farm Share of At-Home Food Dollar Is Relatively Stable Since 1993, But
Has Declined For Away-From-Home Food Dollar
30%
25%
At-Home Food $
23.6%
20%
Total Food $
15.5%
15%
10%
Away-From-Home Food $
5%
4.5%
0%
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Source: ERS, Food Dollar Series, USDA, data as of March 6, 2013.
Farm Share of Retail Price Varies by Food Groups and Individual
Foods
In addition to its estimate of total food expenditures, ERS also constructs food market baskets for
consumer at-home expenditures on ten major food subgroupings—beef, pork, broilers, eggs,
dairy products, fats and oils, fresh fruits, fresh vegetables, processed fruits and vegetables, and
cereal and bakery products—as well as for several important individual food products within
those subgroups. ERS derives annual estimates of farm share and marketing spreads for each of
the ten major food groups (Table 1) as well as for several individual food items (Table 2).
The food group market baskets contain the average quantities of food from a particular food
group purchased by a typical American household during a one-year base period—they include
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only at-home expenditures; away-from-home expenditures are excluded.10 The farm share varies
considerably among these different food products and groupings.
As a rule of thumb, the farmer receives a smaller portion of the shopper’s dollar for foods
requiring a higher degree of processing or special handling.
Table 1. Farm Shares for All Foods and Ten Major Food Groups
Food Groupa 3-Year
Averageb
Farm Share (%)c
Marketing-Bill Share (%)d
Eggs
2010-2012
53.7 46.3
Beef 2010-2012
49.4 50.6
Broilers (composite)
2010-2012
42.5 57.5
Pork 2010-2012
31.4 68.6
Fresh Fruit
2009-2011
30.0 70.0
Dairy 2009-2011
29.4 70.6
Fresh Vegetables
2009-2011
27.6 72.4
Fats & Oils
2007-2009
24.0 76.0
Processed Fruits & Vegetables
2006-2008
17.0 83.0
Cereals & Bakery Products
2007-2009
8.3 91.7
Total Market Basket
2009-2011
15.2 84.8
Source: Derived from ERS data sets: Price Spreads from Farm to Consumer (http://www.ers.usda.gov/data-
products/price-spreads-from-farm-to-consumer.aspx) and Meat Price Spreads (http://www.ers.usda.gov/data-
products/meat-price-spreads.aspx), USDA, downloaded Sept. 23, 2013.
a. Includes foods purchased for at-home consumption only. Farm values for fresh fruits and fresh vegetables
are based on prices at first point of sale, and may include marketing charges such as grading and packing for
some commodities.
b. Most recent three-year period with available data.
10 For information on how the market baskets are derived and then used to estimate the farm and marketing bill shares,
see Documentation, “Price Spreads from farm to Consumer,” ERS, USDA, at http://www.ers.usda.gov/data-products/
price-spreads-from-farm-to-consumer/documentation.aspx.
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c. The value of the farm input contained in a retail food product, expressed as a share of the retail price.
d. The difference between the retail food price and the farm share expressed as a share of the retail food
dollar.
Among the major food groups, the principal example of this “rule of thumb” is cereals and bakery
products where the farm share was just 8.3% during the 2007 to 2009 period. Cereals and bakery
products involve a substantial degree of processing, first through a flour mill, then through a food
processing plant, where the grain flour is combined with other products and baked before being
packaged and shipped off to retail outlets. In addition, substantial costs are involved in shipping
bakery products (e.g., each item is individually shelved so as not to crush ready-to-eat products).
Finally, most cereal and bakery products are subject to substantial advertising and retailing costs,
as competition for consumer interests can be fierce.
In contrast to cereal and bakery products, eggs require relatively little extra processing, although a
significant amount of crating and handling is involved. The average farm share for eggs was
estimated at nearly 54% during 2010-2012. Similarly, fresh meat products for beef (49.4%) and
broilers (42.5%) also had relatively high farm shares.
The lower farm shares for pork (31.4%) and dairy (29.4%) suggest that both these food groups
undergo more processing and marketing, perhaps including more selective cuts and special retail
packaging for pork, than for either beef or eggs in general.
Similarly, the farm shares for fresh fruits (30%) and fresh vegetables (27.6%) suggest that, as
perishable fresh products are shipped greater distances, handling and sorting, shelving and
crating, refrigeration, shipping, and labeling have become increasingly important components of
retail prices.
Table 2 presents estimated farm shares for several individual food items drawn from the ten food
subgroups. The rule of thumb mentioned earlier clearly holds—the more highly processed food
items have significantly lower farm shares than less processed products.
• The average retail price for minimally processed eggs had an estimated farm
share of 52.7%.
• The average retail price for more highly processed ice cream had an estimated
farm share of 16.8%
• Citrus fruit products appear to involve substantial handling and shipping costs in
their final retail prices as the estimated farm share for grapefruit, oranges, and
lemons ranged from about 12% to 16%.
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Table 2. Average Farm Share of Selected Food Products
(averages for 2008-2010 period)
Average Farm Share of
Food Type
Food Item
Retail Price (%)
Animal products
Eggs, Grade A large, 1 doz.
52.7
Animal products
Whole Milk,1 gal.
50.7
Animal products
Beef, fresh, 1 lb.
44.8
Animal products
Poultry meat (composite), 1 lb.
41.9
Animal products
Cheese, natural cheddar, 1 lb.
31.4
Crop products
Sugar, 1 lb.
28.1
Animal products
Pork, fresh, 1 lb.
27.0
Crop products
Margarine, 1 lb.
25.5
Fresh Vegetables
Fresh—Lettuce, 1 lb.
24.7
Fresh Vegetables
Broccoli, cut, 1 lb.
23.8
Crop products
Flour, wheat, 1 lb.
23.5
Fresh Fruit
Apples, red delicious, 1 lb.
23.4
Processed Fruit
Orange juice concentrate, reconstituted, 1 gal.
21.3
Fresh Vegetables
Potatoes, 1 lb.
18.7
Animal products
Ice Cream, regular, 1 gal.
16.8
Fresh Fruit
Fresh—Lemons, 1 lb.
16.0
Fresh Fruit
Fresh—Oranges, California, 1 lb.
12.9
Fresh Fruit
Grapefruit, 1 lb.
11.8
Source: USDA, ERS; calculated by ERS based on data from government and private sources. Available as the
“Individual foods” database at http://www.ers.usda.gov/Data/FarmToConsumer/pricespreads.htm.
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ERS’s Food Dollar Series
USDA's Economic Research Service (ERS) measures annual expenditures by U.S. consumers on domestical y
produced food as part of its food dollar series.11 This data series is composed of three primary series—the
marketing bill series, the industry group series, and the primary factor series—that shed light on different aspects of
the food supply chain.
Marketing bill statistics for food commodities have been published annual y since the 1940s by ERS. The Agricultural
Marketing Act of 1946 mandated that USDA measure the costs of marketing U.S. agricultural commodities. Due to
measurement problems, the discontinuation of several underlying data sources, and increased interest in evolving
supply-chain relationships, ERS, in 2011, replaced the original marketing bill series with the new food dollar series.
The food dol ar series uses input-output analysis to calculate the food dol ar and its components for the years 1993 to
2011. The series is updated annual y.
ERS uses input-output analysis to generate food dollar estimates (and food-and-beverage dol ar estimates) for three
food expenditure categories—total expenditures, at-home expenditures, and away-from-home expenditures (Figure
7). For each expenditure category, three primary dol ar series are generated:
1. The marketing bill series (Figure 8) measures the food dol ar share accruing to farmers from the sale of raw
food inputs (the farm share), with the remainder accruing to food supply chain industries involved in al post-farm
activities that culminate in final market food dollar sales (the marketing bill).
2. Because the market value of all food dollar expenditures equals the value added by all food dollar supply chain
industries, the industry group value-added series (Figure 9) divides the food dollar into total value added for
10 industry groups: farm and agribusiness; food processing; packaging; transportation services; energy; retail trade;
foodservices; finance and insurance; advertising; and legal and accounting services.
3. The primary factor series (Figure 10) divides the food dol ar into the value contributions of four primary
production factor groups—salary and benefits, property income, output taxes, and imports. Then a cross-
tabulation table divides the food dollar into the primary factor returns for each industry group.
A Closer Look at the Food Dollar
Marketing Bill Share
The marketing bill series is based on sales proceeds of all food products of U.S. farm-origin
consumed in the United States (both at-home and away-from-home). By definition, the difference
between the retail price of a food product and its farm value is the marketing bill (referred to
earlier as the farm-to-retail price spread or marketing margin). As such it includes all costs
associated with getting the raw commodity from the farm to the consumer (including any profits).
Proceeds from each food dollar expenditure are divided into two sub-components of market
value:
• Farm share measures proceeds of farm commodity sales tied to a food dollar
expenditure and sold to non-farm establishments. It does not include sales of
farm commodities that are incorporated into other commodities and resold to a
domestic farm industry—this eliminates double counting.
11 The ERS Food Dollar Series includes data extending back to 1993; see ERS, Food Dollar Series database; available
at http://www.ers.usda.gov/data-products/food-dollar-series.aspx. For a discussion of the methodology underlying the
ERS Food Dollar Series, see A Revised and Expanded Food Dollar Series, Patrick Canning, ERS Report No. 114,
February 2011.
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• Marketing bill is the market value added to farm commodities that are embodied
in a food dollar expenditure, measured as $1 minus the farm share.
The size of the national aggregate marketing bill is affected by changes in the amount and type of
products consumers buy. For example, restaurant meals have more marketing costs associated
with them, and are therefore more expensive than foods at grocery stores. So, as consumers spend
more of their food budget at restaurants, the marketing bill increases. Similarly, as consumers
purchase more highly processed food products, such as microwave-ready dinners, relative to less
processed fruits, vegetables, and meats, the marketing bill increases. Also, as food products travel
greater distances to reach consumers, their marketing bill increases.
Since 1950, the U.S. marketing bill has increasingly taken a larger share of the consumer food
dollar, growing from 59.1% of consumer food spending to 85.9% in 2010 (Figure 3). In 2011,
USDA estimated that the average farm share was 15.5% (Figure 8) out of an estimated
$1,140 billion. The other 84.5% covered the cost of transforming the raw U.S. farm commodities
into food products and getting them to the retail store shelves, restaurants, and other consumer
outlets.
Figure 8. U.S. Food Dollar Breakout by Marketing Share, 2011
15.5¢
84.5¢
Farm Share
Marketing Share
Source: ERS, Food Dol ar Series, USDA, data as of March 6, 2013; at http://www.ers.usda.gov/data-products/
food-dollar-series.aspx.
Industry Group Shares
Besides showing how much the marketing system as a whole receives, the national marketing bill
provides a good indication of how these expenditures are divided among such marketing inputs as
processing, energy, packaging, transportation, retailing, and so forth. Moreover, it enables
measurement of annual changes in the individual components of the total marketing bill.
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Figure 9. U.S. Food Dollar Breakout by Industry Group, 2011
10.8¢
22¢
4¢
2.1¢
3.5¢
12.2¢
31.2¢
5.5¢ 6.1¢ 2.4¢
Farm & Agribusiness
Other Industry Groups
Source: ERS, Food Dol ar Series, USDA, data as of March 6, 2013; at http://www.ers.usda.gov/data-products/
food-dollar-series.aspx.
Industry groups are establishments grouped together by type of product or service provided. The
ten major industry group components of the marketing bill (Figure 8) and their respective
marketing-bill shares are listed and described below. 12
• Farm and Agribusiness (10.8%)—all establishments classified within the
agriculture, forestry, fishing, and hunting industry, and all subcontracting
establishments.
• Food Processing (22%)—all establishments classified within the food and
beverage manufacturing industries, and all subcontracting establishments.
• Packaging (4%)—all establishments classified within the packaging, container,
and print manufacturing industries, and all subcontracting establishments.
• Transportation (3.5%)—all establishments classified within the freight services
industries, and all subcontracting establishments.
• Retail Trade (12.2%)—all food retailing and related establishments, and all
subcontracting establishments.
• Foodservice (31.2%)—all eating, drinking, and related establishments, and all
subcontracting establishments.
12 See Food Dollar Series, “Documentation,” ERS, USDA, at http://www.ers.usda.gov/data-products/food-dollar-series/
documentation.aspx#primary.
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• Energy (5.5%)—oil and coal mining, gas and electric utilities, refineries, and
related establishments, and all subcontracting establishments.
• Finance and Insurance (6.1%)—all financial services and insurance carrier
establishments, and all subcontracting establishments.
• Advertising (2.4%)—all advertising services and related establishments, and all
subcontracting establishments.
• Legal and Accounting (2.1%)—establishments providing legal, accounting, and
bookkeeping services, and all subcontracting establishments.
Primary Factor Shares
Primary factors are assets employed by establishments to use or transform products purchased
from other establishments (intermediate inputs) to produce and market a different product.13
These assets add market value to the purchased intermediate products.
Figure 10. U.S. Food Dollar Breakout by Primary Factor, 2011
Property Income
Salary and Benefits
7.5¢
37.1¢
5.4¢
50.0¢
Source: ERS, Food Dol ar Series, USDA, data as of March 6, 2013; at http://www.ers.usda.gov/data-products/
food-dollar-series.aspx.
In the food dollar accounts, value added is recorded as income to primary factors as follows:
• Salary and benefits (50%)—pre-tax employee wages plus employer and
employee costs for employee benefits for domestic hired labor—for services on
13 Ibid.
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behalf of a domestic establishment that directs sales towards fulfilling the supply
of food to the U.S. market.
• Property income (37.1%)—pre-tax income or capital gain accruing to owners of
non-labor primary factors of production—e.g., machinery, equipment, structures,
natural resources, product inventory, and other tangible or intangible assets—for
services on behalf of a domestic establishment that directs sales to the U.S. food
supply.
• Output taxes (5.4%)—excise, sales, property, and severance taxes (less
subsidies), customs duties, and non-tax fees-are levied by Federal, State, and
local governments independently of establishment dispersals to primary factor
owners. Taxes that are tied to outlays for domestic labor and capital, such as
income-based taxes, are not reported separately but are included in the primary
domestic factor returns.
• Imports (7.5%)—food and non-food commodities that are imported from
international sources and are used as inputs (e.g., petroleum imports for energy
and transportation) by U.S. food supply chain industries producing for the U.S.
market.
In 2011, half of every food dollar expenditure went to the salary and benefits of domestic
workers, slightly more than a third was spent as property income, and the remainder was split
between the U.S. government (as output taxes) and international assets as imports to the supply
chain.
Linking Farm and Retail Prices
Price is the primary mechanism by which various levels of the market system are linked. While
farmers and consumers sometimes do meet directly in farmers’ markets, in most cases the raw
farm product is separated from the retail food product by a complex processing and distribution
system.14 Farm-to-retail price changes may originate from three potential sources: (1) changes in
farm prices; (2) changes in prices of marketing inputs along the farm-to-retail marketing chain; or
(3) changes in retail prices. This section will briefly discuss the various factors involved in
understanding farm-to-retail price linkages—in particular, how they are measured and what
influences them.
Farm-to-Retail Marketing Margin
As defined earlier, the farm-to-retail price spread is the difference between the farm share (i.e.,
the portion received by producers) of a food product’s price and the price paid by final
consumers. To estimate a food product’s farm-to-retail price spread, the farm share must first be
calculated. Once the farm share of a retail price is determined, then the price spread itself is
determined. Price spreads may be calculated at various stages along the market chain as, for
example, the farm-to-wholesale margin, the wholesale-to-retail margin, and the farm-to-retail
margin.
14 Much of this discussion is based on William G. Tomek and Kenneth L. Robinson, “Marketing Margins,” Chapter 6
of Agricultural Product Prices, 4th ed. (Cornell University Press, 2003), pp. 117-142.
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Measuring Farm-to-Retail Price Linkages
Farm and retail prices are linked by the evolving dynamic embodied in the marketing system’s
attempt to respond to consumers’ demand for marketing services. Changes in consumer
preferences for food products at the retail level (e.g., increased demand for consumer-ready food
products) can drive the food marketing system to add more or fewer services to the commodities
grown by farmers. As the mix and price of services required to transform raw agricultural
commodities into consumer food products change, so too does a food product’s farm and
marketing shares.15
As a result, the nature of price transmission between the price paid by the consumer for the retail
food product and the farm price of the underlying agricultural commodity can be better
understood by evaluating two key aspects of any particular food product: (1) the farm share of the
retail price, and (2) the competitiveness of markets at each stage of the marketing chain.
Farm Share
The larger the share of farm value in the retail product, the greater will be the effect of a change
in farm price, other things being equal. In direct contrast, the greater the degree and duration of
processing and value-added that is accumulated between the farm and the consumers, the smaller
will be the effect of a change in farm price on the retail price. In other words, more highly
processed food products are likely to show less price response to a change in the related farm
commodity price than are less-processed retail products like meat. (However, some factors
affecting farm commodity prices, e.g., energy costs, may concomitantly affect marketing inputs
and services, which, in turn, would impact retail prices.)
The share of marketing inputs and services embodied in retail food products has been growing
steadily over time relative to the farm share, as shown earlier (Figure 4). This would suggest that
retail price responsiveness to farm price changes has been gradually diminishing over time.
Market Competition
Price transmission will tend to occur both more quickly and more fully to changes in market
conditions for farm commodities that move through marketing chains subject to more highly
competitive market conditions—that is, markets with a large number of buyers and sellers dealing
in commodities that have several potential close substitutes and where market information is
transparent and easily accessed by all participants—than for those subject to less competitive
market conditions.16 In uncompetitive markets, certain participants may wield an abnormal degree
of market power and, as a result, prices may be less responsive to changes in market conditions.
The growing concentration of processing and retail firms in many food product markets has led
many to question whether certain market participants wield excessive market power and exert
undue influence in price formation. This concern has attracted greater scrutiny to changing
market structures within the U.S. food distribution network, and their potential effect on farm-to-
15 Ibid.
16 For a discussion of agricultural markets for major field crops, see CRS Report RL33204, Price Determination in
Agricultural Commodity Markets: A Primer, by Randy Schnepf.
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retail price linkages. However, several factors other than market power can also make measuring
the farm-to-retail price spread a difficult exercise.
Potential Measurement Difficulties
First is the fact that many agricultural commodities are used for numerous final products. Take
corn, for example. Corn’s primary use traditionally has been as an energy source in animal feed
rations. However, corn is also processed into a large number of food and industrial products,
including corn oil, starch, high fructose corn syrup, corn flour, grits, corn meal, beverage
alcohols, and ethanol. The demand for corn at the farm level is derived from the demand for each
of these uses, each of which trades in its own market subject to its own set of economic
conditions. The same is true for soybeans, sorghum, wheat, and most other raw agricultural
commodities.
In other words, U.S. and international consumers must compete with livestock and poultry
feeding operations, and industrial and other types of non-food uses, for a portion of U.S.
agricultural output. The portion of non-food uses has expanded rapidly in recent years with the
emergence of agriculture-based biofuel production as a new source of demand for raw
agricultural commodities. These multiple sources of demand weaken the price linkage between
the price for any single retail product and its related farm commodity price.
Another emerging factor that weakens the direct farm-to-retail price linkage is the evolution of
the U.S. food distribution network, which has experienced a substantial expansion in the number
and type of outlets in recent decades. This includes the growth of big box discount stores, the
integration of ready-to-eat foods and/or deli sections at grocery stores, mini-marts, gas stations,
pharmacies, and other non-traditional outlets, and online food delivery services. As a result of this
dynamic evolution in commodity markets and food retailing, simple pricing structures have
increased in complexity and the link between farmers and consumers is gradually becoming more
diffuse, especially for highly processed products.
A prime example of this is how, in response to changing consumer preferences, grocery stores
have been expanding consumer convenience by offering prepared entrees and side dishes ready
for the oven, microwave, or even the dinner table. Many grocery store chains now include ready-
to-eat food buffets and deli sections where made-to-take meals are prepared. All of these
transformations are increasing the share of services needed to convert agricultural commodities
into retail food products. This lowers the farm share of retail prices and weakens the potential
retail price response to a change in a farm commodity price.
Farm-to-Retail Price Transmission
Vertical price transmission (hereafter referred to simply as price transmission) is the process by
which changes in farm prices are transmitted along the marketing chain both downstream from
farm to retail and upstream from retail to farm.17 The adjustment to price shocks along the
marketing chain is an important characteristic of the functioning of markets.
17 Horizontal price transmission is the linkage between prices at the same stage of the marketing chain but at different
locations (also referred to as spatial price transmission). For a detailed discussion of analytical issues related to
measuring and interpreting vertical price transmission, see “Analysis of Price Transmission Along the Food Chain,” by
(continued...)
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Economists have identified three fundamental components that define the nature of price
transmission:18
• Magnitude. How big is the response at each level to a shock of a given size at
another level? This is referred to as the extent of pass-through. For example, a
100% pass-through from farm to retail would imply equal percent price changes
at both the retail and farm level.
• Speed of adjustment. Do changes occur simultaneously or are there significant
lags in adjustment between marketing levels?
• Asymmetry. Do adjustments differ depending on whether a shock is transmitted
downwards (from farm to retail) or upwards (from retail to farm) along the
marketing chain?
Asymmetry in price transmission directly encapsulates the concept of “sticky” retail prices
mentioned earlier and addressed later in this report. To better understand asymmetric price
transmission, consider two hypothetical examples (Figure 11 and Figure 12) where a price rise at
the farm level transmits both faster and more fully to the retail level than does a price decline. In
the first scenario (Figure 11), an upward farm price shock of 40% occurs immediately at the start
of the first month (M1). The farm price shock translates into a gradual 15% retail price rise that
begins one month later and is spread over an entire month. In this case the magnitude or degree of
pass-through would be (15%)/(40%) = 37.5% with a two-month lag (M1 to M3).
In contrast, the second example (Figure 12) is of a downward farm price shock of 50% that
eventually transmits into a 10% decline in retail prices. The retail price decline begins three
months after the initial farm price shock, and is extended over a three-month period for the 10%
retail decline to fully occur. Most of the pass-through occurs during the fourth and fifth months,
followed by a very gradual sixth month of decline. In this later example, the magnitude of pass-
through is (10%)/(50%) = 20% with a six-month lag (M1 to M7).
The implication of asymmetric price transmission as portrayed by these examples is that
consumers at the retail level would not fully benefit from a price reduction at the farm level. In
contrast, processors and retailers would likely benefit from such “sticky” retail prices. One could
also envision a case where an upward shock to retail prices due to a surge in consumer demand is
only partially passed through to farm prices such that producers would not fully benefit from the
retail price increase.
Agricultural producer groups are often annoyed when farm prices fall by more than retail prices,
but economic analysis has shown that this can occur in a competitive market.19 In other words,
abnormal market power (e.g., monopoly, oligopoly, monopsony) need not be present for the
phenomenon of asymmetric or “sticky” retail prices to exist. This is discussed further in the
section of this report entitled “Why Do Retail Prices Tend to Be Sticky?”
(...continued)
Pavel Vavra and Barry Goodwin, OECD Food, Agriculture and Fisheries Working Papers, No. 3, OECD, Paris, 2005.
18 Ibid., p. 3.
19 “Marketing Margins,” Chapter 6, Agricultural Product Prices, by William G. Tomek and Kenneth L. Robinson, 4th
Edition, ©2003, Cornell University Press, p. 119.
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Figure 11. Hypothetical Price Transmission Following an Upward Farm Price Shock
Price
300
Retail
230
+15%
200
Farm 140
+40%
100
0
M1
M2
M3
M4
M5
M6
M7
M8
M9
Time in months
Source: Hypothetical construct by CRS for exposition purposes only.
Note: In this example, the farm price rise occurs immediately at the start of the first month (M1), and is 40% of
the initial farm price of 100. In contrast, the rise in the associated retail price begins one month (M2) later and
takes one month to occur. When fully expressed, the retail price rise is 15% above the initial 200.
Figure 12. Hypothetical Price Transmission Following a Downward Farm Price Shock
Pri30
c 0
e
Retail
200
-10%
180
Farm 100
-50%
50
0
M1
M2
M3
M4
M5
M6
M7
M8
M9
Time in months
Source: Hypothetical construct by CRS for exposition purposes only.
Note: In this example, the farm price decline occurs immediately (M1) and is roughly 50% of the initial price
(100). In contrast , the decline in the associated retail price starts three months later (M4) and is spread over a
three-month period, with most of the transmission taking place during the fourth and fifth months fol owing the
initial shock. When fully expressed, the full retail price decline is roughly 10% of the initial retail price of 200.
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What Is Known About Price Transmission?
While much empirical evidence exists in support of asymmetry between farm and retail prices,
the empirical analysis is still inconclusive concerning the specific nature of price pass-through
between farm and retail markets. This is perhaps largely because agricultural markets in general
encompass such a vast array of commodities and products—each with their own particular set of
product characteristics and market conditions. However, a broad review of economic analysis on
the relationship between farm and retail prices leads to three generalizations:20
• first, causality usually runs from changes in farm prices to changes in retail
prices;
• second, time lags in retail price response to farm price changes are generally
months in length, even for perishables like milk, meat, and fresh fruits and
vegetables; and
• third, retail prices appear to respond asymmetrically, with adjustments to
increases in farm prices occurring faster and with greater pass-through than
adjustments to decreases in farm prices.
Why Do Retail Prices Tend to Be Sticky?
The general perception (supported by considerable empirical evidence) is that retail food prices
are “sticky”—that is, retail prices follow commodity prices upwards rapidly, but fall back only
slowly and partially when commodity prices recede. A common concern of policymakers is that
this retail “stickiness” is due to imperfect price transmission perceived to be caused by market
power and oligopolistic behavior at some stage of the marketing chain.21
According to economic theory, the “stickiness” of retail prices should be inversely related to the
degree of retail competition in a locality. More retail shopping opportunities in close proximity
would engender greater price competition and should diminish the “stickiness” of retail prices.
The same would be true of wholesale prices and markets, or any other stage of the marketing
chain. However, economic theory does not fully explain the observed phenomena.
Economists have noted several exceptions to the “retail price competition” paradigm that may
limit retail prices from adjusting fully to downward farm price movements, including certain
aspects of consumer behavior, as well as store inventory management and retailing strategies. As
a result, the presence of asymmetric price transmission alone does not necessarily imply the
presence of excessive market power. This section briefly discusses some of the various factors
that might produce asymmetric price transmission other than market power.
Consumer Behavior
First, consider how consumer behavior could encourage price stickiness. Consumers often must
make their food purchases while considering tight budget constraints. However, several factors
other than retail price may enter into their grocery purchase decision, including time and
20 Ibid., p. 131.
21 Pavel Vavra and Barry Goodwin, “Analysis of Price Transmission Along the Food Chain,” OECD Food, Agriculture
and Fisheries Working Papers, No. 3, OECD, Paris, 2005, p. 3.
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convenience of food acquisition, strong consumer store preference, or strongly established
consumer shopping patterns (e.g., picking up groceries at the nearby store on the way home from
work). Also, the average level of a consumer’s wealth is important, since higher-income
consumers tend to be less price-conscious and less likely to change stores or shopping patterns
due to food price changes. All of these factors contribute to a lower price responsiveness by
consumers to retail price changes, which, in turn, allows retail outlets to keep prices higher than
they otherwise would (were consumers more price-responsive) without losing market share,
revenues, or profits.
Search Cost
Retail prices are local in the sense that consumers do not venture far to buy milk and fresh
produce for daily consumption. When retail prices for certain food products rise, consumers may
be reluctant to invest the necessary time to find cheaper alternatives. This concept is referred to as
“search cost” by economists. A consumer will accept a “higher” retail price if the cost to change
shopping patterns and search out a better price is perceived as exceeding the potential savings
from such an act, particularly when the consumer would have to balance the savings for any one
item obtained by switching grocery stores against possible price losses on other retail products in
the new store.
Retail Inventory Management
Retail inventory management could also contribute to sticky prices. Large retail inventories
purchased or forward-contracted during a period of high commodity prices may limit a
shopkeeper’s ability to lower prices. This would depend on how much profit margin exists on
each item and how much loss on each item a store is willing or able to absorb. As a result of such
inventory management issues, there is often a substantial time lag between farm and retail price
changes—a decline in farm prices may take several months to pass through to retail stores as
retail stores work through higher-priced inventories and contractual purchase obligations.
Menu Cost
The cost to a retail store of lowering prices may be prohibitive. Referred to in economic jargon as
menu cost, this refers to the costs associated with making changes in retail prices such as re-
marking in-store price labels, updating advertisements and promotional flyers, and the like. Also
associated with menu cost is the risk to the retailer’s reputation from frequent price changes that
send complex signals to shoppers. A retail store’s perception of menu cost and its influence is also
related to consumers’ price responsiveness for a particular food item. For example, if the increase
in sales generated by the lower price would fail to offset the cost associated with re-marking price
labels, then a retail store would likely not lower its prices.
Market Uncertainty
Market price uncertainty regarding whether a price shock is permanent or temporary may
influence retail price strategy, as firms are generally reluctant to chase temporary price
movements. Such uncertainty may contribute to asymmetry in retail and farm price movements.
For example, during periods when commodity and energy prices are particularly volatile (as in
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2008), retailers may be reluctant to lower prices if there is a significant probability that their costs
may turn around and rise quickly thereafter.
Volatile commodity prices generally translate into higher retail prices as dealers try to lock in
profit margins in the face of uncertain costs. Subsequent “sticky” retail prices mean that
consumers benefit only partially when commodity prices recede and are left with the perception
(if not the reality) of paying for higher retail profit margins. In contrast, farm prices respond
quickly to market conditions because most agricultural markets are highly competitive and
because, unlike retailers, farmers have little say in the price at which they sell their products, only
in the timing of such sales.
Incidence of a Change in Marketing Costs
In addition to the timing and pass-through aspects of price transmission, policy makers and
market participants have also expressed concern over the incidence of an increase in the price of
an input to the retail food production process (such as an increase in energy costs). Who bears the
added cost? Is it:
• passed on to consumers in the form of higher prices,
• passed back to farmers in the form of lower prices, or
• absorbed by food processors in the form of lower revenues?
Most economists would agree that the time period under consideration is critical when evaluating
the incidence of a change in a marketing input cost. Economic theory suggests that the price of
the average food product will be more sensitive to an input price change in the short run than in
the long run due to the time needed for price-induced behavioral adjustments to occur. For some
commodities there may be a substantial time lag for food processors and consumers to adjust their
behavior in response to a change in retail prices that result from a change in the price of a retail
food product input (whether it originates from the farm component or the non-farm marketing
component)—whether an input purchase or technology adjustment in the case of food processors;
or an adjustment to inventories held by wholesalers or retailers; or a different consumption choice
in the case of a consumer.
In the long run, both firms (food producers) and consumers have more time to adjust their
behavior to relative input price changes, thereby mitigating the effects on consumer food prices.
Some firms may exit the industry, while others may adjust their input mix by finding a cheaper
alternative input or by altering the food processing technology so as to use less of the more
expensive input or perhaps switch to a different input entirely. Finally, some firms seek out
increased supplies of the more expensive input via imports or expanded domestic production
(which would require a new growing cycle).
Similarly, in the long run, consumers have more time to substitute among food products in favor
of obtaining their nutritional needs at the lowest cost. In so doing they shift their demand among
individual food products.
In the short run, the time period is sufficiently short that wholesalers and retailers are unable to
adjust their behavior or their technology or to acquire additional lower-cost supplies of the
relevant marketing input. Then, food producers and consumers are limited in their response to an
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unexpected input price change. Under these conditions, a larger portion of an input price increase
is usually passed along to consumers in the form of higher retail prices.
Extenuating Circumstances for Farm-to-Food Price Linkages
Certain characteristics of individual farm commodities can play an important role in determining
the price transmission between the farm and the retail consumer. For example, livestock
production tends to have a cyclical pattern driven by biological constraints in the gestation-birth
process that limit producer response to market conditions. As a result, meat and dairy product
prices are influenced by the long lag time involved in farm (or ranch) production adjustments to
input (feed costs) or output price changes.
Annual crops tend to have seasonal patterns, although this pattern is strongly influenced by the
storability of the individual commodity. Perishable products have shorter shelf-life and often
require greater handling. As a result, prices for perishable products tend to show strong seasonal
patterns; they are vulnerable to volatile swings as near-term conditions change; and long-term
price formation is less correlated with current supplies and more correlated with producer
behavior. In contrast, storable commodities (e.g., grains) can be moved in bulk and stored for
several years at a time such that current supplies are an important factor in determining price
volatility as well as both current and long-term price formation.
On the demand side, many food products have strong seasonal patterns of demand. For example,
meat demand tends to rise in the summer months when grilling activity is at a maximum, and the
demand for turkey is strongly correlated with the Thanksgiving and Christmas holidays.
Farm and Retail Prices Compared
During the 2006 to 2009 period, the news media reported on unusually wide variances between
low farm and high retail prices, suggesting that perhaps some food retailers were profiting
unfairly by engaging in price gouging.22 The retail grocery business is highly competitive, making
it unlikely that such activity could occur either on a large scale or for a sustained period of time.
Sometimes consumers tend to focus on a single highly visible item that is purchased routinely
(such as milk) to draw their conclusions about retail price responsiveness and market power,
without fully understanding the time lag involved in a farm-to-retail price response for most
commodities.
Another retail marketing consideration that may cloud retail price perceptions by consumers
(about whether asymmetric price transmission has occurred) is the use of “loss leader” items,
whereby a retail outlet sets the price for highly visible consumer items at below cost as a
marketing strategy to attract consumers into the store. Supplementary consumer purchases of
other goods with normal retail markups would then offset the loss on the leader items. Consumers
may be easily confused when neighboring stores use different products as loss leaders,
particularly in a period of volatile prices.
22 For example, “Food Bill Still High? Blame ‘Sticky’ Prices,” Associated Press, ©2009 Journal Gazette and Times-
Courier, Oct. 19, 2008; Scott Kilman and Laren Etter, “Grain Costs Down, Groceries Not,” Wall Street Journal, March
13, 2009; “Food Prices Continue to Rise, Despite Fall in Overall Inflation,” The Land, online, Jan. 29, 2009.
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Farm-to-Food Price Dynamics
This final section uses national average price data to examine the farm-to-retail price linkages for
several major commodities during the 2006 to 2009 period, when volatile prices characterized
many agricultural markets. Price indexes for major food groups are presented in a series of graphs
to allow for a visual comparison of farm, wholesale (when available), and retail price movements
for differences in magnitude, timing, and asymmetry in adjustment. This section is followed (in
Appendix A) by a series of comparisons of actual price data for certain select retail food products
and their corresponding agricultural commodities.
Aggregate Price Indexes
In 2008, retail food prices rose by an average of 6.4%, the largest percentage increase since 1989.
This increase is extremely modest when compared to the price rise during the first half of the year
for most farm commodities. However, to fully capture the potential time lags in price response
between the relative rise in farm and retail prices, a longer historical perspective is preferable.
Since the rise in farm prices began in mid-2006, that year is selected as the reference base.
A comparison of national aggregate indexes—using 2006 = 100 as a base—for farm (monthly
average farm price received, or MAFP, for food commodities), wholesale (Producer Price Index
or PPI for finished consumer foods), and retail (Consumer Price Index or CPI for food-at-home
purchases) indicates that price response varied through the system, but in line with expectations
(Figure 1 and Table 3). The percent rise in farm commodity prices was more than double the
percent rise in either wholesale or retail prices:
• average farm prices for food commodities rose 33.2% from the 2006 base to their
peak in July 2008;
• wholesale food prices rose 15.8% to their peak in September 2008 (two months
later); and
• retail food prices rose 13.8% to a peak in January 2009 (six months after the farm
price peak).
Now consider how far farm and retail prices have fallen from their peaks:
• aggregate farm-product prices fell nearly 22% from their July 2008 peak until
their trough eight months later in March 2009;
• wholesale prices fell 4.4% from their peak in September 2008 until their bottom
(10 months later) in July 2009; and
• retail prices dropped 3.2% from their January 2009 peak to a low in April 2009
(four months later).
Grocer Margins
The spread between the food-at-home CPI (reflecting retail prices) and the PPI for finished
consumer foods (reflecting wholesale prices) is often studied by market analysts as a gauge for
grocer margins.23 Clearly, by this comparison, the first three months of 2009 (Figure 1), when the
23 “U.S. Govt. Data Show Food Prices Falling,” CME News for Tomorrow, © Dow Jones & Co., Inc., May 15, 2009.
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CPI exceeded the PPI, represented a period of profitable margins for grocers (as did the first half
of 2006). Of course, retail price changes vary widely by specific commodity and market.
Grocery store sales are generally competitive and, as a result, most prices stay within a fairly
narrow trading range to avoid altering consumer behavior. In addition, the value added by the
food marketing system is largely independent of farm prices, as evidenced when consumer prices
have held steady or risen in the face of a decline in farm prices.
Declining Real Farm Prices
Historically farm prices have been subject to significant downward pressure due to tremendous
gains in agricultural productivity resulting from improvements in farm machinery, cultivation and
conservation practices, fertilizers and pesticides, animal husbandry, and animal and plant
genetics. These productivity gains, in turn, have resulted in agricultural output tending to expand
faster than demand. As a result, farm prices declined in real terms steadily from the late 1940s
until 2006, as exemplified by the farm price of corn (Figure 13).
Figure 13. U.S. Monthly Farm Price for Corn, 1930-2013
$10
U.S. Corn
Monthly AFP $ per bushel
$8
1982-84 $s per bushel
$6
$4
$2
Nominal $s per bushel
$0
1930
1940
1950
1960
1970
1980
1990
2000
2010
Source: National Agr. Statistics Service, USDA. nominal farm price deflated by CPI (1982-1984 = 100), BLS.
Several major market-shifting factors have emerged since 2006—including increased demand for
corn under strong federal biofuels incentives, a prolonged surge in China’s soybean import
demand, and the severe U.S. drought of 2012—that have resulted in tight U.S. and global grain
and oilseed supplies and sharply higher farm and wholesale commodity prices.24
24 For a discussion of the rise in commodity prices since 2006 see CRS Report RL34474, High Agricultural Commodity
Prices: What Are the Issues?
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In contrast, the marketing bill has been subject to general inflationary pressures despite certain
technological gains (e.g., in the processing, storage, and transportation sectors). As a result, the
food marketing bill has risen rapidly in nominal dollars, and slowly but steadily in real terms
(Figure 5). As a result, the farm share has tended to decline for most foods, while farm-to-
consumer price spreads have widened. This is indicative of the extent to which the components of
general inflation (i.e., energy, labor, rental rates, etc.) have increased in importance as a share of
retail food prices.
Price Indexes for Major Food Groups
This section uses a series of charts (Figure 14 to Figure 20) and a table (Table 3) to compare
price indexes for farm, wholesale (when available), and retail prices for several major food
groups.
The monthly average farm price (MAFP)-received data represent national averages that have
been adjusted to comparable indexes where the average price for the year 2006 = 100. This
allows a pure comparison across all prices indexes—farm (MAFP), wholesale (PPI), and retail
(food-at-home CPI)—relative to their 2006 base.
As mentioned earlier, most agricultural prices began their rise in 2006, making it an obvious point
of comparison. Table 3 focuses on the asymmetry in upward and downward price movements
across farm, wholesale, and retail levels that occurred during the sharp upward-downward price
swings of the 2008-2009 period.
Readers should note that, in every case for the 2006-2009 period,
• the farm and wholesale price movements are substantially larger than the
corresponding retail price movements;
• the retail price peak follows the farm price peak with a lag of one to two months,
with the exception of egg prices, where the farm and retail price indexes peaked
in the same month, and cereal and bakery products, which peaked several months
later than the farm price; and
• farm, wholesale and retail pork prices showed nearly perfect symmetry in
response to downward price changes as to upward price changes.
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Table 3. Farm, Wholesale, and Retail Price Movements, 2006 to 2009
Correspondi
Market
% Change:
% Change:
ng Figure
Commodity or Food Group
Level
2006-to-Peaka Peak-to-2009b Ratio
Figure 1 MAFPc Index: Al Food Commodities
Farm
33.2%
-21.8%
-0.6
PPI:d Finished Consumer Foods
Wholesale
15.8%
-4.4%
CPI:e Food-at-Home
Retail
13.8%
-3.2%
-0.2
Figure 14
MAFP Index: food grains
Farm
128.5%
-47.4%
-0.3
CPI: cereals & bakery products
Retail
19.8%
-1.3%
-0.1
Figure 15
MAFP Index; eggs
Farm
132.3%
-56.6%
-0.3
CPI:
eggs
Retail
53.6%
-22.3%
-0.3
Figs. 13-14
MAFP Index; dairy products
Farm
33.2%
-21.8%
-0.6
PPI: fluid milk
Wholesale
69.5%
-48.4%
-0.7
Figure 16
CPI: fresh milk
Retail
24.1%
-22.0%
-0.8
Figure 17 CPI:
cheese
Retail
23.0%
-10.9%
-0.4
Figure 18 MAFP
Index;
broilers
Farm
41.3%
-21.6%
-0.4
PPI: slaughter chicken
Wholesale
48.8%
-22.3%
-0.5
CPI:
poultry
Retail
13.6%
-2.6%
-0.2
Figure 19
MAFP Index: al beef, 500+ lbs.
Farm
10.0%
-18.1%
-1.8
PPI: slaughter cattle
Wholesale
17.3%
-20.4%
-1.2
CPI:
beef
Retail
13.5%
-6.7%
-0.5
Figure 20
MAFP Index: barrows & gilts
Farm
31.7%
-39.1%
-1.2
PPI: slaughter hogs
Wholesale
38.9%
-43.4%
-1.1
CPI:
pork
Retail
7.5%
-7.8%
-1.1
Source: Calculated by CRS from the source data identified in each of the figures cited in the table.
Note: The period of 2006 to 2009 was chosen for comparative purposes because of its pronounced upward-
downward volatility. The price data are adjusted such that average prices for the year 2006 = 100.
a. Peak value was selected as the highest value that occurred during the 2007-2009 period. The peak value is
compared against the 2006 annual index of 100.
b. Percent change from peak value to lowest value point in 2009.
c. MAFP = Monthly Average Farm Price received as reported by NASS, USDA.
d. PPI = Producer Price Index as reported by the Bureau of Labor Statistics (BLS).
e. CPI = Consumer Price Index as reported by BLS.
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Farm-to-Food Price Dynamics
Figure 14. Cereal Price Indexes: Farm Food Grains vs. Retail Cereals
and Bakery Product Prices
250
MAFP Index: Food Grains
200
0
10 150
2006 =
100
CPI: Cereals
& Bakery Products
50
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Monthly average farm prices (MAFP) received are from NASS, USDA; Consumer Price Indexes (CPI)
for major retail food groups are from the Bureau of Labor Statistics (BLS).
Figure 15. Egg Price Indexes: Farm Prices Received vs. Retail Prices
250
220
MAFP Index: eggs
190
0
10160
2006 =
130
CPI: eggs
100
70
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Monthly average farm prices (MAFP) received are from NASS, USDA; Producer Price Index (PPI) and
Consumer Price Indexes (CPI) for major retail food groups are from BLS.
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Farm-to-Food Price Dynamics
Figure 16. Dairy Price Indexes: Farm Prices Received for Dairy Products, PPI for
Wholesale Fluid Milk, and CPI for Retail Fresh Milk
175
PPI: fluid milk
160
MAFP Index:
Dairy Products
145
0
10 130
2006 =
115
CPI: fresh milk
100
85
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Monthly average farm prices (MAFP) received are from NASS, USDA; Producer Price Index (PPI) and
Consumer Price Indexes (CPI) for major retail food groups are from BLS.
Figure 17. Dairy Price Indexes: Farm Prices Received for Dairy Products, PPI for
Wholesale Fluid Milk, and CPI for Retail Cheese
175
PPI: fluid milk
160
MAFP Index:
Dairy Products
145
100 130
06 =
20
115
CPI: Cheese
100
85
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Monthly average farm prices (MAFP) received are from NASS, USDA; Producer Price Index (PPI) and
Consumer Price Indexes (CPI) for major retail food groups are from BLS.
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Farm-to-Food Price Dynamics
Figure 18. Poultry Price Indexes: Farm Live Broilers, PPI for Wholesale Slaughter
Chickens, and CPI for Retail Poultry
200
PPI: slaughter chickens
180
160
100
=140
06
20
120
CPI: poultry
100
MAFP Index:
broilers
80
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Monthly average farm prices (MAFP) received are from NASS, USDA; Producer Price Index (PPI) and
Consumer Price Indexes (CPI) for major retail food groups are from BLS.
Figure 19. Beef Price Indexes: Farm All-Beef (500+ lbs.), PPI for Whole Slaughter
Cattle, and CPI for Retail Beef
160
PPI: slaughter cattle
150
140
0 130
10
CPI: beef
120
2006 =
110
MAFP Index:
all beef, 500+ lbs.
100
90
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Monthly average farm prices (MAFP) received are from NASS, USDA; Producer Price Index (PPI) and
Consumer Price Indexes (CPI) for major retail food groups are from BLS.
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Farm-to-Food Price Dynamics
Figure 20. Pork Price Indexes: Farm All-Hogs, PPI for Wholesale Slaughter Hogs,
and CPI for Retail Pork
MAFP Index:
160
barrows & gilts
130
100
2006 =
CPI: pork
100
PPI: slaughter hogs
70
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Monthly average farm prices (MAFP) received are from NASS, USDA; Producer Price Index (PPI) and
Consumer Price Indexes (CPI) for major retail food groups are from BLS.
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Farm-to-Food Price Dynamics
Appendix A. Farm versus Retail Price Comparisons
for Select Food Products
This appendix includes several figures that graph retail and farm prices for those food products
that have clearly identifiable farm commodities as their raw ingredient. The farm prices are
national average farm prices received as reported monthly by the National Agricultural Statistics
Service (NASS) of USDA. The retail prices are U.S. city average retail prices as reported
monthly by the Bureau of Labor Statistics (BLS).
Note to Readers
The farm and retail prices in the following charts each relate to a different axis with different measurement scales. As
a result, these charts are not useful for evaluating farm-to-retail margins. Instead they are useful for evaluating
differences in direction and response behavior between farm and retail prices.
• In all the figures presented here, retail prices are highly correlated with the farm
price of their corresponding raw commodity. In most cases, retail prices alter
their direction in response to farm prices changes with only a slight lag.
Figure A-1. Rice Prices: Farm Rough, All-Rice versus
Retail White Uncooked Long-Grain
$0.90
$20
$0.80
$16
Farm: all rice
ds
$0.70
ed poun
r pound
ndr
pe
$12
r hu
il: $ $0.60
pe
eta
R
: $
rm
Retail: rice, white,
Fa
long-grain, uncooked
$8
$0.50
$0.40
$4
2003
2005
2007
2009
2011
2013
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
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Farm-to-Food Price Dynamics
Figure A-2. Wheat Prices: Farm High-Protein Wheat versus White All-Purpose Flour
$0.60
$12
Farm: Hard Red Spring
(HRS) wheat
$0.50
$9
d
el
un
sh
u
r po
$0.40
er b
pe
$6
p
: $
il
: $
eta
arm
R
F
$0.30
$3
Retail: flour, white, all-purpose
$0.20
$0
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
Figure A-3. Wheat Prices: Farm High-Protein Wheat versus White Bread
$1.50
$12
Farm: Hard Red Spring
(HRS) wheat
$1.40
$10
d $1.30
l
he
$8
Retail: bread, white, pan
er poun
r bus
$1.20
p
pe
: $
$6
etail: $
rm
R $1.10
Fa
$4
$1.00
$0.90
$2
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
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Farm-to-Food Price Dynamics
Figure A-4. Chicken Prices: Farm Live Broilers versus Retail Fresh Whole Chicken
$1.60
$0.70
Farm: broilers, live
d $1.40
$0.55
d
n
un
u
o
r po
r p
pe
: $
il
: $ pe
eta
rm
R $1.20
$0.40
Fa
Retail: chicken,
fresh, whole
$1.00
$0.25
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
Figure A-5. Chicken Prices: Farm Live Broilers versus Bone-in, Chicken Legs
$1.75
$0.73
$1.60
$0.61
d
d
n
un
Farm: broilers, live
u
o
r po
r p
$1.45
pe
$0.49
: $
il
: $ pe
eta
rm
R
Fa
$1.30
$0.37
Retail: chicken,
legs, bone-in
$1.15
$0.25
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
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Farm-to-Food Price Dynamics
Figure A-6. Beef Prices: Farm All-Beef Cattle (500+ lbs.) versus
Retail 100% Ground Beef
$3.50
$132
Farm: cattle,
all beef 500+ lbs
$3.00
$114 ds
d
un
o
un
p
r po
red
$2.50
nd
pe
$96
: $
il
r hu
eta
pe
R
: $
rm
$2.00
$78
Fa
Retail: ground beef,
100% beef
$1.50
$60
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
Figure A-7. Beef Prices: Farm All-Beef Cattle (500+ lbs.) versus USDA Choice,
Boneless Round Roast
$5.00
$132
$4.50
$114
Retail: round roast
ds
d
USDA Choice, boneless
un
o
un
p
$4.00
r po
red
nd
pe
$96
: $
il
r hu
$3.50
eta
pe
R
: $
rm
$78
Fa
$3.00
Farm: cattle,
all beef 500+ lbs
$2.50
$60
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
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Farm-to-Food Price Dynamics
Figure A-8. Pork Prices: Farm All-Hog versus Retail Sliced Bacon
$6.20
$80
$5.30
$65
ds
Farm: all hogs
d
oun
un
p
r po
red
$4.40
nd
pe
$50
: $
il
r hu
eta
pe
R
: $
rm
$3.50
$35
Fa
Retail: bacon, sliced
$2.60
$20
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
Figure A-9. Pork Prices: Farm All-Hog versus Chops (Center-Cut, Bone-In)
$3.90
$80
Retail: chops, center cut, bone-in
$3.60
$65
pounds
ound
ed
r p
$3.30
pe
$50
$
r hundr
etail:
pe
R
: $
rm
$3.00
$35
Fa
Farm: all hogs
$2.70
$20
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
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Farm-to-Food Price Dynamics
Figure A-10. Dairy Prices: Farm All-Milk versus Retail Fresh, Whole Milk
$4.10
$24
Retail: fresh, whole milk
$22
$3.70
$20
n
llo
t
w
r ga
$18
er c
pe $3.30
p
: $
: $
il
$16
eta
arm
F
R
$14
$2.90
$12
Farm: all milk
$2.50
$10
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
Figure A-11. Dairy Prices: Farm All-Milk versus Retail Cheddar Cheese
$6.20
$24
Farm: all milk
$5.80
$22
$5.40
$20
ds
d
un
o
un
p
$5.00
$18
red
r po
nd
pe
r hu
il: $ $4.60
$16
pe
eta
R
: $
$4.20
$14
rm
Fa
$3.80
$12
Retail:
cheddar cheese
$3.40
$10
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
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Farm-to-Food Price Dynamics
Figure A-12. Egg Prices: Farm versus Retail
$2.40
$1.40
Farm: all eggs
Retail: eggs,
grade A,
large
$1.20
$2.00
n
zen
o
$1.00
ze
o
er d
p
er d
$1.60
p
: $
ail: $
$0.80
arm
Ret
F
$1.20
$0.60
$0.80
$0.40
2000
2002
2004
2006
2008
2010
2012
2014
Source: Farm prices received data are from NASS, USDA; U.S. city average retail price data are from BLS.
Author Contact Information
Randy Schnepf
Specialist in Agricultural Policy
rschnepf@crs.loc.gov, 7-4277
Acknowledgments
This report builds upon and replaces the earlier, out-of-print CRS Report 88-761, The Cost of Our Food, by
Geoffrey Becker.
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