Animal Production and Marketing Issues: Retail Meat Prices and Price Spreads

Price Spreads

ERS develops price spreads for beef, pork, broilers, turkey, and eggs as a measure that describes the allocation of the consumer dollar among the various stages of marketing in the livestock/meat industry. The measuring points are the farm, wholesale, and retail levels in the marketing chain. The farm and wholesale prices are from USDA's Market News, and retail prices are from BLS. Prices from these sources are standardized to reflect 1 pound of meat at the retail level. Meat Price Spreads are reported monthly for total (farm to retail), farm to wholesale, and wholesale to retail.
Beef values and price spreads measure the value of a Choice steer at the farm, to the packer, and when sold through grocery stores. Pork values and price spreads measure the value of a slaughter hog at the farm, to the packer, and when sold through grocery stores. Both tables show values for the current month, the previous 12 months, the last 12 quarters, and the last 6 years. A historical series contains many more years of data on price spreads for beef, pork, chicken, turkey, and eggs.
Price spreads can be volatile and may reflect lags in price response at the farm and retail levels due to price changes. Lag lengths may vary depending upon whether prices are going up or down and depending upon expectations about future price changes.
Price spreads on a current-dollar (nominal) basis show long-term increases over time. Marketing expenses reflect costs of labor, utilities, facilities, and non-livestock materials such as packaging. The cost of these items tends to follow inflation. After accounting for inflation by deflating beef and pork price spreads by the Consumer Price Index, deflated price spreads do not show much of a trend over the long term. Some studies suggest that economies of size gained in meat packing have been passed back to the farm, thereby raising livestock prices above what they would otherwise have been absent of consolidation.
More information on price spreads can be found in U.S. Beef Industry: Cattle Cycles, Price Spreads, and Packer Concentration (April 1999); in the Agricultural Outlook article, Controversies in Livestock Pricing December 2002); and in Beef and Pork Values and Price Spreads Explained (May 2004).

 http://www.ers.usda.gov/Briefing/AnimalProducts/PriceReporting.htm