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Food processors, manufacturers, wholesalers, retailers,
and foodservice providers transform raw agricultural commodities
into convenient food products for American consumers to
buy. Transportation, processing, and packaging are among
the many marketing services provided. Value added to commodities
through marketing services accounts for a substantial
portion of consumer food prices.
ERS compares the prices paid by consumers for food with
the prices received by farmers for their corresponding
commodities. ERS's goal is to inform policymakers, agriculture,
and the general public about the value added to agricultural
commodities by the food marketing system and to compare
costs for marketing commodities with farm receipts.
The data product Price
Spreads from Farm to Consumer reports these comparisons
for a variety of foods sold through retail food stores
such as supermarkets and supercenters. Foods with different
levels of processing are included—minimally processed
products like whole milk typically have a higher farm
share than do foods such as Cheddar cheese that require
more processing.
ERS also groups individual foods into market baskets. These
baskets contain a collection of foods that represent
what an American household may buy at retail in one year’s
time. The costs of the market baskets at retail are
then compared with the prices received by farmers for
a corresponding basket of agricultural commodities.
Grouping foods into baskets yields not only data on
particular foods such as whole milk but also a composite estimate of the value added
to farm milk by the food marketing system for all dairy
products.
ERS calculates market basket statistics for fresh fruit, fresh vegetables, and dairy products.
Farm
share changes from year-to-year partially reflect volatility in farm prices. For example, if the farm value of a gallon of whole milk were $2 and the retail price were $4, then the farm share would be 50 percent. If the farm value subsequently fell by 50 cents (a 25-percent decline) and if all of the decline were passed through as a retail price decline, then the new retail price would be $3.50 (a 12.5-percent decline). The new farm share would be 43 percent ($1.50 divided by $3.50).
Farm-to-consumer price spreads also may increase or decrease over time with changes in the mix and prices
of services required to transform raw agricultural commodities
into consumer food products. Long-run trends therefore reflect
a variety of underlying economic conditions, including
changes in the technology used to process and distribute
food as well as changes in the price of inputs, such as
labor and energy.
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