An Examination of Beef and Pork Price Spread Computation Procedures

Excerpts from the report: Growing discontent with beef and pork price spread data, both within and outside the U.S. Department of Agriculture, was brought into full view by the report of the National Commission on Food Marketing. The major concern of the Commission report in the area of meat price spreads was whether the total effect of specials is accounted for in the reported retail prices. At the same time, price spreads are also dependent on the level of the wholesale and farm values. Thus, these have also been a subject of concern. As a result of the questions raised about the present spread series, a thorough examination of procedures currently used to calculate price spreads was undertaken. This article reports some of the revisions being considered in the procedure for estimating price spreads for beef and pork. Price spreads are defined as the differences between retail, wholesale, and farm values. For example, the farm-retail spread is the difference between the retail price and the farm value. Therefore, the proposed revisions discussed in the following paragraphs relate to the task of estimating accurate or representative retail prices, wholesale values, and farm values. The farm and wholesale figures are termed values, rather than prices, because they represent the value of the amount of the carcass or live animal equivalent to one pound at retail. Near the end of the article, a comparison is made between the current price spread series and proposed new series incorporating the changes indicated by our analysis to date.