Developments in Marketing Spreads for Agricultural Products in 1965

Report Highlights: The farm food marketing bill totaled $48 billion in 1965. Total costs of marketing farm foods consumed by U S domestic civilian consumers have increased steadily since the end of World War II. The 1965 total was more than double (up 113 percent) the 1947-49 average of $22.5 billion During this same period—1947-49 to 1965—farmers’ receipts for these food products rose from $18.3 to $24.5 billion, an increase of only one-third. Of the $6.2 billion increase, about $2 billion came in 1965. The continued rise in the marketing bill has come from three factors: (a) larger volume of food marketed; (b) more processing and other marketing services; and (c) higher costs per unit of food marketed. There have been significant gains in marketing efficiency, especially in recent years. These gains have saved many billions of dollars in possible added food costs to consumers. Between 1947-49 and 1965, hourly earnings of labor costs per unit of food market rose less than 30 percent. Labor costs make up the largest single element in the food marketing bill. However, the percentage increase in other costs factors such as capital costs and advertising have been much greater than the rise in labor costs in the post-World War II period. Despite increases in food prices and the purchase of more services with food, consumers are spending a declining portion of their income for food. The percentage has declined from 25.7 in 1947 to 18.3 in 1965. Higher marketing charges combined with declining farm prices since 1947 pushed the farmer's share of the consumer's retail food dollar to a near record low in 1963 and 1964. The farmer's share in 1965, however, rose about 2 to 39 cents to interrupt the longtime downward trend. Higher prices to farmers in 1965 contributed most to this change. In 1965, major public attention centered on changes in prices and price spreads for beef, bread, potatoes, and several other fruits and vegetables. Beef prices rose sharply in early 1965. As is customary during rising prices, the spread between farm and retail prices for beef declined, but by the end of the year the spread almost equaled the 1964 average. The retail price of bread has risen steadily since World War II. Price increases have been entirely the result of factors other than the cost of farm ingredients. The spread between retail cost of representative cotton products and the farm value of lint cotton used in their production increased in 1965 for the third consecutive year. The farmer's return amounted to 13 percent of consumers’ expenditures in 1965, down slightly from earlier years. Consumer expenditures for tobacco products continued to rise in 1964 (latest available data) but at a lower rate than in the past 2 years. The farmer's share of the consumer's tobacco dollar dropped to about 10 cents in 1964.