Developments in Marketing Spreads for Agricultural Products in 1966

Excerpts from the report Highlights: The retail value of food in the market basket in 1966 averaged almost 6 percent higher than in 1965. The largest increase occurred in the first quarter of 1966 with smaller increases in the second and third quarters. In the fourth quarter, the retail value declined 1 percent from the third quarter level. The retail value of the market basket is expected to remain near the fourth quarter level in 1967. Historically, the food price index has lagged behind that of most other consumer items, and while it is now about the same as for all consumer items combined, it still is far behind the increase in prices of consumer services. Even though food prices increased, consumers still spent about the same proportion of their income for food during 1966 as they did in 1965--18 percent. This compares with 25 percent during 1947-49. The proportion of disposable income that consumers spent for food declined in 11 of the past 15 years. The farm value of food in the market basket averaged almost 8 percent higher in 1966 than in 1965. The rise in farm prices began in 1965 and reached the highest levels for the year in the first and third quarters of 1966. Compared with 1957-59 levels, the farm value of food in the market basket in 1966 was 14 percent higher but still about the same as in 1947-49. A rapidly increasing demand for marketing services, coupled with declining farm prices, has been an important factor accounting for the long-term declining trend in the farmer’s share of the food dollar. Recent research indicated that consumer demand for marketing services has increased 2 to 3 times as fast as the demand for food entering the marketing system. The marketing bill in 1966 for moving the food supply to consumers was $55 billion, about 6 percent above the 1965 total. Marketing charges amounted to nearly twice the farm value of foods marketed and were 66 percent of consumer food expenditures. Prices of most marketing inputs increased in 1966, keeping pressure on the marketing system to find ways of increasing efficiency and reducing costs. Average hourly labor costs were up 39 percent in 1966 over the 1957-59 base period. Plant and equipment cost was up 10 percent. Innovations in rate making for rail freight and adoption of new technology have resulted in a downward trend in freight rates for farm products since 1957-59. Rail freight rates have declined at an average annual rate of 1 to 2 percentage points during the past decade. The retail price increases for both milk and bread followed increased farm prices of raw milk and wheat. However, the retail price increase was larger than the increase in farm price.