How Retail Beef and Bread Prices Respond to Changes in Ingredient and Input and Costs
AbstractThe extent to which cost changes pass through a vertically organized production process depends on the value added by each producer in the chain as well as a number of other organizational and marketing factors at each stage of production. Using 36 years of monthly Bureau of Labor Statistics price indices data (1972-2008), we model pass-through behavior for beef and bread, two retail food items with different levels of processing. Both the farm-to-wholesale and wholesale-to-retail price responses are modeled to allow for the presence of structural breaks in the underlying long-term relationships between price series. Broad differences in price behavior are found not only between food categories (retail beef prices respond more to farm-price changes than do retail bread prices) but also across stages in the supply chain. While farm-to-wholesale relationships generally appear to be symmetric, retail prices have a more complicated response behavior. For both bread and beef, the pass through from wholesale to retail is weaker than that from farm to wholesale.
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Bibliographic InfoPaper provided by United States Department of Agriculture, Economic Research Service in its series Economic Research Report with number 102757.
Date of creation: Feb 2011
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pass through; wholesale; retail; farm prices; beef; bread; supply chain; price transmission; price response; Demand and Price Analysis; Livestock Production/Industries;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-05-07 (Agricultural Economics)
- NEP-ALL-2011-05-07 (All new papers)
- NEP-COM-2011-05-07 (Industrial Competition)
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