Productivity and Food Processing Costs

Measures of productivity, for agriculture as well as for the private sector of the economy as a whole, have a long and fruitful history in helping to interpret movements in output, prices, and factor costs. To an economist who is familiar with productivity research, and who has watched the continuing rise in marketing charges for farm products, the inevitable question is: What can measures of productivity tell us about the continued rise in the Farm-Food Marketing Bill and the Farm-Food Market Basket (farm-retail spread)? 1 This paper is only a step in that direction (1) 2—it presents some new information, and it brings together our major findings on productivity in factories that process farm food products (10). (Similar work on distribution of farm foods is now underway.) Within the last decade, food processing costs in factories have accounted for roughly a third of the Farm-Food Marketing Bill. The eventual product of this area of research should advance our knowledge of supply relations for marketing services for food and, therefore, better our understanding of the relationship between consumer demand for food at retail level and the marketing system's derived demand for agricultural products at the farm level. Briefly summarized, the principal finding in this paper is that, during the post-World War II period, food manufacturing as a whole was an average sector with regard to total productivity and price increases—the postwar rise in the price of food processing services was part of the general price rise in the economy as a whole. The author expresses his appreciation to Jerome Mark, Frank deLeeuw, William Wesson, Forrest Scott, and Allen Paul for their helpful comments.