overview
Changing consumer preferences are one of the driving forces behind changing food selections and, in turn, demand for the marketing services needed to transform foods from raw agricultural commodities to finished retail food products. The strong economy of the last few years has raised incomes and allowed more consumers to pay for convenience. Fast-paced, two-income lifestyles have limited time for preparing food at home, raising the demand for quick, easy-to-prepare food and the marketing services needed to provide foods in the forms consumers demand. The farm-to-retail price spread measures the contributions of food manufacturing, wholesaling, and retailing firms. Recent increases in consumer demand for convenience have increased the demand for the marketing services provided by those firms, which increases price spreads and the food sector's overall marketing costs. More overview...

contents

• How ERS measures marketing and price spreads
• USDA marketing bill
• USDA market basket
• Farm-to-retail price spreads for individual food items
• Relationships between price spreads and marketing input costs
• Current trends

features
Retail-Farm Price Margins and Consumer Product Diversity—Under a Congressional mandate, USDA estimates the proportion of U.S. consumer food expenditures earned by farmers. New ERS research develops refined estimates of price spreads, which are the difference between consumer expenditures and farmer receipts. These new spreads capture both changes in the relative prices of inputs used by food marketing firms and changes in consumer demand for marketing services and convenience.

Food Marketing Costs at a Glance—In 2000, U.S. consumers spent $661.1 billion on food, excluding imports and seafood. Estimated marketing costs for domestic farm foods in 2000 totaled $537.8 billion, or 81 percent of consumer expenditures. From 1990 to 2000, consumer expenditures for farm foods rose $211.3 billion. In the same period, marketing costs rose 57 percent and accounted for most of the 47-percent rise in consumer spending. Labor costs of manufacturers, wholesalers, retailers, and eating places totaled $253 billion in 2000 and accounted for nearly 40 percent of total consumer food expenditures.

Food Marketing Costs: A 1990's Retrospective—U.S. consumers spent $618.4 billion on food in 1999 (excluding imports and seafood), up 37 percent from the $449.8 billion spent in 1990. Consumers bought a larger volume of food, value-added processing and packaging of at-home foods increased, spending at restaurants and fast-food outlets grew, and prices for marketing inputs rose. All of these factors contributed to the jump in food spending during the 1990's.

Desire for Convenience Drives Marketing Costs—America’s desire for convenience foods—meats cut up, marinated, and ready for the grill; entrees in microwavable packaging; individual juice boxes for bag lunches; and the large portion of our meals prepared by foodservice companies—translated into $466 billion worth of marketing costs in 1998.

recommended readings
Food Cost Review, 1950-97—Provides data and analysis of farm-to-retail price spreads, the marketing bill, and the farm value share. Higher levels of marketing services required to satisfy consumer demand imply that marketing continues to comprise a greater portion of the consumer food dollar over time.

Structural Change and Competition in Seven U.S. Food Markets—Technical bulletin presents empirical tests of market power for seven food categories. The study provides evidence of competitive conduct in both the sale of final food products and the purchase of farm ingredients.

See all recommended readings...

recommended data products
USDA Marketing Bill—The marketing bill represents the annual cost for the food sector's marketing services required to process and distribute U.S. farm-originated foods to consumers. The marketing bill reflects changes in product mix, product quantity, product price, and the volume of marketing services.

USDA Market Basket—The market basket measures changes over time in retail food store prices, farm prices, and the price of providing services associated with marketing a fixed quantity of U.S. farm-originated foods.

Farm-to-Retail Price Spreads for Individual Foods—Farm-to-retail price spreads are calculated for a set of 40 individual foods. They are the difference between the average food store price and the farm value of an equivalent quantity of raw food materials.

Food Market Indicators—Food market indicators describe economic activity related to food production and distribution from the farm to the domestic or international consumer. The database provides information on the supply, demand, structure, and economic health of the U.S. food system and indicators that are useful in determining how well the system serves its consumers and producers.

Meat Price Spreads—Meat price spreads are calculated for a weighted average of Choice beef and pork products. See also the Retail Scanner Prices for Meat data product.

recent research developments
Recent research suggests that the ratio between farm inputs and retail outputs varies across the firms of an industry. This variation generally reflects changes in the relative prices of farm and marketing inputs. These research results further indicate that changes in consumer demand would not produce changes in price spreads over time if the ratio between raw farm commodities and retail food products is constant. For more information, contact Howard Elitzak.

related briefing rooms

• Food consumption
• Food CPI, prices, and expenditures
• Food market structures

related links
Census Bureau—Provides data on food processing establishments in the Economic Census, conducted every 5 years, which provides information on establishment numbers, value added, materials usage, and value of shipments by detailed industry and geographic region. Data on shipments, value added, and employment by industry through the Annual Survey of Manufactures, plant location and employment through the annual County Business Patterns survey, financial information through the Quarterly Financial Report and the Annual Capital Expenditures Survey, and monthly production and inventory data for selected industries through the Current Industrial Reports program.

Bureau of Labor Statistics—Provides consumer price indexes, hourly earnings, and number of workers in the food industry.

USDA National Agricultural Statistics Service—Provides prices received by farmers for a wide variety of farm commodities.

USDA Agricultural Marketing Service—Provides market news data.

for more information, contact: Hayden Stewart
web administration: webadmin@ers.usda.gov
page updated: August 16, 2004