BEEF PRICES

Mr. ANDREWS. We had a lot of discussion today about the price of meat and the consumers' concern about the price of meat being as high as it is. The Secretary of Agriculture has pointed out quite rightly that the price of meat is just back to where it was 10 years ago, and what other industry is still receiving the prices they got 20 years back? Could you prepare a chart on beef that goes back over the same period of time, say back to 1945?

I've got a sneaking suspicion that 20 years ago when the price of beef was to the farmer what it is today the retail price to the consumer was considerably less. I would suspect offhand that we have a situation now where a lot of this high cost of meat is because of the increased marketing costs, rather than increased income to the farmer and that this type of chart would show it.

It would show the fluctuation in the price of beef on the farm, the price the farmer would receive live weight, and average price the consumer pays for standard beef cuts. The chart would look somewhat like this bread chart, except for the fact that the farm value would probably fluctuate much more than the farm value of the goods mainly wheat that go into a loaf of bread. And if you would put that chart into the record at about this point.

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MARKETING MARGINS

Mr. ANDREWS. Last year we discussed in detail the spread between the cost of food to the consumer and the price the farmer receives, and I expressed my concern on the statements you made, and your quote was: "Our studies show that the spreads are not substantially out of line with growing cost in the food industry."

Could you discuss what your current outlook is and what your current thinking is on these marketing spreads and farm prices? Are they increasing or

Dr. WEST. Sure, they are increasing.

Mr. ANDREWS. How much of them are unavoidable and how much of them are, shall we say, avoidable?

Dr. WEST. Last year the increase in the market spread was 2.7 percent. The year before that, 7.4 percent. Yet the farm value has not increased in the last 2 years. The spread has been increasing.

A large part of it has been in wages, in labor costs. Labor costs have gone up 66 percent over the last 10 years.

Mr. ANDREWS. Is this in straight marketing costs, or is this percentage you are talking about also including the built-in consumer services, the packaging, the precutting, the ready-to-cook preparation?

Dr. WEST. This chart is an attempt to move in that direction. This 7.6 percent here on top [indicating] (see p. 418) is the increased services that have occurred over the past 10 years. The middle part is actually the increase in costs. The last part shows the difference in volume. The change in costs and services, is represented in this top part of the chart.

The lower part of it is the increase in volume.

Mr. ANDREWS. According to this paragraph of yours, two-thirds of the increase is the rise in cost and one-third is the fact that they are adding more services.

Dr. WEST. Well even more so than that. I mean the difference is greater than that.

Mr. ANDREWS. $1.9 billion worth of rise in costs and $0.9 billion in more services, that is about 2 to 1, unless you are giving us the wrong

Dr. WEST. That was the first 4 years of the decade. The first 4 years it was not so great. The increase in costs was 27 percent compared to 13 percent in services, but over the entire decade it has been 53.1 percent increase in costs, compared to 7.6 percent increase in services.

Mr. ANDREWS. That makes my point even better. The chart I had was 1961 through 1965 at which time-point nine billion was more services. Now when you finish off the total decade, the second 5 years only increase more services by point three billion, but your rise in costs have gone from a level of 1.9 billion to 14.2 billion so you have increased this by 700 percent in rising costs in the last 5 years, whereas in more services the differential is only increased by 30 percent.

Dr. WEST. That is right.

Mr. ANDREWS. Which would say that we have a logarithmic curve developed in the rising cost of food marketing over the last few years, and maybe the statements that we have heard that the increased costs of food to the consumer is due to more services are not quite as accurate

Dr. PAARLBERG. Not as accurate as they once were.

Mr. ANDREWS. That would hold for the first 5 years, over the past decade, but not the last 5 years. Could you put these graphs into a little more appealing and more easily understood way-in fact if you could put lines that show the sharp break, and this is not a uniform curve, this is a sharp curve upward, and I would suspect if you charted it year by year, maybe we would find that the past few years have been even worse than the first ones.

Dr. PAARLBERG. That is quite true.

Mr. ANDREWS. If we could get that as a constant curve, it might give us even more information, if you could supply that type of chart I would appreciate it.

Dr. WEST. We will do that.
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