model plant than in the smaller one. Plants having a mixing capacity of 80 and 200 tons per 8-hour shift are common in the mixed food industry. This and other reports published by the Marketing Economic Division are used by the Feed Production School, Inc., conducted by an industry association, as a part of its program to reduce production costs. The cost standards developed in this study are believed to be below the costs of most plants in the industry. Because of the intense competition within the mixed feed industry, savings achieved by reducing costs to these standards likely would be passed on at least in part to farmers and ultimately to consumers of animal products. EXPORTS TO THE COMMON MARKET Mr. WHITTEN. Where you bring together the facts as they exist, for various and sundry to interpret as they wish, I think nearly everybody recognizes the value of bringing together that information. I know that those who have studied the subject can see the benefits in these others. It is not as easy to get over, however, either to us or on our part to other Members of the Congress and to the country. I note in your statement that our exports to Common Market countries were off some half a billion dollars in 1962 as against 1961. Anyone who has wrestled with the cotton problem, which I have, representing an area where it is quite a commodity, and anyone who has been familiar with the fact that there has been lots of talk that prices would be reduced would know that the buyers would get by with just as few purchases as possible. I am sure that if you matched the fall-off in the sales of cotton just from that talk alone, it would equal the difference that you point out there. I am sure that there are some other factors which don't show in just this one commodity. We all know that this Common Market problem is a real one. Turning briefly to the Foreign Agricultural Service, which will be before us later, some years ago I spoke to the foreign agricultural attachés in Paris, at which time none of our representatives knew that the United States had authority under the law to sell our surplus competitively for cash. Every country in the world did that except us. From that start we finally got it accepted that that was the law. We moved billions and billions of dollars of commodities. We are about to backslide again, I am sorry to say. Now, why is it that FAS doesn't do a lot of these things that you are talking about as to probable markets and things of that sort? Wherein is your work in that area not a duplication of our agricultural attachés' work, since they primarily are there to develop world markets? Mr. KOFFSKY. The attachés is just one source of information that we use in developing the statistics. For example, when we indicated in here the statistics of the falloff on our exports of the Common Market in that five-point period from August to December 1962 Mr. WHITTEN. Could you supply at this point in the record a listing by commodity so we can see what has fallen off and what has held its own? Mr. KOFFSKY. Yes. I have a table on that. Mr. WHITTEN. You might introduce it at this point in the record.. 1952 to 1962 the retail price increased 5 percent; the farm value decreased 22 percent; and the spread increased 34 percent. Ice cream. The retail price of ice cream decreased for the third year in a row in 1962. At 85.8 cents per half gallon, it was 0.7 cent lower than the 1961 average and 2 cents lower than the average for 1959. The farm value decreased 1 cent to 22.6 in 1962. Since the farm value decreased more than the retail price, the spread between them widened to 63.2 from 62.9 cents in 1961. The farm-retail spread increased about 1 percent from 1952 to 1962; the farm value decreased 16 percent and the retail price 4 percent. Washington Delicious apples Retail prices for Washington Delicious apples averaged 20 cents higher per 42-pound carton in Chicago than in New York City from 1956-57 to 1961-62 (fig. 13). Auction prices for the same period averaged higher in New York City by 26 cents per carton. Consequently, the spread between these prices, which is the combined wholesale-retail margin, averaged 46 cents more per carton in Chicago than in New York City. In both markets the wholesale-retail spread was the largest component of the total marketing charge. It ranged from 37 to 54 percent of the retail price in Chicago during the six seasons from 1957-57 to 196162, and from 34 to 48 percent in New York City. Other marketing charges were for auction, transportation, and shipping-point services. These changed little over the six seasons. The total marketing charge, or farm-retail spread, for Washington Delicious apples marketed in New York ranged from $6.03 per carton in 1956-57 to $7.30 in 1960-61, and for those marketed in Chicago from $6.31 in 1956-57 to $7.63 in 1961-62. As a percentage of the retail price, marketing charges claimed from 65 to 88 percent of the retail price in New York and from 66 to 90 percent of the retail price in Chicago. FIGURE 13 Seasonal Average at Chicago and New York City PRICES AND MARGINS FOR Returns to producers remaining after marketing charges were deducted from retail prices in Chicago ranged from 77 cents per carton or 10 percent of the retail price in 1957-58 to $3.28 per carton or 34 percent of the retail price in 1956-57. From apples marketed in New York, producer returns ranged from 92 cents (12 percent) in 1957-58 to $3.20 (35 percent) in 1956-57. Prices and producer returns varied widely from season to season. Price variations were closely related (inversely) to the annual production of apples, particularly Washington Delicious. The marketing spread, on the other hand, varied less and apparently quite independently of prices. Producer returns generally increased with retail price increases and decreased with retail price decreases. Oranges Retail prices for California navel and Valencia oranges were higher in Chicago in 1962 than in 1961 (table 3). But retail prices of Florida oranges declined. For each type of orange, the retail price moved opposite to the change in volume of production. TABLE 3.-Oranges: Retail prices, marketing margins, and growers' returns for sales in Chicago, and seasonal production, 1961-62 1 1 California Valencia season, May through November; California navel season, December through May; and Florida season, November through May. Preliminary. California data are for 37.5-pound cartons; Florida data are for 90-pound boxes. Of the $1.04 increase in the retail price of California Valencias, 89 cents went for marketing and 15 cents to the growers. The 51-cent increase in the naval price went mostly to growers 48 cents. The Florida orange retail price decreased 65 cents. Nevertheless, the marketing spread increased 38 cents, forcing the growers' returns down $1.03. In the 1960-61 season the percentage distribution of the retail price was quite similar for the three orange types. But wide differences occurred in the following season. Most noticeable was the increase in the wholesale-retail margin for Florida oranges from 37 to 44 percent of the retail price and the decrease in the growers' share from 30 to 21 percent. The wholesale-retail spread for Valencias also increased substantially, but the growers' share did not change significantly. For navels, the growers' share increased from 32 to 37 percent. Corn flakes The manufacturer's margin is by far the largest component of the retail price of corn flakes. This margin is the spread between the manufacturer's selling price and the cost to him of flaking grits bought from the dry-corn miller. In 1961, the manufacturer's margin accounted for 69 percent of the retail price (fig. 14). It included processing costs, packaging costs, advertising, and many other costs. The wholesaler's margin, the next largest component, took between 12 and 13 percent of the retail price. The retailer's margin accounted for about 12 percent, and the assembler-corn miller margin for 3 perrent. This margin includes the margin taken for assembling corn by elevator operators, dealers, brokers, and others; shipping costs; and the dry corn-milling margin. Returns to farmers for the quantity of corn equivalent to a 12-ounce package amounted to 1 cent in 1961, or about 4 percent of the retail price. Each of the marketing margins except the assembler-corn miller margin was larger in 1961 than in 1947-49. In percentage terms, the increase was largest for the retailer margin, which was nearly four times as large in 1961 as in 1947-49. Returns to the farmer, however, were a third smaller in 1961 than in 1947-49. 95910-63-pt. 3-6 FIGURE 14 CONSUMER'S CORN FLAKES PRICE Consumers paid an average of 41.8 cents for a 12-ounce jar of peanut butter during the 12 months beginning August 1, 1960. Changes in retail prices of this product were small in recent years (fig. 15). Changes in the farm-retail spread and in the grower's return also were small in cents per jar, but in percentage terms some were substantial. The farm-retail spread totaled 30 cents in 196061. and the farm value of peanuts required to produce a 12-ounce jar of peanut butter averaged 11.8 cents. Shellers received an average of 13.9 cents for peanuts equivalent to 12 ounces of peanut butter in 1960-61. The sheller's spread was 2.1 cents-the difference between the value of shelled peanuts at the plant and the farm value of peanuts. The manufacturer's spread averaged 15 cents per jar in 1960-61-the difference between his selling price of 28.9 cents and the sheller's return. This spread included the cost of packaging materials and ingredients other than peanuts, costs of processing and distributing the finished product to wholesale and retail agencies, and profits. The wholesale-retail spread for peanut butter averaged 12.9 cents per jar in 1960-61. Charges for wholesaling and retailing services were combined because wholesaling services were not always performed by distinct wholesaling agencies. Manufacturers sell much of their production directly to retail grocers. Variations in retail prices.-Noticeable differences in retail prices and price spreads were associated with type of retail outlet, brand name, location of consuming area, and container size. Chainstore prices for peanut butter were lower than independent store prices. The most frequent price was 43 cents per 12ounce jar in chainstores and 45 cents in independent stores. Total farm-retail spreads for 1960-61 were 31.2 cents per jar for chains and 33.2 cents for independents. Advertised, nationally distributed manufacturers' brands of peanut butter were generally higher priced than other brands. In 1960-61 the most frequent price was 45 cents per 12-ounce jar for a group of four such major brands compared with 37 cents for a group of minor brands. Prices of major brands commonly were 6 cents higher than for minor brands in 1959-60 and 4 cents higher in 1958-59. The farm-retail price spread of major brands averaged 33.2 cents in 1960-61 compared with 25.2 cents for minor brands. Differences in prices between major and minor brands are indicative of the additional costs incurred in merchandising the highly advertised brands. Retail prices in eight cities were compared. This comparison was limited to chainstore prices of the same four nationally distributed brands in order to provide a regional comparison indicative of differences in prices resulting from market location." Portland, the market farthest from the peanut producing areas, had prices as high or higher than those found in the other seven cities studies. Baltimore and Philadelphia prices consistently fell below the average price for the eight cities. The foregoing comparisons were based on prices for peanut butter retailed in 12-ounce containers. Peanut butter, however, is sold in a variety of container sizes. Substantial variation in retail prices is related to differences in container size. The average per unit cost of peanut butter decreases substantially as container sizes increase up to about 25 ounces. In 1960, 12 ounces of peanut butter in 8-ounce jars cost consumers 46.9 cents compared with 35.1 cents in 18-ounce jars. This meant that the marketing charge for 12 ounces of peanut butter in S-ounce jars was about 11⁄2 times as much as in 18-ounce jars. However, for 30ounce containers or larger, reductions in marketing charges from increases in container size were relatively insignificant. Margarine and advertising prices Seven leading margarine manufacturers are among the 100 top advertisers in the United States. Their promotion and merchandising are of such a scope that 11 or more brands of margarine distributed by these companies are known throughout the United States. * Data in this section are for a peanut crop year, which extends from August through July. Prices reported were for the most popular brand sold in each store. Special and sale prices were excluded. The price shown for minor brands is the simple average of bimodal prices of 35 and 39 cents per jar. Chainstore sales comprise somewhat more than 40 percent of retail grocery sales. 1 Comparisons of retail prices by container sizes are based on prices in independent stores, reported to the Statistical Reporting Service, USDA. |