Price spreads are larger for more highly processed foods
Food price spreads—the difference between a food’s retail price and the value of the farm commodities used in the food—measure the cost of processing, wholesaling, and retailing food from the farmer to consumer. Price spreads vary by food products, reflecting different degrees of processing and marketing. The price spread for white flour, which averaged 30 cents per pound over 2000-2013, is smaller than the price spread for white bread. Multiple ingredients are required to produce bread (including flour, high fructose corn syrup, and vegetable oil) and bread must be mixed, baked, sliced, packaged, and advertised. These additional processing and marketing costs resulted in an average price spread for bread of $1.13 per pound over 2000-2013. Large price spreads signal that changes in farm prices will likely have a weaker effect on retail prices. When wheat prices climbed 162 percent from 2000 to 2013, the retail price of flour rose 79 percent, while retail bread prices were only 52 percent higher. The statistics for these charts come from ERS’s data product, Price Spreads From Farm to Consumer, updated August 11, 2014.
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