Summary Findings

The data product Price Spreads from Farm to Consumer compares prices for food paid by consumers with prices for corresponding agricultural products received by farmers. These comparisons are reported for a variety of foods sold through retail food stores such as supermarkets and supercenters. Foods with different levels of processing are included-minimally processed products like whole milk typically have a higher farm share than do foods such as Cheddar cheese that require more processing.

ERS also groups individual foods into market baskets. These baskets contain a collection of foods that represent what an American household may buy at retail in one year's time. The costs of the market baskets at retail are then compared with the prices received by farmers for a corresponding basket of agricultural commodities. Grouping foods into baskets yields not only data on particular foods such as whole milk but also a composite estimate of the value added to farm milk by the food marketing system for all dairy products.

ERS calculates market basket statistics for fresh fruit, fresh vegetables, and dairy products.

Farm share changes from year-to-year partially reflect volatility in farm prices. For example, if the farm value of a gallon of whole milk were $2 and the retail price were $4, then the farm share would be 50 percent. If the farm value subsequently fell by 50 cents (a 25-percent decline) and if all of the decline were passed through as a retail price decline, then the new retail price would be $3.50 (a 12.5-percent decline). The new farm share would be 43 percent ($1.50 divided by $3.50).

Farm-to-consumer price spreads also may increase or decrease over time with changes in the mix and prices of services required to transform raw agricultural commodities into consumer food products. Long-run trends therefore reflect a variety of underlying economic conditions, including changes in the technology used to process and distribute food as well as changes in the price of inputs, such as labor and energy.