Documentation
Scope and Coverage
Data cover selected cuts of beef, pork, and poultry, as well as eggs and dairy products. Price spreads are reported for last 6 years, 12 quarters, and 24 months. The retail price file provides monthly estimates for the last 24 months. The historical file provides data since 1970. Data are national averages.
Methods
ERS starts with a standard animal in calculating beef and pork price spreads. This standard animal is cut up in a fixed way at the packing plant, and its wholesale cuts are then cut up in a standard way at the retail level. The total value of the animal at the farm could be compared with the total value of the animal at wholesale and retail.
ERS calculates its price spreads on a per-pound-of-retail product basis. It takes 2.40 pounds of the standard steer to produce a pound of retail beef and 1.14 pounds of wholesale beef to produce 1 pound of retail beef. For hogs, the conversion factors are 1.869 pounds of hog per pound of retail cuts and 1.04 pounds of wholesale cuts per pound of retail cuts. The gross farm values in the price spread tables are the farm price of live animals multiplied by the farm-to-retail conversion factor, and the wholesale values are the average price of the animal's wholesale meat cuts times the wholesale-retail conversion factor.
In addition to meat, cattle and hogs also produce a number of byproducts when they are slaughtered: organs, bones, hides/skins, etc. ERS does not calculate retail values for these parts, but the price-spread tables do include estimated byproduct values at the wholesale level. The wholesale values and retail values are directly comparable. The byproduct value is subtracted from the gross farm value to produce the net farm value. The net farm value is meant to measure the farm value of an animal's meat.
The main difference between broiler spreads and those for beef and pork is that there is no farm price for broilers. The vast majority of broilers are produced under contracts, where the integrator (poultry slaughter company) usually supplies chicks and feed and pays growers a per-unit fee for the birds they produce.
Sources
Retail prices are from the Bureau of Labor Statistics (BLS) Consumer Price Index (CPI). Wholesale and farm prices are from USDA's Agricultural Marketing Service. Conversion factors developed by USDA, ERS are used to convert live animal and wholesale meat prices to a retail weight basis.
Variables
| Variable name | Definition |
|---|---|
| Values | |
| Retail prices | Average retail prices for the selected product as reported by BLS, measured in dollars per pound for meat, dollars per dozen for eggs, and dollars per gallon or carton for dairy products |
| Retail value | The value of a weighted average of an animal’s retail meat cuts measured in cents per pound |
| Wholesale value | Average value of the meat as it leaves the packing plant, measured in cents per pound of retail weight |
| Gross farm value | Value of the animal when it is sold, measured in cents per pound of retail weight |
| Net farm value | Gross farm value minus the value of byproducts; represents the value of the meat to the farmer |
| Byproduct allowance | Value of hides, skins, fats, bones, and edible and inedible offal |
| Spreads | |
| Total spread | Retail value minus net farm value |
| Wholesale to retail | Retail value minus wholesale value |
| Farm to wholesale | Wholesale value minus net farm value |
| Farmers' share | Net farm value divided by retail value |
| Retail to consumer spread (poultry only) | Difference between what the retail grocery store pays for the product (wholesale price plus a delivery charge) and what the store charges the consumer |
| Market prices | |
| 5-market steer price (dollars per hundredweight) | Average monthly value for the 5-market steer price as published by AMS, measured in dollars per hundredweight live-weight basis |
| 51-52 percent lean hogs (dollars per hundredweight) | Average monthly value for 51-52 percent lean hogs as reported by AMS, converted from carcass weight to live-weight basis |
| All fresh beef retail price (cents per pound) | Composite value based on Choice beef, other beef, and hamburger retail prices; developed to estimate the average retail value of total beef production |
| Wholesale broiler composite (cents per retail pound) | Composite value based on wholesale prices for whole birds and chicken parts; developed to estimate the average retail value of all broiler production |
| Retail broiler composite (cents per retail pound) | Retail value of the composite wholesale value for broilers |
Strengths and Limitations
The prices for cattle, hogs, wholesale beef, and wholesale pork are reported under the Livestock Mandatory Price Reporting Act of 1999, as amended. According to USDA, Agricultural Marketing Service, “Livestock Mandatory Reporting was developed to facilitate open, transparent price discovery and provide all market participants, both large and small, with comparable levels of market information for slaughter cattle, swine, sheep, boxed beef, lamb meat, and wholesale pork.” This is not an easy task that provides perfect information, but the prices reported are generally trusted benchmarks used by the industry. Over the years, changes have been made to enhance the program’s effectiveness and efficiency.
The retail price data come from surveys of grocery stores; there may be some measurement error in these data.
Beef price spreads are based on a specific type of steer and pork on a specific type of hog. Using a specific type of animal allows ERS to make comparisons of the values and spreads over time that depend solely on prices. However, these values and spreads are unlikely to match the values or spreads for a particular steer or hog.
Resources
For more detail on how beef and pork price spreads are calculated and how price spread changes affect livestock prices, see Beef and Pork Values and Prices Spreads Explained (May 2004).
For webinar overview of this data product and highlights of its uses, please see Price Spreads from Farm to Consumer & Meat Price Spreads.
Recommended Citation
U.S. Department of Agriculture, Economic Research Service. Meat Price Spreads.