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Farm-to-retail price spread and farm share in food supply chains: Background paper

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Created 08/06/2018

Updated 13/11/2024

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Overview
This report examines Australian and international experience in monitoring farmgate and retail prices for food products. It also outlines a simple methodology to monitor farm shares and farm-to-retail price spreads for food products, and investigates the potential to apply the methodology to Australian data.

Key Points
• The food retail sector in Australia is highly concentrated while there is increasing consolidation in the food processing sector. There is some concern that this could lead to farmers receiving lower prices and consumers paying higher prices than would be the case in a perfectly competitive market. • The paper reviews local and international research in monitoring movements in farm and retail prices for food products, outlines a simple methodology to monitor farm shares and farm-to-retail price spreads for food products, and investigates the potential to apply the methodology to Australian data. • The review of international research found significant variation across countries in the importance they place on food price monitoring and analysis. Research has consistently found that the more processed food products are, the lower the farm share, and that farm shares have generally been declining over time. • The review also found that the United States Department of Agriculture Economic Research Service (USDA ERS) is a world leader in analysing prices in food supply chains. The paper outlines a relatively simple methodology used by the USDA ERS to monitor changes in farm shares and farm-to-retail price spreads for food products. • While there are limitations with the USDA ERS approach, an increase in farm-to-retail price spread or a decrease in farm share of the retail price could be a useful early indicator that competition issues are emerging within a supply chain. However, additional analysis will always be required to confirm whether the cause was an increase in market power because these changes can occur for a number of reasons, including differences in productivity in different sectors or input prices increasing at a faster rate in the retail sector than in the farm sector. Unfortunately, there is generally a lack of data that will allow a breakdown in marketing costs to facilitate this analysis. • One option for additional research is to replicate another methodology developed by the USDA ERS, which uses input-output data to decompose costs and profits between different sectors within a supply chain and to estimate returns to primary factors, including capital and labour. This type of analysis would be more expensive than the high-level analysis described in this paper but it would also be more informative than the farm share/price spread analysis in identifying the range of factors influencing prices, and lead to a more informed debate about the various factors influencing prices, including market power.

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Additional Info

Field Value
Title Farm-to-retail price spread and farm share in food supply chains: Background paper
Language English
Licence Creative Commons Attribution 4.0 International
Landing Page https://devweb.dga.links.com.au/data/dataset/235753c0-3b51-46d2-a324-b6399d4edc90
Contact Point
Australian Bureau of Agriculture and Resource Economics and Sciences
dataman@agriculture.gov.au
Reference Period 20/12/2016
Geospatial Coverage Australia
Data Portal data.gov.au

Data Source

This dataset was originally found on data.gov.au "Farm-to-retail price spread and farm share in food supply chains: Background paper". Please visit the source to access the original metadata of the dataset:
https://devweb.dga.links.com.au/data/dataset/pb_fspsa9aas_20161220

Original dataset
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No duplicate datasets found.