TABLE 1.-Retail price of bread, cost of flour to baker, and farm value of wheat in a pound loaf of bread, by years, 1947-57

Ketail prices of dairy products rose an average of about 3 percent in 1957. Part of the increase went into slightly higher farm prices, and somewhat more than half into an increase in farm-to-retail price spreads. Retail prices now are about as high as the peak in 1952. The farm-to-retail spread, on the other hand, has risen continuously, and is now about 14 percent higher than in 1952. As a result, the farmer's share of the retail price of dairy products as a group fell from 53 percent in 1952 to 46 percent in 1957 (fig. 2).

Fluid milk.-The marketing margin for fluid milk in 1957 remained at 55 percent of the retail price, where it has been for the past 3 years.

Retail

FIGURE 1

PRICE SPREADS FOR 1 LB. OF BREAD AND FLOUR AND WHEAT EQUIVALENTS

*FOR AV. QUANTITY PURCHASED PER URBAN WAGE-EARNER AND CLERICAL-WORKER FAMILY, 1952

U. S. DEPARTMENT OF AGRICULTURE

AGRICULTURAL MARKETING SERVICE

prices averaged 24.2 cents a quart in 1957, 0.9 cent a quart higher than in 1956. The marketing margin and farmer's share both increased in the same relative amount (figs. 3, 4, and 5).

The increase in the marketing margin since 1952 has been less than the increase in plant operating costs. Our continuing study of data from a representative group of fluid milk distributors shows that during this period the gross margin increased 12 percent and operating costs increased nearly 17 percent on a per unit basis. Personnel costs, which account for more than half of all operating costs, increased 17 percent; container costs increased 16 percent; and buildings and equipment costs increased 34 percent. All operating costs combined increased 17 percent. Net profits, before income taxes, declined by about 34 percent on a per unit basis during this 6-year period.

Much of the increase in wage rates and prices of operating items has been offset by increasing efficiency and by changes in marketing practices. Two of our studies indicate some of these changes. During the past 5 years, there has been a shift away from the more expensive home delivery to sales through retail stores. Perhaps of greater significance has been the shift to the use of larger containers and sales of multiple-quart units at prices below the single-quart price. For example, in the Chicago market, sales in single-quart containers have decreased from nearly 90 percent of all fluid milk sales some 20 years ago to about 22 percent. Much of this change has occurred in recent years. A study based on nationwide data shows that in the last 2 years sales in quart containers,as a percent of total sales, has descreased 13 percentage points with the gain going to half-gallon containers and bulk dispenser cans.

In addition to the changes in marketing practices, fluid milk processing plants are making increased use of labor-saving machinery and equipment. While personnel costs per unit of sale were increasing 17 percent, hourly earnings increased 28 percent.

Butter. The retail price of butter averaged 74.3 cents a pound in 1957, up to 2.2 cents from 1956. A half cent of the increase went to the farm value, but 1.7 cents were added to the farm-retail spread.

The farm-to-wholesale part of the total farm-to-retail price spread was reduced from 9.6 cents a pound in 1947 to 8.1 cents in 1957. This is quite a remarkable reflection of increased efficiency in a period when costs of labor, materials, and most other items have been on the rise. This did not, however, prevent an increase in the total marketing spread from 19.0 cents to 22.8 cents during this period, because the wholesale-retail portion increased by over a half (from 9.4 cents to 14.7 cents a pound).

In the marketing of butter from the creamery onward, there have been efforts to decrease the stages of handling. Direct movement from first receivers to city warehouses of chainstores, for example, has been on the increase. Cooperative marketing has expanded, as has also the trend toward greater advertising and use of brand names.

We are studying some of the practical problems with which firms engaged in the marketing of butter are faced, by following several shipments of butter from creameries in the specialized butter-producing sections of the Midwest.

Competitive conditions, with perhaps an assist from the Government purchase programs, tend to keep prices within a narrow range at the creamery and wholesale levels for butter of the same quality.

Prices paid farmers for butterfat in cream or milk of similar grade showed a greater variation, however. The price of butterfat in sweet cream or No. 1 milk varied from 65 to 70 cents a pound among the 10 plants surveyed. Also, as we move in the marketing process from the first-receiver-wholesaler toward the consumer, we find a greater tendency to variability. Some jobbers engaged primarily in meat and poultry operations handle butter at cost as an accommodation for their customers, although the more specialized distributors cannot afford to do so. Retailers sometimes handle butter as a loss leader. On the other hand, butter in specialty stores and certain advertised brands tend to command premium prices over other butter of the same grade.

Cheese. The retail price of processed American cheese was 57.6 cents a pound in 1957, up 0.4 cent a pound from 1956. For the past 4 years (1954-57), the combination of Government support programs and surpluses has tended to provide both a floor and a ceiling for wholesale prices of cheese at the support level. Average retail prices have varied only a half cent, from 57.1 cents to 57.6 cents a pound. Farm value of a pound of cheese has increased from 27.7

cents to 28.8 cents, while the marketing margin decreased slightly. Detailed studies being made in the Southeast and Midwest show some interesting variations in cheese processing and marketing margins. Midwest farmers received about 5 cents a pound more for cheese equivalent than did Southeast farmers. Processed cheese produced in the Midwest sold at generally higher prices in various sales outlets and in different types of packages. Midwest cheese retailed at prices ranging from 49 cents a pound in 2- and 5-pound loaves in supermarkets to 75 cents a pound, cut to order, in specialty food stores. Southeast cheese sold as natural cheese at prices ranging from 39 cents to 69 cents a pound.

Evaporated and concentrated milks.-The retail price of evaporated milk average 14.6 cents a can in 1957, compared with 14.0 cents a year earlier. A half cent of the increase went to marketing agencies, while 0.1 cent went to farmers. The farmer received 43 percent of the retail price in 1957.

Dairy scientists are making every effort to develop new products which will keep as well as evaporated milk and be as acceptable for beverage purposes as fresh fluid milk. Success would bring important changes in markets for dairy products. One of our most recent marketing research reports brings together the most up-to-date information on what those changes might be.

Indications are that milk, concentrated, processed, and distributed with the utmost efficiency, could be sold in many eastern and southeastern markets at margins from 5 to 8 cents per quart of whole milk equivalent below those for single quarts of fresh whole milk delivered to homes, or at about the same margins as those for fresh fluid milk sold in gallon jugs in stores. With farm prices for milk at the level of prices for Grade A milk in Wisconsin plus transportation costs of concentrated milk to the market, refrigerated or sterile concentrated milk and instant dry whole milk could be sold to consumers in many eastern and southeastern markets for about 16 cents per quart of milk equivalent. This compares with 23 to 30 cents per quart for the home-delivered price of a single quart of milk, and 21 cents or more per quart for milk sold in gallon jugs. The farmer could expect to get about half of the consumer's dollar spent for concentrated milks, as compared with 45 cents for the farmer from the consumer's dollar spent for fresh whole milk in 1957.

Ice cream. For ice cream, the farmer's share of the retail price amounted to 19 percent of the retail price in 1957, unchanged from 1956.

Average retail price for ice cream, for single-pint purchases in 20 large cities. increased one-half cent a pint, from 28.9 cents in 1956 to 29.4 cents in 1957. This was the highest price in 3 years and almost as high as the 29.6 cents in 1954. The farm-to-retail spread increased 0.4 cent a pint, since equivalent farm value increased only one-tenth of a cent-from 5.5 to 5.6 cents-between 1956 and 1957. Consumer choices among ice-cream products were broadened during the year by two developments. The wider availability of multiple grades of ice cream has spread to additional cities. Both premium and thrift ice creams have been introduced in additional major markets, to complement long-established standard grades. A second development, in line with the continuing trend in consumer food buying toward one-stop shopping, is the recent introduction at large supermarkets in some eastern cities of store brands of ice cream in premium as well as standard grades. The store brands are displayed at prices slightly below those of manufacturers' standard and premium brands carried in adjoining cabinets. Nonfat dry milk.-Widespread sale of nonfat dry milk in consumer packages is a comparatively recent development. In 1948, consumer package sales totaled 2.4 million pounds, less than 1 percent of total commercial sales. By 1956, consumer sales reached 154 million pounds-21 percent of total commercial sales of the product.

The growing importance of nonfat dry milk sold in consumer packages has led us to initiate a study of marketing margins for the product. Marketing practices. processing and distribution costs, and retail prices are being studied.

Through the Bureau of Labor Statistics, we are obtaining in 20 cities monthly retail prices of instant nonfat dry milk. For the 10-month period ended Novem ber 1957, the average farm value of the skim milk equivalent of 1 pound of nonfat dry milk was 8.6 cents. For the same period, the manufacturer's average selling price f. o. b. plant for spray process nonfat dry milk was 15.5 cents a pound: and the 20-city average retail price of instant nonfat dry milk in consumer packages was 46.1 cents a pound.

The price spread between farmer and consumer thus averaged 37.5 cents a pound. The return to farmers averaged 19 percent of the retail price; and the farm-to-retail spread was 81 percent.