Here’s the time series on beef farm-to-wholesale spread, in 1982-84$.
Figure 1: Real retail price per pound (black line), wholesale-retail spread (tan bars), rest (blue bars), all in 1982-84$. Deflated using core CPI. Source: USDA, and author’s calculations.
The right side part of the spread obviously looks bigger, but it’s kinda hard to “eyeball” it in terms of the percentage change of the spread. That’s not a complaint, and I know there’s only so many hours in the day to compile these things, it’s just an observation that the year-to year percentage change stated in numbers in a table type format (even from just 2010) would be interesting.
After Menzie’s hard work, Some jerk always has to “complain”, aye?? Just a passing thought really.
I played around with some of the other excel file. Not to criticize the USDA ERS team as they have some great economists but interpreting this data is not easy. So what Dr. Chinn provided was really informative and well formatted. The know nothing critics should do something positive for a change – assuming they know how.
Interesting data. I take spreads represent gross margins. Yea one would expect retail gross margins to be modest. The gross margins of the processors are more significant. Now I get those try to excuse these gross margins will talk about operating expenses and the normal cost of capital in a competitive market. Operating expenses however are quite modest and the normal cost of capital is around 8%. Once again does the detail accounting, the actual return to tangible assets is about five times that. So yea – anyone who does the hard work in an intelligent way would see a lot of profits from market power.
But of course the spokesperson for this sector – Bruce Hall – cannot do any of the actual analysis as he is still trying to find the apple treats near what they call the Campus on Cupertino, CA (home of Apple Inc.). I used to run in Cupertino and I never say those alleged apple trees!
As it happens, I know a little about this. There are only four certified large-scale meat packers in the U.S., so somewhat of a regional monopoly. Even Walmart (where I work) is not on the winning side of that balance of power, despite being the largest grocer in the U.S. It manifests itself in several ways, not just price. OTOH, you have to think about the “other side” of the meat packer, namely, the rancher. They are under pressure to meet 16-month lead times (growing a cow) so the meat packer can, in turn, meet the forecasted demand. If they fall short, they don’t get paid more per cow, it’s just a loss. The meat packers are regional monopsonies from the point of view of the ranchers, and consequently, the ranchers make very, very little money while bearing a lot of risk.
A middleman who adds value and faces limited competition is in an excellent position, marketwise.
So competition would help the rancher as well as the consumer. Someone should tell them this. Tim Walz – you’re the man.
“There are only four certified large-scale meat packers in the U.S”
what is the reason for this? expertise, cost, regulations? why such limited competition?
The Trump Administration had a joke for an FTC so anti-competitive mergers were allowed. Biden has changed that but it takes time.
BTW – could you please tell Bruce Hall that Apple Inc. makes things like computers and not fruit. I’ve grown tired to reminding this utter moron of the obvious but he keeps posting the same old stupidity.
You never actually stated why you think that a 26% net margin is more “social justice” than a 0% net margin.
https://www.macrotrends.net/stocks/charts/AAPL/apple/net-profit-margin#google_vignette
https://www.macrotrends.net/stocks/charts/TSN/tyson-foods/net-profit-margin
Oh, I get it… you’re vegan.
But if you insist on ROA
https://www.macrotrends.net/stocks/charts/AAPL/apple/roa
https://www.macrotrends.net/stocks/charts/TSN/tyson-foods/roa
Same song, second verse
A little louder, a little worse.
I’m anxiously awaiting the response you’ll type on your iPad. I’m sure that it will be something about Trump, poor people, and White Nationalists, but totally ignore the data. C’mon, man, who is really doing the “price” gouging? The 26%-er or the 0%-er?
No you do not get. The Campus of Apple is in Cupertino California and they do not make fruit. They design smart phones and make computers. How many times are you going to tell us that a fruit producer makes these kind of returns. They don’t.
Look Bruce – even a retarded monkey would not keep making comments like this. But you do. Yea – Bruce Hall is the dumbest troll ever.
pgl, you are dumber than a rock to think that anyone would confuse Apple with a fruit grower. The question remains: how is Tyson gouging if Apple isn’t?
Justify that net margin and ROA if it isn’t “gouging” in the “Kamalaian” way of thinking.
BTW utter moron. But the DOJ has started an anti-trust suit against Apple. The computer company – not your mythical apple producer.
Maybe the DOJ should sue the culprit who fed you bleach and rotted out that excuse of a brain on your shoulders.
The DOJ may or may not have a case. If you look at market share, a monopoly is a hard sell.
https://www.statista.com/statistics/271496/global-market-share-held-by-smartphone-vendors-since-4th-quarter-2009/
But if the argument is that other manufacturers and vendors have a harder time accessing Apple’s proprietary system, then the DOJ would have to demonstrate significant harm for a company with only 15-20% of the smartphone market. That would be like GM suing Ford because Ford limits access to its vehicles operating systems. Or some brake manufacturer who wasn’t chosen as a Ford OEM supplier.
But hey, you should read what Snopes has to say about your bleach meme. Your comments are just getting more and more desperate.
Still with the hit-and-run argumentation?
So, the textbook tells us that, in a competitive market, risk-adjusted returns should be roughly equal. When they aren’t, either the market isn’t competitive, or there is some other sort of market failure. Inefficient allocation of capital. Productivity lower than it would be in a competitive market. Less to go around.
I shouldn’t have to explain this to you, seein’ as how you pretend to know stuff about economics. This is all quite fundamental. You don’t know this, you don’t know anything.
I just went back to the 10-K filings for Tyson Foods since we know Bruce Hall is too stupid to do the real work. When Brucie keeps claiming Tyson Foods has a zero percent operating margin he is lying through his retarded rear end.
A little accounting Brucie does not get. Operating profits are defined as gross profits minus operating expenses. I went through the 3 years before the pandemic to address John Cochrane’s lazy bloviating but let me report. Gross profits were 12.57% of sales while operating expenses were 5.3% of sales. So the operating margin = 7.27% of sales.
For the last 3 years, gross profits were 10.33% of sales and operating expenses = 4.33% of sales so the operating margin = 6% of sales. Far higher than zero and relative to assets an extremely return to capital.
Yea Brucie pulls out a source that he does not understand and finds a quarter or two where his source claimed operating profits were temporarily negative. But in all these quarters, gross profits exceeded operating expenses. Even though I told this moron that his source was deducting a one-time expense called goodwill impairment, he persists with a claim that is completely false. Is he lying or just the dumbest retarded troll ever?
Bruce-ie, are you a septuagenarian now?? The only reason I ask is your comments are getting markedly dumber by the day and I’m trying to find a reason for the deterioration.
Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
https://fred.stlouisfed.org/series/CPIAUCSL
To express these figures in inflation adjusted term index today = 100, multiply all figures by 3.13534. So yea – a lot of the high cost of beef is due to high margins for the oligopolistic beef processing sector.
Looks like since 2000, wholesale beef prices have risen faster than overall inflation. Between 2015 and 2020 the wholesale/retail spread widened while wholesale prices fell. During the Covid (and drought and wildfire) era, wholesale prices have risen again. During the Covid-era period of high infllation, the wholesale/retail spread was wider than at any other time since 2000.
None of this is, in itself, evidence of monopolistic practices, though if there is increasing industry concentration among producers and wholesalers, faster-than-inflation price increases are suggestive.
The extreme widening in the spread during the early Covid era is suggestive of pricing power at a different point in the supply chain.
Let’s not forget that a great deal of western water is diverted to alfalfa grown in arid parts of California to feed cattle, and that cattle are a major driver of climate change.
Beef. It’s the other greenhouse gas.
Let’s not forget that a great deal of western water is diverted to alfalfa grown in arid parts of California to feed cattle
BIG issue in California. Don’t believe me? Watch the movie China Town.
I know I’m on a tirade with respect to stupid press reports but I just read some reporter talking about this food issue talking to the CEO of Target. Target is a retail store that sells all sorts of things. Its own 10K notes 80% of their sales are due to products other than food and beverages. So WTF does Target have to do with the price of beef? Nothing.
Now this self serving CEO says they make about a penny on the dollar. Really? Their own 10K filings put their gross margins near 25%. OK their operating expenses are 20% of sales. That makes their operating profits around 5 cents on the dollar.
Now I ask you – did this CEO just lie to this reporter or is he lying to his shareholders?
By the way, the paper to which pgl linked, “Concentration and Consolidation in the U.S. Food Supply Chain”, was written in 2017, so missed most of the widening in wholesale/retail spreads. Even so, it managed to predict that widening. The paper also helps to explain the rise in beef prices relative to overall inflation since 2000.
So had Trump hired actual economists as opposed to the clown show lead by Kudlow the Klown he could have done something about this. Be he didn’t.
Mr. McBride going on a hiatus. Kind of a bummer with all this talk about Harris’s housing policy plan. I bet whatever Mr. McBride would have to say about it would be interesting.
https://calculatedrisk.substack.com/p/calculated-risk-on-vacation-until
I’m gonna guess the Bill the Diver is slipping on some fins and a mask. He’s earned it.
he used to hike the sierra as well. its a good life…
Maybe he’s worried about wild fires. This has been a rough season.
Last year we had to cancel trip to Yosemite due to fire. Never made it back to the area this year during hiking season. Bummer. But did see some redwoods in the spring near the coast. Beautiful.
Off topic, but still relevant to this site:
Garry Kasparov, one of the best chess players of all time and a russian dissident who stood up to Putin: “The Ukrainian flag raised in Sevastopol is the only way to knock the imperial nonsense out of the minds of russians.”
the maga crowd seems to really embrace the idea of family values
https://newrepublic.com/post/185178/maga-meltdown-tim-walz-gus-walz-dnc
hey rick striker, why do you continue to embrace a maga leader convicted of felonies, fraud, sexual assault, insurrection? why do your family values not embrace a son who simply shows love and respect to his father? why would you call a child who loves his father weird? rick stryker, exactly how despicable of a human being must trump and maga become before you decide maybe I am on the wrong side of history here? the smarter republicans are defecting from trump by the boatload now, embarrassed by the idea of supporting a cult. but not rick striker. he is gonna double down on the most morally corrupt individual to ever sit at the White House. how is that djt stock investment working for you now? cause it is gonna continue to crater over the next few months.
trump and the maga crowd continue to talk about a civil war. just a reminder, those confederates of the insurrection did not fare so well in the end…
Filial love in the MAGA/Republican world arises from money and assets bequeathed in a last will. The idea of genuine love for a father who spends time with them is obviously repugnant to the MAGAs.
“Donald Trump ally and MyPillow CEO Mike Lindell got into (and badly lost) an argument with 12-year-old content creator Knowa De Brasco.”
I saw the video. Lindell tried to bully the kid but Knowa held his own and made Lindell look stupid. Oh wait – Lindell is stupid.
Republicans Better Get on the Ball
They haven’t made the case against Harris. The clock is ticking.
https://www.wsj.com/opinion/republicans-better-get-on-the-ball-thomas-sowell-2024-election-kamala-harris-91883df6?mod=hp_opin_pos_5#cxrecs_s
Thomas Sowell is such a joke. Maybe this incompetent economist does not realize that the right wing tried to make their case but they failed as they know even less economics than Thomas Sowell.
They are desperately trying to make sure that Tim Walz is not being recognized for what he is – a real manly man. I get why Tim scare them (and why he was chosen). If their narratives, that you cannot be a liberal democrat and a real manly man crumbles, then their grip on rural white male voters could dissolve. It is fun to observe, because Tim IS the real deal and their couch hugging little VP boy is not (neither is Orange Jesus). But you are right that the more news cycles they spend on Tim, the less they have to attack current democratic narratives about Harris. However, I am sure they already have produced at least half a dozen AI doctored videos “showing” Harris drowning a baby in a bathtub (or something) – ready to be released 10 days before the election.
I got past the WSJ pay wall and read what Sowell wrote:
‘But do 330 million Americans deserve to see their lives ruined by another four years of the Democrats’ economic disasters and unchecked violence by both domestic and imported criminals? Does America deserve more tragic military fiascoes like that in Afghanistan? Or like allowing a spy balloon from China to photograph our military installations from coast to coast, before finally being shot down, after it was too late? And these are the people who are telling Israel how to fight a war.’
Sowell pretends to be an economist but he never defined WTF he meant by “economic disasters”, He only babbled about foreign policy where he has no competency either. Imported criminals? Can you be more racist?
Look I get it – the WSJ editorial page is a right wing rag. But this was low even for them.
Sowell is apparently even too dumb to compare basic crime statistics between WH administrations over the last 12+ years. Also does Sowell think the Afghanistan blunder was as bad as what “W” Bush did in Iraq?? What does he call the economic situation “W” left President Obama, and what trump left President Biden?? “Economic triumph”?? Sowell was writing garbage editorials for Forbes way back in the late ’80s. Sowell was working at Forbes around the same time as known racist Peter Brimelow was working at Forbes.
https://www.washingtonpost.com/politics/trump-adviser-larry-kudlow-hosted-publisher-of-white-nationalists-at-his-home/2018/08/21/f418a76c-a55e-11e8-8fac-12e98c13528d_story.html
It’s unknown if when Thomas Sowell passed Brimelow in the halls of Forbes offices if he said “Yes Massa”.
My father was born in 1927. He told me in the 1930s rural people would use ripped out pages from slightly old Sears Roebuck catalogues for toilet paper. So, Sowell’s editorials do have one potential useful application.
Kudlow told The Washington Post he did not know about Peter Brimelow’s racist beliefs when he had him over to his house on Monday for his birthday party. “If I had known this, we would never have invited him,” Kudlow told the publication. “I’m disappointed and saddened to hear about it.” Brimelow is the founder of VDARE.com, which the Southern Poverty Law Center describes as a website that “publishes works by white supremacists, anti-Semites, and others on the radical right.”
Larry is such a liar. Everyone knew about Brimelow and VDARE.
Trump lies so much it is not possible to keep up. But Kevin Drum is trying:
America is not in decline. Not even close.
https://jabberwocking.com/america-is-not-in-decline-not-even-close/
As Kamala Harris prepares to debate this serial liar – she should take note.
https://www.bing.com/images/search?view=detailV2&ccid=rhqYZyiY&id=08059CFC3728960BCCB8CCB61D0CCB25AB95789C&thid=OIP.rhqYZyiY1pQ8ow0N12I3GgHaEs&mediaurl=https%3a%2f%2fimages.idgesg.net%2fimages%2farticle%2f2018%2f09%2fiphone-ranges-100772893-large.jpg&cdnurl=https%3a%2f%2fth.bing.com%2fth%2fid%2fR.ae1a98672898d6943ca30d0dd762371a%3frik%3dnHiVqyXLDB22zA%26pid%3dImgRaw%26r%3d0&exph=760&expw=1200&q=iphone+pricing+chart&simid=608017290922894153&FORM=IRPRST&ck=16C87D2D3AE172D5559DE0F3D2F02FF2&selectedIndex=0&itb=0&idpp=overlayview&ajaxhist=0&ajaxserp=0
Posting the fact that some iPhones are priced at $1200 even though Apple pays Foxconn only $300. Now you may be wondering why anyone would mention this here since we are talking about beef prices.
Well the USDA ERS should be telling us what constitutes the price of an apple but for some reason it does not show us this data. And our resident “expert” Bruce Hall keeps telling us iPhones are an overpriced form of fruit. Yes – Bruce Hall is THAT STUPID!