APPENDIX V WHITE BREAD: COST COMPONENTS BY FUNCTION, FARM-WHOLESALE, 1972 [J. C. Eiland, CED, September 25, 1973] Estimated cost components for each function performed in production and marketing bread are based on several underlying premises, which are stated for documentation and understanding of these data. ERS computed estimates for relevant prices and price spreads are used to determine the magnitude of total marketing costs and as a guide for developing cost component figures for each function. This carries the implicit assumption that these price spreads present a good U.S. average and they cover all costs including a positive profit. Prices and price spreads for 1972 were computed and rounded to the nearest tenth cent. Consequently, total costs (spreads for certain functions) are shown rounded to the nearest tenth of a cent, when in reality spreads may not work out that neatly. If unrounded price and price spread data had been readily available, some accuracy of significance at four decimal places may have been added to cost component estimates. Price spreads developed from concurrent price data (differences between prices at two stages in the marketing process for an instant in time) include no storage spread or cost. Rather the cost of storage is included in prices. This is true for farm prices as well as primary market prices or at the processor's door. Mill-door price of wheat in January minus farm price of wheat in January equals price spread, and since incurred storage costs presumably are reflected in each price, storage in farm price subtracted from storage in mill-door price leaves no storage in the price spread or marketing margin. Hence, in the concept embraced by concurrent price spreads there is no cost of storage provided for in the price spread. Costs of storage could be developed but they would not be deductible from price spreads-but from prices. If we developed storage costs, to the extent the farmer stored or held in public storage the raw farm products before he sold them, these storage costs would be deducted from his price received for them. Likewise, to the extent entrepreneurs in the marketing channels held title to the products in storage, storage costs would be deductible from prices received for them. In other words, some costs of storage may be borne by farmers (outside the marketing process as defined by our marketing price spreads framework) and some storage costs may be borne by market entrepreneurs (inside the marketing process after the raw products are sold by the farmer). WHITE PAN BREAD: ESTIMATED FARM VALUE OF WHEAT, TRANSPORTATION ON WHEAT AND FLOUR, MARKETING SPREADS AND COST COMPONENTS BY MARKETING FUNCTION PER 1 POUND LOAF, UNITED STATES, 1972 .0085 None 2065 .2150 None None .0009 None .0991 .1000 None None .0054 None .0600 .0654 None None (9) 0156 None .7599 .7755 None None 0029 0024 None .0165 .0218 1 Shown to begin the 1st step in building the retail price. Based on wheat prices received by farmers 2 This averaged 31.8 cents per bushel of wheat (87 percent to flour) based on the 0.4 cent price 3 Spread between f.o.b. mill sales value of flour (0.6329 lb) used per 1 pound loaf of bread and the 4 The price of flour received by the mille deducted from the cost of flour to the baker represents transportation between the 2 points. Flor is sold basis delivery point from which millers deduct transportation charges in deriving the f.c.b. mill price as reported to us in the survey mentioned in footnote 3. Flour is sold by mills to bakers and shipped directly with no storage involved. Brokerage 5 Spread between the estimated price received by bakers for bread delivered to store shelf and the 6 Cost components added for each stage to retailer's shelf (not to include his price spread) to 10 Transportation charges between points of marketing and or processing. Not included in any price spread as measured by ERS estimates. 398 Some blanks exist in cost component estimates because of lack of necessary available information. Sometimes this is because that cost component may not be applicable, sometimes it may be zero but applicable, and sometimes it may be a positive figure. Since we do not have the necessary information to judge which case is the situation, we have chosen to say in the footnotes that information is "not available," in which event the component would include this item as well as those items covered in the description. The table does not cover all costs by functions for a loaf of bread marketed in retail food stores. The marketing spreads (costs) on nonflour ingredients incurred prior to receipt by the baker are not developed. For bread this includes the farm ingredients lard, shortening, sugar, and nonfat dry milk and such nonfarm items as salt, calcium propionate, yeast, yeast food, malt extract, etc. The cost of these ingredients in the form received by the baker is carried in other costs under baker-wholesaler costs of processing as footnoted. The farm value of these items amounted to 1.0 cent for a 1-pound loaf of bread in 1972. The cost to the baker of all nonflour ingredients was 2.2 cents, of which the farm-produced items cost the baker about 1.7 cents per loaf. The handling, processing, transportation and merchandising between the farmer and the baker's door amounted to about 0.7 cent (1.7 cent minus 1.0 cent) per loaf of bread on these four nonflour farm produced ingredients. |