ally without exhibiting any discernible trend. Better 

 harvesting years command lower ex-vessel prices. 

 Price margins for most fish products were rela- 

 tively large at the ex-vessel level because of high 

 wage costs. Over two-fifths of gross earnings were 

 spent on labor and about one-fifth on capital ex- 

 penses. 



Processor's Margin and Markup 



Price margins at the processor's level for most fish 

 products were as large as those at the ex-vessel level 

 because processing is rather labor intensive. 

 Processor's prices after adjustment to constant dol- 

 lar value increased slightly for most of finfish pro- 

 ducts during the last two decades and for shellfish 

 during the last decade. Exceptions to this observa- 

 tion were canned tuna, fresh flounder fillets, and 

 frozen ocean perch fillets. 



The decline of processor's prices usually followed 

 the drop of ex-vessel prices. If the ex-vessel price of 

 one product dropped more than the processor's 

 price, the processor's margin increased despite the 

 fact that the price he asked declined. To compare the 

 margins at different levels of one product and those 

 among different products over a period of time it is 

 more convenient and better understood to express 

 the differences in relative instead of absolute values. 

 When the processor's margin is divided by the 

 processor's price, the result is the value of markup 

 interpreted as the gross earning in percent of the 

 processor's sales, or simply the gross earning rate. 

 During 1969-71. gross earning rates at the 

 processor's level were highest for ocean perch fillets 

 (47.9%) among groundfish products, highest for 

 fresh king salmon steaks (37.2%) among dressed 

 and steak forms of fish products, and higher for 

 canned pink salmon (54.2%) than canned tuna 

 (Tables 4 and 5). For all packaged seafood process- 

 ing, the gross earning rate was 52.7% according to 

 the Census of Manufactures. (See Appendix Tables 

 19 and 20.) 



Over the past 20 yr. gross earning rates for fresh 

 flounder fillets, fresh cod fillets, halibut steaks, and 

 fresh blue crab meat increased slightly at the 

 processor's level, while fresh haddock fillets and 

 canned tuna declined as frozen ocean perch fillets, 

 raw peeled shrimp, and canned pink salmon re- 

 mained almost unchanged. 



The processor's markup, as will be seen later, is in 

 most cases higher than the wholesale level. About 55 

 to 60% of the processor's margin is composed of 

 labor and material costs which increased faster than 



Table 4. — Annual average markups (gross earning rates) 



of finfish by product group at three functional levels. 



1969-71. 



' Canned salmon price series was dropped by Bureau of Labor 

 Statistics in 1966. 



- Used 1965 figure to compare with canned salmon in the same 

 period. 



Note: According to the Burometer of small business of 1963, 

 published in 1964 by the American Accounting Association, 

 markup at any level can be calculated in two ways: One is the 

 quotient of the margin (or the difference between the sales value 

 and cost of sales) divided by cost of sales; the other is the quotient 

 of the margin divided by the value of sales. Either method is 

 correct depending on the purpose it serves. The second method is 

 used here because the result so obtained is equivalent to the gross 

 profit rates that will be applied in the report from time to time. 



the overhead costs (Fig. 14). In addition, the amount 

 spent for food product advertising increased even 

 faster than wage costs. These expenses are incurred 

 by the processor when the products bear the 

 manufacturer's name. Processor's margin may go 

 down from the present level in the event that there 

 will be advancement in production efficiency due to 

 modernization of technology, growth in plant size to 

 reduce unit cost, and/or utilization of byproducts. 



Wholesale Margin ancd Markup 



In most instances, retail prices are subject to les- 

 ser fluctuation than are ex-vessel prices. Since retail 



11 



