and spreads, especially the retail spread, trends are 

 often obscured. In most cases data covering only five 

 or six seasons do not provide a reliable basis for deter- 

 mining trends. However, marketing margins for most 

 commodities increased during the period 1956-1962. 

 Price advances were also common but not to the extent 

 of margin increases. Of specific commodities, potato 

 margins were among the most definite and consistent 

 as to trend. The retail spread as a percentage of the 

 retail price for all varieties in nearly all markets trended 

 upward. The general pattern was not without excep- 

 tions, however. For example, the retail margin for 

 California celery sold in Chicago decreased from 52 

 percent of the retail price in 1957 to 43 percent in 1962. 



Vary By Commodity 



Marketing margins often vary widely among com- 

 modities. Their highly individualistic behavior is illus- 

 trated in Table 2 which contains spreads as a percentage 

 of the retail price for eight commodities sold in New 

 York City from 1957 to 1962. Some of their differ- 

 ences, as in transportation, are explained by relative 

 weights and shipping distances. Others are related to 

 the amount of labor and other costs involved in grading 

 and packing operations. Some of the biggest differ- 

 ences, and also the most difficult to explain are in 

 retail spreads. The reasons are at least partly related 

 to pricing methods used in large, multi-unit firms. These 

 firms operate in an imperfectly competitive market 

 situation that permits leeway to individual firms in 

 setting their prices and margins. Under such conditions 

 prices and margins are a function of firm policy. 



Table 2.— Marketing spreads as a percentage of the retail price for 

 selected commodities sold in New York City, 1957-1962 



Year 



Carrots 



Celery, 

 pascal 



Lettuce 

 Iceburg 



Onions, 



dry 

 yellow 



Potatoes, 



round 



white, 



old 



Potatoes, 



western 



Long 



White 



Potatoes, 

 western 

 Russet 



Sweet- 

 potatoes 









Percent of Retail Price 



Retail spread 









1957.. 



. 27 



45 



— 



— 



— 



41 



— 



. — 



1958.. 



. 40 



44 



12 



42 



38 



40 



45 



32 



1959.. 



. 33 



45 



16 



40 



59 



40 



49 



33 



I960.. 



. 37 



46 



16 



59 



48 



44 



43 



47 



1961.. 



. 37 



41 



17 



63 



56 



51 



44 



45 



1962.. 



. 37 



45 



23 



51 



62 



47 



52 



39 







Shipping point to retailer spread 







1957.. 



. 26 



26 



— 



— 



— 



39 



— 



— 



1958.. 



. 20 



27 



46 



15 



14 



36 



25 



13 



1959.. 



. 25 



29 



46 



8 



14 



26 



27 



12 



I960.. 



. 25 



29 



42 



9 



12 



27 



23 



10 



1961.. 



. 21 



31 



49 



7 



13 



32 



23 



10 



1962.. 



. 23 



24 



41 



5 



14 



31 



27 



7 









Grower-packer spread 









1957.. 



. 47 



29 



— 



— 



— 



20 



— 



— 



1958.. 



..40 



29 



42 



43 



48 



24 



30 



55 



1959.. 



. 42 



26 



38 



52 



27 



34 



24 



55 



I960.. 



.. 38 



25 



42 



32 



40 



29 



34 



43 



1961.. 



.. 42 



28 



34 



30 



31 



17 



33 



45 



1962.. 



.. 40 



31 



36 



44 



24 



22 



21 



54 



















-k- 



The rationale underlying these policies varies widely. 

 In multi-product firms such as retail food stores, pricing 

 and margins policy is but a part of their competitive 

 strategy. This strategy is generally developed in an 

 over-all, firm-wide framework and then projected 

 downward through the organization. The objectives 

 are finally transmitted to the commodity level where 

 pricing takes place. However, objectives that were 

 rational and reasonable from an over-all view may 

 appear to be neither from the standpoint of a single 

 commodity. Firm strategy developed thus within a 

 product-mix context and employing nonprice as well 

 as price competition may result in prices and margins 

 that cannot be logically explained on a commodity 

 basis. It should be noted also that variations in the 

 retail margin expressed as a percentage may be the 

 result of a stable absolute margin and a widely varying 

 retail price. 



Retail Margin Large 



The retail spread receives considerable attention 

 because of its relatively large size and its variability. 

 The average of retail spreads for fruits and vegetables 

 included in the report is nearly 40 percent of their 

 retail prices. Of the 18 commodities, dry onions had 

 the largest retail spread during the period 1957-1962, 

 about 52 percent. The retail margin for potatoes was 

 also high — nearly 46 percent — but there was consider- 

 able variation both among varieties and markets. The 

 high margins for onions and potatoes may be at least 

 partly explained by their inelastic demand and low per 

 unit price compared with most other commodities. 



Retail spreads for lettuce and corn were at the other 

 extreme. The retail spread for lettuce averaged about 

 20 percent of the retail price in six markets over five 

 seasons. In some markets, seasonal averages were as 

 low as 1 2 percent and monthly spreads below five per- 

 cent were not uncommon. The retail spreads for corn 

 were also relatively low during most seasons. In 

 Minneapolis the range was from eight to 24 percent of 

 the retail price and in Seattle and Washington, D. C. 

 somewhat higher. 



The Development of Research 



Historically, interest in the distribution of the retail 

 value of farm products and requests for research in 

 this area tended to wax and wane with decreases and 

 increases in the level of prices. One of the pioneer 

 studies resulted from the sharp drop of farm prices in 

 1920-21. The 67th Congress created the Joint Com- 

 mission of Agricultural Inquiry and required it to 

 investigate and report on the agricultural crisis and 

 related problems. Part IV of the Commission's report, 

 which dealt with marketing and distribution, showed 

 the proportion of the consumers' dollar taken by each 

 distributor, manufacturer, or producer for more than 

 200 commodities in the period 1913-1921. The decline 

 in farm prices that occurred during the 1930's again 

 stimulated research on farm-retail spreads. One of the 



