FROM RANCH TO ROAST:
THE HOW AND WHY
OF BEEF MARGINS
The price of beef has become—and
is likely to remain—a much
discussed issue among farmers as
well as the general public.
Beef margins, or thefarm-to-retail
price spreads, are central to the ques
tion of beef pricesrHere’s how they
work; *
Between the live steer and the
retail meat counter, beef is moved
long distances, processed, and
packaged in a variety of retail cuts
and a range of package sizes that
consumers choose from at the super
market.
These marketing services entail
marketing costs—and that’s where
price spreads come in.
Trends in overall marketing costs
are depicted in price spreads
between the fed steer at the feedlot
and the supermarket meat counter,
USDA publishes price spreads for
beef, pork and other important farm
foods each month.
For beef, two gross margins are
calculated—farm-to-carcass, and
carcass-to-retail. Together, they add
up to the farm-to-retail margin.
The farm-to-carcass margin is the
difference between the farmer’s
return for the carcass beef portion of
his steer (referred to in USDA data
as the net farm value) and the
packer’s gross return for that
carcass. It excludes hides and other
byproduct items.
Likewise, the spread in value
between the packer’s price for the
carcass and final returns from con
sumer purchases is the carcass-to
retail margin.
Put together, they make up the
farm-to-retail margin: the beef value
sold by retailers less the net farm
value.
To make a ready comparison be
tween live weight and retail prices
per pound, the diagram here illus-
We Want To Thank All Our Customers For Making Our
WE STILL HAVE THE FOLLOWING
Farmall M
6-J.D. 4020
Case 1090
Oliver 1950 G.M.
J.D. 60
6-Oliver 1855
Oliver 1750
3-Allis Chalmers Dl7
3-J.D. 3010
Int. 544
2-J.D. 1020
J.D. 2020
WENGER'S FARM MACHINERY, INC
-————————————— .—■— ■
SOUTH RACE STREET,
MYERSTOWN, PENNSYLVANIA
April 2nd & 3rd Sale A Success
TRACTORS FOR SALE
A COMPLETE LINE OF PARTS AND SERVICE
Total farm value of a
1.000-pound steer—s3s3 40,
or 35 cents per pound average
Total value of 439 pounds
of retail cuts—s 493 45
or an average of
$1 12 per pound
trates the value per head during the
second quarter of 1972 for a 1,000-
pound Choice steer for the live
animal, the beef carcass, and the
corresponding retail cuts.
During second quarter 1972, the
farmer sold his 1,000-pound Choice
steer to a packer for an average of
$353.40, or about 35 cents per pound,
taking into account about $5.80 for
2- 4010
Oliver 1950 T
5-J.D. 2510
Ford 3000
J.D. 5020
3- 180
2- Dl9
Farmall Cub w-cult.
AA.F. 165
3- 930
J.D. 520
A.C. 170
FROM RANCH TO ROAST
Farm-to-table weight and
value changes for a
1 000-pound Choice steer.
2nd quarter, 1972
Total value ot 620-pound
carcass sold by packer—
s3s6 93 or 58 cents per pound
Carcass-io-retail
margin—s 136 52
transportation and marketing
charges.
Of this total, $80.74 was the farm
value of byproducts n ot sold as retail
cuts—hide, tongue, tripe, liver, etc.
To arrive at the farm value of the
beef portion of the steer, the byprod
uct value is subtracted from the live
weight selling price: $353.40 - $30.74
= $322.66.
Lloyd Wenger
Sales Manager
M.F. 50
Case 1170
Case 970
Case 770
M.F. 175
Ford 4000
Ford 5000
AA.F. 65
J.D. 1010
D.B. 1200
D.B. 990
2-Farmall 450
Plus lots More
value of
>und steer—s 322 66
\J^ y
'—s34 27
PHONE
717-866-2138
ister Farming, Saturday, April 7.1973
After removal of byproducts and
waste, the steer carcass weighs 620
pounds. At a carcass price of 58
cents per pound, the packer’s return
for the dressed carcass would be
$356.93. Thus, the tarm-to-carcass
margin was $34.27 ($356.93 less
$322.66).
The retailer trimmed the 620
pound carcass into 462 pounds ot
cuts, but because of a 5-percent
shrink, he sold only 439 pounds.
(Retail shrink includes losses in
value from spoilage and pilferage.)
The retail gross value for 439
pounds of meat —sold at an average
of $1.12 per pound—was $493.45.
The margin from carcass to retail
was $136.52.
Since 1967 the greatest increase
has been in the carcass-to-retail
margin. Into this goes the cost ot
breaking the carcass, transporting,
local delivery, and retail cutting and
packaging, as well as retail costs
The retailers’ share averages
about one-third less than the
carcass-to-retail margin.
The widening spread may be ex
plained in part bv factors that have
tended to push up costs along the
marketing chain- longer distance
shipments to consumer centers,
higher laboi costs, interest and over
head, for example
Rising incomes coupled with
mounting consumer demand have
also played a role in the overall meat
price rise.
Per capita consumption of heel
has more than doubled in the past 20
years—from 56 to 11.‘! pounds. While
the supply of beef has more than
kept pace—going from 8.8 million to
21.9 million pounds in the last two
decades—increases in population
are swallowing up production gains
as fast as they occur.
Even so, beef is not likely to
become a scarce commodity soon.
Predictions from USIJA’s Economic
Research Service are that cattlemen
will rise to the challenge of upping
beef output by a third by 1980.
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