Producer’s Share of Consumer Dollar Is Up

by Erica Rosa and James Robb, Livestock Marketing Information Center
The producer’s share of beef’s estimated retail value has been higher than a year ago for each month in 2003, with the exception of February. For January through August the producer’s share of beef’s estimated retail value averaged 47.9 percent, about 8 percent higher than the same time last year.
On a monthly basis, the producer share has fallen each month since January, with the exception of May and August, when the producer share posted an  increase. The producer share improved in May due to record high fed cattle prices and stronger wholesale (cutout) beef prices. Producers are capturing a greater percentage of the beef retail value this year compared to prior years.
The producer share represents the estimated percentage of value a producer receives (value of slaughter steer) from the estimated retail value of the meat and byproducts produced by a steer. The producer share has continued to decline during the past five years. This year, however, the producer share has been fairly stable, averaging in the upper 40 percent range because of tighter fed cattle supplies.
The producer’s share of beef’s retail value is expected to continue to be fairly steady throughout the remainder of 2003 given a moderate yearly decline in cattle supplies coupled with higher fed cattle prices during the fall of 2003.
The beef packer spread is calculated by using the USDA cutout value plus an estimated byproduct value. The beef packer spread does not include any manufacturing, distribution, nor labor costs that are incurred by the packer. The beef packer share is highly seasonal as these relationships vary significantly over time due to market conditions.
Packer Share
The estimated packer share of retail value has been unstable this year compared to prior years, ranging from a high of 13.4 percent in June to a low of 6.9 percent in February. For the first eight months of 2003, the packer’s share of the retail value averaged 9.6 percent, slightly below a year ago. Packer shares have been greater than last year during four of the first eight months this year. Typically, the packer share moderately declines in the third and fourth quarters. In July, the packer share was at 9.7 percent, but then jumped to 10.8 percent despite higher fed cattle prices. Given record breaking boxed prices, the packer margin may not narrow as much as would be expected in the third quarter.
Retailer Share
During the past 10 years, the retailer share has been steadily increasing regardless of monthly fluctuations.
On a monthly basis, the retailer’s share of beef’s retail value has modestly fluctuated this year reaching a low of 39.8 percent in May to a high of 44.9 percent in March.  For the first eight months of 2003, the retailer’s share averaged 42.4 percent, 7.5 percent below the respective period last year.  Since March, the retailer’s share has been below a year ago.