Agriculture's share of consumer spending on selected food products
For more than 40 years, the Thünen Institute has been monitoring how agricultural revenues develop in relation to consumer expenditure on selected food products. The time series show that the agricultural value chain has changed structurally over time. For the meat markets we additionally calculate the ratio between producer and consumer prices, i.e. the market margin.
By calculating the share of producer revenues in consumer expenditure, we examine the medium- and long-term market relationships between the different stages of the agricultural value chain. Specifically, we use the share of agricultural revenues in consumer expenditure to determine how high the value added contribution of key agricultural commodities is to the food products in the supermarket. Changes in the value added contributions reflect the changing economic significance of agriculture in the context of economic structural change. Reliable statements on short-term market and price relationships cannot be derived from the highly aggregated calculated shares.
For the calculations, we need comparable quantities on both sides of production and consumption. The starting point are the quantities of agricultural products produced in the respective year that are used as food. We value them at the producer level with the average revenues from the agricultural accounts. From the producer revenues we deduct the value of by-products that arise during processing. These are, for example, grain bran or animal skins. Taking into account exports as well as loss, utilisation and exploitation coefficients, we calculate from the production quantities the amount of domestically produced food that is available to consumers here. We value these quantities at the average prices paid by consumers, whereby consumption outside the home is not taken into account.
In addition, we calculate the market margin for beef and pork. It is calculated as the simple difference between the consumer price (5 cuts of fresh beef and 3 cuts of fresh pork) and the average producer price. We calculate this for the average of all trade classes (warm) from the data that must be reported regularly according to the Meat Act Implementing Regulation (Fleischgesetz-Durchführungsverordnung).
In general, the more processed food is and the more complex trade and logistics are along the value chain, the lower the producer share. In 2020, the share of producer revenues in consumer expenditure (rounded) was 4 percent for bread grain, 26 percent for potatoes and 28 percent for sugar beets. For meat, the producer share was 20 per cent, for milk 35 per cent and for eggs 41 per cent.
Until around the turn of the millennium, the producer share of consumer expenditure on food fell significantly in almost all the product groups studied (see top figure). There are two main reasons for this: Firstly, incomes have risen almost constantly in the corresponding decades. In the course of this, consumers placed more and more value on convenient shopping and the ability to prepare food quickly. As a result, the degree of processing, packaging and transport of food has continued to increase. Secondly, with technical progress and increasing farm sizes, the costs of agricultural production have often fallen more sharply than the costs of the other production stages during the period under observation. With the costs of their production, the price of agricultural commodities also falls under competitive conditions.
In view of possibly simultaneously falling production costs and rising sales volumes on the international market, the observation of falling producer shares does not allow any conclusions to be drawn about the development of the economic situation of farmers. Nor can the producer shares be used to make any statements about the price formation process itself or about the balance of power on the market. In order to answer such questions, further analyses are required. These include price transmission analyses, which statistically analyse the connection between short-term price fluctuations at the different stages of the value chain.
(Monthly values available on request)
Permanent task 1.2001 - 12.2025