Meat Price Spreads Are Not Proof of Price Gouging

Abstract

The relationship between farm, wholesale, and retail prices for meats is often controversial. Data from USDA's Economic Research Service (ERS) show that retail beef and pork prices react faster to cost increases than to cost decreases. Wholesale and farm pork and beef prices also adjust more quickly upward than downward. In addition, wholesale-to-retail price spreads have grown faster than inflation over the past 20 years. These facts have convinced some people that retailers or packers have, and use, market power to the disadvantage of consumers and producers. Increases in the price spread, for example, often lead to accusations by producer and consumer groups of price gouging and to Congressional calls for investigation of the meat industry. The long-term trend, however, shows farm-to-wholesale price spreads increasing less than inflation. And, more labor-intensive services offered by retailers account for some of the widening in wholesale-to-retail meat price spreads.