Philippe BOYER, septembre 2011 The French Observatory on formation of Food Products’ Prices and Margins Objectives, methods, first results Eurostat 7 octobre.

Philippe BOYER, septembre 2011Philippe BOYER, septembre 2011

The French Observatory on formation of Food The French Observatory on formation of Food Products’ Prices and MarginsProducts’ Prices and Margins

Objectives, methods, first resultsObjectives, methods, first results

Eurostat7 octobre 2011

• 2

Outline of presentation

Context of setup for the Observatory

Methods

Objectives

First results : Bovine meat

Pork meat (fresh meat and ham) : extracts

Dairy products : cf. presentation 20 october 2011

Poultry (extracts)

Fruits and vegs (extracts)

• 3

Context : recent prices volatility, prices disconnection

● From 2007 : « volatility » of agr. prices ; 1st, increase in consumer prices during, divergent evolution in 2009, new increase in 2010

New debates about prices transmision in the food chains

Food products prices indexes at agricultural level, industry level and consumption level

base 100 in 2005

90

95

100

105

110

115

120

125

130

135

2005

_01

2006

_01

2007

_01

2008

_01

2009

_01

2010

_01

2011

_01

Consumer prices Agricultural prices Food industry prices

Source : INSEE, traitements FranceAgriMer

• 4

Objectives : transparency, dialogue, references

« Transparency » : the « good functioning » of free market economy presupposes a « good information » of all stakeholders

« Dialogue » : to improve interprofessional dialogue, based on objectives and shared datas.

« References » : to contribute to produce reliable economic information for chain stakeholders, consumers and policy makers.

Law on modernization of agriculture and fisheries (july 2010) : «… to inform chain stakeholders, consumers and policy makers about prices and margins formation during commercial transactions in the food chains, … »

• 5

Organization

Steering comitee studies orientation and validation

Chairman : Philippe CHALMIN, Professor, Economics University of Paris-Dauphine ;

-30 members, representatives of various agrifood chain stakeholders, organizations and unions (agriculture, industry, wholesale and retail trade), public administrations, economic research, public statistic services, consumers ;

-Product-specific working groups involving farmers, processors, wholesalers, retailers and consumers

Works realization

FranceAgriMer, (public agency in charge of implementing agrifood sector policies)-Public statistic services (National Institute of Statistics and Economic Studies, INSEE) ;-Agricultural professional institutes.

• 6

Method / principle : retail prices analytic decomposition

RETAIL PRICE

VAT

RETAIL GROSS MARGIN

2° INDUSTRY GROSS MARGIN

1st INDUSTRY GROSS MARGIN

AGR. RAW MATERIAL

VALUE

Net result at retail level

Net result in industry

Net resullt in industry

Production costs at retail

level

Coûts de production hors achat produit

Industry production costs

Net result at agri. level

Agriculture production

costs

Industry production costs

• 7

Method / concepts : « gross margin » = part of added value

1a

1b

2a

3a

4

57

1a : sales of processed product « a »

1b : other sales of products

2a : purchase of « a » product

3a : gross margin on « a » product

4 other intermediate goods

5 added value

6 other costs

7 net result

6

From GM to AV From AV to net result

• 8

Methods / concepts : values in agricultural product unit (ex : from carcass to meat)

1 unit of final product at retail level…

1 / (1 – rD ) unit of product at industry level…

Physical losses (yelds, …) at industry level : (1 – rT )

1 / (1 – rD ) (1 – rT ) unit of product at agriculture level…

Agricultural price

=

+

+

Physical losses (yelds, …) at retail level :

(1 – rD )

Value at industry level =

Industry price ( 1 – rD )

Value at agriculture level = Agriculture production price

Value at retail level =

Retail price ( 1 – rD ) ( 1 – rT)

Industry gross margin per agri. product unit =

Industry price . (1 – rT ) - agricultural price

Retail gross margin per agri. product unit =

Retail price . (1 – rD ) . (1 – rT ) – industry price . (1 – rT )

Retail value, in agricultural product unit

• 9

Methods / concepts : analysis in terms of agri product unit : cow carcass

Carcass entry slaughtering reconstituted carcass at retail level

• 10

Methods / concepts : values in retail product unit (ex.: from piece of meat to raw material)

1 unit of produit final product at retail level…

1 / (1 – rD ) unit of product at industry level…

Physical losses (yelds) at industry level : (1 – rT )

1 / (1 – rD ) (1 – rT ) unit of product at agriculture level…

Cost of agri. raw material per unit at retail level =

Agri. price / (1 – rD ) (1 – rT )

Gross margin at industry level per par unit at retail level = industry price / (1 – rD ) - agri. price / (1 – rD ) (1 – rT )

Gross margin at retail level per unit at retail level = Retail price - industry price / (1 – rD )

Retail price

=

+

+

Physical losses (yelds) at retail level :

(1 – rD )

Value at industry level =

Indus. price / ( 1 – rD )

Value at agri. level =

Indus. price / ( 1 – rD ) ( 1 – rT)

Value at retail level = Retail price

• 11

Loin value in the carcass Loinchop

Secteur industriel

Secteur distribution

chop

Methods / concepts : analysis in terms of final product unit : piece of pork meat (loin)

• 12

Methode / concepts : cost in raw material for dairy industry

Industry gross margin on consumer product (CP) = CP receipt – CP raw materiel cost

= CP receipt – ( total milk buying cost – net receipt on industrial products IP )

= CP receipt – [total milk buying cost – (receipt PI – processing costs PI ] )

Receipt

CPNet receipt

IP

Gross marginCP

Processing costs PI

Receipt

IP

Total milk buying cost CP raw

materiel cost

• 13

Methods / sources : retail price decomposition

RETAIL PRICES

VAT

RETAIL GROSSMARGIN

INDUSTRY GROSS MARGIN

AGRI RAW MATERIAL

VALUE

Net result

Net result

Net result

Production costs in retai tradel sector

Coûts de production hors achat produit

Production costs in industry

Net result

Production costs in

agriculture

Production costs in industry

●●FADNFADN

●●Farms Farms networknetworkof professionalof professionalinstitutesinstitutes

●Industry sector statistical accounts

●Distribution sector statistical accounts (supermarkets)

●Ad hoc surveysof rays accounts

●Consummers or distribution panels

●Prices statement in shops

●Quotations of agri prices

●Quotations of industrial prices,

● ad hoc surveys of industrial prices

Technical data : yeld, losse ratio…

Technical data : yeld, losse ratio…

• 14

Methods / sources / retail prices : consummers’ panel vs statement in shops

Retail price of pork chop in hyper & super markets

4,00

4,50

5,00

5,50

6,00

6,50

7,00

7,50

8,00

20

03-0

1

20

03-0

6

20

03-1

1

20

04-0

3

20

04-0

8

20

04-1

3

20

05-0

5

20

05-1

0

20

06-0

2

20

06-0

7

20

06-1

2

20

07-0

4

20

07-0

9

20

08-0

1

20

08-0

6

20

08-1

1

20

09-0

3

Year, 4 weeks

€ / kg

Consummers’panel Mobile mean Statement in shops rays

Sources : FranceAgriMer, KantarWorldpanel

• 15

Results / product folow up at present

Bovine meat : medium cow carcass reconstituted at retail level (fresh pieces and frozen minced steak)

Pork fresh meat : loin products : chop, fillet and roast

Pork delicatessen : ham

Dairy : 4 consumer products: semi-skimmed h-milk, butter, yogourt, emmental

Fruits and vegs (fresh) : apricot, strawberry, apple, peach, cherry, banana… ; carrot, cauliflower, concomber, lettuce, tomato…

Poultry : chiken (whole and cuts ; standard and label), turkey (whole and cuts)

• 16

Results / observation system

Monthly follow-up of prices at various levels od the food chain

Monthly calculation of gross margins at various levels

Annual or quaterly follow-up of production costs :

Costs in specialized industry sector,

Analytic costs in supermarket rays,

Production costs in agriculture, or operating expenses in specialized farms

Website and annual report for Parliament

• 17

Results / cow meat : prices and gross margins par kg carcass

Source : FranceAgriMer, KantarWorlpanel, OFPM

Prices and gross margins per kg of medium cow carcass reconstituted at retail level

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5ja

nv-9

8

janv

-99

janv

-00

janv

-01

janv

-02

janv

-03

janv

-04

janv

-05

janv

-06

janv

-07

janv

-08

janv

-09

janv

-10

janv

-11

€ / kg carcass

Aggregated industry-retail gross margin Carcass price entry slaughtering

Retail price of reconstituted carcass Industry gross margin 2nd processing stage.

Industry gross margin 3rd processing stage. Distribution (supermarkets) gross margin

• 18

Results / cow meat : retail price decomposition


Components of value of kg carcass, medium cow

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0ju

il-10

août

-10

sept

-10

oct-

10

nov-

10

déc-

10

janv

-11

févr

-11

mar

s-11

€ / kg carcass

Distribution gross margin

3rd processing industry gross margin

2nd processing industry gross margin

Carcass value entry slaughtering

• 19

Results / bovine meat : Costs in specialized industry sector

Evolution and components of industry gross margin per kg of carcass eq. processed

Sample of slaughtering-cutting specialized firms in beef sector, FranceAgriMer

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1_98

1_99

1_00

1_01

1_02

1_03

1_04

1_05

1_06

1_07

1_08

quarter_year

Net income (before corporate tax)

Taxes on products and others

Depreciation an interest

Labour costs

External costs (energy, etc.)

Source : FranceAgriMer

• 20

Results / Distribution costs

Under development, survey in distribution firms : direct costs in the rays, general costs coverage by ray.

Difficullty : scope of survey (head office, buying group, shops), industrial operations in back-store (meats), various kinds of analytic accounting …

Now, only available information : Statistical sector accounts

Hyper & supermarkets sectorCosts structure in 2007

78%

8%

8%

4%

Net income beforecorp.tax

Goods for sale

Intermediate goods

Labour costs

Depreciation, financialcosts, others

Source : Insee

• 21

Results / bovine meat : agricultural production costs

Receipts and costs for 100 kg of livestock (bull-calf) in 2009, 2 systems

45 35

3029

3435

89 €73 €

20 €

22 €

25

20

46

43

219 203

78 €

66 €

106 €

83 €

0

50

100

150

200

250

300

350

400

Receipts Costs Receipts Costs

Suckling-fattening farms

« Limousin »

Suckling-fattening farms

« Charolais » > 1,4 cattle unit / ha

€ / 100 kg live

Direct subsidies

Livestock receipt

Labour (familial labour value evaluation)

Farm land and capital rents

General costs

Buildings and installations

Farm implements

Breeding costs (vet, etc.)

Crops costs

Animal feed, included cereals (market price evaluation)

• 22

Results / pork meat (loin) : gross margins


Gross margins on pork loin products (roast, chop) at different stages

0,00

0,250,50

0,75

1,00

1,251,50

1,75

2,00

2,252,50

2,75

3,003,25

3,50

3,75

4,004,25

4,50

jan

v-0

0

juil-

00

jan

v-0

1

juil-

01

jan

v-0

2

juil-

02

jan

v-0

3

juil-

03

jan

v-0

4

juil-

04

jan

v-0

5

juil-

05

jan

v-0

6

juil-

06

jan

v-0

7

juil-

07

jan

v-0

8

juil-

08

jan

v-0

9

juil-

09

jan

v-1

0

juil-

10

€ / kg loin final product

GM retail : roast (super-hyper market) Mobile mean 12 monthsGM retail : chop (super-hyper market) Mobile mean 12 monthsGM slaughtering-cutting industry, chop Mobile mean 12 monthsGM slaughtering-cutting industry, roast Mobile mean 12 months

• 23

Results / viande porcine (longe) : pork chop retail price components


Pork chop retail price components

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

7,0

7,5

8,0

jan

v-0

0

juil-

00

jan

v-0

1

juil-

01

jan

v-0

2

juil-

02

jan

v-0

3

juil-

03

jan

v-0

4

juil-

04

jan

v-0

5

juil-

05

jan

v-0

6

juil-

06

jan

v-0

7

juil-

07

jan

v-0

8

juil-

08

jan

v-0

9

juil-

09

jan

v-1

0

juil-

10

€ / kg final product

Loin value in carcass GM slaughtering-cutting industry GM retail (including 3rd cutting) VAT

• 24

Results / ham : gross margins


Goss margins on ham at different stages

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

jan

v-0

0

juil-

00

jan

v-0

1

juil-

01

jan

v-0

2

juil-

02

jan

v-0

3

juil-

03

jan

v-0

4

juil-

04

jan

v-0

5

juil-

05

jan

v-0

6

juil-

06

jan

v-0

7

juil-

07

jan

v-0

8

juil-

08

jan

v-0

9

juil-

09

jan

v-1

0

juil-

10


GM slaughtering-cutting industry GM ham industry GM retail (super-hyper market)

Mobile mean Mobile mean Mobile mean

• 25

Results /ham : retail price components


Ham retail price components

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

11,0

12,0

13,0

jan

v-0

0

juil-

00

jan

v-0

1

juil-

01

jan

v-0

2

juil-

02

jan

v-0

3

juil-

03

jan

v-0

4

juil-

04

jan

v-0

5

juil-

05

jan

v-0

6

juil-

06

jan

v-0

7

juil-

07

jan

v-0

8

juil-

08

jan

v-0

9

juil-

09

jan

v-1

0

juil-

10

jan

v-1

1


Ham value in carcass GM slaughtering-cutting GM Ham industry VAT

• 26

Results /poultry : value entry slaughtering and retail price : turkey filet


Value live exit farm turkey and retail price of filet

0,80

0,85

0,90

0,95

1,00

1,05

1,10

1,15

1,20

janv

-03

mai

-03

sept

-

janv

-04

mai

-04

sept

-

janv

-05

mai

-05

sept

-

janv

-06

mai

-06

sept

-

janv

-07

mai

-07

sept

-

janv

-08

mai

-08

sept

-

janv

-09

mai

-09

sept

-

janv

-10

mai

-10

sept

-

janv

-11

€ / kg HT

6,50

6,757,00

7,25

7,507,75

8,00

8,258,50

8,75

9,009,25

9,50€ / kg HT

Value entry slaughtering (live animal) Retail price of filet (super-hyper market, VAT non included)

NB : at the moment, industry prices non avaiable

• 27

Results /poultry : Aggregated gross margin indicator for turkey filet


Aggregated gross margin indicator for turkey filet

6,00

6,25

6,50

6,75

7,00

7,25

7,50

7,75

8,00

8,25

8,50

janv

-03

juil-

03

janv

-04

juil-

04

janv

-05

juil-

05

janv

-06

juil-

06

janv

-07

juil-

07

janv

-08

juil-

08

janv

-09

juil-

09

janv

-10

juil-

10

janv

-11

€ / kg

Retail price (VAT n-incl) – Value entry slaughtering

• 28

Results /Dairy products

See next presentation, Bruxelles 20 october 2011

• 29

Results / Fruits and vegs : prices

ROUND TOMATO – Shipping and retail prices

0,0

1,0

2,0

3,0

4,0

00_1

0

00_3

8

01_3

0

02_2

2

03_1

4

03_4

2

04_3

4

05_2

6

06_1

8

07_1

0

07_3

8

08_3

0

09_2

2

10_1

4

10_4

2

year_# week

€ / kgShipping Retail in super-hyper mkt, VAT n-incl

• 30

Results / Fruits and vegs : prices : retail gross margin trend

Retail and shipping prices linear relation for round tomato

(2000-2010)

PD = 1,05 PE + 0,86

R = 0,88

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

0,00 0,25 0,50 0,75 1,00 1,25 1,50 1,75 2,00 2,25 2,50 2,75

PE

PD

• 31

2012 program

Costs in super-hypermarkets rays analysis : survey under development

Datas improvement : - industry prices in poultry sector, - more realistic model for pork chain (retail-ready cuts processed by industry),- distributors brands vs national brands in dairy products, - agriculture production costs (FADN, econometric model)

New products and food chains : - fisheries (fresh fish, cuts, smoked salmon, sardine or tuna preserve…), - wine (without geographic indication)

Thank you for your attention

[email protected]

Philippe BOYER, septembre 2011 The French Observatory on formation of Food Products’ Prices and Margins Objectives, methods, first results Eurostat 7 octobre.

Documents

retail level net result

result slide

industry net resullt

industry gross margin

agricultural level

prices transmision

prices disconnection

consumers product