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

2. 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. 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_012008_012009_012010_01 2011_01 Consumer pricesAgricultural pricesFood industry prices Source : INSEE, traitements FranceAgriMer

4. 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. 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. 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. 7 Method / concepts : « gross margin » = part of added value 1a 1b 2a 3a 4 5 7 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 AVFrom AV to net result

8. 8 Methods / concepts : values in agricultural product unit (ex : from carcass to meat) 1 unit of final product at retail level… 1 / (1 – r D ) unit of product at industry level… Physical losses (yelds, …) at industry level : (1 – r T ) 1 / (1 – r D ) (1 – r T ) unit of product at agriculture level… Agricultural price = + + Physical losses (yelds, …) at retail level : (1 – r D ) Value at industry level = Industry price ( 1 – r D ) Value at agriculture level = Agriculture production price Value at retail level = Retail price ( 1 – r D ) ( 1 – r T ) Industry gross margin per agri. product unit = Industry price. (1 – r T ) - agricultural price Retail gross margin per agri. product unit = Retail price. (1 – r D ). (1 – r T ) – industry price. (1 – r T ) Retail value, in agricultural product unit

9. 9 Methods / concepts : analysis in terms of agri product unit : cow carcass Carcass entry slaughtering  reconstituted carcass at retail level

10. 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 – r D ) unit of product at industry level… Physical losses (yelds) at industry level : (1 – r T ) 1 / (1 – r D ) (1 – r T ) unit of product at agriculture level… Cost of agri. raw material per unit at retail level = Agri. price / (1 – r D ) (1 – r T ) Gross margin at industry level per par unit at retail level = industry price / (1 – r D ) - agri. price / (1 – r D ) (1 – r T ) Gross margin at retail level per unit at retail level = Retail price - industry price / (1 – r D ) Retail price = + + Physical losses (yelds) at retail level : (1 – r D ) Value at industry level = Indus. price / ( 1 – r D ) Value at agri. level = Indus. price / ( 1 – r D ) ( 1 – r T ) Value at retail level = Retail price

11. 11 Loin value in the carcass Loin chop Secteur industriel Secteur distribution chop Methods / concepts : analysis in terms of final product unit : piece of pork meat (loin)

12. 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 CP Net receipt IP Gross margin CP Processing costs PI Receipt IP Total milk buying cost CP raw materiel cost

13. 13 Methods / sources : retail price decomposition RETAIL PRICES VAT RETAIL GROSS MARGIN INDUSTRY GROSS MARGIN AGRI RAW MATERIAL VALUE 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 ●FADN ●Farms network of professional institutes ●Industry sector statistical accounts ●Distribution sector statistical accounts (supermarkets) ●Ad hoc surveys of 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…

14. 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 2003-012003-062003-112004-032004-082004-13 2005-052005-102006-022006-072006-122007-042007-092008-01 2008-062008-11 2009-03 Year, 4 weeks €/kg Consummers’panelMobile meanStatement in shops rays Sources : FranceAgriMer, KantarWorldpanel

15. 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. 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. 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 6,5 janv-98 janv-99janv-00janv-01janv-02janv-03janv-04janv-05janv-06janv-07janv-08janv-09 janv-10janv-11 € / kg carcass Aggregated industry-retail gross marginCarcass price entry slaughtering Retail price of reconstituted carcassIndustry gross margin 2nd processing stage. Industry gross margin 3rd processing stage.Distribution (supermarkets) gross margin

18. 18 Results / cow meat : retail price decomposition Source : FranceAgriMer, KantarWorlpanel, OFPM Components of value of kg carcass, medium cow 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 juil-10 août-10sept-10 oct-10 nov-10déc-10 janv-11 févr-11 mars-11 € / kg carcass Distribution gross margin 3rd processing industry gross margin 2nd processing industry gross margin Carcass value entry slaughtering

19. 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_981_991_001_011_021_031_041_051_061_071_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. 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  Source : Insee

21. 21 Results / bovine meat : agricultural production costs Receipts and costs for 100 kg of livestock (bull-calf) in 2009, 2 systems 45 35 30 29 34 35 89 € 73 € 20 € 22 € 25 20 46 43 219 203 78 € 66 € 106 € 83 € 0 50 100 150 200 250 300 350 400 ReceiptsCostsReceiptsCosts 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. 22 Results / pork meat (loin) : gross margins Source : FranceAgriMer, KantarWorlpanel, OFPM Gross margins on pork loin products (roast, chop) at different stages 0,00 0,25 0,50 0,75 1,00 1,25 1,50 1,75 2,00 2,25 2,50 2,75 3,00 3,25 3,50 3,75 4,00 4,25 4,50 janv-00 juil-00 janv-01 juil-01 janv-02 juil-02 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 € / kg loin final product GM retail : roast (super-hyper market)Mobile mean 12 months GM retail : chop (super-hyper market)Mobile mean 12 months GM slaughtering-cutting industry, chopMobile mean 12 months GM slaughtering-cutting industry, roastMobile mean 12 months

23. 23 Results / viande porcine (longe) : pork chop retail price components Source : FranceAgriMer, KantarWorlpanel, OFPM 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 janv-00 juil-00 janv-01 juil-01 janv-02 juil-02 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 € / kg final product Loin value in carcassGM slaughtering-cutting industryGM retail (including 3rd cutting)VAT

24. 24 Results / ham : gross margins Source : FranceAgriMer, KantarWorlpanel, OFPM 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 janv-00 juil-00 janv-01 juil-01 janv-02 juil-02 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 € / kg final product GM slaughtering-cutting industryGM ham industryGM retail (super-hyper market) Mobile mean

25. 25 Results /ham : retail price components Source : FranceAgriMer, KantarWorlpanel, OFPM 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 janv-00 juil-00 janv-01 juil-01 janv-02 juil-02 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 final product Ham value in carcassGM slaughtering-cuttingGM Ham industryVAT

26. 26 Results /poultry : value entry slaughtering and retail price : turkey filet Source : FranceAgriMer, KantarWorlpanel, OFPM 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 6,75 7,00 7,25 7,50 7,75 8,00 8,25 8,50 8,75 9,00 9,25 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. 27 Results /poultry : Aggregated gross margin indicator for turkey filet Source : FranceAgriMer, KantarWorlpanel, OFPM 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. 28 Results /Dairy products See next presentation, Bruxelles 20 october 2011

29. 29 Results / Fruits and vegs : prices ROUND TOMATO – Shipping and retail prices 0,0 1,0 2,0 3,0 4,0 00_1000_3801_3002_2203_1403_4204_3405_2606_1807_1007_3808_3009_2210_1410_42 year_# week € / kg ShippingRetail in super-hyper mkt, VAT n-incl

30. 30 Results / Fruits and vegs : prices : retail gross margin trend Retail and shipping prices linear relation for round tomato (2000-2010) P D = 1,05 P E + 0,86 R = 0,88 0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 0,000,250,500,751,001,251,501,75 2,002,252,502,75 P E P D

31. 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)

32. Thank you for your attention philippe.boyer@franceagrimer.fr