Normal
The price of an animal at the farm gate only makes up a small portion of the price you pay for the flesh presented in the plastic containers in the supermarket.So when the cattle price drops by say 30%, you shouldn't expect the price of the meat in the plastic trays to drop by exactly 30% too, because the price of all the other inputs probably stays the same or higher.For example, if you pay $5.00 for some meat at woolies, only maybe $1 of that is the actual cattle price, so a 30% drop in the cattle price would only lower the price by $0.30 (30% of that $1 piece of cattle), an it would only drop $0.30 if all the other costs stayed the same.The reason for this is that all the other costs that make up the $5 sale price stay they same.eg, the following costs would not go down with the cattle price Trucking cattle to slaughter house (wages, fuel, maintenance, insurance etc)slaughter house costs (wages, water, gas, electricity, equipment, property expenses, insurance)butchering and packaging (wages, refrigeration, packaging, equipment)Trucking to supermarket distribution centres (wages, fuel, maintenance, refrigeration, insurance)Trucking to stores (wages, fuel, maintenance, refrigeration, insurance)Supermarket costs (wages, lighting, refrigeration, rent, maintenance, wastage, transaction costs, insurance etc)plus many other costs I haven't namedSo all these other costs actually make up the bulk of the costs involved, its not just cost of the cattle at the farm gate, and inflation can be pushing up all these costs even if the raw material costs are declining.Its also the reason you don't see petrol drop 50% when the oil price drops 50%, because again the cost of crude oil is only part of that total supply chain cost.
The price of an animal at the farm gate only makes up a small portion of the price you pay for the flesh presented in the plastic containers in the supermarket.
So when the cattle price drops by say 30%, you shouldn't expect the price of the meat in the plastic trays to drop by exactly 30% too, because the price of all the other inputs probably stays the same or higher.
For example, if you pay $5.00 for some meat at woolies, only maybe $1 of that is the actual cattle price, so a 30% drop in the cattle price would only lower the price by $0.30 (30% of that $1 piece of cattle), an it would only drop $0.30 if all the other costs stayed the same.
The reason for this is that all the other costs that make up the $5 sale price stay they same.
eg, the following costs would not go down with the cattle price
So all these other costs actually make up the bulk of the costs involved, its not just cost of the cattle at the farm gate, and inflation can be pushing up all these costs even if the raw material costs are declining.
Its also the reason you don't see petrol drop 50% when the oil price drops 50%, because again the cost of crude oil is only part of that total supply chain cost.
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