Distribution Costs Account for Half of Consumer Prices

Distribution costs account for 55.9 percent of consumer prices, divided into direct cost including delivery, packaging and commission (17.2 percent); non-operating costs such as office rents (18.2 percent); and profit (20.5 percent).

By distribution phase, shipment accounts for 15.5 percent of distribution costs, wholesale fees 11.4 percent and retail charges 29 percent.

By food category, the share of distribution cost in product price is 55.3 percent for rice, beans and potatoes; 70 percent for cabbage and radish; 39.7 percent for vegetables considered as fruits; 61.6 percent in vegetables used for seasoning; 53.3 percent in fruit; 57.7 percent in flowers; and 40.7 percent in meat products such as beef and pork.

By food, the share of distribution costs in consumer prices is more than 60 percent for green onions (81.5 percent); carrots (75.1 percent); potato sold in spring (72.2 percent); cabbage sold in fall (70 percent); and lettuce (68.5 percent). Other agricultural products whose distribution cost accounts for more than half of their consumer prices include roses (58.5 percent); peaches (57.4 percent); oranges (56.3 percent); unripe red peppers (54.2 percent); and pears (50 percent).

On the other hand, the distribution cost was relatively low for currant tomatoes (37.6 percent); beef (37.4 percent); eggs (34.9 percent); and rice (21.2 percent).

The average share of distribution cost in consumer prices was 56.5 percent for agro-livestock products sold through wholesale markets. The share decreased to 45 percent when they were directly sold to large distributors.

Farming households earn 20 percent more and consumers can buy agro-livestock products 7.7 percent cheaper when products are directly traded instead of being sold and bought via wholesale markets and retailers.

According to a report by the U.S. Agriculture Department last year, distribution cost take up a bigger share in consumer prices in the United States. For example, distribution costs took up 86.8 percent of the prices of potatoes; 70.6 percent of those for apples; 78.7 percent for pears; 52.9 percent for beef; and 70.5 percent for pork.

The 2006 data collected by Japan’s Ministry of Agriculture, Forestry and Fisheries shows distribution costs accounted for 68.1 percent of consumer prices for cabbage; 50 percent for cucumbers; 58.2 percent for onions; and 60.3 percent for apples.

tesomiom@donga.com