President Carter may succeed in getting food processors and supermarkets to trim their prices in response to falling farm prices, but not necessarily because of his White House jawboning effort on Monday, according to food industry experts.
Analysts familiar with food price trends say the president called industry leaders in for a scolding just as supermarket prices were beginning to drop on their own, after recent drops in farm prices.
At the same time, economists say the food industry is overreacting when it tries to impugn the way the Agriculture Department figures the "spread" between farm and retail food prices -- the index Carter invoked the other day.
Joe Uhl, an agricultural economist at Purdue University, notes that the government and the industry have fought similar battles in the past, whenever supermarket prices have become a political issue.
Earl Butz, secretary of agriculture under presidents Nixon and Ford, routinely blamed "middlemen" for rising food prices in the early 1970s. And the industry contended in return that his department was using faulty figures.
The dispute is linked in part to what has been the basic pricing strategy of the food industry over the years -- to swallow some of the increase when farm prices rise and "make up for it" later when farm prices fall.
Supermarket chains generally try to hold the line when farm prices rise, to avoid losing customers as a result of abrupt increases in retail prices. The "spread" between farm and retail prices usually narrows.
But when farm prices dip again, the stores try to recoup their margins by delaying as long as possible in passing the declines on to consumers. So, the farm-retail "spread" widens again. In the long run, it's supposed to even out.
Inevitably, there also are lags between changes in farm prices and changes at the supermarket. Depending upon how much processing the food undergoes, it coult take three to six months to filter through.
The Carter administration says that in the most recent cycle, the system didn't function normally. Stores raised retail prices quickly when farm prices rose and have been slow in lowering them, the administration has charged.
But outside experts insist that, for all the flap here in Washington, they see nothing particularly different this time around: Farm prices began dropping three or four months ago, and supermarket prices are beginning to fall now. The last consumer price index showed grocery prices down 0.1 percent.
Experts also note that the industry has been beset by unusually sharp cost increases in recent months, including the Teamsters' contract in April, a rapid rise in energy prices, and added marketing and labor costs.
"It's not surprising to me that retailers have been hesitant to cut their prices in the face of such uncertainties," says Purdue's Prof. Uhl. He says some executives have been hesitant to reduce prices, fearing the onset of wage price controls. Carter has pledged repeatedly not to impose controls.
Donald Paarlberg, former chief Agriculture Department economist, agrees. "In the long run, grocery prices won't ease dramatically until the general inflation rate abates." Paarlberg says. "Industry profit margins aren't out of line."
At the same time, outside experts tend to discount the food industry's contention that the Agriculture Department is using flawed techniques for computing the farm-to-retail spread -- an argument that industry representatives made to Carter this week.
The industry says the government sampling doesn't take account of month-by-month changes in consumer buying patterns. If shoppers buy proportionally more hamburger it may cost more to provide it, but that doesn't show up in the figures.
But private analysts argue the computation doesn't really matter that much as long as it's consistent from month to month. They say USDA's indexes aren't perfect, but they do provide a valid comparison.
What ultimately may resolve the dispute is the examination by the Council on Wage and Price Stability of whether the big supermarket chains are complying with the wage-price guidelines -- a probe that is only beginning this week.
While the USDA figures are based on broad "aggregate" indexes, the wage-price guidelines involve a firm-by-firm analysis of each company's costs and gross margins, providing a detailed and far less suspect picture.
Anti-inflation officials say they've privately notified some 37 food processors and retailers that they may be violating the guidelines (the total may be trimmed back before final citations are issued).
The figures, which cover the six months since January, aren't as vulnerable to the farm-to-retail difficulties that have plagued the White House jawboning this week.
Meanwhile, supermarket prices appear to be turning down on schedule, with price-cutting having begun last week on meat and a variety of other items. President Carter may have acted just in time.