Exploring Cost Breakdowns — Are Markets Really that Volatile?

Spend Matters welcomes a guest post from Nick Peksa of Mintec Ltd.

Welcome back! I thought I will provide you with a short follow-up article this week to the cost breakdown of chicken, which I wrote about last week.

As we live in volatile times, it is worth understanding a little bit more about the historical price of certain commodities. My question to you, then, is what has happened to the price of meat over the last 750 years? This needs to have a European leaning as there really was not a lot going on in the US in the dark ages.

Back in 1261, the prime industries were weapon manufacture and farming and American Football was not about. However, things like dog fighting were commonplace (things have not changed much -- referring to a certain QB!). We still eat similar diets and there was a marketplace for meat and livestock.

The cost of meat
Back in 1261, the price for an ox would be 10s. and 3d ($0.80). For a sheep you would pay a lot less, at only 1s. and 3d ($0.08). How can this possibly be similar to today times? Well, you have to look at the economical and agricultural problems of the time.

Like us, the old Britons had problems. We have BSE and they had murrain, which went hand in hand with Black Death. When murrain was prevalent there was a noticable increase in the price of oxen. In 1361, you would be paying a massive 17s. and 5d (over $1) for an ox. In closer analysis of our data, we can see annual fluctuations due to bad seasons and other causes, but all in all this give us an excellent idea of the gradual rise in the value of livestock as measured in monetary terms.

By the 1700's you would pay 170s. for an ox (over $10). To get an idea of the increase in value from 1400-1900 we are talking an increase by a factor of 20. Today we would be looking at around GBP £800 per head of cattle (around $1300).

The really interesting thing is exploring the purchasing power of the pound between the years of 1256 and 2009. You'd find that £1 from 1256 is now worth £753.00 using the retail price index, and considering market fluctuations and the fact that cattle across the ages have been smaller and of poorer quality than those of today, the price has not changed! A cow now is worth the same in real terms as a cow 750 years ago.

So my hand tip is that if your supplier says to you: "I'm afraid the price of beef is up, as the markets have moved up." Say to him, "No I will not take a price increase as the price of beef has remained constant for the last 750 years."

NB: If I used an average earnings index for £1 in 1256, this would now worth just over £11,600, but this ruins a perfectly good story, until you read this article.

If you really desperately to have access to a 750 year price series for the beef or mutton markets, we can help you. We have the information available, but not processed -- and in reality probably it will remain like that.

-- Nick Peksa, Mintec Ltd.

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