.»-1._, _ ~ ~ Seasonal Price Change aqd é v‘ ' El Qllommerclal Storage Costs ~0f Rice if” QeMua/zy I 95 7 TEXAS AGRICULTURAL EXPERIMENT STATION R. D. LEWIS. DIRECTOR, COLLEGE STATION, TExAs SUMMARY This study was made to determine whether the seasonal behavior of them market price for‘. rice provides farmers a profit from storing rice in commercial elevators and selling it later rathe r than at harvest. ' ' When the farmer's only alternative is to sell rice on the market. either at harvest or later he can profit from storage if the later price is sufficiently above the price at harvest to more --" cover the cost of storing and handling until the sale is made. However, the farmer still woul need to know when to sell to gain the greatest returns. - The farmer with rice harvested in August could have profited from storing instead of sellin at the harvest market price in 8 years had he sold his rice the following December or Ianuary and 7 years had he sold the following February during the l0 seasons 1945-46 through 1954-5 l Even though partial losses would have occurred in 3 of the 10 years, his average armual --1 would have been greater from February than from December and Ianuary sales. Based on ti‘ 10-year average farm price of rice and 1955 average storage costs, the net gain from 2,000 barre‘ of rice stored in August and sold in December, Ianuary and February over the 10-year peri‘ averaged $1,024, $930 and $1,076 annually. respectively. Peak harvest in Texas normally occurs in September and the market price normally is 10w“ that month than in August. Thus, the farmer stands to make more from storing rice harvested 5 . September than in August. In 9 of the 10 years studied, the seasonal increase in market pri from September was sufficient to cover the cost of storage and return a profit to the who sold his rice in December, Ianuary or February. Average annual profits from rice harvest A and stored in September, and sold in December, Ianuary and February, were more than twi as large as average annual profits from rice harvested and stored in August and sold in peak-price months during the 10-year period. Annual returns averaged $2,250, $2,170 and $2.3 for December, Ianuary and February sales of September rice, respectively, on 2,000 barrels. Under the government loan and price-support program in existence in recent years, y‘ rice farmer has had additional alternatives to those of selling at the market price. 1f the effecti CCC loan price (the support price less deductions for storage charges) is less than the mar a price at harvest, the ‘analyses given on the profit gained from storing rice still would be applicabli However, the support program still would benefit the farmer who puts his rice in storage und the CCC loan agreement in that: (1) he could recoup some of the losses should the subsequw» seasonal price of rice move below the effective support level, instead of up as is its normal patte and (2) he could obtain money for his rice at harvest to care for any pressing debts or finan A needs he might have. 2 Should the effective support price be above the harvest market price, the farmer still rety the right to redeem his rice from storage and sell it on the market if the seasonal market p ' moves above the effective loan rate. l A t ACKNOWLEDGMENT '5 This study was made under the Texas Agricultural Experiment Station's State Contribu?’ Project to the Southern Regional Cooperative Grain Marketing Project No. SM-11, “Marketing --~ Utilization of Grain in the South." ‘ " ‘ Seasonal Price Change and Commercial Storage Costs 0i Rice ‘Clarence A. Moore and Howard S. Whitney * HIS STUDY WAS MADE t0 determine, over a period 0f years, whether it would be better t0 sell ‘ e when harvested 0r t0 store 1t for sale later. The farmer who sells rice at harvest avoids rther expense in its handling. Should he choose 1 to sell at harvest he must pay storage and ndling costs until the rice issold. Unless the sonal price increase amounts to more than the " st of holding the rice, it does not pay the rmer to store. ' l, Investigations were made of (1) the seasonal ovement of the farm price for rice, (2) the st to farmers of holding rice in commercial rage, (3) the relationship between the ‘seasonal ovement of price and the cost of commercial rage, and (4) other conditions bearing on hether to sell rice at harvest or to store for le later. EASONAL MOVEMENT OF RICE PRICES The seasonal movement of prices paid Texas ice farmers for the seasons 1945-46 through 54-55 was analyzed. Price and production con- ls during World War II rendered the seasonal rice changes of that“ period valueless for the * rposes of this study. Pre-World War II price ovements were likely affected by such conditions a to make them incomparable with the price anges of recent times. The immediate past pears a more reliable indicator of what may be vpected in the immediate future. v Harvest of rice in the Gulf Coast area of exas usually begins in August with peak harvest- g in September or early October. In this study, e marketing season is taken as beginning in ugust, when the new crop generally first appears 11 the market. Reference to a particular season cans from August of one year through July of * e next year. ‘ ice Movement The solid heavy line in Figure 1 shows the verage mid-month Texas farm price for rice rom 1945-46 through 1954-55. The 10-year verage September farm price was $7.52 per . rrel (162 pounds), the lowest monthly average. his reflects the lteavy supply harvested and arketed in that month. Price generally streng- ens in October and the following months until bout mid-winter. The highest 10-year average Assistant professors, Department of Agricultural Eco- omics and Sociology, Texas Agricultural Experiment 1 tation. monthly price received by farmers for their rice was $9.19 per barrel in February‘. The average February price was $1.67 greater per barrel than the average September price during the 10-year period. Price of rice generally weakens in the spring and summer. This analysis suggests that the farmer who stores rice commercially should sell normally from storage sometime during the winter if seasonal price movements continue in the future as they have in the recent past. There was some difference in the seasonal be- havior of prices in the late Forties (1945-46 though 1949-50) in contrast with that in the early Fifties (1950-51 through 1954-55) as shown by the light, broken lines which depict the 5-year periods in Figure 1. Even though the 10-year average price is probably the most useful for predicting seasonal price change over the next few years, it is well to consider the seasonal price behavior of the two 5-year periods, and the conditions which likely account for this difference. Average monthly prices in the late Forties tended to weaken in the winter, after a peak price in December, but strengthened in the sum- mer following the spring decline. Prices in the early Fifties, however, continued to increase u_n- til February and showed a consistent decline through the summer. This difference reflects CONTENTS Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . 2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3 Seasonal Movement of Rice Prices . . . . . . . 3 Price Movement . . . . . . . . . . . . . . . . . . . . . . 3 Price Margins . . . . . . . . . . . . . . . . . . . . . . . . 5 Deviations from Average Prices . . . . . . . . 5 Cost of Storage and Handling . . . . . . . . . . . 6 Charging Practices . . . . . . . . . . . . . . . . . . . 6 Costs for Bulk Storage . . . . . . . . . . . . . . , 6 Costs for Sack Storage . . . . . . . . . . . . . . . . 8 Profits from Storage . . . . . . . . . . . . . , . . . . . . 8 Returns on 2,000 Barrels ot Rice . . . . . . . . 9 Interest on Rice Held in Storage . . . . . . . . 9 Other Considerations . . . . . . . . . . . . . . . . . . . l0 Price Supports . . . . . . . . . . . . . . . . . . . . . . . . 11 Farmers’ Need for Ready Cash . . . . . . . .11 Proportion Sold and Stored at Harvest. . 11 9.50 /-Q/”‘//'___ 9.00 fig o w? a O | j _ c mi as E @;8_0O ~ The ten-year period: Average of monthly Ev \ prices, lyus-uovthrough 19511-55. , The late forties: Average of monthly prices, l9h5-L5 through l9b9-SO. 7.50 _ The early fifties: Average of monthly prlces, 1950-51 through 1955-55. 7.00 l 1 | | l l l l 1 | Aug. Sept. Oct. Nov, Dec. Figure 1. Seasonal price behavior oi rice. Texas, 1945-55. Prices used in this bulletin are the mid-month Tex' prices as reported by the Crop Reporting Service, U. S. Department of Agriculture. 1 different forces affecting the seasonal prices in the two periods. There is reason to suspect that the early Fifties will more nearly be consistent, and the Forties inconsistent, with conditions like- ly to prevail in the next few years. Inadequate storage facilities available to farm- ers, and a strong demand measured against supply probably accounted for the December peak rather than a February peak in the late Forties. Rice mills likely bid strong for a good portion of their needs during and shortly following the harvest season. As storage facilities expanded, and as the supply of rice increased in the Fifties, there was less need for rice mills to follow this procedure. Strengthening of prices in late spring and early summer in the Forties reflected a different demand-supply situation than that of the Fifties. Stocks of rice on hand near the end of the market- ing season—pri0r to the new crop harvest—were relatively low in the Forties. Average stocks on hand at the time the new crop harvest began was almost three times greater in the Fifties than in the Forties. Although exports were greater in the Fifties than in the Forties, increased pro- duction more than offset increased exports. Pro- 4 Feb . Mar. Apr. May June J duction minus exports was over a third l in the early Fifties than in the late Forties. In view of the relatively small carryove-i rice from one season to the next in the late F0, buyers no doubt tended to “bid up” the pri late spring and early summer as stocks 0* become short. With increasing productio" large carryovers of rice from one season next in the Fifties, there has been no nec for buyers paying more in the summer to 3T the amounts they need. Ample stocks 0f..ri, hand could be obtained at lower prices. farmers have been in a weaker barg; position when selling their rice just prior new crop harvest in recent years than i'* Forties. - The 5-year period of the Forties was c‘, terized by a relatively favorable demand t0 s‘ situation, and relatively low stocks available 1 end of the market season. The 5-year peri the Fifties was characterized by relatively supplies as measured against demand, and p_ ful stocks on hand at the end of the mar season. Since it is likely the large suppli rice will continue to exist in the next few . BLE 1. SEASONAL CHANGE IN RICE PRICE FROM AUGUST AND SEPTEMBER BY PERIODS, 1945-46 THROUGH 1954-55 V Difference . between September and later prices Difference between August and later prices onth First Second m First Second m_ em, 5-year 5-year ‘Year 5-year 5-year Y. a period‘ period‘ periods period‘ period‘ period _ _ - - — — Dollars — —-. — — — — pt. —— 77 — .44 — .60 ct. —.13 .86 .37 .64 1.30 .97 » ov. .64 .89 .77 1.41 133 1.37 c. .93 1.09 1.01 _ 1.70 1.53 1.61 n. .68 1.31 1.00 1.45 1.75 1.60 'b. .77 1.38 1.07 1.54 1.82 1.67 arch .52 1.35 .93 1.29 1 79 1.57 pril .39 1.25 .82 1.16 1.69 1.46 ay .46 1.21 .84 1.23 1.65 1.48 - e .55 .67 .61 1.32 1.11 1.25 ~ y .76 .28 .52 1.53 .72 1.16 ug, 1.18 .12 .66 later Forties: 1945-46 season through the 1949-50 season. arly Fifties: 1950-51 season through the 1954-55 season. 0-year period: 1945-46 season through the 1954-55 season. he seasonal behavior of rice prices in the Fifties re more nearly what can be expected to prevail han those 0f the Forties. However, with acreage ontrol and the Soil Bank program in effect, ‘over-supply” may not be as acute in the future s in the last five years. This leads to the con- lusion that the 10-year average seasonal price ehavior is probably the most reliable indicator of ~ hat may be expected the next few years, since it I eflects a more conservative “up and down” ovement of seasonal prices than in the early ifties. There is a possibility that some years hence emand-supply conditions may become similar to hose of the late Forties. Should this occur, the rice behavior of the late Forties may be a eliable basis of predicting seasonal price change t that time. Price Margins The difference between the average August price and subsequent monthly prices and between the average September price and subsequent monthly prices are shown in Table 1. The average September price for the 10-year period was 60 cents less per barrel than the average August price as shown in column 3. However, prices generally strengthened after September and the average February price was $1.07 per barrel greater than the average August price. A break- down by 5-year periods, columns 1 and 2, shows the average of December prices, the peak, in the late Forties as 93 cents above the average August price, and the average of February prices, the peak, in the early Fifties as $1.38 above the average August price. Since September prices normally are the seasonal low ‘prices, the difference between September and subseqent monthly prices are greater than the difference between August and subsequent monthly prices. Column 6 of Table 1 shows that the average of the peak February prices was $1.67 per barrel greater than the average of the previous September prices over the 10-year period. The analysis indicates that the farmer stands to gain more on rice harvested in September and stored for future sale than on rice harvested in August and stored. Deviations from Average Prices Individual monthly prices, from which the averages for several seasons were computed, varied widely. Table 2 shows the range of prices above and below the average. The 10-year average September price was $7.52 _per barrel as shown in column 2. However, the_h1ghest September price during the 10-year period was $8.75 and the lowest September price AVERAGE MONTHLY PRICES AND RANGES BETWEEN LOW AND HIGH MONTHLY PRICES PER BARREL OF RICE » ABLE ‘2. ' BY PERIODS, 1945-46 THROUGH 1954-55 Item Aug. Sept. Oct. Nov. Dec. Ian. Feb. Mar. Apr. May I une Iuly — — — — — — — — — — — Dollars per barrel — — — -- — -- _ -_ _ _ ._ 10-year period‘ Average price 8.12 7.52 , 8.49 8.89 9.13 9.12 9.19 9.05 8.94 8.96 8.73 8.64 Range: High 9.72 8.75 9.76 10.80 11.52 11.88, 12.24 11.88 11.88 12.24 12.60 12.42 - Low 5.87 5.91 7.02 7.02 6.95 6.70 6.59 6.91 6.77 6.66 6.48 6.48 Absolute range 3.85 2.84 2.74 3.78 4.57 5.18 5.65 4.97 5.11 5.58 6.12 5.94 Late Forties’ Average price 8.19 7.42 8.06 8.83 9.12 8.87 8.96 8.71 8.58 8.65 8.74 8.95 Range: High 9.72 8.75 9.76 10.80 11.52 11.88 12.24 11.88 11.88 12.24 12.60 12.42 Low 5.87 6.55 7.02 7.02 6.95 6.70 6.59 6.91 6.77 6.66 6.66 6.84 Absolute range i‘ 3.85 2.20 2.74 3.78 4.75 5.18 5.65 4.97 5.11 5.58 5.94 5.58 Early Fifties‘ Q " i Average price 8.05 7.61: 8.91 8.94 9.14 9.36 9.43 9.40 9.30 9.26 8.72 8.33 Range: High 8.91 8.75 9.72 10.21 10.53 10.85 11.02 11.50 11.50 11.50 11.18 9.72 Low 6.72 5.91 8.10 7.78 7.94 7.94 7.78 7.78 7.78 7.77 6.48 6.48 Absolute range 2.19 2.84 1.62 2.43 2.59 2.91 3.24 3.72 3.72. 3.73 4.70 3.24 ‘1945-46 through 1954-55. ‘1945-46 through 1949-50. 31950-51 through 1954-55. was $5.91 per barrel. Thus, individual September prices varied from $1.61 below the average to $1.23 above it, or a range of $2.84. The range of prices around the average for other months was even greater than for September. The range was $5.65 between the low and high February prices for the 10-year period. Generally there has been less variation of monthly prices around the average in the Fifties than in the Forties. The range between the low and high August price was $3.85 during the late Forties, but only $2.19 during the Fifties. The range was $5.65 between the low and high Feb- ruary prices during the late Forties, but only $3.24 during the Fifties. The only exception was in September prices, where the range between the low and high price was $2.84 in the Fifties but only $2.20 in the Forties. This analysis indicates the economic benefits that may be gained by consistent action over a period of several years, while recognizing that the gains may be at the expense of partial losses in any one year. COST 0F STORAGE AND HANDLING Facilities for storing rice are provided by business firms organized for that purpose so that rice may be handled and sold more efficiently throughout the marketing season. Considerable expense is involved in providing storage facilities. Initial investments are sub- stantial, and day-by-day operating expenses occur in protecting and handling rice while it is in storage. Therefore, storage space is provided the farmer at a cost. Charging Practices No uniform rate is charged by all elevators and warehouses for storing rice. The charge varies from one plant to another in different parts of the rice producing area. Some elevators have a flat charge per barrel stored. The charge may be 50 cents per barrel regardless of whether the rice remained in storage only 1 or as much as 10 months. Others have an accumulative rate, charging a minimum amount the first month, and an additional amount for each sub- sequent month. Normally, such firms have a maximum charge which, when reached, prevails regardless of the length of time the rice remains in storage within a particular marketing season. The basic storage charge in some plants in- cludes the cost of providing such items as insur- ance, receiving, turning, fumigating and selling. Other elevators include such services at an addi- tional cost to the farmer. Charges sometimes depend on whether the rice is stored in sacks or in bulk. Handling is more inconvenient, and the elevator’s operation costs are greater, when rice is stored in sacks. As a 6 ‘ study may be somewhat higher than wo f result, some elevators charge the farmer? his rice is stored in sacks. Most of the 1 analysis is based on the charge for bulk .5 since most rice for commercial use is s p bulk, and the trend is toward bulk an from sack storage. ? Costs for Bulk Storage "‘ ~ An analysis of storage charges in e 1955 was made on data from 26 eleva L warehouses that stored rice for farme charges for storing and handling while in j were included. ‘ The charge for bulk storage by the el that charged the same for bulk and sack ' were included. Had those elevators char ferent rates based on the comparative handling bulk and sack rice in storag charge for bulk storage probably wou been less than that reported. Theref‘ average charge for bulk storage used .4 u , _-_ iwn-wuvyw-unrneln-MQA"; I é been the case had sack storage costs v enced the bulk storage charges. ~ Average total charges of the 26 fig creased from 34.3 cents per barrel for t month of storage to 61.5 cents per barrel-T eleventh month of storage, Table 3. ' 4\_|_¢_~»\_~4—.. To eliminate extremely low or extrem charges reported by a few firms, where e reporting may have been a factor, the thr and the three highest charges each mon excluded to obtain a range from low to y individual charges by elevators and wa ' in the area. These data are given in 2 and 3 of Table 3. The lowest individua of elevators in this group increased from f; per barrel for the first month to 42 ’ the fifth through the eleventh month-of. 1 TABLE a. COMMERCIAL CHARGES ron sro en's arcs m THE GULF COAST TEXAS. 1955 Range in - _ Months in Average charge perb ' storage per barrel‘ ‘i’ - Lowest _ — — — — — Cents —-g 1 34.3 20.0 ~ 2 44.4 32.0 3 49.0 37.0 4 51.5 40.0 5 52.7 42.0 6 53.3 42.0 7 56.8 42.0 8 58.6 42.0 9 59.6 42.0 l0 60.7 42.0 ll 61.5 42.0 ‘Average oi total storagecharges by 26 elevator! _ houses reporting their schedule oi charges in 1955. ' “Range reported includes only 20 firms, or 77 perc , reporting. The three lowest charges and the thr‘ charges each month were excluded in view of tho oi error in reporting. g 105 PRICE CHANGE (stromor: 'c0s'r' O ' BLE 4. TIMES THE STORAGE OF RICE HARVESTED IN AUGUST AND SEPTEMBER WAS PROFITABLE OR UNPROFITABLE _BY PERIODS FROM 1945-46 THROUGH 1954-55‘ Stored in August Stored in September omh Late Fortiesi > Early Fiitiesa 1U-year period‘ Late Forties2 Early Fifties“ 1U-year period‘ Protit- Unproiit- Profit- Unprofit- Proiit- Unproiit- Protit- Unproiit- Proiit- Unproiit- Proiit- Unproiit- able able able able able able able able able able able able ptember 1 4 U 5 1 9 tober 2 3 4 1 6 4 4 1 5 U 9 1 vember 3 2 4 1 7 3 5 U 5 U 1U U cember 4 1 4 1 8 2 4 1 5 U 9 1 uary 3 2 5 U 8 2 4 1 5 U 9 1 gbruary 3 2 4 1 7 3 4 1 5 U 9 1 arch 3 2 3 2 6 4 3 2 5 U 8 2 ril 3 2 4 1 7 3 3 2 5 U 8 2 ay 3 2 4 1 7 3 3 2 4 1 7 3 e 3 2 4 1 7 3 3 2 3 2 6 4 ‘y 3 2 4 1 7 3 4 1 3 2 7 3 _ta assumes the farmer's cost oi storage was the average oi charges by commercial elevators in 1955. given in Table 3. and at he would have received the mid-month Texas farm price during each oi the years covered in the study. 5-46 through 1949-5U. 51950-51 through 1954-55. 41945-46 through 1954-55. ‘ e highest individual charge increased from 54 Most of the rice put in storage at harvest nts to 80.5 cents per barrel from the first t0 was moved from storage 4 to 6 months after _e eleventh month of storage. Based on 1955 harvest. Subsequent analysis suggests that this arges, few farmers would have paid less than is the most appropriate time for sale to obtain e storage charge given in the low column or maximum economic returns from storage. ore than that given in the high column. The Therefore, the accumulated charges in the latter ajority were charged somewhere between those months given in Table 4 empahsize only that the tremes for storing their rice in bulk. farmer’s cost of storage continues to increase Difference between the August and subsequent monthly prices, _\_ l9li5~li6 through l95l1-55 average. 90 ‘\\\\~\ .-v4‘-______,;r""" 75 \ , \"i\\ 1 6o m. u; 3O ) PER BARREL (CENTS 15 Sept. Oct . Nov. Dec. Jan. Feb . Mar. Apr. May une July Cost of holding rice in storage (based on 1955 charges) Y‘ Lowest Storage Cost I l-' . m .30 *1 Average Storage Cost "b5 Highest Storage Cost -6O Figure 2. Relationship between the price change {or rice from August to subsequent months and the accumulative cost oi holding the rice in storage. 7 16S / P" U) U1 l-' ID O 15o HA\ Cost of holding Rice in stor (based on 1955 cha y T ‘.-‘_J. CJ.‘—_ [H.1- IJUVICD U U UUL 35C VU Highest Storage Cost t—' O U1 \O O 75 \ Difference between the September and subsequent monthly prices, 19115-416 through 19514-55 averatle. \ \\ \ 6O us [I 3O PRICE CHANGE (STORAGE COST) PER BARREL (CENTS) 15 Oct, Nov. Dec. an. e - Figure 3. Relationship between the price change for rice from September to subsequent months and-the accumulatil oi holding the rice in storage. during a time he is faced normally with declining seasonal prices. Costs for Sack Storage Some elevators and warehouses made no additional charge for storing in sacks. Those making additional charges commonly charged 15 cents for sacking and 25 cents for the sack. Where the farmer pays for the sack he usually retains its ownership, and sacks can be used more than once for storage. Usually no additional charges were made-other than for sacks and sacking—for sack storage above the charges for bulk storage. ' PROFITS FnoM STORAGE Table 4 shows the number of times during the 10-year period the price of rice has increased from the August and September harvest price by an amount more than sufficient to cover the average cost of storing and handling rice in com- mercial elevators. In only 4 of the 10 years was the September price greater than the August price. As shown in column 5, in only 1 of those years did the September price exceed the August price by an amount that would have covered the first month’s storage cost. The October price ar. l pr. ay une Ju y ug exceeded the previous August price in 8 10 years, and in 6 years the excess pricei than covered average storage cost from to October. December and January prices e _ ed the previous August price by an amoun‘ more than covered average storage cost in} the 10 years. The data, however, do not‘ how large the gains were in the 8 yea _g farmer would have made money by stori August and selling in December or January j storage charges did not exceed those in‘ in 1955, or how much the losses were in the“ 2 years. The price of rice in November exceed. previous September price by an amount; more than covered average storage cost in, of the 10 years, as shown in the last two co of Table 4. October, December, January an ruary prices were sufficiently higher th l’ September price to more than cover storag f in 9 of the 10 years. Figures 2 and 3'.present the relations-hi tween 1955 storage ‘costs and the 10-year av, seasonal increase in price per barrel fo, harvested and stored in August and Sept respectively. These charts show that, in to l year period studied, the farmer wouldgl I Average Storage Cost fited by storing either his August or Septem- r rice in commercial elevators. The most ‘fit could have been obtained by selling con- tently in December, January or February. e height of the excess price line above the rage cost bar on the charts in any one month iicates the amount of gain possible under the i ditions specified. iturns on 2.000 Barrels oi Rice i Table 5 gives an example of the financial ults of storing rice for. future sale over the year period. Assuming the farmer’s storage d handling cost was the average of commercial rges in 1955, and that prices he. received for ~ rice were the monthly farm prices, columns 2 and 8 show the gain or loss he would have ».urred each year had he stored 2,000 barrels rice harvested in August and sold the following i- ember, January or February. i Losses would have been incurred in 3 of the é years had he sold in February, and in 2 of the i years had he sold in either December or nuary. However, the gains far exceed the ses over the 10-year period. Gains from‘ bruary sales averaged $1,076 annually, as com- red with $1,024 and $930 for December and nuary sales, in spite of the 3 years of loss 0m February sales. a Similar data on results of storing 2,000 barrels rice in September are given in columns 4, 5 and ‘of Table 5. Losses were incurred only in the 45-46 season, and the largest loss was $974 om rice sold in February. As was true of rice red in August, the greatest gain from Septem- r storage over the entire period came from rice ldin February. Price increases from Septem- 9r to February were sufficient to cover storage "BLE 5. GAINS AND LOSSES FROM DECEMBER. IANU- a ARY AND FEBRUARY SALES OF 2.000 BARRELS OF RICE HARVESTED AND STORED IN AUGUST OR IN SEPTEMBER. 1945-46 THROUGH 1954-55‘ Stored in September and sold in Stored in August “son and sold in Dec. Ian. Feb. Dec. Ian. Feb. _ _ — — ——Dollars—————— 1,130 606 374 — 180 — 730 — 974 2.350 1.766 1.974 2.040 1.430 1.626 2.570 3.266 3.974 4.560 5.230 5.926 1.490 — 694 -1.146 5.500 3.290 2.826 ~ '3.4l0 -—.3.494 —-2.866 240 130 746 1.970 2.506 3.474 ‘ 1.300 2.210 3.166 71.030 246 — 106 3.080 4.330 3.966 2,210 2.826 3.154 2.580 3.170 3.486 590 886 874 1.620 1.890 1.866 2.370 1.386 1.054 1.760 750 406 10.240 9.300 10.760 22.500 21.700 23.040 sees; .P“?@“ wibibi-F-ib ocnoowcn aaaaa ??¥?° 0101010101 mph-GNP“ O n0- Q r-I pverage \- nual . _ a ain 1.024 930 1.076 2.250 2.170 2.304 ains and losses computed ior this table are based on the Tierence between seasonal price change for the years indi- ated and the average storage charge by commercial e1eva~ ors and warehouses in 1955. RIBE-ERWINE AREA 0F TEXAS ._J"__ LUUISIANA Figure‘ 4. The principal rice-growing area of Texas. irom th_e Louisiana line southeast along the Gulf Coast through Victoria county. The heavy black lines show the north and south boundaries oi the rice area. costs and leave an average annual gain of $2,304. Gains from rice harvested and stored in Septem- ber for winter sale was more than twice the gains from rice harvested and stored in August for winter sale. . Interest on Rice Held in Storage Cost ofstorage and handling used in previous analyses did not include interest on the capital involved in_holding the rice. For a good many farmers this may be important since a loan incurred to produce the rice crop may not be liquidated until its sale. If storage for future sale necessitates paying additional interest on debts, or if the farmer could invest ready cash at harvest and obtain a, return on it, then putting rice in storage involves the additional cost of interest on amount of money he has tied up in the stored e. Figure 5. Rice harvest is a busy time {or farmers and commercial elevators. Most rice is harvested by combine. transferred irom the combine bin to a truck and hauled directly to a local elevator tor drying and storage. 9 be received easily and conveniently and unloaded by hoist- ing the front end of trucks. Thus, the farmers truck is released quickly ot\its load so that it may return to the tarm for another. Delay in hauling may cause harvesting to come to a standstill. At the 10-year average August price of $8.12 per barrel, 2,000 barrels of rice would amount to $16,240, and at the average September price of $7.52 it would amount to $15,040. This would be a sizable sum to have tied up for 4 to 6 months. However, should interest be charged at the rate of 8 percent, the average annual returns from price increases shown in Table 5 would be more than ample to cover interest. It would reduce the average annual gain from rice stored in August by about $433 if sold in December, $541 if sold in January and $650 if sold in February. Thus, the net return from rice storage, after interest is deducted, would be greater for December than for February sales. Figure 7. Belt (shown above) and auger are the two most important conveyor systems for moving rice in com- mercial elevators. 10 Figure 6. Most elevators are equipped so that rice can ._¢_. Figure 8. Handling and care of rice is more cont; when it is bulk stored in bins rather than in sacks. p, mercial elevators in Texas store the farmer's rice “identity preserved" basis. i‘ The interest cost would not be as large on»; stored from the September harvest. At 8 pe interest, the average annual gains sho t; Table 5 would be reduced by about $301 if December, $401 if sold in January and $5 sold in February. Again it would cause the’ gain from storage, after interest is deduc be greater for Decemberthan for February‘ OTHER CONSIDERATIONS Numerous conditions affect the extent 0 g farmer’s profits or losses from storing in ' one year. Any condition that causes the c storage to be lower, or that causes the diffe between the price at harvest and prices during the winter to be greater, w. increase profits from storing rice. Condi that increase the cost of storage, or decrease; Figure 9. Adequate control of insects and -» i handling of rice are necessary to guard against deterio of quality while in storage. Elevators and warehousei storing more and more rice in bulk and less in sacks. 1* - -_ erence in seasonal prices, would decrease the fits from storing. ~ ice Supports The government’s price support policies and ivities cannot be ignored in a study of this a d. It may, in the future, be the most significant tor in a farmer’s decisions as to the proper g e and circumstance in which to sell rice. " The guaranteed government price program s provided the farmer with the following alter- tives: (1) to sell his rice on the market at ;rvest; (2) to store his rice in commercial ,_vators at harvest for future sale on the market; ) to store his rice under loan to the Commodity I dit Corporation, and either forfeit the rice to e CCC or redeem it before the date of forfeit d sell it on the market. ' The farmer who is concerned primarily with taining the greatest income would sometime nsider the first, but never the second, alter- tive listed. Number 1 would be considered as 1 alternative to storing rice only when the CCC an price is below the harvest market price. d should his ‘decision be to store the rice, he rtainly would choose to store it under CCC an rather than outside the loan. For should ices decrease after harvest and go below the an level he could recoup some of the loss from orage by forfeiting to the CCC. If the loan support price, after storage charges re deducted, is abovethe harvest market price e farmer cannot lose,‘ and may possibly gain, by putting his rice in storage under loan to the overnment at harvest. He still has the choice of deeming the rice to sell on the market before e forfeit date, or forfeiting it at that time. owever, should the market price not move above he loan rate before forfeit date, it would pay to orfeit to the government. Should the market rice move above the loan price sufficiently to stify redeeming the rice and selling it on the "arket, then the farmer must decide when it likely will reach a peak in order to selland-obtain the greatest returns. Our analysis indicates that December, January and February usually is the peak in the seasonal movement of rice prices. Fctrmefs Need for Ready Cashi- It is possible that a farmer, with pressing debts, or with a need for cash in other operations at harvest time, may obtainjbetter returns, either in the good will of his creditors or~in financial re- turns from his operations, than he .could obtain fromistoring his rice for future sale. The need for ready cash at harvest should be balanced against the returns he can expect from storing to determinewhich may be the most profitable in the long run. The government loan-price sup- port program, in its present form, relieves the farmer from this financial pressure. Proportion Sold and Stored at Harvest The size of the margin between the harvest market price and subsequent seasonal market prices is affected by the proportion of the total crop that is sold or stored at harvest. Prices later in the season will be lower, and prices at harvest higher, if greater amounts are stored, for this relieves the heavy harvest supply but increases the amount supplied later. Therefore, if a large proportion of the crop goes into storage, there will be lower margins between harvest and sub- sequent monthly prices, and a tendency toward less favorable possibilities of profit from storage. A lower proportion going into storage, with more sold at harvest, means lower harvest prices, higher prices later in the marketing season, greater margins between harvest and subsequent monthly prices and greater possibility of profit from storing. It may pay the farmer to gather what infor- mation is available at harvest on the amounts of rice going into storage, and govern his action according to the likely consequence on subsequent monthly prices. » r 11 State-wide Research ‘k The Texas Agricultural Experiment Stati, is the public agricultural research agen A Location of field research unitls inlTExas main- oi the state of TQXGS- and 1s Qne of ‘V, tained by the Texas Agricu tura xperiment »* Station and cooperating agencies pCIItS Of the TGXOIS COHGQG SYSlI- IN THE MAIN STATION, with headquarters at College/Station, are 16 subject-matter departments, 2 departments, 5 regulatory services and the administrative staff. Located out. in the major agricultural of Texas are 21 substations and 9 field laboratories. In addition, there are 14 cooperating stations ' by other agencies. Cooperating "agencies includejthe Texas Forest Service, Game gand Fish Commiss: Texas, Texas 'Prison System, U. S. Department of Agriculture, University of Texas, Texas Technologic lege and the King Ranch. Some experiments are conducted on farms and ranches and in rural homes. 1 .v RESEARCH BY THE TEXAS STATION is organized by programs and projects. A program of research?! sents. a coordinated effort to solve the many problems relating to a common objective or situationfg search project represents the procedures for attacking a. specific problem Within a program. ' ' .1 THE TEXAS STATION is conducting about 35,0 active research projects, grouped in 25 programs w clude all phases of agriculture in Texas. Among these are: conservation and improvement of soil servation and use of water in agriculture; grasses and legumes for pastures, ranges, hay, conservatii improvement of soils; grain crops; cotton and other fiber crops; vegetable crops; citrus and other s,’ cal fruits; fruits and nuts; oil seed crops—other than cotton; ornamental plants—including turf; b weeds; insects; plant diseases; beef cattle; dairy cattle; sheep and goats; swine; chickens and turk‘ mal diseases and parasites; fish and game on farms and ranches; farm and ranch engineering; fa ranch business; marketing agricultural products; rural home economics; and rural agricultural econ Two additional programs are maintenance and upkeep, and central services. A RESEARCH RESULTS are carried to Texas farm and ranch owners and homemakers by specialists and ‘j agents of the Texas Agricultural Extension Service.