Bulletin 887 On-Farm RgymgT“ ‘w and Storugekof G ' wmimum in Central Texas ‘and t€Coustal Bend TEXAS AGRICULTURAL EXPERIMENT STATION R. D. LEWIS, DIRECTOR, COLLEGE STATION, TEXAS m COOPERATION WITH THE UNITED STATES DEPARTMENT OF AGRICULTURE 0'01! SUMMARY The cost 0f owning and operating round bins and drying equipment when used at capacity -for on-farm drying and storage 0f grain sorghum iin the Coastal Bend area was 34 cents per hundred- weight and 30 cents per hundredweight in the Central Texas area.» These costswere based 0n a study 0f 91 units over two drying and storage seasons, 1954-55 and 1955-56. The costs with a building were slightly higher. The seasonal price spread cannot be compared directly with the cost per hundredweight of on- farm drying and" storage since grain is sold on a 15 percent moisture content" basis at harvest. Grain stored on-farm should be dried to 12 per- cent. The value of the loss in weight as well as other incidental costs and benefits, such as inter- est charges and discounts for high moisture grain, should be considered in the purchase of an on-farm unit. The average seasonal price spread between harvest price in July and selling price in March was 42 cents per hundredweight for th_e 10-year period 1946-47 through 1955-56. The price spread was slightlylarger for grain harvested 1n August. CONTENTS summary _______________________________________________________________ -- 2 Effect of On-farm Drying and Storage ' 3 on Quality ____________________________________________________________ - Introduction ------------------------------------------------------------ -- Gross Returns t0 Omfarm Drying Cgstg of On-farm Drying and Storage ............. _- 3 and Storage _______________________________________________________ .- Operating Costs ....... .._ ..................................... -- 3 Comparison of Costs and Benefits ................... _. Cleaning Bins ________ _'_ ___________________________________ __ 4 Drying and Storage for Later Sale .............. .. ¢ Labor ............................................................ -- 4 Drying and Storage with Grain in § Extra Hauling (lost ------------- -1 --------------------- -- 4 CQC Loan --------------------------------------------------- Electricity ___________________________________________________ _. 5 Drylng and Storage for Feeding ------------------ -. j {used Control _____________________________________________ .. 5 Non-measurable Returns and Costs .................. ._ n Grain Insurance; _______________________________________ _. 5 Non-measurable Costs ................................... .. l Shrinkage During Storage ______________________ __ 5 Non-measurable Benefits _____________________________ __ Overhead’ Costs ............................................... .. 5 Planning Space Requirements ____________________________ __~ n Depreciation ............................................... .. 6 Reduging Costs _____________________________________________________ __ . Interest on Investment ............................... .. 6 Insect Contm] _________________________________________________ __ ‘ Taxes ----------------------------------------------------------- -- 6 Hauling From Field to Bin ........................... IIlSl1Ya1l¢e---= -------------------- -------------------------- -- 6 Increased Utilization of Equipment ........... .. Annual RQPH-irs and Upkeep -------------------- -- 6 Labor Utilization ____________________________________________ __ l, Annual OVEPhGHd COStS ____________________________ -- 6 Fgllgwing Reggmmendgd Operating l Costs not Induded ________________________________________ __ 5 Procedure ..................................................... .. Total Costs ...................................................... .. 6 Acknowledgments ................................................ "n; the past IO-year period, this study indicates tha . in the season or put the gfaih in loan. For exam Considering only the average price spread ove '6 it would not ‘pay the average farmer to purch ~ J an on-farm unit to dry and- store and sell late ple, the total cost, 49 cents, of drying and stor‘ age of 16 percent moisture grain in Central Tex § consists of a basic cost of 30 cents; value o weight loss in drying from 16 to 12 percent mo’. ture, 10 cents; and interest on grain during "store age, 9 cents. This total cost of 49 cents compar with total benefits of 47 cents—the price spre J between July and March and the discount on gra’ above 15 percent moisture level, 5 cents. As th moisture level increases, the total benefits if crease more rapidly than the total costs. Where the farmer drys and stores to fe livestock or poultry, the purchase of a unit may y profitable. If the production of grain sorgh ' in the near future remains at present high leve or increases, the price spread may widen, maki the purchase of the unit profitable both for fe y ing and for storage for cash sale. i I GRAIN SORGHUM COMBINED IN THE Coastal Bend and Central Texas areas usually has a moisture "fcontent too high for safe storage. The grain must be dried artifically before it can be stored. Farm- ers must sell the grain at the time volume is great- iest and prices usually lowest unless on-farm or commercial storage facilities are available. If the crop is left in the field until the grain is dry enough for immediate storage, heavy losses may occur from storm, bird or insect damage and ilfrom shattering When combined. , A number of on-farm drying and storage in- tstallations for grain sorghum, using unheated air, have recently been constructed in the Coastal sBend and Central Texas areas. The design and recommended operating procedure for these units are based on the results of tests conducted at Substation No. 1 at Beeville. There has been considerable interest in on-farm drying and stor- e age units with the expansion of government facil- a ity loans for storage and conditioning equipment and the continuance of the commodity credit loan Qprogram. This report answers questions farmers have ., raised about the economics of on-farm drying and storage of grain sorghum. These questions A concern the costs of owning and operating on- farm drying and storage units, the benefits from ~ owning on-farm units as opposed to selling at ‘i harvest time, the ability of the farmer to main- tain quality of the stored grain sorghum, and the size of the unit to purchase. This reportis based on information obtained leftover two drying and storage seasons (1954-55 a and 1955-56). Operating practices and cost infor- imation were obtained on 21 units during the 1954- 55season and 77 units during the 1955-56 season. Figure 1 shows the counties in which these instal- }lations were located. Quality information was ob- stained from farmers and from samples of grain A sorghum taken fromzflthe units. Overhead cost disinformation was obtained from farmers and build- ing equipment dealers. Respectively, associate professor and assistant professor, Mei-Department of Agricultural Economics and Sociology. Pro/ire’ and £05555 from On-Farmflrging and Storage of Grain Sorghum in Central Texas and the Coastal Bend R. J. HILDRETH and C. A. MOORE* COSTS OF sON-FARM DRYING AND STORAGE Operating Costs Operating cost information was obtained on the operation of 21 units during the 1954-55 season and 32 units during the 1955-56 season in the Coastal Bend area. The operation of 45 units was studied in Central Texas during the 1955-56 season. The operating costs per hundredweight (100 " 9' pounds) for the two areas are presented in Table 1. The combined costs for the 1954-55 and 1955- 56 season represent a weighted average for the g-yegr period in the case of units in the Coastal en . The total costs in Table 1 do not represent an average of actual farmer costs. They are made up of totals for the individual cost items. The in- dividual cost items are averages of farmer exper- ience. However, certain items may not be ex- perienced by all farmers; for example, insect control measures were not needed each year by vggJfi. Coastal Bend Study Area g Central Texas Study Area Figure 1. Location of counties included in study. Figure 2. Typical round steel bins used for drying and storing grain sorghum on-iarm. all farmers. Thus the total costs for an individ- ual farmer may tend to be lower than those in- dicated. Two major types of units were used: round bins and quonset-type buildings, Figures 2 and 3. An analysis of the operation cost for each type of unit indicated only slight differences in costs. Thus, no distinction is made between the two types of units in Table 1. The costs presented are for a season of 7 to 8 months, July or August to March. Most costs do not vary with the length of the storage period. Only the grain insurance and the insect control costs would vary slightly with the length of the storage period. i Cleaning Bins During the 1954-55 season few farmers in- curred this cost- since the buildings were new. The costs for this season were based on operations at the Substation No. 1, Beeville. The costs dur- ing the 1955-56 year were based on farmer exper- ience and did not vary much from the estimated cost during the 1954-55 season. TABLE 1. TYPICAL OPERATING COSTS PER HUNDRED- WEIGHT OF ON-FARM DRYING AND STORAGE OF GRAIN SORGHUM: COASTAL BEND. 1954-55 AND 1955-56: CENTRAL TEXAS. 1955-56 Coastal Bend Central Item 1954-55 Texas 1954-55 1955-56 and ' 1955-56 1955-56 - Number of units 21 32 53 45 — — — Cents per 100 pounds — — — Cleaning bins 0 3 1.4 1.0 0.3 Labor 2.6 2.8 2.7 3.7 Extra hauling 5.3 8.1 7.0 5.2 Electricity 1 9 2.0 2.0 1.2 Insect control 4 6 3.6 4.0 2 3 Value oi loss due to shrinkage and han- dling during storage 2 2 2.2 2.2 2.2 Grain insurance 0.9 0.9 0.9 0.9 Total 17.8 21.0 19.8 15.8 Figure 3. Typical quonset type building used ior dryi and storing grain sorghum on-iarm. ' x ‘z Labor This item includes the cost of labor used loading the grain into the drying unit from truc at harvest time and loading it into trucks to taken to market. Most of the labor used w‘ hired; even if it were not hired the operation ti a up labor that could be used in other parts of t I farm. The labor charge is based on an avera _ of the time necessary to perform the jobs _ estimated by farmers, and an assumed wage ran of 75 cents per hour. There was little difference in cost betwei seasons in the Coastal Bend area. The charge Li hundredweight was higher in Central Texas tha the Coastal Bend, probably because of less e, ficient utilization of crews with the smaller unit, Extra Hauling Cost Grain dried and stored on the farm involv an extra hauling charge. It was assumed tha the cost of hauling grain from the building _ market (distance A, Figure 4) was approximate i. equal to that which would be incurred at harv time if the grain were hauled directly from t_ field to market or to commercial drying and sto] i, FIELD DISTANCE B MA ~ POIN DISTANCE C ON-FARM UNIT DISTANCE A Figure 4. Extra hauling distance due to on-iarm dryi, and storage unit. ge facilities (distance B, Figure 4). Hauling he grain from the field t0 the bin (distance C, i igure 4) then is an extra cost incurred with the se of on-farm drying and storage. , There is considerable variation among individ- fal farm units in the hauling cost. In many local- ‘ties a normal charge for this operation is 10 cents er hundredweight if a hired trucker is used. ‘here the farmer uses his own trucks or trailers _, t bring the grain from the field to the building, f he cost is considerably less. The cost presented gin Table 1 is an average of the two methods. The average cost of hauling was higher during 1955- ' M56 than during 1954-55 for the Coastal Bend area. ‘The cost for the Central Texas area is less,be- ifcause of shorter hauls with smaller farms and more use of farmer equipment. _, A number of farmers expressed the opinion that hauling grain from the combine to market involves more expense than hauling the grain from ithe on-farm units to market. They felt the need ‘to keep the harvesting operation in progress tended to tie up more equipment during harvesting than in moving the grain from the unit after har- vest when the pressure of harvest is off. Also many farmers sold the grain in the bin with de- livery expense borne by the grain buyer. Under ‘these conditions, depending on whether the price f offered is reduced by the full transportation ‘charge, this cost may be less or eliminated. Thus, the charge per hundredweight given here may I overstate the extra hauling cost. q ‘Electricity t Electricity was used to dry, aerate and, in most cases, to load and unload the grain. The cost ifof electricity mainly depends on the amount of § moisture removed from the grain during the dry- jting. The moisture of the grain as it went into f the bins ranged from 13 to 25 percent with most 10f it below 15 percent; usually the grain was dried i-to at least 12 percent moisture. However, it was Limpossible to relate this cost to the amount of moisture removed since many farmers operated their fans longer than necessary or when climatic fconditions prevented effective drying. The costs during the two seasons for the Coastal Bend were isimilar, with the cost in Central Texas lower. This lower cost for Central Texas probably was Ii-caused by the lower moisture of the grain when it went into the bin. Control , Almost all units had insect infestations large enough to warrant control practices. The costs _ shown in Table 1 are for material and labor. iGrain Insurance - Grain insurance for fire and lightning and ex- tended coverage was obtained by 5 of the 21 farm- rs during 1954-55 and 2 of the 32 farmers dur- 'ng 1955-56 in the Coastal Bend. It was obtained? i» 7 of the 45 units in Central Texas. Grain in- urance is a legitimate operating charge for all units. Those not insured are undertaking a risk similar to the insurance charge. The charge is based on insurance rates in the area. Shrinkage During Storage Grain is sold at harvest time on a basis of 15 percent moisture. The reduction in weight that usually occurs during storage represents an extra cost. This loss in weight is caused mainly by decreases in moisture content, which may not oc- cur with high humidity during aeration of the stored grain. The loss in weight during storage was com- puted on the basis of 6 years’ experience at the Substation No. 1, Beeville; a reduction of 1 per. cent of the dry weight (12 percent moisture) of the grain, and the average July price of 2.22 per hundredweight during 1946-47 through 1955-56. Overhead Costs Overhead costs are the annual cost of owner- ship. A summary of overhead costs for different types of structures and handling equipment is shown in Table 2. The figures in this table were obtained on commercially constructed units from l“ A farmers with on-farm drying and storage facil- ities and from building and equipment dealers. They do not represent an average of farmer ex- perience but represent the overhead cost of units of specific size and type. The overhead cost in- formation was based on commercially construct- ed units equipped with drying systems that would supply the minimum airflow rates recommended by the Texas Agricultural Experiment Station. The farmer contemplating investing in on- farm drying and storage equipment should check with his local dealers to determine the actual prices of the various units. Building and fan costs vary. Also, differences in location might mean different freight rates to the dealers and thus different prices to the farmers. TABLE 2. ANNUAL OVERHEAD COSTS OF ON-FARM DRY- ING AND STORAGE OF GRAIN SORGHUM FOR UNITS OF SELECTED SIZE AND TYPE Item Round bin Quonset type Dimensions 2—2.200 bushel 1—32 x 60 bins building Capacity‘ 2.274 cwt. 7.815 cwt. Annual costs — — — Dollars — — — Depreciation on structure, tans. grain moving and other equipment 130 613 Interest on investment at 6 percent 110 430 Taxes 9 41 Insurance on structure l3 58 Repairs 17 69 Total 329 1.211 — Cents per 100 pounds - Annual per cwt. overhead cost at capacity 14.5 15.5 Three-fourths capacity 19.3 20.7 One-halt capacity ~ 28.9 31.0 ‘Capacity at a 10-foot depth. Depreciation Depreciation expresses the original cost of the building, fans, drying and aeration equipment and grain moving and other equipment as an annual cost over the life of the item. The assumption is made that the building would have a life of 25 years and the fans and motors, 15 years. The portable auger is assumed to have a life of 10 years. These assumptions as to length of life are based on estimates of farmers and the De- partment of Agricultural Engineering. The length of life assumption for the building is the same as that listed for metal grain tanks in Bul- letin “F” published by the Internal Revenue Ser- vice. In figuring depreciation charges, provisions were made for salvage values of the units. Interest on Investment When the farmer’s money is tied up in a drying and storage unit, it cannot be used for other in- vestments. The costs of missing these oppor- tunities are represented by this figure, which is generally a noncash cost; that is, the farmer does not actually pay interest unless he has bor- rowed money. The rate of interest used was 6 per- cent. » Taxes Property taxes had not been assessed because most of the units studied were new. The assump- tion was made that the buildings would be valued at 20 percent of one-half of the original cost. The tax cost was computed by applying the average rates of the various taxing agencies in certain counties in the grain sorghum production area to the assumed valuation. Insurance Insurance provides fire and extended cover- age on the structure and equipment. The charge is computed from information on insurance rates for the types of structure studied. Annual Repairs and Upkeep The cost of annual repairs on the structure, fans, motors and grain-handling equipment was computed since most of the units have not been in use long enough to determine accurately what actual experience will be. Necessary repairs were based on estimates by the Department of Agri- cultural Engineering. It was assumed that 0.5 percent of the initial cost of the buildings and equipment will be spent for repair each year. Annual Overhead c0515 The annual overhead costs are presented in Table 2. These costs are constant each year, thus, the cost per hundredweight depends on the level of utilization. Capacity of the units is defined at the 10-foot depth. If the grain to be dried has a moisture content above 15 percent, it is recommended that an 8-foot depth be used, below 15 percent, 10 6 feet. However, even if the moisture content of i» the grain is above 15 percent, a 10-foot capacity f can be utilized. The first grain harvested can be ‘ placed in the bin below an 8-foot depth and dried a to 15 percent or less. Then additional grain can . be placed on top of the relatively dry grain to a A (For detailed operation recom- p mendations, see Texas Agricultural Experiment * Station Bulletin 885, “Researlch on Farm Drying I 10-foot depth. and Storage of Sorghum Grain,” J . W. Sorenson, Jr., et. at.) " Costs not Included .. Interest on the value of the grain during! the storage period was not included in the operating . costs. It is included in the evaluation presented in a later section. A charge for deterioration in quality during I drying and storage has not been included. Most farmers maintained grade and suffered no econo- ; mic loss. However, there is a risk that quality deterioration may occur as well as a risk that a Q ‘price decline may occur. It is extremely difficult to put a value on this risk. The cost of manage- ment also is very hard to evaluate and was not included. The farmer will have to balance the. benefits against the value he places on his man- i agement. Total Costs There is no one definite answer to the ques- tion: “What does it cost to dry and store grain on the farm?” The total cost per hundredweight de- 4 pends mainly on the extent to which drying and j storage facilities are used. Overhead costs are I the same regardless of how much grain is dried ’ and stored. The overhead cost per hundredweight i and the total cost per hundredweight decrease as ¢ the amount of grain dried and stored increases: The cost will be less at capacity than if half of capacity is used. Total costs per hundredweight at capacityf three-fourths capacity and one-half capacity are; presented in Table 3 for the round-bin unit. These a costs were obtained by dividing the constant over- head cost by the number of hundredweight dried and stored and adding the operation cost perl hundredweight. The decrease in cost as the level of utilization increases for the bin unit in" Central’ Texas is shown in Figure 5. TABLE 3. ANNUAL TOTAL COST PER HUNDREDWEIGHT OF‘ ON-FARM DRYING AND STORAGE OF GRAIN SORGHUM AT VARIOUS UTILIZATION LEVELS FOR ROUND-BIN UNITS. COASTAL BEND AND' CENTRAL TEXAS Level of utilization —— Cents per 100 pounds —-—- Capacity‘ i 34.3 30.3 Three-fourths capacity 39.1 35.1 One-halt capacity 48.7 44.7 Coastal Bend Central Texas ‘Ten-ioot depth. . EFFECT OF ON-FARM DRYING AND i‘ STORAGE ON QUALITY I A major consideration in using on-farm dry- E and storage for grain sorghum is the effect is method has on quality." _ Quality in this study _}1s measured by the grade of the grain sorghum. ‘though the cost for on-farm drying and stor- may be low and less than the gain from the "sonal price spread, the farmer may suffer a 5e in income unless grade can be maintained. During 1954-55, the study of quality main- nance consisted of farmers’ reports of the grade "t which they sold the grain. Grade information as obtained on 45 different bins of grain dried ‘nd stored by the 21 farmers surveyed. The grain a 35 of the bins, 78 percent, graded No. 1 at the _ e of sale. The grain in 10 bins, 22 percent, g aded No. 2. All of these units were located in e Coastal Bend area. y An intensive study of the drying and storage ration of 16 farmers with 38 bins of grain rghum was made during 1955-56. Samples of __ e grain were taken during the unloading pro- (check sample). This grain was dried in {hin layers in the open air and then graded by . ain inspectors of the USDA. A second sample taken from the farmer’s bin after the grain as dry (dry sample). A third sample was taken prom the bin before sale (sale sample), in the ses where the grain was stored. Deep bin obes were used to take the samples at various vels in the bin. q The percentage of the units with increases, . I‘ reases and no change in grade during the dry- " I g period and storage period is given in Table 4. ew bins of grain sorghum had a decrease in grade _' ring either drying or storage, and a few showed Tn increase during storage. The decrease in those ins showing a decrease was only 1 grade. Most ’rror in the bins. At the time of sale, only 2 out the 38 bins were No. 3 grain. None of the g ins were below No. 3. , The economic importance of the effect of this l! ethod of drying and storage on grade is indi- t: ted by the lack of a price differential between o. 1 and No. 2 grade. Thus, it appears that Hrmers can maintain quality with on-farm units. pith reasonable management and proper equip- ‘exit, the farmer should suffer little economic u from quality deterioration. 1.2: 4. CHANGE IN GRADE or GRAIN SORGHUM DUR- - ING DRYING Arm STORAGE. 1955-56 Increase No change Decrease Time period . — — — Percentage — — — I 'ng period . * heck sample to dry sample) 0 92 8 rage period H sample to sale sample) 14 77 9 ‘ the changes probably were caused by sampling l 100 ~ 80 - 70 R 60 - 50 = Dollars Per Unit 40 _ 30 — - -___ 20 ‘ 10 - I I I 25 50 75 100 Percent of Capacity Figure 5. Total cost per hundredweight of drying and storing grain sorghum in a round-bin unit at various levels of utilization. t GROSS RETURNS TO ON-FARM DRYING AND STORAGE When the producer harvests his grain, he may sell the grain at harvest or hold it in storage for later sale or for use in a feeding program. If he holds it for later sale or for feeding, he must pay storage and handling expenses until it is sold. Whether it pays the farmer to store his grain for later sale depends on an increase in price after harvest large enough to more than cover the costs of storing and holding the grain. The difference between harvest prices and prices later in the season may be. determined by studying the seasonal price pattern of grain sor- ghum. This difference in seasonal price provides the farmer his gross returns to the storage oper- TABLE 5. SEASONAL CHANGE IN GRAIN SORGHUM PRICE FROM IULY AND AUGUST BY PERIODS, 1946-47 THROUGH 1955-56, Difference Difference between Iuly between August and later prices and later prices Mm!“ F‘ st s o a F‘ t s a 1r ec n irs econ 5-year 5-year 12x3; 5-year 5-year lueggg period‘ period’ p period‘ period’ p — — — — Cents per 100 pounds — — — — September —-I 18 8 ll 13 ll October I5 17 16 27 l2 l9 November 14 26 2U 26 21 23 December 16 36 26 28 31 29 Ianuary 28 35 32 40 30 35 February 14 37 26 26 32 29 March 38 45 42 50 40 45 April 37 40 39 49 35 42 May 38 50 44 50 45 47 ‘Five-year period, 1946-47 through 1950-51. “Five-year period. 1951-52 through 1955-56. “Ten-year period, 1946-47 through 1955-56. ation. These returns can be compared with the costs t0 determine whether the farmer can make a net profit from storing. Table 5 shows the, gross returns to grain sor- ghum storage in the form of price margins be- tween harvest (July and August) and later prices, for the 10-year period 1946-47 through 1955-56 in Crop Reporting District Eight of Texas. The data are based on reported but unpublished mid- month farm prices in the District supplied by the division of Agricultural Estimates of the Uni- ted States Department of Agriculture. There was no discernible upward or downward trend in grain sorghum price over the 10-year period studied, indicating that the results drawn from the seasonal behavior of price over the per- iod could not be affected materially by trend. The prices used in this study are not adjusted‘ for trend. Grain is sold on a 15 percent moisture con- tent basis at harvest. Storage, to take advantage of possible price increases later, involved the cost of drying the grain to a 12 percent moisture con- tent as well as a weight loss due to drying—-100 pounds of 15 percent grain becomes only about 96.6 pounds when dried to 12 percent. These costs of storage are included along with other costs in the following section, so no adjustment is made in the harvest price in this section. The largest returns to storage of July grain over the 10-year period averaged 42 and 44 cents per 100 pounds of sales from storage in March and May, respectively. Returns to storage of August grain were somewhat higher since August is the lowest price month. The 10-year average March and May prices were 45 and 47 cents, re- spectively, above the average August price. Since the behavior of prices is uncertain, the farmer-who stores is interested in determining the period when prices are usually at a seasonal peak and whether he can profit by consistently storing and selling in that period. March, April and May had higher average prices over the 10 years than other months. ' TABLE 6. DIFFERENCE BETWEEN HARVEST. AND MARCH. APRIL AND MAY GRAIN SORGHUM PRICES BY SEASONS, 1946-47 THROUGH 1955-56 Iuly grain August grain ‘season stored and sold in stored and sold in March April May March April May . — — — — Cents per 100 pounds — — — — 1946-47 —48 —35 —26 0 13 22 1947-48 99 107 97 91 99 89 1948-49 ' 15 12 18 40 37 43 1949-50 45 38 34 43 36 32 1950-51 79 65 69 75 61 65 1951-52 80 84 84 76 80 80 1952-53 29 15 12 8 — 6 —- 9 1953-54 42 51 43 38 47 39 1954-55 45 9 56 31 — 5 42 1955-56 29‘ 40 52 48 59 4 71 10-year average 42 39 44 45 42 47 _ sale rather than sell at harvest, (2) farmer drip ' vest prices by the farmers on the basis of off l- Table 6 shows the annual difference betwe harvest price and prices in those three, usuall “peak” price, months. For example, annual r turns on July grain sold from storage in Marc, varied from a 48 cent loss to a 99 cent gain, b a- averaged 42 cents over the 10-year period. T table shows the considerable variation in annu returns from grain sorghumstorage. Since the farmer has little basis for correctl predicting what will happen to prices each yea consistent action over a period of years appeaw. the better policy in deciding whether to sell at ha j vest or store. The 10-year average returns age ' better guide for consistent action. I COMPARISON OF COSTS AND BENEFITS The comparison of costs of on-farm dryi and storage to benefits is made for three situ tions the farmer may face. The three situatio are: (1) farmer dries and storesgrain for la 5 and puts grain in Commodity Credit Corporati; (CCC) loan and forfeits grain rather than sell ' harvest and (3) farmer dries and stores gr and feeds out rather than sell at harvest and b back during feeding period. The third situati applies only to the farmer with livestock or p0 i try and the possibility of feeding the grain. I The benefits computed fin this study depend a large extent upon the seasonal spread in t Eighth District prices. This spread may f represent the exact situation faced by cert farmers. The prices for each month in any a ticular year represent an average of prices quo f at various locations. Certain farmers may T pect a larger-Q-‘esmaller spread than shown in t prices used in this study. For example, the , farmers contacted during the 1954-55 season ‘i ported an average harvest price of $1.66 .7 hundredweight and an average selling price f $2.50 per hundredweight, a spread of 86 ce, per hundredweight. This compares with the '1 ported spread between July and March pricesf 44 cents in Eighth District prices. Part of difference between farmer experience and t reported prices may be caused by quoting of h“ received at the “turn-row” where the buyer the transportation cost. If this were true, e would tend to explain part of the differe between the two spreads. However, the only - liable price data available over a period of --: are those used in this study. t‘ Drying and Storage for Later Sale - In the analysis of the first situation, dry and storing for later. sale rather than selling, harvest, the results depend on the moisture =4 at which the farmer harvests the grain. G t, can be sold with up to 15 percent moisture harvest time at no discount. However, if’, in is above 15 percent moisture, there is a eral discount of 5 cents per 1 percent of mois- fie above 15 percent. The items of cost and benefit used in evaluat- this situation at various moisture levels for a Coastal Bend and Central Texas area using A d bins are shown in Table 7. The basic cost itaken from Table 3 when the farmer uses his ‘nd bins at capacity. It is assumed that little Tno additional costs are involved in drying 18 r116 percent moisture grain than when drying fpercent grain. There is also a loss in Weight 'olved in drying and storing for later sale since jg farmer could sell‘ the grain at a 15 percent at harvest time, but in order to store safely, ue of this difference in weight was computed ,using the average July price discounted for the ious moisture, levels and the actual loss in fght. There is also the possibility of an inter- j cost. The farmer has his funds tied up in in and may have to borrow funds to keep it in g rage or he cannot use the funds for paying off ' cost of producing the grain. The interest __ is figured on the basis of storing the grain til March at" an annual rate of 6 percent. This rest cost per hundredweight was computed by Isidering the price received at harvest time _* es the interest rate for the period from July 7ugh March. __ As an example, the total cost with 17 percent in in the Coastal Bend is 54 cents per hundred- 'ght, Table 7. This cost is made up of a basic ‘t of 34 cents, weight loss of 12 cents and in- t of 8 cents. The price of grain sorghum tends to rise later the storage season, but the highest price does occur during the same month each year. There ; considerable variability in the highest month fing the 10-year period, 1946-47 through 1955- . assumptions. First, that the farmer will lays sell the grain in March, the next to the hest month in terms of average price. March fsed rather than May, the highest price on an "rage basis, on the basis that there will probably more time available to move the grain out dur- p’; March and that the advantage of the extra few must bring the grain down to 12 percent. The , Y Thus, this situation has been analyzed under ' cents per hundredweight gained by holding until May will be more than offset by the availability of labor in March. The second assumption made is that the farmer is able each year with perfect certainty to pick the highest month, which ranges from September through May. The average spread between July and the highest month over the 10-year period is used. (The interest charge will be slightly less when the highest month is picked since the grain is sold before March some years and the total costs for both the Coastal Bend and Central Texas will be 1 cent less than that shown in the total cost column.) Analysis under this assumption sets the upper limit of benefits. - v The basic benefits or the spread‘ between July and March and July’ and the highest month each year is shown in Table 7. A further benefit from on-farm drying and storage is the amount of the ' discount on the grain due to moisture levels above 15 percent. ' A comparison of the total cost columns and the total benefits columns indicates that only at the 17 and 18 percent moisture levels do the bene- fits exceed the costs when the grain is sold in March. However, in both areas the benefits are equal to the costs at the 15 percent moisture level,’ assuming the farmer is able to pick the highest month. ' In conclusion, on the basis of past prices, it is somewhat doubtful if on-farm drying and storage of grain for sale later rather than at harvest time would be a sufficient basis for the purchase of an on-farm unit. It is doubtful that the typical or average farmer will be able to realize enough return above his cost to pay for the management and risk bearing necessary to hold the grain for later sale. However, insofar as local facilities for buying the grain are not available in certain areas and harvest prices were below the Eighth District average, there may be more justification than is shown in this analysis. Also, if the grain is harvested in August rather than July, a slightly higher price spread occurs. If a substantial num- ber of farmers started storing grain sorghum on- farm and withheld their grain at harvest, the seasonal spread would be lower. * l 7. COMPARISON OF COSTS PER HUNDREDWEIGHT OF ON-FARM DRYING AND STORAGE OF GRAIN SORGHUM TO BENEFITS OF SELLING IN MARCH AND THE HIGHEST MONTH Basic costs‘ Vflfiteld Total costs Price spread Total benefits jure iweig oss 4 - . i Adel Coastal Central during Interesta Coastal Central March Highest Dlscount March Highest "* Bend Texas dryingz Bend Texas month month -- -- - 4f’ - — — — — — — Cents per 100 pounds — — — — — — — — — — - 34 33’ 8 9 51 47 42 55 0 42 55 34 30 1D 9 53 49 42 55 5 47 6O 34 3U 12 8 54 51 42 55 l0 52 65 34 30 14 8 56 52 42 55 15. 57 70 ‘due to selling ot grain betore March. -: taken from Table 3 assuminghuse at capacity of round bins. . < . puted on the basis of weight loss between moisture level and 12 percent grain and Iuly price less any discount. , Vputed on the basis of an annual rate of 6 percent and discounted Iuly price. Interest charge for highest month is l cent 9 TABLE 8. COMPARSION OF COSTS PER HUNDREDWEIGHT OF ON-,FARM DRYING AND STORAGE OF GRAIN TO BENE OF PUTTING GRAIN IN CCC LOAN Average spread Total benefits i Basic costs‘ Value of ASC Total costs between Iuly price Moisture weight loss . and loan rate D- t y 1 ev e1 during service iscoun A Coastal Central drying charge Coastal Central Central Coastal Central Coastal p Bend Texas Bend Texas Texasi Bend” Texas2 Bend“ Percent —- — — — — — — — — - — Cents per 100 pounds — — — — -— — — — — 15 33 29 8 2 43 39 21 23 ‘l! “I. 21 23 16 33 29 10 2 45 41 21 23 5 26 28 17 33 29 12 2 47 43 21 23 1U 31 33 18 33 29 14 2 49 45 21 23 15 36 38 ‘Costs taken from Table 3 assuming use at capacity oi round bins ’Burleson county. “Calhoun county. However, during the 1957 season, the acreage and production of grain sorghum has increased in both Texas and the nation. With grain sor- ghum a major alternative for acres diverted from cotton, the future holds prospects for continued high production. This will put pressure on the price at harvest time and may lead to a higher spread in prices than in the past. Drying and Storage with Grain in CCC Loan The second situation analyzed is where the farmer puts the grain in CCC loan and forfeits it, Table 8. The cost factors considered are the basic cost factors from Table 7 less the grain in- surance, approximately 1 cent; the Agricultural Stabilization Conservation (ASC) service charge, 2 cents per hundredweight; and the value of the weight 10st. Interest is not computed as a cost since the farmer will receive his cash for the grain very soon after it is put in loan. The benefits are figured on the basis of the average July price for the Eighth District and the loan rate in two counties, Burleson (Central Texas) and Calhoun (Coastal Bend). The benefits were determined by taking the average loan rate for the 9-year- period 1947-48 through 1955-56 for these two counties. The basic benefits from these two counties are less than the usual or average spread in price for the related 10-year period. Comparison of the benefits to the cost for both the Coastal Bend and the Central Texas region COMPARISON OF COSTS ‘PER HUNDREDWEIGHT OF ON-FARM DRYING AND, STORAGE OF G/RAIN SORG l? pay. However, the purchase of a unit based o _ i farmer would dry and store his grain on the fa é less grain insurance. indicates that the benefits do not exceed the Q at any of the moisture levels. Other counti with other loan rates may show slightly differe results from this analysis, but they will not diff =- greatly. This analysis does not indicate it wou not ever pay to put grain sorghum under loan. E certain years on-farm storage, if available, W0 j on the difference of loan price and harvest pri may not be wise. a Drying and Storage for Feeding The third situation analyzed was where for feeding out later in the year rather than se ing at harvest time and "then buying back f feeding purposes, Table 9. The basic cost is t a shown in Table 7 less 2 cents since the grain not have to be loaded out of the building exc during the feeding operation; this cost should i charged to the feeding operation. If grain ' bought and fed to the cattle, this feeding operati will take place also. The other cost items a the weight loss and the interest for the avera feeding period, July through December. 2‘ benefits in this situation are considered to be t price spread, the discount for high moist grain, and a transportation charge to and fr market. It was assumed that the total transpo r tion charge would be 20 cents per hundred V. cents each way). The total benefits are equal or greater than the total costs in both the Co Bend area and Central Texas area with 15 0 TABLE 9. , TO BENEFITS OF BEING ABLE TO STORE RATHER THAN SELL AT HARVEST AND BUY BACK FOR FEEDING Basic costs‘ vflllfield Total costs P T T M M ' g ' t s rice . ranspor- o g 135m Coastal Central wlldlgrings Interes? Coastal Central spread“ Discount tation‘ benefi l Bend Texas drying Bend Texas ' Percent - - - - - - - - - - — cents per 10v pounds - — — — — — — — — - . 15 32 28 8 6 46 42 27 0 20 47 ,7 16 32 28 10 5 47 43 27 5 20 52 17 32 28 12 5 49 45 27 10 2O 57 i 18 32 28 14 5 51 47 27 15 20 62 ‘f ‘Costs taken from Table 3 assuming use at capacity of round ’Interest at 6 percent annually for 5 months. the average len “Average spread between Iuly and 6-month period, October ‘Assumed cost oi hauling to or from market, 10 cents per hundredweight. l0 bins less 2 cents per hundredweight lor unloading. gth of storage. -March. 1947-48 through 1955-56. t-moisture.—As the moisture level increases, benefits become greater than the cost by a tlening margin. This would indicate a long-run p fitability for this type of operation. This is a Hservative analysis in the sense that if the _er were t0 feed out he would still need some - frage since it is doubtful that less than truck of grain would be delivered and he would To necessarily be assured of getting the grain hen and in the condition he wanted it. There p. also some risk associated with the change in 'ce levels of buying the grain later in the year. NON-MEASURABLE RETURNS AND cosrs p- The returns andcosts of owning on-farm dry- j: and storage equipment are relatively easy to Iii; in dollars and cents. However, there are her costs and benefits that are hard to evaluate _ dollars and cents, but which may outweigh easurable costs and benefits. Non-measurable Costs '0 The management and operation of on-farm ing and storage equipment is time consuming. e farmer has to spend time to operate the fans, ake moisture tests and check for insects. i c; There are risks involved to the farmer from lling prices or deterioration of quality. Al- ough good management may reduce these risks _ quality deterioration the farmer must bear em. - ifilf insect control is necessary, the use of fumi- _nts involves some danger. Non-measurable Benefits Grain sorghum can be harvested at the most » nvenient time with on-farm ‘drying and storage . kuipment.‘ Many areas have adequate commer- pl facilities for drying and storing grain, but ring certain periods much grain may be cut in T Short time, and it may be impossible to dry all e grain. Thus, the farmer Would either have 'sell wet grain or let it dry‘ in the field and stand ‘e chance of damage. On-farm drying and storage installations, such gthe quonset type or straight-sidewall building, be used in off-season periods or in low-yield i’ “ s for machinery ‘and supply storage. The ind bins can be used to store other grains and w. PLANNING sQAcE REQUIREMENTS A Many types and sizes of on-farm drying and rage units are available. One or several bins v be purchased. The quonset-type building or straight-sidewall building also may be pur- in different sizes and with different bin p ngements. There are probably two main factors to con- sider in deciding on the size unit._ The first of these factors is the relationship between degree of utilization and cost per hundredweight. Figure 5 shows that the cost per hundredweight in- creases with a decrease in the degree of utiliza- tion. Drying capacity is the second factor. Grain sorghum should not be dried above a A10-foot depth with most of the present types of equipment. If too small a unit is purchased and the attempt is made to dry above a 10-foot depth, there is a danger of loss in quality. If too large a building is purchased, the overhead costs lead to a large total cost per hundredweight. The size of the unit should be based on the expected future acreage of grain sorghum. Once the basic acreage has been determined, there are at least two different ways to determine the size of the unit. One is on the basis of average yields. For example, with an expected acreage of 100 acres and an average yield of 3,000 pounds to the acre, the farmer should buy a unit with a 3,000- ‘ hundredweight capacity. The second alternative is to base the capacity on maximum yields.‘ For example, assuming 100 acres of grain sorghum and a maximum yield of 4,000 pounds to the acre, " ' a building or unit with 4,000-hundredweight ca- pacity should be purchased. This alternative will lead to higher costs per hundredweight during average and below-average yield years. With capacity based on maximum yields, the farmer also would have an extra dryingspace available as a “turning bin” which could be used in case of high moisture grain sorghum and difficulty in drying. ' REDUCING‘ cosrs’ Various steps can betakenin the operation and management of an on-farm drying and stor- age unit to cut costs. ' Insect h Control A good clean-up program before storinggrain will help in effective insect control during storage and the reduction of insect control costs. The bin Walls andthe areas around the building in which the grain is to be stored shouldbe cleaned thoroughly and sprayed with a residual spray. A careful checking for insects, at least once a month during storage; will enable the farmer to get a head start on the insects and thus reduce insect control costs. Hauling From Field to l3in Careful planning as to the means of transpor- tation from the field to the building may reduce this cost. Many farmers reduced this cost by us- ing their own or neighbor’s truck in bringing the grain sorghum from the field to the bin. Plan- ning as to the number of trucks and men to oper- ate them will reduce confusion and expense. ll Increased Utilization oi Equipment It is possible for the farmer to reduce his costs below the drying capacity costs. Ifthe harvesting dates for the grain sorghum are spread out over a period of time, he can utilize the entire space to a depth of less than 8 feet. "The grain sorghum that comes in later can be piled above the 8-foot depth and in this manner the unit utilized beyond the drying capacity. i Labor Utilization Good planning in the use of labor for loading the grain sorghum into the bins and moving out is a source of potential cost reduction. Having three men to do the job of two is costly. Care and attention in planning labor use can reduce this cost considerably. ’ Following Recommended Operating Procedure _ The cost involved when quality is not main- tamed is very great. Most quality losses can be in Texas. prevented with good management and by follovsf” ing recommended operating procedures for drylns»; and storage. f ACKNOWLEQQMENTS Acknowledgement is expressed to the Grai and Feeds Section, Market Organization and Cos . Branch of the Agricultural Marketing Service, U_ S. Department of Agriculture, for help in plan, ning and carrying out this study. I ' ‘a Acknowledgment also is expressed to Robe f Hagan and Vernor Bippert, field workers; an to J. W. Sorenson, J r., and W. S. Allen, Depa A ment of Agricultural Engineering. l Special acknowledgment is made to the fa a. ers who cooperated in the study, and to V. 0; Childs, statistician in charge of the U. S. =' partment of Agriculture Crop Reporting Servii