AN ABSTRACT OF THE THESIS OF
GEORGE E WOOD for the M. S. in Agricultural Economics
(Major)
(Degree)
(Name)
Date thesis is presented May 10, 1966
Title ECONOMIC CONSIDERATIONS IN MARKETING OREGON
GRAIN: FACTORS AFFECT,G COLUMBIA BASIN PRODUCERS
a
Abstract approved
Signature redacted for privacy.
(Major professor)
Wheat is the primary field crop in Oregon. Selection of time of
sale is one of the most important marketing problems facing grain
producers. The objectives of the study deal with economic considerations involved in a wheat producer's marketing process including
factors motivating the time of sale, price analysis, availability and
use of market information, the role of country grain handlers, and
the use of marketing alternatives to improve net income.
The study area consisted of wheat-fallow farms in the Columbia
Basin in north central Oregon. Included are specialized wheat units
in Umatilla, Gilliam, Morrow, Sherman, and Wasco Counties. Data
were obtained through a mail survey of a selected sample of farms
and through personal interviews with country elevator managers.
The most frequently used alternatives for marketing wheat are
selling the grain all at one time (34 percent), selling at more than
one time (23 percent), and placing all or part of the wheat under
government loan (43 percent). The time of marketing wheat varied
from year to year for 70 percent of the growers. Eighty-five percent
of the growers who varied the time of sale did so to sell at a better
price. Barley sales were much more concentrated in the late summer and early fall months than were wheat sales. Wheat is held
longer than barley before selling because of greater fluctuations of
wheat prices during the marketing year.
The months were ranked from high to low according to an ad-
justed seasonal price index. Grower estimates of the high and low
months of wheat and barley prices ranged throughout the adjusted
seasonal price index. Growers have a greater awareness of the
months of low prices than the months of high prices for both wheat
and barley.
In basing their selling decision growers place more importance
on unofficial market information than on official reports. Grain
handlers, newsletters, magazines, and past experience were the most
important unofficial information sources. The weekly grain market
report issued at Portland was the most important official source of
market information. Even though farmers have ready access to gen-
eral market and price information, they expressed a need for more
specific information on the demand and supply outlook in foreign
countries and government grain marketing operations.
Country elevator managers stressed the point they do not offer
advice on when to market. They only present the market information
they have available, and all marketing decisions rest with the grower.
The price growers receive equals coastal price minus transportation,
wheat commission, and elevator charges.
Characteristics of a producer's marketing environment are price
uncertainty, scarcity of relevant market information, and the oligop-
sonistic market structure a producer faces in the sale of his grain.
The following marketing plan was profitable from 1955-56 through
1964-65.
If the domestic cash price minus the effective support rate
for wheat is greater than or equal to $0.10 per bushel during August
then August sale of the grain is recommended. If the difference is
less than $0.10 per bushel, the sale is made in November or December. The net income received from using this alternative for mar-
keting wheat is $0.035 per bushel more than a straight August sale
and more than $0.015 per bushel greater than a straight November
or December sale.
Barley sales in October and November during the same time
period returned about $1.25 per ton more than an August sale. All
calculations include storage charges and the opportunity cost of not
having sold the grain in August, freeing the producer's capital for
other uses.
ECONOMIC CONSIDERATIONS IN MARKETING OREGON GRAIN:
FACTORS AFFECTING COLUMBIA BASIN PRODUCERS
by
GEORGE E WOOD
A THESIS
submitted to
OREGON STATE UNIVERSITY
in partial fulfillment of
the requirements for the
degree of
MASTER OF SCIENCE
June 1966
APPROVED:
Signature redacted for privacy.
Director, Agrrcultural Experiment Station
In Charge of Major
Signature redacted for privacy.
Head of Department of Agricultural Economics
Signature redacted for privacy.
Dean of Graduate School
Date thesis is presented May 10, 1966
Typed by Lucinda M. Nyberg
ACKNOWLEDGMENT
The author expresses his sincere thanks to Dr. G. B. Wood,
Director, Agricultural Experiment Station; Dr. G. E. Korzan, and
Dr. J. G. Youde both of the Department of Agricultural Economics;
all of whom have given their time and guidance in this study. Exten-
sion Agricultural Economist M. D. Thomas deserves special recognition for his help in the formulation of this study. Ray Teal and
Stephen Marks, Extension Agricultural Economists, were helpful in
answering questions. Many others such as Gerald Nibler, State Extension Agent and the County Extension Agents in Umatilla, Morrow,
Gilliam, Sherman, and Wasco Counties were helpful.
Special thanks for her encouragement, interest, and support go
to my wife, Becky. Appreciation is also extended to the individual
farm operators whose cooperation made this study possible.
TABLE OF CONTENTS
Page
INTRODUCTION
Statement of the Problem
Objectives of the Study
AREA OF STUDY AND METHODOLOGY
Area of Study
Methodology
Wheat Grower Survey
Country Elevator Survey
ANALYSIS OF THE MARKETING SURVEY
Time of Sale for Wheat
Factors Affecting the Selling Time of Wheat .
Time of Sale and Factors Affecting the Selling Time of
Barley
Grower Estimates of the Months of Highest and Lowest
Prices for Wheat and Barley
Information Sources
Information Usage
The Role of Country Elevator Dealers in Marketing Grain
PRICE ANALYSIS
Key Indicators in Cash Wheat Prices
What the Producer Should Know About Prices
PRODUCERS' MARKETING ALTERNATIVES: PROFITABILITY AND IMPLICATIONS
Characteristics of the Growers Marketing Environment
Alternative Methods of Selling Wheat
Comparison of Selling Barley Throughout the Marketing Year
1
1
3
5
5
7
8
12
13
13
21
23
25
26
31
34
35
38
44
44
46
51
Summary
Conclusions
55
55
59
BIBLIOGRAPHY
62
APPENDIX I
65
65
SUMMARY AND CONCLUSIONS
An Example of the Grower Research Survey Form, (1965)
Page
APPENDIX II
An Example of the Country Elevator Manager Survey
Form
APPENDIX III
Explanation and Computation of a Seasonal Price Index
for Wheat
72
72
81
81
APPENDIX IV
84
84
APPENDIX V
87
Computation of a Seasonal Price Index for Barley
1965 Wheat Program Worksheet - Probable Effect on
Farm Costs and Returns
87
LIST OF 'FIGURES
Page
Figure
1
2
3
An economic model of the United States Wheat Industry
36
July to June changes in the effective support rate for
No. 1 Soft White wheat from 1954-55 to 1964-65 .
.
37
.
39
The cash price, effective support price, and export
payment for No. 1 Soft White wheat at Portland,
Oregon from July, 1965 through July, 1965 .
.
.
LIST OF TABLES
Page
Table
I
II
III
IV
V
NUMBER OF WHEAT GROWERS IN THE POPULATION, NUMBER OF SURVEY FORMS DISTRIBUTED
AND RETURNED IN EACH COUNTY OF THE STUDY
AREA, 1965
11
GROWER USE OF MARKETING ALTERNATIVES FOR
WHEAT AND THE MONTHS OF ACTION, 1964-65.
15
NUMBER OF GROWERS SELLING WHEAT AT THE
SAME TIME EVERY YEAR AND THE NUMBER OF
GROWERS VARYING THEIR SELLING TIME FROM
YEAR TO YEAR
16
THE EFFECT OF REPAYMENT OF DEBT ON THE
SELLING TIME OF WHEAT, 1964-65
18
THE INFLUENCE OF FEDERAL AND STATE INCOME TAX ON GROWERS SELLING WHEAT AFTER
JANUARY 1
19
VI
INFLUENCE OF A SHORT OR LONG CROP ON THE
SELLING TIME OF WHEAT
20
VII
BARLEY SALES BY MONTH, ALL OF THE CROP,
PART OF THE CROP, 1964-65
22
VIII
NUMBER OF GROWERS WHO SELL BARLEY AT THE
SAME TIME EVERY YEAR, NUMBER WHO VARY
THEIR SELLING TIME FROM YEAR TO YEAR AND
23
THE NUMBER NOT RAISING BARLEY, 1964-65 .
IX
NUMBER OF TIMES GROWERS ESTIMATE EACH
MONTH AS THE HIGH AND LOW MONTH FOR WHEAT
24
PRICES
_
X
NUMBER OF TIMES GROWERS ESTIMATE EACH
MONTH AS THE HIGH AND LOW MONTH FOR BARLEY
25
PRICES
Page
Table
XI
XII
XIII
IMPORTANCE OF OFFICIAL REPORTS AND OTHER
INFORMATION SOURCES TO GRAIN GROWERS IN
BASING THEIR SELLING DECISION, 1964-65
27
NUMBER OF GROWERS INDICATING A NEED FOR
MORE SPECIFIC MARKET INFORMATION ON WHICH
TO BASE THEIR SELLING DECISIONS, 1965. . . .
28
COMPARISON OF SELLING 10,000 BUSHELS OF
WHEAT IN AUGUST WITH SELLING DURING EACH
OF THE REMAINING MONTHS OF THE MARKETING YEAR, OPPORTUNITY AND STORAGE COSTS
CONSIDERED
XIV
XV
XVI
47
SPREAD BETWEEN AVERAGE CASH PRICE AND
EFFECTIVE SUPPORT RATE IN CENTS PER BUSHEL,
AUGUST THROUGH JUNE, 1955-56 THROUGH
50
1964-65
COMPARISON OF SELLING 200 TONS OF BARLEY
IN AUGUST WITH SELLING DURING EACH OF THE
REMAINING MONTHS OF THE MARKETING YEAR,
OPPORTUNITY AND STORAGE COSTS CONSIDERED.
52
ARRAYS OF PERCENTAGE (SEASONAL RELATIVES)
FOR OREGON NO. 1 SOFT WHEAT PRICES AT
PORTLAND, JANUARY, 1956 THROUGH DECEMBER,
1964
83
XVII ARRAYS OF PERCENTAGES (SEASONAL RELATIVES)
FOR OREGON NO. 2 WESTERN BARLEY PRICES AT
PORTLAND, JANUARY, 1956 THROUGH DECEMBER,
1964
85
ECONOMIC CONSIDERATIONS IN MARKETING OREGON GRAIN:
FACTORS AFFECTING COLUMBIA BASIN PRODUCERS
I.
INTRODUCTION
Statement of the Problem
Wheat is the primary field crop in Oregon. In the 1964-65 crop
year, Oregon produced 27.7 million bushels of the 124.5 million
bushels of wheat produced in the Pacific Northwest. The soil, cli-
mate and topography of the interior plateaus east of the Cascade
Mountains provide natural features favorable for growing wheat. The
Columbia Basin area produces over 90 percent of the wheat grown in
the Pacific Northwest (19, p.
1).
This high interior plateau occupies
the central part of Washington and north central Oregon.
Recent relevant literature concerning the Pacific Northwest
wheat industry includes a thorough study of the supply, distribution,
and value of wheat made through the Pacific Northwest Wheat Project (19). Hollands has done comprehensive studies of the price
mechanism of wheat, government programs for wheat, and a general
view of the Pacific Northwest wheat industry (7, 8). Hollands and
Thomas cooperated in the preparation of a series of special papers on
domestic and international wheat programs, policies, practices, and
problems (9). Part of a broad program of research by the Economic
Research Service is a study of the changing patterns of grain
2
transportation in the Pacific Northwest (17). These studies have
been concerned with the wheat industry as a whole.
On the individual grain producer's level research has promoted
efficient production techniques through the development and improve-
ment of tillage and harvesting equipment to decrease costs of operation. Disease-resistant and higher-yielding varieties of grain have
been developed. Chemical treatments aid in controlling weeds and
insects. Such research has solved many of the complex production
problems of Oregon wheat growers.
Research to date has neglected one area of concern. Little work
has been done in studying the marketing process of the individual
grower. Perhaps this is because government programs assure parti-
cipating growers a certain stability of income and seemingly have
lessened the managerial decisions a wheat farmer makes in marketing his product. For instance, growers who participate in the govern-
ment price support program by placing their wheat under loan after
harvest are assured of receiving the current effective support price
for their area. If this price is satisfactory to the grower he no longer needs to speculate about the cash market price. His marketing
function is ended when his grain is taken over by the Commodity
Credit Corporation.
This point raises the question of whether farmers' lack of choice
about price and about when or where to market make them passive
3
participants in the market. Little is known at present about the
factors grain growers consider in deciding when and where to sell
their crops. Do growers need information that is presently not
available to them to make better selling decisions? How do growers
answer the question, "When should I sell my grain to obtain the high-
est return?" The answer to this question is speculative for many
growers. Success or failure depends on making the right forecast
about subsequent price behavior. This is not an unusual experience
for farmers. Selecting the time to sell is one of the most important
marketing problems of farmers.
Many of Oregon's wheat producers also grow barley. Therefore,
it was possible to obtain information on marketing barley at the time
information was obtained on marketing wheat. Emphasis of this study
will be on wheat marketing, but consideration will also be given barley marketing when applicable.
Objectives of the Study
Objectives of the study are: (1) to determine when Oregon grain
growers sell their wheat and barley; (2) to identify factors that motivate the time and place of sale; (3) to determine seasonal variations
in wheat and barley prices; (4) to determine the use of market information and the need for more specific marketing information in basing the selling decision; (5) to gain a better understanding of the
4
role of the country elevator dealers in the grower's marketing process; and (6) to determine how growers might improve marketing
in order to increase income.
5
II.
AREA OF STUDY AND METHODOLOGY
Area of Study
The area studied is the wheat summer-fallow area of north central Oregon called the Deschutes Plateau. A subdivision of the
Columbia Basin wheat area, the Deschutes Plateau is the wheat belt
of Oregon and includes parts of Wasco, Sherman, Gilliam, Morrow,
and Umatilla Counties. The region is bordered on the north by the
State of Washington with its similar wheat-fallow region, on the west
by the Cascade Range, on the east by the Blue Mountains, and by the
mountains of Jefferson, Wheeler, and Grant Counties on the south.
The 1964 preliminary harvested area estimates are composed
of 527,000 acres of wheat and 197, 500 acres of barley.
1
Of the total
harvested acres in Oregon, the five counties under study grew approximately 61 percent of the wheat and 46 percent of the barley raised in
the state. The Columbia Basin wheat area represents one-tenth of
the land area, but nearly one-fourth of the land in farms within the
state. Grain is the most important crop in each of the five counties
but agriculture in each county differs from that in the others because
of topography, soils, and climate (16, p. 4-6).
In 1964 Umatilla County, the largest in the Oregon wheat area,
'Cooperative Extension Service, Corvallis, Oregon. Commodity
data sheets "Wheat" dated August 24, 1965 and "Barley" dated August
30, 1965.
6
produced 23 percent of the wheat and 16.7 percent of the barley har-
vested in the state. The north central part is the major wheat growing area of the county. This section has sufficient moisture for
annual cropping which normally consists of growing wheat in rotation
with green peas. Range cattle, sheep, dairy cows, hogs, and irri-
gated fruit and vegetable crops contribute to a large amount of diversification in the county. Large sections of the southern and east-
ern parts are in national forests.
Sherman County, the smallest of the five counties, follows
Umatilla in the production of wheat and barley. However, it is sub-
stantially lower, producing 11.9 percent of the wheat and 8.8 percent
of the barley raised in Oregon. Grain production is more specialized
and operating units are fairly large in comparison with the other
counties. There are two basic reasons for this. First, lack of
moisture necessitates a wheat summer-fallow rotation. Second,
there is a fairly small acreage in steep slopes of little agricultural
value; consequently, there is not enough grazing land available to
support a very large livestock enterprise per farm.
Morrow County closely follows Sherman in wheat and barley
production. The topography of the central part is level to gently
rolling and land used for wheat production is concentrated in this area.
Enterprises are divided between grain farms and stock ranches. The
grain farms usually lack sufficient range for a livestock enterprise
7
and stock ranches have little land that can be used for crop production.
Most Gilliam County farms derive their incomes from the sale
of both grain and cattle. The noncropland is fairly well distributed
throughout the county and, in contrast to Morrow County, only a
few farms have insufficient rangeland for a minimum livestock enter-
prise.
In Wasco County wheat production is the most important agri-
cultural enterprise. As in Umatilla County, agriculture as a whole
is more diversified than in the centrally located counties in the study
area. Productive soil and favorable topography make the northeast.
ern part of the county the major wheat producing area. Livestock,
dairy and poultry production, fruits, vegetables, and forest products
are all of some significance as farm products.
Methodology
The study has an analytical phase built on information from
wheat producers, country elevator managers, and price analysis.
Price data were obtained from releases by the Oregon Cooperative
Extension Service, from the Portland Grain Exchange records, and
from the records of the United States Department of Agriculture
Grain Marketing Division at Portland. The general steps of analysis
and the statistical techniques used in the price analysis will be
8
presented as they are used in the later chapters. The remainder of
this chapter will describe the procedure used in defining the popula-
tion, selecting a sample, and describing the sampling technique.
Wheat Grower Survey
In studying the decision making process of wheat growers, it
was considered essential to select a population from growers whose
primary source of income was from the sale of wheat. By selecting
a population of specialized wheat units this marketing study centers
on the core of Oregon's wheat producers.
How much cropland is required for a specialized wheat unit?
Barkley found that cost curves on specialized wheat-fallow farms in
Oregon's Columbia Basin fell sharply until reaching approximately
1,000 acres and were quite flat to 3,500 acres (2, p. 58-66). An
economic farm unit committee for Umatilla County recommends a
minimum of 960 acres of farmland for an economic wheat unit (3,
p. 10).
An allotment factor of approximately 60 percent of the annual
cropland is the result of government restrictions on wheat acreage.
For purposes of this study the preceding information is used as an
aid in the following breakdown of a specialized wheat unit.
500 acres
Summer Fallow
500 acres
Crops
.60
Allotment Factor
300 acres wheat
200 acres barley or other use
1000 acres
Total Cropland
9
From the county Agricultural Stabilization and Conservation
Service a listing of all farms with a wheat allotment was obtained for
each of the five counties in the study area. Farms with less than
300 acres wheat allotment in 1964 were eliminated from the list because they did not fit the specialized wheat unit description. Also
eliminated were those farms with over 500 acres of rangeland, as
this would allow a livestock enterprise of sufficient size to decrease
the importance of the wheat operation. Total farms in the population
are derived from the following breakdown.
1726
Total farms with a 1964 wheat allotment
Total farms with less than 300 acres of wheat allotment 669 1197
528
Total farms with over 500 acres of rangeland
529
Total farms in the population
In the collection, processing, and tabulation of data a sampling
procedure rather than a complete enumeration was used. The sample
size had to be large enough to yield statistically representative and
significant results in all the proposed tabulations. Factors which
affect the necessary sample size are the degree of heterogeneity,
amount of breakdown, collection problems, and the type of sampling
(13, p. 294-326).
If there had been more homogeneity in the population, fewer
cases would have been required to yield a statistically reliable sample. The major similarity among the individuals of the population
with respect to marketing grain, was felt to be the producer's desire
10
to obtain the highest return from his crop. Reaction to price uncertainty, however, is met differently by each individual.
This in-
troduces a large degree of heterogeneity into the population.
Sample size and collection problems are important in terms of
time and money. A sample, rather than a population study, was
used because of the large area within the geographical bounds of the
study and the difficulty in arranging interviews with producers.
Stratification by amount of wheat production requires a sample of
sufficient size to be representative.
A mail research survey was used. The sample was not a probability sample since it was anticipated that half of the surveys forms
distributed would not be returned. For this reason the degree of pre-
cision could not be measured. A subjective sample size of 15 to 20
percent was selected after giving consideration to heterogeneity,
collection problems, and stratification.
A survey form was mailed to approximately 40 percent of the
population. Through their district supervisor the county extension
agents were contacted. A letter explaining the objectives of the study
and the necessity of the survey, together with a suggested letter of
transmittal to the wheat growers, was sent to each of the five county
extension agents. The research survey form, an addressed return
envelope, and the letter of transmittal were distributed to each grower in the sample by the county agents.
11
The grower sample was obtained in the following manner. The
population was numbered from one to 529. A number was selected
from a random numbers table to begin sampling. From that point
every third name was chosen until the desired sample size of 40 percent was reached. Corrections and deletions by the county agents
reduced the number of survey forms distributed to 203 or 37 percent.
To insure a geographical cross section, the source list was arranged
by counties before sampling.
The population and the survey forms distributed and returned
are shown in Table I. Of the 106 survey forms returned, nine were
too incomplete to be used in tabulations.
TABLE I.
NUMBER OF WHEAT GROWERS IN THE POPULATION,
NUMBER OF SURVEY FORMS DISTRIBUTED AND RETURNED IN EACH COUNTY OF THE STUDY AREA, 1965.
Number of Survey
County
Number of Growers
in the Population
Wasco
30
12
9
114
45
22
40
16
6
89
35
16
256
95
53
529
203
106
Sherman
Gilliam
Morrow
Umatilla
Totals
Forms Distributed
Number of Survey
Forms Returned
The research survey form2 contained questions of importance for
2An
example of the research survey form is shown in Appendix I.
12
all producers with grain to sell. A pretest of four grain producers
and two grain marketing specialists was made. After the discussion,
comments, and criticism, the questionnaire was revised.
Country Elevator Survey
To supplement the information obtained from wheat producers
and to realize a more complete picture of grain marketing at the producer and country level, a survey3 was taken from several country
elevator managers. A total of seven elevator managers was personally interviewed. Those interviewed were managers of five major
cooperatives and two independent buyers. At least one was located
in each of the five counties.
The managers were questioned about the extent and type of ad-
visory service provided to grain producers. They were asked the
extent growers seek their counsel on market information and the time
to sell. Questions concerning elevator practices and policies which
affect the price a grower receives for his grain were included. These
practices and policies include blending, buying grain to fill out a
shipment, the use and availability of transportation, and the timing
of price changes. Another area of inquiry was the extent managers
bought grain in anticipation of sales or sold grain in anticipation of
purchases.
3An
example of the country elevator form is shown in AppendixII.
13
III.
ANALYSIS OF THE MARKETING SURVEY
The purpose of this chapter is to investigate the time of sale for
wheat and barley, the factors affecting the time of sale, growers'4
estimates of the months of high and low prices for wheat and barley,
information sources and usage, and the role of country elevator deal-
ers in the growers' marketing process. Data were stratified according to the following classes of 1964 wheat production: under 10,000
bushels, 10,000 to 20,000 bushels, and over 20,000 bushels. The
number of growers in each production class is 29, 40, and 28 respectively.
Time of Sale for Wheat
For almost a year the wheat producer has invested considerable
time and money in the production of his crop. For a specialized
grain farm the years' income is dependent on the sale of that crop.
A wise producer gives much consideration to market conditions in
arriving at a selling time. General marketing alternatives are:
selling all or part of the crop at harvest, or shortly thereafter, so
that storage rates are not charged; holding the crop or the remainder
of the crop until a more favorable market price occurs; selling after
4Hereafter, the word growers is used synonomously with the
97 respondents to the survey. The word producer will be used for
grain growers in general.
14
January 1, for tax reasons. Another alternative is placing all or
part of the grain under government loan. The grain can be redeemed
by paying back the loan and interest or, if no action is taken by the
grower, the grain is taken over by the Commodity Credit Corporation after the redemption date of March 31. The use of the various
marketing alternatives by the survey respondents is shown in Table
Observations from Table II illustrate that each alternative or a
combination of alternatives is commonly used. Thirty-four percent
of the growers sold their crop all at one time, whether after harvest
or at some other time within the marketing year. A majority of the
43 percent placing all their wheat crop under loan did so in August,
September, and October. The remaining growers sold or placed
their crop under loan during two or more different months.
The stratification shows an increasing use of the loan program
and redemption of the grain as the amount of wheat production is in-
creased. About 51 percent of the growers producing 10,000 bushels
or less placed all or part of their grain under loan. Of these only
one-third redeemed their grain. In the 10,000 to 20,000 bushel class
60 percent used the loan and 63 percent redeemed their grain. About
two-thirds of the growers producing over 20,000 bushels of wheat
placed all or part of their wheat under loan, and 70 percent redeemed
their grain before take-over by the Commodity Credit Corporation.
Production
class (bu.)
Jul
1
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Totala
Number of growers using alternative and month of action
GROWER USE OF MARKETING ALTERNATIVES FOR WHEAT AND THE MONTH OF
ACTION, 1964-65.
2
0
0
13
5
2
0
1
0
1
0
1
under 10,000 1
1
0
0
12
0
1
1
4
0
1
1
1
2
10-20,000
1
2
0
8
2
0
0
0
2
0
0
1
0
over 20,000
1
33
2
1
3
5
0
2
2
3
11
2
1
Total
1
0
15
3
3
1
1
1
1
1
1
2
More than
under 10,000 0
0
13
0
3
0
0
1
2
0
1
4
1
1
one sale
10-20,000
0
15
3
2
1
0
2
3
2
0
1
0
1
of wheat
over 20,000
4
6
2
0
1
43
2
4
4
2
7
7
4
Total
0
0
1
6
0
0
0
0
0
0
2
9
Placing all
under 10,000 0
0
17
2
0
0
0
0
0
0
7
5
2
wheat under 10-20,000
0
15
2
0
0
0
0
0
0
3
0
9
1
gov't. loan
over 20,000
0
4
5
0
0
41
1
0
0
22
8
1
0
Total
6
2
0
0
1
1
0
0
0
1
1
Placing
0
under 10,000 0
0
0
7
1
0
0
0
0
0
0
6
0
0
part of the
10-20,000
5
0
0
1
1
0
0
0
2
1
0
0
0
wheat under over 20,000
0
4
18
2
0
0
2
1
1
0
0
0
8
gov't. loan
Total
1
5
3
0
0
0
1
0
0
0
0
0
Redeeming
under 10,000 0
2
1
15
7
3
1
0
1
0
0
0
0
0
wheat placed 10-20,000
2
6
1
1
14
2
0
1
1
0
0
0
0
under gov't. over 20,000
3
3
34
5
416
1
1
0
1
0
0
0
loan
Total
(Source: 1965 Grower Survey)
aCombined totals of all marketing alternatives are greater than the number of respondents. The
reason is duplication when growers sell in more than one month. Placing all or part of the grain under
government loan may also take place in more than one month.
Selling all
wheat at
one time
alternative
Marketing
TABLE II.
16
Twenty-eight growers indicated they sold their wheat at the same
time every year while 65 growers varied their selling time from year
to year. Table III shows this breakdown by production class. Grow-
ers with farm storage are more likely to vary their time of selling
from year to year. Of the 33 growers with farm storage 25 varied
their selling time while only 40 of 65 growers without home storage
did likewise.
NUMBER OF GROWERS SELLING WHEAT AT THE
SAME TIME EVERY YEAR AND THE NUMBER OF
GROWERS VARYING THEIR SELLING TIME FROM
YEAR TO YEAR.
TABLE III.
Number of growers in each production class
10,000-20,000 Over 20,000
Under 10,000
bushels
bushels
bushels
Selling
Time
Tertal
Same every
year
11
12
5
28
Varies from
year to year
16
27
22
65
2
1
1
4
40
28
97
No answer
29
Totals
(Source: 1965 Grower Survey)
Factors Affecting the Selling Time of Wheat
A determination as to why 70 percent of the growers did not mar-
ket at the same time every year was approached four ways. First,
the grower was asked the month and day his 1964 wheat was sold.
17
The results by month can be reviewed in Table U. If there was more
than one selling time the grower was asked why he sold at different
times. Secondly, the grower was asked, "Do you usually sell at the
same time every year? If not, why does the selling time vary?"
The third approach consisted of two questions. "Does repayment of
debt (i.e. operating loans) influence your selling time?" "To what
extent is selling after January 1 influenced by the federal and state
income tax situation?" Both questions were to be answered by mark-
ing "very little,',' "some," or "very much." A fourth question concerned the size of crop and its influence on the selling time.
Growers who sell at varying times must be motivated to do so
for one reason or another. Growers not using the loan are free to
sell whenever they wish. Those using the loan must apply before
February 28, and the redemption date is March 31. A grower may
still sell after this date if there has been no call for his grain by the
Commodity Credit Corporation.
Of the 65 growers in the sample who indicated they did not sell
at the same time every year, 55 gave as one reason, "trying to sell
at a better price. " Other reasons which affected the selling time
and which were mentioned singly or in combination with another rea-
son are the need of money, tax considerations, farm storage, and
the sale of grain for seed.
Findings of the question on whether repayment of debt had
18
"very little," "some," or "very much" influence on the selling time
of wheat are shown in Table IV.
TABLE IV. THE EFFECT OF REPAYMENT OF DEBT ON THE
SELLING TIME OF WHEAT, 1964-65.
Production
class
(bushels)
Very
little
Number of Growers
Very
Some
much
No
answer
Total
Under 10,000
11
7
8
3
29
10,000 to 20,000
14
8
8
0
40
Over 20,000
12
11
5
0
28
47
26
Totals
(Source: 1965 Grower Survey)
21
3
97
Slightly under 50 percent of the growers stated that repayment
had "very little" influence on their selling time. For those influenced
by debt repayment, about 27 percent indicated "some" and about
22 percent indicated that repayment of debt was "very much" a factor
on the selling time.
Table V shows responses to the question "To what extent is selling after January 1 influenced by the federal and state income tax
situation."
The 53 growers who are influenced "very little" by tax consid-
erations include at least ten growers who are on a fiscal year October
1 to September 30 or on the accrual system for tax purposes. Also
included are those growers who sell at the same time every year,
19
TABLE V.
THE INFLUENCE OF FEDERAL AND ST NTE INCOME
TAX ON GROWERS SELLING WHEAT AFTER JANUARY
1.
Production
class
(bushels)
Number of Growers
Very
little
Some
Very
much
Under 10,000
16
2
10
1
29
10,000 to 20,000
22
8
9
1
40
Over 20,000
15
6
6
1
28
53
Totals
16
(Source: 1965 Grower Survey)
25
3
97
No
answer
Total
before January 1. Once a pattern of selling has been established it
would be difficult to change, as income tax on the sale of two crops
in one year would be very punitive. For many, however, unevenly
divided cropland or large differences in back to back yields and production can make managing income for tax considerations a very important item in the economics of farming. Hence, it may sometimes
be advisable to carry over some of the crop into the next year before
selling.
The fourth approach in studying the varying selling times consisted of two questions.
"When you have a short crop do you sell
earlier or later than usual?" "When you have a big crop do you sell
earlier or later than usual?" The results of this approach are listed
in Table VI.
The growers were asked to explain why the selling time was
20
TABLE VI. INFLUENCE OF A SHORT OR LONG CROP ON THE
SELLING TIME OF WHEAT.
Production
class
(bushels)
Under 10,000
SHORT 10,000-20,000
CROP Over 20,000
Totals
Number of Growers
No
No
Earlier Later Difference Answer Total
8
1
20
0
29
6
0
33
1
40
6
0
21
1
28
20
1
74
2
97
7
19
1
29
2
33
4
40
5
21
2
28
14
73
7
97
2
Under 10,000
10,000-20,000 1
LONG
CROP
0
Over 20,000
3
Totals
(Source: 1965 Grower Survey)
earlier, later, or no different with a short or a long crop. The predominant reason for selling earlier with a short crop was to pay
debts. Other reasons given were to balance income, to sell on a
better market, and to do away with storage costs. The reason given
by those selling earlier with a long crop was not enough farm storage. The one respondent selling later with a short crop did so to
sell on what he felt was a better market. Those with a long crop
selling later did so for tax reasons and to sell on a better market.
Not all growers gave an explanation for their actions. Overall, the
size of the crop had no influence on the selling time for three out of
four growers.
21
Time of Sale and Factors Affecting
the Selling Time of Barley
The selling time of barley is much more concentrated in the late
summer and early fall months than is the sale of wheat. Barley sales
by month are shown in Table VII. Selling to local and central Oregon
feeders and selling seed for spring planting account for practically
all the barley sold after the first of the year.
Sixteen of the 22 barley sales from January through June were
for feed or seed. Fifty-nine growers sold all their barley at one time
with 70 percent of these sales occurring in the July through October
period. Nineteen growers did not raise barley. Price, selling for
feed or seed, and the need of money were the reasons mentioned for
selling at different times. Of the 78 growers harvesting barley in
1964, 41 held wheat longer than barley before selling, six held barley
longer than wheat and the remainder sold both at the same time or
else there was no particular pattern. Invariably, the reason given
for holding wheat the longest was the greater price fluctuations of
wheat during the marketing year. Using barley or selling it for feed
or seed accounted for those few indicating they held barley the longest.
A breakdown of growers selling barley at the same time every
year is listed in Table VIII.
Only seven of the 30 growers selling barley at the same time
every year had farm storage. As with wheat, those growers with
Under 10,000
10-20,000
Over 20,000
Total
Number of growers using alternative and month of action
8
0
3
0
3
1
1
1
1
0
1
1
0
0
0
0
1
1
0
0
0
2
7
2
0
2
0
0
2
1
1
3
1
0
2
0
2
0
2
0
0
0
0
3
0
3
0
3
1
1
1
0
2
0
2
3
1
1
1
0
2
1
1
0
0
0
0
0
0
0
0
0
2
1
1
20
2
16
2
59
26
23
10
aCombined total of growers use of marketing alternatives is greater than the number of growers
raising barley. The reason is duplication when growers sell in more than one month.
0
0
0
0
3
26
4
4
1
4
1
0
4
5
11
10
0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Totala
More than Under 10,000
0
one time
3
10-20,000
0
of barley
Over 20,000
3
sales
Total
(Source: 1965 Grower Survey)
All barley
sold at
one time
of sale
Method
Production
class
(bushels)
TABLE VII. BARLEY SALES BY MONTH, ALL OF THE CROP, PART OF THE CROP, 1964-65.
23
TABLE VIII. NUMBER OF GROWERS WHO SELL BARLEY AT THE
SAME TIME EVERY YEAR, NUMBER WHO VARY
THEIR SELLING TIME FROM YEAR TO YEAR AND
THE NUMBER NOT RAISING BARLEY, 1964-65.
Number of
Growers
Selling at the
same time
every year
Varying selling
time from year
to year
Production Class (bushels)
10,000-20,000 Over 20,000
Under 10,000
Total
6
14
10
30
11
22
15
48
4
3
19
12
Not raising
barley
(Source: 1965 Grower Survey)
farm storage are better able to vary their selling time.
It is important to note that barley growers, especially in Umatilla, Sherman, and Wasco Counties, need not rely on a local grain
elevator to market their barley. Feeders in Umatilla County and in
the central Oregon area compete with the Portland buyers to the advantage of the barley producers.
Grower Estimates of the Months of Highest
and Lowest Prices for Wheat and Barley
How informed is the Columbia Basin grower on the months of
highest and lowest prices? There is strong evidence that a great
deal of uncertainty exists in this area.
For wheat, 30 respondents indicated they did not know or had no
24
opinion as to when prices were high or low. Fourteen growers gave
only a high or a low estimate but not both. In Table IX, the months
are ranked according to an adjusted seasonal price index which covers the period from January, 1956, to December, 1964. 5 The first
row of Table IX contains the number of growers estimating that particular month as high and the second row contains the number of
growers estimating that particular month as low.
TABLE IX. NUMBER OF TIMES GROWERS ESTIMATE EACH
MONTH AS THE HIGH AND LOW MONTH FOR WHEAT
PRICES. MONTHS RANKED ACCORDING TO AN ADJUSTED SEASONAL PRICE INDEX. a
Months ranked from high to low according
to seasonal price index
times each
month is: Apr Feb May Mar Jan Dec Nov Oct June Sept Aug July
Number of
Estimated
as high
6
12
6
11
Estimated
1
0
1
3
as low
(Source: 1965 Grower Survey)
10
8
5
1
7
2
12
12
4
7
3
3
11
12
19
11
aComputation of the seasonal price index for wheat is presented
in Appendix III.
The highest month, April, was estimated as the highest only six
times while the lowest month, July, was estimated to be highest 12
times. Many growers estimated more than one month as high or low.
For this reason the total number of estimates is larger than the
5Computation of the seasonal price index for wheat can be found
in Appendix III.
25
number of growers doing the estimating. Observations from Table
IX indicate that the majority of the growers are much better informed
as to periods of low wheat prices than periods of high wheat prices.
Table X is derived by using the same approach for barley as was
used for wheat.
TABLE X. NUMBER OF TIMES GROWERS ESTIMATE EACH
MONTH AS THE HIGH AND LOW MONTH FOR BARLEY
PRICES. MONTHS RANKED ACCORDING TO AN ADJUSTED SEASONAL PRICE INDEX. a
Months ranked from high to low according
to seasonal price index
Number of
times each
month is: Dec Jan Nov Feb Apr Mar Oct May Sept June July Aug
Estimated
as high
6
4
10
8
Estimated
2
1
1
0
as low
(Source: 1965 Grower Survey)
4
10
2
2
2
4
13
13
1
1
4
5
8
4
18
17
aComputation of the seasonal price index for barley is presented
in Appendix IV.
It should be pointed out that the high price during a particular
month may not maximize revenue when storage and other costs are
considered.
Information Sources
There are several official reports and a large number of unofficial sources of market information available to the wheat
Z6
producer. A list encompassing the most pertinent disseminated information was broken into three categories: "not important,"
"fairly important, " and "very important. " Growers were asked to
check the category of importance for each information source. A
fairly large number of growers left the importance of one or more
sources unchecked. It is unknown if the sources unchecked were not
received or unavailable. Tabulations on the use of information
sources are presented in Table XI.
It can be pointed out from Table XI that grain dealers, past experience, newsletters and magazines constitute the growers' most im-
portant information sources. The weekly grain market report issued
at Portland stands out as the most valuable official report. These
data suggest there is more information available than farmers receive or consider important. This conclusion is drawn from the
large number of sources left unmarked or marked "not important.
Information Usage
Do growers consider the available grain marketing information
adequate, or would most growers like more specific information on
which to base their selling decisions? To answer this question a
series of six questions was asked. The results of this portion of the
survey are tabulated in Table XII.
Apparently, farmers have ready access to marketing and price
7
Monthly and quarterly crop statistics
released at Portland
Grain- handlers
Your past experience
Other
(Source: 1965 Grower Survey)
Radio reports
Local newspapers
Other newspapers
Newsletters, magazines
Other official reports
circulars
25
2
33
6
36
25
31
19
17
36
16
22
19
2
4
3
8
16
19
14
17
23
21
15
97
97
87
97
97
97
97
97
97
97
97
97
97
Total
35
27
28
45
40
51
59
38
40
47
24
No
Answer
Not
Important
15
14
31
27
22
41
Fairly
Important
12
10
11
7
Weekly grain and hay market review
issued at Corvallis
Oregon farm and market outlook
17
Weekly grain market reports issued
at Portland
Information Sources
Very
Important
TABLE XI. IMPORTANCE OF OFFICIAL REPORTS AND OTHER INFORMATION SOURCES TO
GRAIN GROWERS IN BASING THEIR SELLING DECISION, 1964-65.
28
TABLE XII. NUMBER OF GROWERS INDICATING A NEED FOR
MORE SPECIFIC MARKET INFORMATION ON WHICH
TO BASE THEIR SELLINQ DECISIONS, 1965.
Could you use more specific
information on:
No
answer
Total
Yes
No
recent price trends?
58
22
17
97
price trends of previous years?
49
28
20
97
grain offered in your marketing
area the previous 30 days?
50
30
17
97
inventory situation locally
and at Portland?
67
16
14
97
demand and supply outlooks in
foreign countries?
81
6
10
97
government grain marketing
operations here and elsewhere? 78
(Source: 1965 Grower Survey)
5
14
97
information. However, they encounter considerable difficulty in securing certain kinds of information on these subjects or they do not
use the information that is available. This finding is supported by an
Interstate Managerial Survey to indicate farmers opinions concerning probable use, importance, and difficulties encountered in acquiring and using information.
Responses to the ranking questions for the different
types of information indicate that farmers regard
price information to be the most important type of
information. This conclusion holds with respect to
setting up (organizing) and operating farms regardless of whether the objective is to get "the most out
of life" or "profits." Of the 920 farmers who ranked
the different kinds of information, 352 indicated that
29
price information was the most important to them in
setting up and operating farms. Production methods
was ranked first by 325 farmers while fewer farmers
ranked institutional, human information and new technology first (10, p. 29).
When farmers were asked to indicate the least difficult kinds of
information to secure the following results were reported.
In all, 241 farmers indicated that price information
was the least difficult to secure while only 60 farmers
felt the same way about new technology. The second
greatest number of farmers indicated that production
information was the least difficult to secure while human and institutional information were nearly tied for
third (10, p. 32),
When remarking on informational needs the growers nearly
always mentioned, sometimes vehemently, the need for more information on government operations. In planning their marketing,
growers were hampered by the uncertainty associated with both Public
Law 480 announcements and the amount and timing of wheat to be
offered by the Commodity Credit Corporation.
On the local level the growers want to know the prices the feed-
ers are willing to pay for feed grain, the local grain inventory situation, and they want to have greater coverage of the daily Portland
price s.
Before selling, all but five respondents discussed market condi-
tions with someone. Grain dealers were listed as the most important
source of market information in Table XI. It logically follows that
they are the most important when market conditions and prospects
30
are discussed. This is pointed out in the following list of market
information discussants.
Grain dealers
Wife
Other farmers
Cooperator, partner or landlord
Banker
County agent
86 percent
60 percent
37 percent
31 percent
23 percent
3 percent
The wife was second only to the grain dealers in discussing mar-
ket conditions but it must be remembered she is an integral part of
the marketing decision unit. Her role in furnishing market information may be questionable.
The last subject to be covered from the grower survey analysis
relates to changes in the marketing of grain in the last ten years.
Twenty-eight growers, or almost 29 percent, stated there had been
a change in the way their grain was marketed during the past decade.
Eight growers presently market directly to the Columbia River by
truck and then by barge to the coastal terminals. Eight growers now
contract the sale of all or part of their grain before harvest. Other
changes are the erection of farm storage, varying the time of sale,
and direct delivery to feedlots. In Sherman County, the 1965 flood
washed the railroad tracks out, so the method of shipment has
changed from rail to truck.
31
The Role of Country Elevator Dealers
in Marketing Grain
The importance of grain handlers as a source of market information and their part in discussing market conditions and prospects were
investigated in the preceding sections on information sources and
usage. A survey of seven elevator managers, all of whom bought
grain the year round, was made to better understand their role in the
growers' marketing process.
Of the seven managers, only one encouraged growers to sell at
certain times. He did this only when he was certain that the market
price was going to drop. When the question was turned around,
growers were not discouraged from selling at specific times except
by one grain handler. In this case, if a grower was to sell after the
first of the year, he may be advised to wait until his storage period
was about to change, depending on the price prospects at that time.
Elevator managers were asked to what extent growers seek
counsel on market information and selling time. Once again it was
emphasized that advice, as such, was not given, although all managers were willing to give market information when requested. Personal contact was the leading method of disseminating information
from the handlers to the growers. Other methods utilized were a
daily price board in the office window, daily broadcasts on the local
radio station, and printing current market prices in the local weekly
32
paper.
Each handler was asked his personal opinion regarding what pre-
vented growers from selling their grain at a time so as to maximize
returns. Inability to judge the market due to government operations
was given as the primary cause. Other reasons given were failure
of growers to pay attention to the market or to keep in touch: necessity to pay back operating loans; selling at a predetermined price
without considering future market prospects; and selling right at
harvest time. In conflict with this last reason, one handler felt
growers would be better off selling before interest or storage costs
become effective. Incidentally, one handler felt growers in general
were selling at the proper time to maximize returns.
The influence of elevator policies is insignificant except for a
4.0 to 6.5 cent per bushel handling fee for wheat and a 4.0 to 5. 5
cent per bushel handling fee for barley. The standard storage charge
is one cent per bushel per month, beginning at the time of delivery
for some, but more generally from ten, fifteen, or even thirty days
after the last harvested grain is delivered.
No managers bought grain in anticipation of sales or sold grain
in anticipation of purchases. Four of the seven managers blended
grain before selling, but all stated this did not affect the price paid
growers. All elevator managers changed the price during the day
only if the Portland market changed. No premium was paid to fill
33
out a shipment unless the coastal buyer was willing to pay extra to
have the shipment filled. The only premium given on the local level
was for seed wheat. None of the managers interviewed hedged or
speculated in the futures markets.
Grain elevators organized as cooperatives generally provide
other services besides the storing, handling, and marketing of grain.
These services range from petroleum products to a complete line of
agri-business supplies. Other services some growers indicated they
would like to have offered include the cleaning and treating of seed
grain, steam rolling and grinding for feed, bookkeeping and farm
records analysis, and better newspaper and radio coverage of market information. 6
6Cooperatives in some areas do offer many of these services.
34
IV.
PRICE ANALYSIS
It was found in Chapter III that growers vary their marketing
time from year to year in an effort to sell at a good market price.
What must be considered by the wheat producer in his attempt to sell
at the price and time that maximizes his net return? The first decision lies in participation or non-participation in the voluntary gov-
ernment programs. Wheat programs include acreage allotments,
price support loans, marketing certificates, and diversion payments.
By the use of a worksheet,
7
each producer can calculate the probable
effects on farm costs and returns of using the different government
program alternatives. A stated objective of past wheat programs
has been to raise income of wheat growers.
The producer's next step involves the marketing alternatives
discussed in Chapter III. Alternatives are: selling all or part of the
crop at harvest; holding the crop or the remainder of the crop until
a more favorable market price occurs; selling after January 1, for
tax reasons; and placing all or part of the grain under government
loan. Grower use of these alternatives is illustrated in Table II. In
selecting a marketing alternative, one's decision must be based on a
price forecast for the marketing year following the harvesting of this
crop. The marketing year for Pacific Northwest wheat and barley
7An
example of a worksheet for the 1965 wheat program is shown
in Appendix V.
35
is from July to June. The farmer either sells to the government at
the effective support price or to a grain buyer at the domestic cash
price at a particular location.
Maximizing net income from grain sales requires a fairly accurate prediction of the timing and amount of the annual rise in domes-
tic cash prices. Prediction requires an understanding and knowledge
of a number of factors and their varying degrees of importance. The
interrelationship of factors in an economic model of the wheat in-
dustry are illustrated in Figure 1. This overview is a qualitative
model based upon a classification of supply and demand factors which
interact and affect price.
Key Indicators in Cash Wheat Prices
In this economic model of the wheat industry there appears to be
three forces which shall be called key indicators in relation to the
domestic cash price of wheat. These indicators are world wheat
price, the effective support rate, and the export subsidy payment.
Karl Hobson has shown the close relationship between export
prices at different ports even when the types of wheat are quite dif-
ferent (6, p. 36). He compares the prices of No. 2 Manitoba, in
store at Fort Williams, Canada, and No. 1 Soft White wheat at Portland, Oregon, from 1910 to 1965.
Uses of
Land
Competing
Stor ito
Cost of
Stocks
Stocks
arm Stocks
Stocks
Commercial
Stocks
Government
Owned
Stockpilinr
Reserve
Curry In
Carry Out
Acreage
Acre age
A /lotme rus
Expectation
Price
Soil Condition at Time
of Seedin;
GRAIN
its, Institu-
Yield
SIVP,Ft
Price
Trend
Price
Imports
Domestic
Price
Cash vs.
Futures
Seasonal
Cyclical
ability of
Syroad
Consumer
Income
Other Grains
SubstitutInter-Product
!Landon,
and
Investmer-t
Climate
Practices
Consumption
Weather
Cultura/
Mobility
Agicultinv
to uid Oct
of
Consumption
Trend
Form of
Competition
Degree and
DEMAND
Figure 1. An economic model of the United StAtes wheat industry 114, p. 117 /.
Domestic
Production
of Capital
Availability
tional Factors
Resource
Withm
Agriculture
Customs, Hab-
SUPPLY
Costs
Transportation
Substitutes
Price of
World Price
Relationships
dForeign
and Stocks
Production
Pxyrnerns
Export
International
Commodity
Ageements
Regulations
Trade
International
Price of
Other Grail.
3?
In this case we are comparing a low protein soft white
wheat with a high protein hard red wheat. When the
world crop of soft wheat is less plentiful than that of
hard wheat, the Portland price tends to be highest.
When the world crop of hard wheat is less plentiful,
the price at Fort Williams tends to be highest. On the
major swings however, they invariably move in the
same direction and almost to the same degree (6, p. 36).
What is the relationship of the government loan rate to domestic
market price? According to R. E. Men.ze, the loan rate is perhaps
the most important single factor governing wheat prices (12, p.
6).
At the beginning of the new marketing year in July, the United States
Department of Agriculture releases the effective support price. A
producer can usually expect a ten cent increase in the price during
the marketing year to cover storage costs based on the experience of
the past six marketing years. This movement is illustrated in Figure 2.
12
11
10
1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964
1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965
0
Year
Figure 2. July to June changes in the effective support rate for
No. 1 Soft White wheat from 1965-55 to 1964-65.
(Source: Grain Market News, AMS, USDA Portland,
Oregon)
38
A close relationship exists between the effective support rate
and the domestic cash price for No. 1 Soft White wheat. 8This re
lationship is illustrated by the graph in Figure 3 of the cash price,
loan rate and export subsidy for the past ten marketing years. Examination of daily price data reveals that the cash price has been
higher than the loan rate at sometime during the July to June marketing period during each of the ten years. This fact has been especially
predominant during the latter part of this period.
The third key indicator is the export subsidy payment. Like the
other two key indicators, the export subsidy is related to the domes-
tic cash price. A reexamination of Figure 3 points toward the relationship of the export subsidy, the effective support rate, and the
cash price of wheat. A subsidy control group in Washington D. C.
determines a subsidy rate that will move United States wheat into
dollar markets. The amount of the subsidy is influenced by the international price and the domestic price of wheat. The subsidy is the
difference between the two.
What the Producer Should Know About Prices
It is unlikely that any producer will have the information, time,
and knowledge to analyze the data concerning each block of the
8Data obtained from the Grain Market News, weekly summary
and statistics published at Portland, Oregon.
39
$3.00
Cash Price
Effective Support Price
Export Payment
2.80
2.60
2.40
\
,i
.-1 ,,'
2.20
...,
A
2.00
1.80
.
''
A,-,,
\ / ,i7
/
r)
I.
,1 /
1
1
.
I, :
It :
1
11
vs
_
1
1.60
1.40
1.20
1.00
.80
.60
.40
.20
0
July
July
1955..56
July
July
July
July
1956-57 1957-58 1958-59 1959-60
July July
1960-61
July
July
1961-62 1962-63 1963-64
July
1964-65
YEARS
Figure 3. The cash price, effective support price, and export
payment for No. 1 Soft White wheat at Portland, Oregon
from July 1955 through July 1965.
SOURCE: Grain Market News, Weekly Summary and
Statistics, Portland, Oregon and the daily
ledger of the Commodity Credit Corporation,
Portland, Oregon.
40
economic wheat model shown in Figure 1. A grower may be unable
to measure changes in supply, demand, elasticity, stability, and the
relationships of these variables among the various farm products.
Price explanation and prediction can be left to market specialists,
but it is desirable for all sellers to have a basic concept of the price
movements applicable to their products. These movements are im-
portant to the seller in optimizing his marketing function. Trelogan
supports this point of view in the following quotation.
Knowledge of past trends and the current situation
are invaluable for making decisions for the present
and future. This is equally true for persons engaged in the production and in the marketing of agricultural products. Efficiency in the marketing process usually brings the greatest possible return to
all segments of an industry and yet provides the consumer with a wholesome product at a reasonable
price (19, i).
Therefore, every producer should be aware of the four types of
changes in prices. They are secular trends, year to year changes,
seasonal variation, and irregular variation. Secular trends are
caused by changes in population, in the technology of production, in
per capita real income and in consumer preferences. Over the past
19 years there has been a downward trend in the cash price of wheat.
The season average of No. 1 Soft White wheat at Portland has gone
from a high of $2.496 per bushel in 1947 to a low of $1. 512 per bushel
in 1965. This is not to say that each year's season average is lower
than the preceding year.
41
Year to year variation of average seasonal wheat prices go from
a high of a plus 47.3 cents per bushel in 1946 to 1947 to a low of a
minus 37.2 cents per bushel in 1963 to 1964. The average variation
of season average prices since the downward trend began in 1947 is
14.8 cents per bushel. Many forces are responsible for such changes
in price including wars, booms, recessions, annual variations in the
weather, and objectives of government policies.
Seasonal variation is of great importance to everyone concerned
with grain prices. Changes in wheat prices from harvest to the end
of the marketing season the following June reflect storage costs to a
degree, like the effective support price, it can be expected that cash
prices will move up month by month by the amount of the monthly
storage costs. This is not always true, however, because other
forces such as prospects for production of wheat the following year,
at home and abroad, are at work modifying prices. The influence
of the Asiatic markets on the seasonal price trend of White wheat is
important. The Far East markets prefer White wheat for many of
its uses. These markets have the power and desire to purchase much
more wheat than can be produced in the Northwest (6, p. 43). Part
of the market is a cash market, but most sales are financed under
the Public Law 480 program, which allows sale of United States sur-
plus farm products for foreign currencies.
An explanation and computation of a seasonal price index for
42
wheat is presented in Appendix III. Computation of a seasonal price
index for barley is shown in Appendix IV. In Tables IX and X the
months were ranked from high to low according to their seasonal
price index for both wheat and barley. To determine if any significant
seasonal variation in the price of wheat occurs, an analysis of
variance test was made. 9 The results of this analysis indicate that
the seasonal variation in wheat prices from 1955 to 1965 is large
enough to be significant. An analysis of variance of barley prices
for the same period also shows a highly significant seasonal variation.
10
Irregular seasonal price changes at Portland are strongly influenced by the Public Law 480 authorizations for White wheat issued
9Analysis of Variance of Oregon #1 Soft White Wheat, Portland
price, 1955 to 1964.
Mean
Sum of
Degrees of
Squares
Squares
Source of variation Freedom
3666
Between means of years
9
32,992
4.31*
642
7,057
11
Between means of months
149
14,709
Remainder, interaction
99
119
54,758
Total
*Significant at the 0.5 percent level.
10Analysis of Variance Oregon #2 Barley, Portland prices, 1955
to 1964.
Mean
Degrees of Sum of
F
Squares
Squares
Freedom
Source of variation
50.02
450.18
9
Between means of years
3.65*
18.27
Between means of months 11
200.97
496.35
5.01
Remainder, interaction
99
1147.50
119
Total
*Significant at the 0.5 percent level.
43
by the United States Department of Agriculture. The size and timing
of the Public Law 480 authorizations for White wheat and the changes
in policy relating to these authorizations do not seem to follow any
particular pattern. They do cause significant unpredictable changes
in the day to day and week to week wheat prices, however (6, p. 43).
By harvest time the United States Department of Agriculture has
set the effective loan rate. Knowing the secular trend, the pattern
of seasonal variations, and the specialists predictions on world supply and demand, the grower can evaluate his individual position in
the context of market prospects. With this knowledge he has become
better equipped to judge the probability associated with a certain
price at harvest time or the gamble of speculating on a market rise.
44
V.
PRODUCERS' MARKETING ALTERNATIVES:
PROFITABILITY AND IMPLICATIONS
Characteristics of the Growers Marketing Environment
In developing a market plan interrelated problems face the pro-
ducer trying to maximize net income from grain sales (1, p. 82-85).
One problem is the uncertainty of price movements resulting from
government operations at home and abroad. Hobson indicates that the
size and timing of Public Law 480 authorizations for White wheat have
frequently brought drastic day to day and week to week changes in
the price of wheat. "These changes in policy do not seem to follow
any particular pattern. This makes them unpredictable" (6, p. 43).
Other factors such as weather phenomena can affect supply and demand, leading to price movement.
Another feature of the grain producer's marketing environment
is the scarcity of relevant information on which producers can base
marketing decisions. Findings in Chapter III reveal that available
data are often ambiguous. The market prediction a producer accepts
is based on the adequacy, pertinency, timeliness, and accuracy of
the information available as well as the analytical ability of the predictor.
An additional feature of the environment is the market structure
in which grain producers operate. Most farmers are competitors
45
selling to an oligopsonist. There are many farmers selling the same
product while the number of buyers of the product are relatively few.
Once grain is harvested, graded, and stored each class represents
a homogeneous product. The daily price for grain of the same class
in a particular location is generally the same to all producers. About
the only way one producer can gain an advantage over another is to
predict the most advantageous method and time of sale.
During or shortly after harvest, a grain producer's thoughts turn
from those of a production manager to those of a marketing executive.
Rational managerial planning requires knowledge of the plausible al-
ternative courses of action and the probable consequences of each
action. The alternative with the most attractive set of predicted con-
sequences is then chosen and implemented. The actual results are
compared with predicted consequences, and the new information is
fed back in a repetitive cycle of planning, direction, and control.
Prediction plays a key role in the process of the cycle.
Prediction is a more or less sophisticated projection or extrapolation of the past. The manager's information concerns the past;
his expectations are conjectures about the future. In the following
section the results of the most commonly used marketing alternatives
will be compared for the marketing years 1955-56 through 1964-65.
46
Alternative Methods of Selling Wheat
Assume a hypothetical grower is farming a specialized wheat
unit with 1,000 acres total cropland, 500 acres of annual cropland
and a wheat allotment of 300 acres per year. A 34 bushel per acre
yield would make a total production of approximately 10,000 bushels!'
Let us also assume our grower produces No. 1 Soft White wheat,
harvests it in August, and places it in commercial storage. Monthly
average Portland prices for No. 1 Soft White wheat will be used.
The first alternative requires selling the grain after harvest, before
storage costs become effective. The first row of Table XIII gives
the revenue from selling 10,000 bushels of wheat at the monthly average August price. The average revenue for the ten years is
$20,106.
The second alternative is composed of several subalternatives.
The wheat is sold, at the monthly average price, in each of the ten
marketing months after harvest. Charged against the gross revenue
is one cent per bushel for each month of storage and a four percent
annual interest on the return from the grain if it had been sold in
August.
The latter charge is the opportunity cost of not having sold
the grain in August, freeing the producer's capital for other uses.
reasonable production for a specialized wheat unit would be
10,000 bushels. The technique used in this analysis is applicable
11A
to larger or smaller quantities of wheat.
Nov.
Sept.
Oct.
June
May
Mar.
Apr.
1903
-223
-188
-453
-617
-582
506
741
171
135
62
-371
-542
-513
-484
-555
-126
-397
-268
-739
-250
-701
-652
-902
-1152
1708 -1303
665
1470
1505
1340
766
1372
1808
1845
1181
1117
77
137
181
185
118
112
-307
-676
877 -1245
(912) -1514
247 -1518
-255 -1253 -1882 -188
(598) -517 -52
480 -1204
-911
-91
79
-64 -982
715 -1354 -3975 -397
-827 1547
210 -3110 -5350 -2305 -18340 -1834
(371)
306
41
37
375
312
249
287
324
361
-165
1800 -4062 -1247
-70
630
-76
-541 1060 -352
-711 1690 -329
-380 2720 -805
-550 3050 -1381
-721 3680 -1657
-491 3710 -1834
-661 (3740) -2410
-932 3070 -3186
to the nearest dollar.
aCalculation: Monthly average price per bushel of No. 1 Soft Wheat at Portland minus one
cent per bushel per month storage charge multiplied by 10,000 (bushels) minus 0.33 percent per
month interest on the August revenue equals positive or negative net gain. Final figures are rounded
year
Dec.
maining months Jan.
of the marketing Feb.
Net gain or loss
from selling
wheat during
each of the re-
COMPARISON OF SELLING 10,000 BUSHELS OF WHEAT IN AUGUST WITH SELLING
DURING EACH OF THE REMAINING MONTHS OF THE MARKETING YEAR, OPPORTUNITY AND STORAGE COSTS CONSIDERED. a (1955-56 through 1964-65)
Average
Year 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964
gain
1956
Total revenue
1957 1958 1959 1960 1961 1962 1963 1964 1965 Total or loss
from August Sale
$1600 21200(23100)19600 19100 19600 20900(21500)19700(15300)2010600 20106
TABLE XIII.
48
The net gain or loss of each subalternative, for the period studied,
is shown in Table XIII.
12
In four of the ten years money was lost, when storage and interest charges were considered, by not selling during August. The over-
all averages favor selling later in the marketing year, but not later
than February. The month of highest revenue is circled for each
year.
The minus numbers indicate the dollar amount less than the
August revenue from selling in any given month.
The financial position, interest rates, and farm or commercial
storage costs vary from one producer to another. Therefore, the
calculations used to derive Table XIII can be adjusted to fit each par-
ticular case. Analysis of past data evaluated with current market
information serves as a guide for present decision making.
The marketing of grain may be approached through the use of
a price support loan. This alternative assures the farmer a mini-
mum price for his grain. If the spread between the effective support
rate and the cash market price is attractive enough, the producer
can redeem his grain by paying the effective support rate at the time
of redemption and a 3. 5 percent annual interest charge.
Marketing by using the loan program was done by over 60 percent
of the growers responding to the survey. The greatest percentage of
12
The general formula for this calculation is:
Net Gain = [(Mo. Ave. price - $. 01/mo.) (No. of Bu. )]
(Aug. Revenue) (0. 33/mo. )]
49
growers placing grain under loan do so in August and September.
Table XIV compares the average monthly price per bushel with the
corresponding effective support price from August through June for
ten years. The loan redemption period expires March 31, but if the
Commodity Credit Corporation has not called for the grain it may be
redeemed after that date.
It is not surprising to note that the spread13 between the cash
price and the effective support rate is the largest positive or smallest
negative number in exactly the same month as was the most profit-
able time to sell in each of the ten years, except
keting year
1955-56
1962-63.
The mar-
is the only one in which it would have been best
to place the wheat under loan after harvest and not redeem it. The
month of largest positive or smallest negative (D) is circled for
each year. The minus numbers indicate S is greater than C or
-D.
If D is
greater than or equal to + $0.10 in August, sale at that
time appears favorable. If D is less than + $0.10 in August, holding the grain until later in the marketing year would increase revenue.
Consider the following marketing alternative. If D is greater
than + $0.10 in August the wheat is sold. In Table XIII, it was found
that sale in December results in the highest return. Therefore, if
13Spread (Dr) equals the difference between domestic cash price
(C ) and effective support price (S ).
D
=C -S.
P
P
0
7
12
CD
37
26
Er)
-2
-6
-8
-4
-6
-7
-4
-5
-5
-14
August
September
October
November
December
January
February
March
April
May
June
-14
-8
-1
3
5
7
12
17
16
18
(i-(3)
1957
1958
-5
0
-2
-1
1
0
2
5
CD
-1
0
1958
1959
-4
-2
2
5
0
2
12
(C)
16
15
12
8
7
5
1960
1961
4
3
2
1
2
2
-2
- -3
1959
1960
19
16
13
7
7
9
14
17
-17
5
8
6
8
4
3
2
1
2
0
20
5
1962
1963
18
1961
1962
-40
19
15
7
26
of44
21
22
11
1
16
1963
1964
5
6
6
5
5
6
7
9
8
12
g
1964
1965
-4.6
7.4
8.8
8.0
10. 6
9.9
10.0
9.7
7.7
6. 3
7.3
Average
aCalculation: Average monthly cash price per bushel of No. 1 Soft wheat at Portland minus
monthly effective support rate per bushel equals positive or negative spread.
41
40
33
29
19
1956
1957
1955
1956
TABLE XIV. SPREAD BETWEEN AVERAGE CASH PRICE AND EFFECTIVE SUPPORT RATE IN
CENTS PER BUSHEL, AUGUST THROUGH JUNE, 1955-56 THROUGH 1964-65. a
0
51
D is less than + $0.10 in August, the wheat can either be placed
under government loan or held for a December sale. In this case
the average net gain from 10,000 bushels of wheat over a straight
August sale, for the ten years considered, is $340. This alternative
is better than a straight December sale by $156.
Participation in the government loan program reduces a producer's uncertainty while allowing the producer to take advantage of
market price increases. The use of the loan by a farmer in need of
money provides low cost funds if the decision is made to redeem the
wheat before the redemption date. If the producer elects not to re-
deem the grain, the loan rate at the time of initial use becomes the
sale price.
One more marketing alternative that a small number of producers
use is the contracting of terms of sale before harvest. The different
terms of each contract make it difficult to measure contracting
against the other alternative methods of selling.
Comparison of Selling Barley Throughout the Marketing Year
If the hypothetical grower raises barley on the 200 acres of
annual cropland not planted to wheat, a one ton per acre yield would
equal 200 tons total production. The first line of Table XV gives the
total revenue from selling 200 tons of No. 2 Western barley at the
average August price at Portland for the past ten years. A one cent
June
May
Jan.
Feb.
Mar.
Apr.
Nov.
Dec.
Sept.
Oct.
261
147
542
243 (740)
52
219
(357 ) 439
(342) 130
227 -152
-15
61
51
104
322
51
561
-508
-89
665
(-6-97)
-115
-146 -143
81
290
257
26
304 (138j 154
(52.5)
329
391
-324
-688
-1136
-1082
-1196
-81
252 -196
887
-210(1106) 123
-430
50
-65
919 (154)
-316 1030
-114
141 -310
-46 -304 -129 -302 -702 -367 385
554
-402
520
90 -918 -158 -498 -733 -562
245 -482
-189-1449 -356 -531 -1011 -506 322
-1728
-192
-523
-1539
-618
-542
-303-1814-1219-1311
-114
(107)
-92
-205
-235
-182
-552
-2768
-3188
-5153
-9789
1132
2498
2523
2325
993
-55
-277
-319
-515
-979
99
252
232
113
250
aCalculation: Monthly average price for No. 2 Western barley at Portland minus 42 cents per
ton (one cent per bu.) storage charge multiplied by 200 (tons) minus 0.33 percent per month interest
on the August revenue equals positive or negative net gain. Final figures are rounded to the nearest
dollar.
ing months of
the marketing
year
loss from
selling barley
during each
of the remain-
Net gain or
TABLE XV. COMPARISON OF SELLING 200 TONS OF BARLEY IN AUGUST WITH SELLING DURING
EACH OF THE REMAINING MONTHS OF THE MARKETING YEAR, OPPORTUNITY AND
STORAGE COSTS CONSIDERED. a (1955-56 through 1964-65)
Average
1957 1958 1959 1960 1961 1962 1963 1964
1955
1956
Total
gain
revenue from Year
1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 Total or loss
August sale
$9000 9334 8834 9250 8584 8418 9150 (9088p 8166 9170 88994
8899
53
per bushel per month storage and a four percent annual interest
charge is subtracted from the revenue earned from selling at the
monthly average price for each of the remaining marketing months.
The result is a positive or negative net gain on the sale of 200 tons
of barley by holding past August. 14The month of highest revenue
is circled for each year. The minus numbers are dollar amounts
less than the August revenue.
The 1962-63 marketing year was the only one in which it was ad-
vantageous to market in August. A reexamination of Table VII points
out that a large percentage of growers did market their 1964 barley
in August. On the average the month of November has a slight ad-
vantage over October as the month with the highest revenue. The
average net gain in revenue in December is over twice as large as
the average net gain of fourth place September. All of the averages
after January are negative.
The accurate prediction of prices as an aid in selecting marketing alternatives still may appear as a Gordian knot. We have, however, examined alternatives for marketing wheat and barley that,
when used by a hypothetical producer harvesting 10,000 bushels of
wheat and 200 tons of barley, returned almost $600 above a straight
August sale of both grains. Storage and opportunity costs were also
14
The general formula for calculation is:
Net Gain = [(Mo. Ave. price - $. 01/mo.) (No. bu.)1
[(August Revenue) (0.33/mo.)1
54
considered. In light of these findings, it may behoove many pro-
ducers to examine present marketing policies and give greater thought
to the alternatives available to them before selling their grain.
55
VI. SUMMARY AND CONCLUSIONS
Summary
Selection of time of sale is one of the most important marketing
problems facing grain producers. This study deals with economic
considerations involved in a wheat producer's marketing process
including factors motivating the time of sale, price analysis, availability and use of market information, the role of country grain hand-
lers, and the use of marketing alternatives to improve net income.
The study area consisted of wheat-fallow farms in the Columbia
Basin in north central Oregon. Included are specialized wheat units
in Umatilla, Gilliam, Morrow, Sherman, and Wasco Counties. The
number of specialized wheat units was determined by eliminating
all farms with less than 300 acres wheat allotment and over 500 acres
of rangeland. There were 529 farms in the population.
Data were obtained through a mail survey of a selected sample
of farms and through personal interviews with country elevator
manager s.
The most frequently used alternatives for marketing grain are
selling the grain all at one time, selling at more than one time, and
placing all or part of the wheat under the government loan program.
Producers using the government loan program have the choice of
either redeeming the wheat or letting the Commodity Credit
56
Corporation take over the grain after March 31. Thirty-four per-
cent of the growers sold all their grain at one time; 43 percent placed
all their wheat under loan during two or more different months.. Over 40
percent of the growers using the loan program in 1964 did not redeem
their grain.
Grower returns were stratified into three classes according to
bushels of wheat produced in 1964. The stratification showed an in-
creasing use of the government loan program as the amount of wheat
produced increased. Those growers in the lower production classes
redeemed their wheat less frequently than growers with a larger
total production.
The time of marketing wheat varied from year to year for 70
percent of the growers. Eighty-five percent of the growers who
varied the time of sale did so to sell at a better price. Other reasons determining time of sale were need of money, tax considerations,
the amount of farm storage, and the sale of grain for seed. Many
of these reasons were given together with selling at a better price.
For three-fourths of the growers the size of crop made no difference
on the selling time of wheat. Growers affected by a small crop sell
earlier to pay debts, to balance income, to sell on a better market,
and to do away with storage costs. Growers affected by a large
crop generally sell later in the marketing year for tax reasons and
to sell on a better market.
57
Barley sales by farmers were much more concentrated in the
late summer and early fall months than were wheat sales. Barley
sold after the first of the year was sold primarily for feed or seed.
Most growers hold wheat longer than barley before selling because
of greater price fluctuations of wheat during the marketing year.
There is a great deal of uncertainty in the minds of growers regarding the months of high and low prices for wheat and barley. About
one-third of the growers did not express an opinion on this subject.
The months were ranked from high to low according to an adjusted
seasonal price index. Grower estimates of the high and low months
of wheat and barley prices ranged throughout the adjusted seasonal
price index. Growers have a greater awareness of the months of
low prices than the months of high prices for both wheat and barley.
In basing their selling decision growers place more importance
on unofficial market information than on official reports. Grain
handlers, newsletters, magazines, and past experience were the
most important unofficial information sources. The weekly grain
market report issued at Portland was the most important official
source of market information. Even though farmers have ready
access to general market and price information, they expressed a
need of more specific market information. Growers particularly
need knowledge of the demand and supply outlook in foreign countries
and government grain marketing operations at home and abroad.
58
Country elevator managers stressed the point that they do not
offer advice on when to market.
They only present the market in-
formation they have available, and all marketing decisions rest with
the grower. Elevator policies regulate the costs and conditions of
storage and handling but elevator managers do not set the price of
grain. Ultimate price determination occurs at the terminals. The
price growers receive equals coastal price minus transportation,
wheat commission, and elevator charges.
A basic understanding of prices is important to those producing
and marketing agricultural products. Secular trends, year to year
changes, seasonal variation, and irregular variation are four types
of changes that affect grain prices. The secular trend for wheat
prices since 1947 has been downward. Since 1947 seasonal price
variations from one marketing year to the next have ranged from
47.3 cents above to 37.2 cents below the average seasonal price.
An analysis of variance of Portland prices from 1955 through
1964 for No. 1 Soft White wheat and No. 2 Western barley shows a
significant F value for seasonal price variation in both cases. The
world wheat price, the effective support rate, and the export subsidy
have been the major factors influencing prices received by Pacific
Northwest wheat producers.
Characteristics of a producer's marketing environment are
price uncertainty due to weather and government operations at home
59
and abroad, scarcity of relevant market information, and the oligop-
sonistic market structure a producer faces in the sale of his grain.
.
These characteristics must all be considered as producers investigate various marketing alternatives.
From the 1955-56 marketing year to the 1964-65 marketing year
the net income from wheat sales was increased by marketing after
August and before March. For the period studied average revenue
from wheat sales was highest in November and December.
Comparison of selling barley in August with selling during each
of the remaining months of the marketing year over the past decade
favors selling in October, November, and December. Selling after
January led to progressively decreasing returns compared with an
August sale.
Conclusions
We conclude that many grain producers could improve their
marketing techniques. For example, growers who sold wheat during
November or December for the past decade averaged $0.018 per
bushel more than growers making a straight August sale. However,
selling in November or December is far from optimum. A grower
with perfect market knowledge who sold during the month of highest
net revenue for each of the past ten marketing years could have av-
eraged almost $0.08 per bushel more than a straight August sale.
60
There is no way for a grower to have perfect knowledge. If it were
available the marginal cost of obtaining and using the information
may be greater than the marginal return. For this reason we recommend the following straightforward marketing plan which was profitable from 1955-56 through 1964-65.
If the domestic cash price minus the effective support rate for
wheat is greater than or equal to $0.10 per bushel during August then
August sale of the grain is recommended. If the difference is less
than $0.10 per bushel the sale is made in November or December.
The net income received from using this alternative for marketing
wheat is $0.035 per bushel more than a straight August sale and more
than $0.015 cents per bushel greater than a straight November or
December sale.
Barley sales in October and November return about $1.25 per
ton more than an August sale. All calculations include consideration
of storage and opportunity costs. Storage charges were based on the
average commercial storage rate of $0.01 per bushel per month.
Opportunity costs are dependent upon the alternative uses of capital
available. For purposes of this study a 4.0 percent annual interest
charge on the August revenue was subtracted from grain sales after
August. Each grower can evaluate his storage charges and invest-
ment opportunities and adjust income calculations accordingly.
Grain market information is available from federal, state, and
61
local offices. Education programs sponsored by federal and state
agencies, or grower and industry associations, and directed toward
increased grower use and knowledge of official market publications
would be beneficial to many producers.
Local market information is largely disseminated by personal
contact between dealer and producer. Distribution of market information in this manner is time consuming and depends to an extent on
the personal relationship between growers and the local grain dealer.
Individual grain dealers provide some market information through
radio and newspaper outlets. Such programs often lack the complete-
ness necessary for sound marketing decisions.
A more formal program with equal information at regular inter-
vals to all associated growers merits consideration. Recommendations for a local market program include specific information on:
past and present price trends; the amount of grain offered in the local marketing area the preceding 30 days; the grain inventory situa-
tion locally and at coastal terminals; price and availability of feed
and seed grains.
62
BIBLIOGRAPHY
Alderson, Wroe and Paul E. Green. Planning and problem
solving in marketing. Homewood, Illinois, Richard D. Irwin,
,
1964.
661 p.
Barkley, Paul W. The economic effect of the acreage allotment on specialized wheat-fallow farms in Oregon. Master's
thesis. Corvallis, Oregon State University, 1959. 94 numb.
leaves.
County Agricultural Planning Council. Economic farm unit subcommittee report. In: Recommendations for Agriculture and
Rural Living in Umatilla County. Committee reports of the
county rural affairs planning conference, February 1958. East
Oregonian Publishing Company, n. d. p. 10-12.
Folz, William E. Public Law 480 and Pacific Northwest
wheat. In: Proceedings of Fourth Annual Workshop on Wheat
Marketing in the Pacific Northwest, presented by Institute of
Agricultural Sciences, Washington State University in cooperation with Washington Association of Wheat Growers, Pullman,
Washington, Feb. 2, 3, 4, 1965. p. 46-51. (Mimeographed)
Great Plains Agricultural Council. Wheat, people and the
plains. Lincoln, University of Nebraska, College of Agriculture and Home Economics, Extension Service, n. d. (Publication no. 21, EC 63-821 - EC 63-825)
Hobson, Karl. What makes wheat prices? In: Proceedings
of Fourth Annual Workshop on Wheat Marketing in the Pacific
Northwest, presented by Institute of Agricultural Sciences,
Washington State University in cooperation with Washington
Association of Wheat Growers, Pullman, Washington, Feb. 2,
3, 4, 1965. p. 35-43. (Mimeographed)
Hollands, Harold F. Government programs for agriculture .
for wheat. Corvallis, 1960. 27 p. (Oregon. Agricultural
.
Experiment Station. Station Bulletin no. 572)
Hollands, Harold F. Pacific Northwest wheat. Corvallis,
1956. 48 p. (Oregon. Agricultural Experiment Station. Station Bulletin no. 556)
63
Hollands, Harold F. and M. D. Thomas. Special OSU Wheat
Papers: A general overview; International wheat agreements;
Public Law 480; Federal programs; World prices; Policies
and programs of other nations. Corvallis, Oregon State University, 1964. 6 vols. (Mimeographed)
Johnson, Glenn L. and Cecil B. Haver. Agricultural information as as aspect of decision making. East Lansing, 1960. 56
p. (Michigan. Agricultural Experiment Station. Technical
Bulletin no. 273)
Li, J. C. R. Statistical inference. Vol. 1. Ann Arbor,
Edwards Brothers, 1964. 658 p.
Menze, R. E. Exporters' position in the Pacific Northwest
wheat market. Portland, Pacific Northwest Grain Exporters
Association, Feb. 10, 1964. 18 p. (Mimeographed)
Parten, Mildred. Surveys, polls and samples: practical procedures. New York, Harper and Brothers, 1950. 624 p.
Schruben, Leonard W. Economic problems of the wheat industry and how to solve them. In: Proceedings of Fourth
Annual Workshop on Wheat Marketing in the Pacific Northwest,
presented by Institute of Agricultural Sciences, Washington
State University in cooperation with Washington Asociation of
Wheat Growers, Pullman, Washington, Feb. 2, 3, 4, 1965.
p. 112-122. (Mimeographed)
Shepard, Geoffrey S. Agricultural price analysis. Ames,
Iowa State College Press, 1957. 293 p.
Stippler, H. H. and Emery N. Castle. Wheat farming in the
Columbia Basin of Oregon. Part I. Major characteristics of
agriculture. Corvallis, 1961. 23 p. (Oregon. Agricultural
Experiment Station. Station Bulletin no. 577)
U. S. Department of Agriculture. Economic Research Service.
An analysis of grain transportation in the Northwest. Washington, 1964. 49 p.
Waite, Warren C. and H. C. Trelogan. Introduction to agricultural prices. Minneapolis, Burgess Publishing Company,
1948.
227 p.
64
Western Wheat Associates, Inc. Wheat, supply, value and
distribution in the Pacific Northwest. Nov. 1963. 78 p. (U. S.
Department of Agriculture, Statistical Reporting Service.
Pacific Northwest Wheat Project. Statistical Bulletin No. 2)
Wilcox, Emery C. Trends in wheat production. In: Proceedings of Fourth Annual Workshop on Wheat Marketing in the
Pacific Northwest, presented by Institute of Agricultural
Sciences, Washington State University in cooperation with Washington Association of Wheat Growers, Pullman, Washington,
Feb. 2, 3, 4, 1965. p. 3-18. (Mimeographed)
Wirak, Owen S. Wheat marketing in the Pacific Northwest.
In: Proceedings of Fourth Annual Workshop on Wheat Market-
ing in the Pacific Northwest, presented by Institute of Agricultural Sciences, Washington State University, in cooperation
with Washington Association of Wheat Growers, Pullman,
Washington, Feb. 2, 3, 4, 1965. p. 19-24. (Mimeographed)
APPENDICES
65
APPENDIX I
AN EXAMPLE OF THE GROWER RESEARCH SURVEY FORM, (1965)
66
DEPARTMENT OF AGRICULTURAL ECONOMICS
OREGON STATE UNIVERSITY
Corvallis, Oregon
The purpose of this research survey is to obtain information on
when, where, and why growers sell wheat and barley and on the
thought processes involved in the selling decision. The use of market information in arriving at the selling time will be analyzed to determine where improvements might be made.
Date
Name of Operator:
Part Owner
Tenant
Full Owner
Location: Town
County
Size of unit: Wheat harvested 1965
acres.
1965
1.
How much grain did you produce in 1965?
Barley
2.
acres, barley harvested
bushels or
tons; Wheat
a) Have you sold your 1965 crop? Yes
If so, when did you sell? Wheat
When do you deliver the grain? Wheat
3.
bu.
No
Barley
Barley
To whom did you sell your 1964 crop?
Wheat:
Barley:
4. a) How much of your 1964 wheat crop did you cover with a price
support loan, if any?
When did you do this? Month
Day
Of the grain placed under loan, how much did you redeem?
When did you redeem it?
67
a) When did you sell your 1964 wheat?
Day
Month
Day
Month
Month
Day
b)
If you did not sell your wheat all at one time, why did you sell
at different times?
a) When did you sell your 1964 barley?
Month
Day
Month
Day
Month
Day
b)
If you did not sell your barley all at one time, why did you sell
at different times?
a)
Do you usually sell at the same time every year?
Wheat: Yes
b)
Barley: Yes
No
No
If not, why does the selling time vary?
Does repayment of debt (i. e., operating loans) influence your
selling time?
Very little
9.
Some
Very much
To what extent is selling after January 1 influenced by the
Federal and state income tax situation?
Very little
Explain
Some
Very much
68
a)
What month(s) do you believe the price of wheat is usually
Lowest?
highest?
b)
What month(s) do you believe the price of barley is usually
Lowest?
highest?
a)
If you do not sell at harvest, where do you usually store your
grain?
Wheat?
Barley?
b) Approximately how many miles is it to the place you deliver
miles. From
the grain you sell? From your fields?
miles.
your farm storage?
What are the off-farm storage costs and when do they begin?
/bu. /mo. Beginning
Estimate your on-farm storage costs, if farm storage is
/bu. /mo.
available.
Are storage charges taken into consideration when deciding
whether to hold and to sell?
Seldom
Always
Usually
12. a) Is your selling decision ever delegated?
Never
Sometimes
Always
b) What is the principal occupation of the person selling for you?
Do you usually hold wheat or barley the longest before selling?
Why?
14. a) When you have a short crop do you sell earlier or later than
usual?
Earlier
Later
No difference
69
Why?
b) When you have a big crop do you sell earlier or later than
usual?
No difference
Later
Earlier
Why?
Please mark the importance of the following sources of information in making your decision to sell.
SOURCE
Fairly
Very
Important Important Important
Not
Official reports
Weekly grain market report issued
at Portland
Weekly grain and hay market review
issued at Corvallis
Monthly and quarterly crop statistics released at Portland
Oregon Farm and Market Outlook
Circulars
Other official reports
Other Sources
Radio reports
Local newspaper s
Other newspapers
Newsletters, magazines
Grain handlers
Your past experience
Other (specify)
a)
In basing your selling decision could you use more specific
On price
No
information on recent price trends? Yes
trends of previous years? Yes
No
b) On amount of grain offered by other growers in your market
No
area in the preceding 30 days? Yes
70
On the inventory situation locally and at Portland? Yes
No
On demand and supply outlooks in foreign countries? Yes
No
On government grain marketing operations here and else-
where? Yes
No
Specify other types of information you would desire.
17.
With which ones of the following do you discuss market conditions and prospects before selling?
1.
No one
Z.
Wife
Partner (co-operator, landlord)
Other farmers (neighbors)
County agent
Grain dealer
Banker
18. a) Other than handling of grain, what services do you expect
from your country elevator operator?
Market information
Petroleum products
Tires, tools, hardware, supplies, etc.
Other
b) Are there other services that you would like to see offered?
Explain:
19.
Has the way (the how, when or where) you market your grain
changed in the last ten years? (Examples; selling grain on a
contract before harvest, moving of grain directly from the
field or from storage to river facility, etc.)
Yes
No
Explain:
71
20.
Do you buy or sell in the grain futures market?
Regularly
Occasionally
Never
72
APPENDIX II
AN EXAMPLE OF THE COUNTRY ELEVATOR MANAGER
SURVEY FORM
73
Date
DEPARTMENT OF AGRICULTURAL ECONOMICS
OREGON STATE UNIVERSITY
Corvallis, Oregon
NAME OF ELEVATOR:
Location: Town
County
Type of Organization:
Name of Manager:
Name of Interviewer:
Do you buy grain the year around?
1.
Wheat: Yes
2.
a)
No
Barley: Yes
No
Do you encourage growers to sell at certain times?
Yes
No
b)
If so, what is the reasoning behind this?
a)
Do you discourage growers selling at certain times?
Yes
b)
No
If so, what is the reasoning behind this?
What type of advisory service, if any, do you offer growers:
74
5.
a)
Is there a difference in prices paid for farm or elevatorstored grains of the same class?
Yes
b)
6.
No
If so, explain:
a) Do you buy in anticipation of sales? Frequently
Sometime s
Seldom
Do you sell in anticipation of purchases? Frequently
Sometime s
Seldom
Does (a) or (b) occur more predominantly at one time of the
year than another?
7.
List your principal competitors in buying grain from growers.
Wheat:
Principal Competitors
1.
2.
3.
4.
5.
Barley:
Principal Competitors
3.
4.
5.
75
a)
Is a handling fee of 5 cents per bu. on wheat adequate to
cover your handling plus a reasonable return on your investment?
Too much
Adequate
Inadequate
b) Does the average handling fee on wheat bought and sold vary
in the following periods?
July, August, September
October, November, December
January, February, March
April, May, June
a)
Is a handling fee of 5 cents per bu. on barley adequate to
cover your handling expenses plus a reasonable return on
your investment?
Inadequate
Too much
Adequate
b) Does the average handling fee on barley bought and sold vary
in the following periods?
July, August, September
October, November, December
January, February, March
April, May, June
11. a) Do you trade in the futures market? Yes
No
If so, does this affect the price you pay for grain?
Yes
No
Do you hedge? Yes
No
If so, does this affect the price you pay for grain? Yes
No
12. a) Do you blend? Yes
No
76
b)
If so, does this affect the price you pay for grain? Yes
No
a) Do you at times change your price during the day? Yes
No
b)
If so, explain when and why this is done.
When do you usually change prices?
Why?
a)
If you need grain to fill out a shipment do you pay a premium?
Often
b) How much?
a)
b)
Never
Seldom
Nbu.
Did you have any trouble in the past year securing --
Freight cars?
Yes
No
Trucks?
Yes
No
Barges?
Yes
No
If yes, explain the time of year and the effect on prices paid
for wheat and barley.
Do you at times pay a premium above your quoted price?
Wheat (for other than protein): Yes
Barley? Yes
No
Why?
No
Why?
77
18.
To what type of buyer did you sell your 1964 grain? List in
order of importance. Also indicate location of buyer and
percentage shipped by rail, truck, or barge, if known.
WHEAT
Type of buyer
(private co-op,
exporter, miller, broker)
% of
Location
sales
Place
% by
% by
% by
shipped rail
truck
barge
78
BARLEY
Type of buyer
(private co-op,
exporter, miller, broker)
Location
..
14.
% of
Place
sales
shipped
% by
% by
% by
rail
truck
barge
A
What are the transportation rates from this point to the location where grain is shipped?
Location
Rail
Freight
Barge
79
20. a) Please mark the importance of the following sources of information in arriving at the price you buy and sell grain.
Not
Fairly
Source
Official reports
Weekly Grain Market reports
issued at Portland
Weekly Grain and Hay Market
Review issued at Corvallis
Monthly and quarterly Crop
Statistics released at Port-
land. . . .
Oregon Farm and Market Outlook circulars
Portland Grain Exchange noon
price
Other official market reports
Other sources
Grain handlers
Local newspaper( s)
Other newspapers
Radio reports
Newsletters, magazines
-
.
Your past experience
Other (specify)
b)
Very
Important Important Important
Is this information adequate? Yes
No
80
c)
If not, what additional information would you desire?
In your opinion, what, if anything, limits growers in selling
at the time and price that will maximize returns?
To what extent do growers ask your counsel on market information and the time to sell?
Very little
Sometimes
A great deal
Comments:
al
APPENDIX III
EXPLANATION AND COMPUTATION OF A SEASONAL
PRICE INDEX FOR WHEAT
82
The original data contain trend, cyclical, seasonal, and irregu-
lar characteristics. By using a 12 months moving average seasonal
and irregular fluctuations are eliminated from the data (18, P. 181-2).
Trend and cyclical fluctuations are corrected by dividing the moving
average values as shown below:
Seasonal Index = Trend Seasonal Cyclical Irregular
Trend Cyclical
The results are seasonal relatives expressed in percentage
terms. The irregular elements are then eliminated by taking the
median values of the resulting seasonal relatives of each month thereby obtaining the typical seasonal relative for each month. Finally the
typical seasonal relatives are adjusted so that the sum of 12 months
equals 1200.
Months arranged according to an adjusted seasonal price index
for wheat follow.
April
103. 7
February
103. 3
May
103. 3
March
January
December
November
October
June
September
102. 6
102. 1
101. 1
100. 2
98. 6
97. 2
96. 9
August
95. 6
July
95. 0
Seasonal relatives are expressed
in percent. The May value 103. 3
means that this month is typically
3.3 percent above the trend-cycle.
Aug
101. 5
102. 3
98. 5
1
2
3
95.8
93.8
92.1
89.4
96.0
95. 6
93.3
91.6
86.9
8
9
Median 95. 6
95. 0
7
TC
96. 1
94.7
93.8
Adjustment factor
96.9
96. 5
90.9
95.7
1199.6
1199.7
98. 6
98. 7
92. 5
97.0
97.7
98. 5
98.7
96.0
95.6
5
96. 5
99.0
97.5
101.0 102.0 102.8 102.3 101.5
100.0 100.9 101. 5 102. 8 102. 3 101.4
100. 5
100.9 101.4 104.7 103.0 104.5 102.5
101. 1
100. 5
99. 5
97. 6
102. 1
101.0
= 0.9999166
100. 2
100.9
98. 1
101.0
98. 1
103. 3
102. 6
103. 7
102.0 102. 8 102. 3
96. 2
103. 3
101. 5
96. 6
98.6 100.0 100.5 100.9 101.9 100.0 100.5
99.2 100.0 100.5 101.4 101.9 101.5 101.4
99. 5
100.9
101.0
97. 2
98. 5
87.9
93.9
94.7
96. 8
98.5
98.6
100.0
96.1
104.2
105. 3
95,9
107. 3
102.9 103.9 105.4 104.0 106.1
104. 2
4
101.0
106. 6
99.5
June
97.5
May
96.2
Apr
97.1
Mar
101. 2
Feb
101.4 102.9 104. 1
Jan
98. 6 101.4
Dec
100. 5
Nov
102. 8
Oct
102.4 103. 3 109. 2 110.9 107.0 111.4 116. 5
Sept
103.4 103.4
Rank
Jul
TABLE XVI. ARRAYS OF PERCENTAGE (SEASONAL RELATIVES) FOR OREGON NO. 1 SOFT
WHEAT PRICES AT PORTLAND, JANUARY, 1956 THROUGH DECEMBER, 1964.
84
APPENDIX IV
COMPUTATION OF A SEASONAL PRICE INDEX FOR BARLEY
98.9 100. 3
98. 0
96. 7
95.8
95. 1
94.4
93. 3
91.2
95. 8
95.5
95. 5
95. 1
94. 8
92. 3
91.4
6
7
8
9
Me di an 95. 5
95.7
5
Adjustment factor
98. 2
98. 9
95.7
96. 5
1200.5
1200.7
100.8
100. 3
96. 1
98. 5
99. 6
100. 2
=
102. 3
91.8
96. 7
96. 3
94.6
100. 5
100.6
97.8
101. 1
97.6
101. 5
98.3
102.8 102.2 100.9 101.7
103. 7
98.6
102. 1
92. 5
98. 8
98. 6
99. 8
98.9
94. 6
95.4
99.7
99. 1
100. 4
96. 7
100. 5
100. 8
101. 1
99. 1
0.9998334
103. 5
102. 8
97.6 100.6
102. 5
99. 5
102.4 102. 1
100. 1
101. 5
102. 1
103. 7
102. 5 100. 9
102. 7
102. 8
99.6 101. 8
102. 1
102. 1
102. 5
100. 5
97. 2
103.0 103.4 103. 8 102. 1
102.2
101. 6
102.0 100. 8
98. 9
95. 8
97.7
104. 6
104.4 102.4 103.0 102.4
97. 3
104. 6
103. 6
105. 1
102. 5
105. 2
4
99. 1
97. 5
97. 6
101.7
June
99.4
3
May
106. 6 106.4
Apr
102. 7
103. 6
106.0 104.9
104.0
99.9 103. 5
97. 7
98. 3
Mar
2
Feb
105.7 103. 6
Jan
106.7 106.9
Dec
106. 3
Nov
104. 6
Oct
100. 4
Sept
98. 7
Aug
99. 4
Jul
1
Rank
TABLE XVII. ARRAYS OF PERCENTAGES (SEASONAL RELATIVES) FOR OREGON NO. 2 WESTERN
BARLEY PRICES AT PORTLAND, JANUARY, 1956 THROUGH DECEMBER, 1964.
86
Months arranged according to an adjusted seasonal price index
for No. 2 Western barley are shown below.
December
103.5
January
102.8
November
102.3
February
102.2
April
101.7
March
100.9
October
100.8
May
100.6
September
98.2
June
96. 3
July
95.7
August
95.5
Seasonal relatives are expressed in percent. The April value
of 101.7 means that this month is typically 1.7 percent above the
trend-cycle.
87
APPENDIX V
1965 WHEAT PROGRAM WORKSHEET
PROBABLE EFFECT ON FARM COSTS AND RETURNS
88
1965 WHEAT PROGRAM WORKSHEET
PROBABLE EFFECT ON FARM COSTS AND RETURNS
The worksheets and the following explanations are not intended to
describe the 1965 wheat and related feed grain programs or all their
implications. They are for your use in computing the probable effects
on your farm organization and income in the wheat-summer fallow
area. There are alternatives other than those specified in the worksheets. If you wish to test these for your particular situation, additional calculations will be necessary. Details of the program are
available from your County A. S. C. S. Office.
Aside from the direct monetary effects of the various alternatives, you should consider other points such as: value of released
resources, i. e., time saved; less wear on your equipment; benefits
from devoting land to conserving use; degree of risk due to changes
in yields or prices; reduced need for working capital and miscellaneous non-monetary effects.
INFORMATION NEEDED:
Basic loan rate-wheat $/bu
Expected wheat price $/bu
"Normal" yield for wheat bu/ac_ Expected barley price $/bu
Expected yield for wheat bu/ac_ Variable cost for
$/ac
wheat
ac
1965 barley base
1. Variable cost for
ac
1965 conservation base
$/ac
barley
Expected yield - barley bu/ac_
Variable cost for di$/ac
verted land
$/ac
Diversion payment
ac
1965 wheat allotment
Mandatory wheat diversion ac
In Compliance - Wheat
Non-Compliance - Batley
In Compliance - Wheat
Non-Compliance - Barley
Added Minimum Voluntary Diversion
1965 wheat acreage
line A
o. 1965 wheat acreage
Gross income
Wheat sales
13. Gross income
OxDx1
90% x line A
Wheat sales
OxDx1
Domestic certificates
Domestic certificates
Export certificates
Export certificates
AxCx. 45 x $.75
AxCx. 35 x $.30
AxCx. 45 x $.75
AxCx. 35 x $. 30
89
Barley income
Barley income
ExGxJ
ExGxJ
Diversion payment
10% of line A x N
Total
Total
q. Variable cost for wheat
xK
r. Variable cost for barley
xL
s. Variable costs for diverted land
xM
q. Variable cost for wheat
0xK
r. Variable cost for barley
ExL
s. Variable costs for diverted
land (B + .1A) x M $
t. Return above variable costs
t. Return above variable costs
Compliance with Wheat Program
Compliance with Barley Program
Substitute Wheat for Barley
o. 1965 wheat acreage
A + .8E
All Wheat
Non-Compliance - Wheat
Total P - (Q + R + S) $
Total P - (Q + R + S) $
Non-Compliance - Barley
o. 1965 wheat acreage
A+B+E
p. Gross income
Wheat sales
Gross income
Wheat sales
OxDx1
OxDx1
Domestic certificates
AxCx. 45 x $.75
Export certificates
AxCx. 35 x $. 30
Total
Total
Variable costs for wheat
xK
Variable costs for barley
q. Variable costs for wheat
0xK
r. Variable costs for barley
None
None
Variable costs for diverted acres
(B + . 2E) x M
Return above variable costs
Total P - (Q + R + S) $
s. Variable costs for diverted
land
None
t. Return above variable costs
Total P - (Q + R + S) $
90
Break-Even Price -- an example
The break-even price indicates the price you would have to obtain for wheat in order to make the same return above variable costs
by planting wheat "fence-to-fence" as by complying
with the wheat
and barley programs and substituting wheat for barley.
The "break-even" price as computed may not have any relationship to what the market price may be, but it will provide
a basis for
arriving at a decision. Once your break-even price is calculated,
you must decide: "Is the market price most likely to be above or
below the "break-even" price?"
The break-even price can be computed in the following manner:
Let Y = the price of wheat
1965 wheat allotment + 80% of the 1965 barley base x the expected
yield would give the number of bushels you would produce under
compliance - (A + .8E) x D x Y. Add to this the value of the export certificate (the 1965 wheat allotment x the normal yield x 45% x $. 75) and
the value of the export certificate (1965 wheat allotment x normal
yield x 35% x $. 30). Subtract from this the variable costs involved
for the acreage planted to wheat and the cost of complying with conserving use on the diverted acres. The above should equal
planted to wheat x the normal yield to obtain the production. the acres
Subtract
from this the variable costs of growing the wheat. The formula
would then be:
(A + .8E) xDxY+ (A x C x .45 x $.75) + (Ax C x .35 x $. 30)
- [(B + .2E) x M] = [(A + B + E)xDx Y -r(A+B+E)x1C.]
- [(A + . 8E) x
EXPLANATION OF TERMS:
1965 wheat allotment -- from A. S. C. S. office.
Mandatory wheat diversion. The minimum acreage of conserving use to qualify for price support loans and certificates is an
acreage equal to 11.11% of the farm wheat allotment (A). This
acreage is to be in addition to the conserving base for the farm
and any acreage diverted under any other program. This minimum qualification leaves the entire wheat allotment for growing
wheat but does not qualify the farm for a wheat diversion payment.
91
"Normal" yield for wheat -- from A. S. C. S. office.
Expected yield for wheat -- your estimate of your 1965 yield.
1965 barley base -- from A. S. C. S. office.
1965 conservation base -- from A. S. C. S. office.
Expected yield for barley -- your estimate of the 1965 yield.
Basic loan rate - from A. S. C. S. office. The basic loan rate for
your county -- nationally this will be $1.25 per bushel.
Expected wheat price -- your estimate of the 1965 wheat price.
If you are in compliance with the wheat program you can use
your county support rate as a minimum since you will be eligible
for loans at this rate.
Expected barley price -- your estimate of the price of barley at
harvest time in 1965. (At this time, the support price for barley
has not been announced.)
Variable cost for wheat -- here include only those items of annual
production expense that are affected by changes in land use.
Variable costs include such items as gas, oil, grease, repairs,
seed, fertilizer, sprays, crop insurance, additional hired labor,
custom work, etc. Costs not included are such items as real
and personal property taxes, liability insurance, licenses and
other costs which do not change with the acreage planted.
Variable costs for barley -- the same items as for wheat.
Variable costs for diverted land computed in the same manner
as for wheat. Include on diverted acres only those cash costs
necessary to qualify land for conserving use.
Diversion payment -- a diversion payment will be made for underplanting the allotment by at least 10% and devoting the acreage
to a conserving use. The diversion rate payment per acre is
50% of the county price support loan rate times the normal yield
for the farm for all acreage qualifying for payment. The diversion for payment may be as much as 20% of the farms wheat
allotment.
Prepared by Manning H. Becker, Extension Farm Management
Specialist, Oregon State University. September 15, 1964. SP 395