Alfalfa dehydration : operations and costs
by John George Zurenko
A thesis submitted to the Graduate Faculty in partial fulfillment of the requirements for the degree of
DOCTOR OF PHILOSOPHY in Agricultural Economics
Montana State University
© Copyright by John George Zurenko (1969)
Abstract:
Alfalfa dehydration is a seasonal operation and requires a large capital outlay. Almost continuous
operation during the season in order to generate the contribution is necessary to cover the fixed costs of
production.
Drying drums are rated in terms of evaporative capacity per hour. Consequently dry tonnage
(dehydrated alfalfa) production depends on the moisture content of the raw alfalfa, with production
increasing as the moisture content of the raw alfalfa decreases.
Length of growing season is important. The product price at which similar plants can breakeven is
inversely related to the length of the growing season. At a given price, the shorter the growing season
the larger the plant size and the greater the acreage needed to reach breakeven volume. Acreage
requirements decrease as length of operating season increases because more cuttings can be obtained
from each field.
Cost data from the survey revealed that for plants of similar capacities, conversion costs decreased as
average daily production and percentage of capacity at which the plants operated increased. There was
no indication of economies of scale in this analysis. Larger sized plants did not, however, operate at as
high a percentage capacity as smaller sized plants. The cost synthesis type of analysis, with all size
plants projected to operate at similar capacities, indicated that economies of scale are possible in the
industry.
The principal factor in plant location was availability of raw alfalfa with site at rail siding, natural gas
supply, local market potential, and location with respect to community receiving consideration.
Contracts with alfalfa growers generally are oral. This seems to be a grower preference. A good
reputation with growers seems to be more important than contractual commitments.
Ninety percent of the alfalfa supply of the survey plants came from within a 10-mile radius of the plant.
Harvesting and trucking costs are affected by condition of roads, routes available and yields and
condition of fields.
Marketing functions were generally performed by the plant managers. Most sales were to feed mills
and livestock feeders and within a 100-mile radius of the plant. Most of the plants in the survey had
inert gas storage and indicated that a plant should have inert gas storage for about one-half of its annual
production.
ALFALFA DEHYDRATION:
OPERATIONS AND COSTS
By
JOHN GEORGE ZURENKO
A t h e s i s s u b m i t te d t o t h e G r a d u a te F a c u l t y i n p a r t i a l
f u l f i l l m e n t o f t h e r e q u ir e m e n ts f o r t h e d e g re e
of
DOCTOR OF PHILOSOPHY
in
A g r i c u l t u r a l E conom ics
C h a irm a n , E x a m in in g C om m ittee ■
G ra d u a
MONTANA STATE UNIVERSITY
B ozem an, M ontana
A u g u s t, 1969
iii
ACKNOWLEDGEMENTS
The a u t h o r w is h e s t o e x p r e s s g r a t i t u d e t o D r. C h a r le s R u s t, c o m m itte e
c h a irm a n f o r a d v ic e and a s s i s t a n c e i n t h e u n d e r t a k in g o f t h i s s tu d y and
p a t i e n c e and u n d e r s t a n d i n g shown th r o u g h o u t t h e w r i t i n g p e r i o d .
T hanks a r e e x te n d e d t o D r. R ic h a r d M cCbnnen, D r. L a y to n S . Thom pson,
D r. C la r e n c e J e n s e n , D r. C liv e H a r s t o n , an d P r o f e s s o r Jo h n L i t s c h a u e r f o r
t h e i r a d v ic e and a s s i s t a n c e .
A p p r e c ia ti o n i s e x te n d e d t o D r. J . W arren M a th e r and M r. C h a r le s Reed
o f t h e F a rm e rs C o o p e r a tiv e S e r v ic e f o r t h e i r c o o p e r a t i o n .
' V ery d eep th a n k s a r e e x p r e s s e d t o t h e members o f t h e a l f a l f a d e h y d ra ­
t i o n i n d u s t r y who g a v e s o g e n e r o u s ly o f t h e i r tim e and made t h i s s tu d y
p o s s ib le .
iv
TABLE OF CONTENTS
P ag e
VITA................................................ • ................................................. y .............................................. i i
ACKNOWLEDGEMENTS........................................................................................................................... i i i
TABLE OF CONTENTS............................................■ ......................... .... ......................................i v
LIST OF TABLES...............................................................................................
v ii
LIST OF F IG U R E S................................................ . ............................. .... ............................ i x
A B ST R A C T ..... . . . . .....................
. '. ,
. . . ........................ x i
CHAPTER I . ■ INTRODUCTION.....................................................................................................
P ro b le m S i t u a t i o n ........................................................................................
D e h y d r a te d A l f a l f a ........................
H i s t o r i c a l D ev elo p m en t o f A l f a l f a D e h y d r a tio n ...........................................
The D e h y d r a tio n P r o c e s s ....................................................
R o ta ry Drum D r y e r s .................................
P r o d u c t F lo w ........................ .... . .................................. ............................................... 11
H a r v e s t i n g and T r u c k in g ...........................................................................................
R e s e a rc h P ro b le m . . . ...................................
H y p o t h e s i s ............................................................................
O b j e c t i v e s ...............................................................
I
I
2
3
9
9
18
18
19
20
CHAPTER I I .
THEORY AND METHODOLOGY..............................................................................21
C o n v e n tio n a l T h e o r y .......................
21
L e a s t - C o s t C o m b in a tio n o f I n p u t s ...............................................
21
O p tim a l L e v e l o f O u tp u t ...........................................................................................
26
Long-R un C o st F u n c t i o n ......................................
27
S h o rtc o m in g s o f C o n v e n tio n a l T h e o r y ...................................................................
29
L i n e a r C o st C u rv es R e s u l t i n g fro m V a r i a t i o n s in" th e 'T im e
D i m e n s i o n .............................................................................................................................. 29
L i n e a r C o st C u rv es R e s u l t i n g fro m S e g m e n ta tio n . . . . . . . . .
30
D is c o n tin u o u s C o s t F u n c t i o n s . . . .. . ................................................................32
L o n g -ru n C o st F u n c tio n s fro m L i n e a r S h o r t - r u n C o s t F u n c t i o n s . . 36
The P ro b le m o f D u r a b l e s ................................................................................................. 36
The N a tu r e o f A l f a l f a D e h y d r a t i o n .........................................................
39
H y p o t h e t i c a l C o st F u n c tio n s f o r A l f a l f a D e h y d r a tio n ........................
41
C o st A n a ly s is U sin g C o s t A c c o u n tin g an d O u tp u t D a ta . ........................ 43
A d v a n ta g e s and D is a d v a n ta g e s o f U sin g A c c o u n tin g C o st and
O u tp u t D a t a ...................................
44
C o s t S y n t h e s i s M ethod o f A n a ly z in g P l a n t C o s t s . ........................
45
C o s t S y n t h e s i s i n A l f a l f a D e h y d r a tio n ............................................................... 45
M ethods o f E s t i m a t i n g C o s ts i n A l f a l f a D e h y d r a tio n , .............................
46
L a b o r ...................................................................................... .
.................................. 46
M a t e r i a l s .......................................................... . . . . .
.......................................
47
F u e l ................................................................................................................................................. 47
V
P age
P o w e r ........................ ............................................................................................... .... . . 48
Gas and O i l .............................................................................................................................. 48
M is c e lla n e o u s S u p p l ie s and G e n e r a l E x p e n s e ........................................................ 48
A d m i n i s t r a t i v e C o s t s ...........................................................................................................48
D u ra b le Goods . . . . ......................................
49
S a m p lin g ........................
49
P r e l i m i n a r y R e s e a r c h . ............................................................................. ■...................... 50
S o u rc e o f D a t a .......................
52
CHAPTER I I I .
FACTORS IN ALFALFA DEHYDRATION.......................................................... 53
P l a n t L o c a ti o n . ..................................................... .................................................... .... . 53
Raw M a t e r i a l .................................. .... .........................................................• .........................55
R e q u ir e m e n ts ..............................................................................................................
55
The S u p p ly A r e a .............................................................
57
P r o c u re m e n t, ................................................................................................
P r o d u c e r A g r e e m e n t s .......................................................................
64
Q u a l i t y C o n t r o l D u rin g H a r v e s t i n g and P r o c e s s i n g ................... . . . .
66
O p e r a tio n s P r o c e d u r e .........................................
67
The W e a th e r F a c t o r ...........................................
68
E f f e c t o f M o is tu r e C o n te n t o f Raw A l f a l f a on D e h y d ra te d
A l f a l f a P r o d u c t i o n ..............................................
69
S c h e d u lin g o f H a r v e s t i n g . .................................................................................
71
H a r v e s t i n g and T r u c k in g E q u ip m e n t . . . . . . . .
..................................
73
L a b o r .......................................................... ....................... ' ....................................................... 75
P l a n t L a b o r ...............................................
75
F i e l d L a b o r ...............................................
76
O th e r L a b o r .........................................................
78
CHAPTER IV .
COSTS AND RETURNS................... .... . , ...........................................
82
A v e ra g e P r o d u c ti o n C o s t s ............................................................................
82
P r e v io u s R e s e a r c h . . . . . . .
........................ ........................... . . .. . .
82
F ix e d and V a r i a b l e C o s t s ...........................................
82
V a r i a b l e C o s t s . . ......................................
83
L a b o r ............................................................................
84
F u e l ....................................................
90
P ow er ............................................................................................................................................ 93
Gas and O i l ........................................
95
M a in te n a n c e and R e p a i r . . ............................. . ................................................ 95
T o t a l C o n v e rs io n C o s t s . ......................................
98
F ix e d C o s t s ...................................................................................
T o t a l C o s t s .....................................................................................
B re a k e v e n A n a l y s i s ........................ ............................. ’. ................................ ....
108
P o s i t i v e N e t R e t u r n s .....................................................................
A p p l i c a t i o n o f B r e a k -e v e n A n a l y s i s . t o S u rv e y D a ta . . . . . . . .
HO
L i m i t a t i o n s o f P r e c e d i n g A n a ly s is . . .................................................................. 114
60
109
vi
P age
CHAPTER V. MODEL PLANT CONSTRUCTION......................... .......................................115
E s t i m a t i o n o f F ix e d C o s ts . . . ..................................................... ....................... 115
H a r v e s t i n g ................... . . .................................. ..............................................................115
T r u c k in g . . . . . . .
........................ . . . . . . . . . . . . . . .
116
P r o c e s s i n g .................................. .... . . ............................... .... ......................................116
V a r i a b l e C o s t ............................
120
L a b o r .................................................................................
120
D e h y d r a tin g F u e l ................................................ . . . * ........................................... 120
P o w e r .................................................................................
123
Gas a n d O i l ............................................................................................................................123
M ainte n a n c e and R e p a i r ....................................................................................................123
O th e r C o s ts . .................................
124
C o st I n t e g r a t i o n . ....................................................................................................
124
CHAPTER V I. MARKETING MANAGEMENT . ■.......................
133
S a l e s O r g a n i z a t i o n .................................................................................................................. 134
M a rk e t D e m a n d .......................
136
M a rk e tin g O u t l e t s . . . .
........................ . . . . .
....................................... 136
S a l e s I n f o r m a t i o n ..................................................... .... . ............................................139
S t o r a g e .........................................................
141
CHAPTER-VII. SUMMARY . . . ........................ ■............................................
146
G row ing S e a s o n and A c re a g e R e q u ire m e n ts . .................................. . . . .
146
P l a n t L o c a ti o n . ................................................
147
V a r i a b l e I n p u t s .............................................................. ............................................... . • 148
P l a n t and F i e l d E q u i p m e n t .................................................................................
148
A v a i l a b l e M a r k e t...................................................................
149
O r g a n i z a t i o n a l S t r u c t u r e ....................................................................................................149
APPENDICES........................ . . ........................................................................ ....
A p p en d ix A. . . .......................................................... .... ...........................................
A p p en d ix B . . . . ...................................
154
. 155
157
LITERATURE CITED. . .' .............................
.1 5 9
v ii
LIST OF TABLES
T a b le
I
II
III
IV
P age
ALFALFA MEAL: PRODUCTION BY REGIONS AND STATES, YEAR
BEGINNING MAY, AVERAGE 1 9 5 7 -6 1 , ANNUAL 1 9 5 7 -6 2 ..................................
5
ALFALFA ACRES HARVESTED, DISTRIBUTION OF ACREAGE AND MEANS OF
ACQUISITION BY PLANT, 1966 SURVEY , . ....................................................... 59
FACTORS CONSIDERED BY ALFALFA DEHYDRATING FIEMS IN ARRIVING AT ■
A PRICE TO PAY GROWERS FOR STANDING ALFALFA, 1958 AND 1966. . 62
EFFECT OF MOISTUEE CONTENT OF RAW ALFALFA ON POTENTIAL -PRODUC­
TION OF DEHYDRATED ALFALFA ASSUMING DEHYDRATED ALFALFA WITH A
MOISTURE CONTENT OF 10 PERCENT AND A DRYING DRUM WITH AN
EVAPORATIVE CAPACITY OF 9 ,0 0 0 POUNDS PER H O U R..................................70
V ALFALFA DEHYDRATION HARVESTING AND TRUCKING EQUIPMENT BY
PLANT S IZ E , 1966 SURVEY ........................ . . . . . . . . . . . . .
74
VI LABOR REQUIREMENTS, 1966 SURVEY . . . . . . . . . . . . . . .
77
V II
V III
IX
AVERAGE WAGE RATES AND RANGES, 1966 SURVEY. . . . . . . . . .
80
PLANT AND FIELD LABOR COSTS PER TON, 1966 SURVEY...........................85
NUMBER OF EMPLOYEES AND AVERAGE HOURLY RATES PER SHIFT: PLANTS
WITH ABOVE AVERAGE LABOR COSTS AS COMPARED TO PLANTS WITH BELOW
AVERAGE LABOR COSTS, BY SIZE GROUPS, 1966 SURVEY................... .... . 89
X CONVERSION COSTS PER TON OF OUTPUT, 1966 SURVEY............................ 91
XI FIXED COSTS PER TON OF OUTPUT FOR 20 ALFALFA DEHYDRATION
PLANTS, 1966 SURVEY ........................................................................ .
103.
X II
TOTAL COSTS PER TON OF OUTPUT, 20 PLANTS, 1966 SURVEY . . . .
X III
BREAKEVEN ANALYSIS APPLIED TO SURVEY DATA.................................... ....
XIV HARVESTING:.
EQUIPMENT REQUIREMENTS AND COST...........................
106
Ill
. . 117
XV TRUCKING: EQUIPMENT REQUIREMENTS AND COST........................................... 118
XVI PROCESSING:
EQUIPMENT REQUIREMENTS AND COST. . . . . . . . .
121
v iii
T a b le
Page
XVII LABOR COST PER TON........................................................................................................... 122
XVIH- PLANT COSTS FOR 1 . 5 , 2 . 0 , AND 3 .0 TON PER HOUR PLANTS DURING
A 12-WEEK OPERATING
SEASON...........................................................
125
XIX PLANT COSTS FOR 1 . 5 , 2 . 0 , AND 3 .0 TON PER HOUR PLANTS DURING
A 16-WEEK OPERATING
SEASON...........................................................
126
XX PLANT COSTS FOR 1 . 5 , 2 . 0 , AND 3 .0 TON PER HOUR PLANTS DURING
A 20-WEEK OPERATING SEASON. . ' ............................. . . ................................... .127
XXI WHOLESALE PRICE PER TON, BULK, OF DEHYDRATED ALFALFA MEAL, 17
PERCENT PROTEIN, 1 0 0 ,0 0 0 UNITS VITAMIN A, AT KANSAS CITY. . . 135
XXII
X X III
NUMBER OF PLANTS WHO GUARANTEED PROTEIN AND CAROTENE IN THEIR
PRODUCT, 1966 ............................................................................................................... 140
METHOD OF SELLING DEHYDRATED ALFALFA, 20 PLANTS, 1966 . . . .
142
XXIV STORAGE POLICY AND PROBLEMS, 17 ALFALFA DEHYDRATING PLANTS,
1 9 6 6 . ................................................................... . . ................................................
143
XXV MINIMUM AND MAXIMUM STORAGE REQUIRED PER PLANT BY VOLUME OF
OUTPUT, 1966. . ...........................................
144
XXVI ADVANTAGES AND DISADVANTAGES OF GROWERS BEING STOCKHOLDERS IN
AN ALFALFA DEHYDRATING FIRM. RESPONSES FROM FIRMS INTER­
VIEWED........................................................................
151
ix
LIST OF FIGURES
F ig u re
P ag e
1
Number o f D e h y d r a tin g P l a n t s by S t a t e s i n 1954.
........................
2
C utaw ay View o f T h r e e - P a s s Drum .................................................................... 10
3
P r o d u c t Flow fro m D ry in g Drum t o H a m m e r m ill........................................13
4
P l a n t E m p lo y in g P r o c e s s Diagram m ed i n F i g u r e 3 ........................
5
P r o d u c t Flow fro m D ry in g Drum t o P e l l e t M i l l ........................................15
6
P l a n t E m p lo y in g P r o c e s s D iagram m ed i n F ig u r e 5 ................................... 16
7
P r o d u c t Flow fro m H am m erm ill t o L o a d o u t o r S t o r a g e ......................... 17
.
4
14
8a
T o t a l C o s t C u rv e ......................................................................................
25
8b
A v e ra g e C o s t C u rv e .......................................................................................................25
9a
Long-R un T o t a l C o st C urve . . . . . .
......................................................
28
9b
Long-R un A v e ra g e C o s t C urve .........................................................................
28
10
L i n e a r C o s t.C u r v e s R e s u l t i n g fro m V a r i a t i o n s i n t h e Time
D im en sio n ....................................................
30
11
E f f e c t o f O v e rtim e Prem ium on T o t a l C o st C u rv e ................................... 32
12a
T o t a l C o st F u n c tio n f o r a P l a n t O p e r a tin g w i t h Two P r o d u c tio n
L in e s i n t h e Time D im en sio n O n ly .........................................
34
12b
A v e ra g e C o st F u n c tio n C o rr e s p o n d in g t o t h e T o t a l C o st
F u n c tio n o f F i g u r e 1 2 a . . . . . .
..........................................................
34
13a
D i s c o n t i n u i t y i n T o t a l I n p u t- O u t p u t R e l a t i o n s h i p s
35
13b
A v e ra g e C o s t- O u tp u t R e l a t i o n s h i p s C o rr e s p o n d in g t o T o t a l
I n p u t- O u t p u t R e l a t i o n s h i p s A bove...................................................................35
14
15
....................
An I l l u s t r a t i o n o f Long-Run E conom ies and D is e c o n o m ie s o f
S c a le Due t o C a p a c ity C o n s t r a i n t s on t h e I n d i v i d u a l P l a n t .
37
P l a n t P r o c e s s Flow D iagram f o r A l f a l f a D e h y d r a tio n .
40
. . . .
X
F ig u re
16a
16b
P age
D is c o n tin u o u s Long-R un T o t a l C o s t F u n c tio n R e s u l t i n g
fro m D i s c r e t e V a r i a t i o n s i n P l a n t C a p a c i t i e s . . . ...................
42
D is c o n tin u o u s Long-R un A v erag e C o s t F u n c tio n R e s u l t i n g
fro m D i s c r e t e V a r i a t i o n s i n P l a n t C a p a c i t i e s . . . . . . . .
42
17
L o c a t i o n , O r g a n i z a t i o n a l S t r u c t u r e o f P l a n t s i n S a m p le , and
W h e th e r - E s t a b l i s h e d a f t e r 1961. . . ........................ ........................... 51
18
A n a l y s is o f P e r Ton L a b o r C o s t s .
F o u r P l a n t S i z e G roups by
2 4 -H o u r C a p a c i t y ...........................................
86
A n a ly s is o f P e r Ton F u e l C o s t s .
F o u r P l a n t S i z e G ro u p s-b y
2 4 -H o u r C a p a c i t y ...............................................
92
A n a l y s is o f P e r Ton P o w e r - C o s ts . F o u r P l a n t S i z e G roups by
2 4 -H o u r C a p a c it y . .............................................................................................
94
A n a l y s is o f P e r Ton Gas and O i l C o s t s .
G roups by 2 4 -H o u r - C a p a c it y ........................ ....
96
19
20
21
Four P la n t S iz e
........................ ....
22
A n a ly s is o f P e r Ton M a in te n a n c e an d R e p a ir C o s ts .
Four P la n t
S i z e G roups b y 2 4 -H o u r C a p a c ity . . ...........................................................97
23
A n a ly s is o f P e r Ton V a r i a b l e C o s t s . F o u r P l a n t S i z e G roups
by' 2 4 -H o u r C a p a c ity ................................................................................................. 99
24
A n a ly s is o f P e r Ton F ix e d C o s ts .
F o u r P l a n t . S i z e G roups by
2 4 -H o u r C a p a c it y . ......................................................................................
104
25
A n a ly s is o f T o t a l C o s ts P e r T on. F o u r P l a n t S i z e G roups by
2 4 -H o u r C a p a c it y . . ............................. .... . . ............................. ....
107
26
A v e ra g e C o s ts f o r a 12-Week O p e r a tin g S e a so n w i t h 4 , 5 , 6 , and
7-D ay Work Weeks f o r P l a n t s , w i t h C a p a c i t i e s o f 1 . 5 , 2 . 0 , and
3 . 0 - Tons p e r H o u r ..............................................
128
27
A v e ra g e C o s ts f o r a.1 6 -W eek O p e r a tin g - S e a s o n w i t h 4 , 5 , 6 , and
7-D ay Work Weeks f o r P l a n t s w i t h C a p a c i t i e s o f 1 . 5 , 2 . 0 , and
3 . 0 - Tons p e r H o u r ............................................................
129
28
A v e ra g e C o s ts f o r a 20-W eek O p e r a tin g S e a so n w i t h 4 , 5 , 6 , and
7-D ay Work Weeks f o r P l a n t s w i t h C a p a c i t i e s o f 1 . 5 , 2 . 0 , and
3 . 0 - Tons p e r H o u r ..................................................................................................130
xi
ABSTRACT
A l f a l f a d e h y d r a t io n i s a s e a s o n a l o p e r a t i o n and r e q u i r e s a l a r g e
c a p i t a l o u t l a y . A lm o st c o n tin u o u s o p e r a t i o n d u r in g t h e s e a s o n i n o r d e r
t o g e n e r a t e t h e c o n t r i b u t i o n i s n e c e s s a r y t o c o v e r th e: f i x e d C o sts o f
p ro d u c tio n .
D ry in g drum s a r e r a t e d i n . t e r m s o f e v a p o r a t i v e c a p a c i t y p e r h o u r .
C o n s e q u e n tly d ry to n n a g e ( d e h y d r a te d a l f a l f a ) p r o d u c t i o n d e p e n d s on th e
m o is t u r e c o n t e n t o f t h e raw a l f a l f a , w i t h p r o d u c t i o n i n c r e a s i n g as th e
m o is t u r e c o n t e n t o f th e raw a l f a l f a d e c r e a s e s .
L e n g th o f g ro w in g s e a s o n i s i m p o r t a n t .
The p r o d u c t p r i c e a t w h ich
s i m i l a r p l a n t s can b r e a k e v e n i s i n v e r s e l y r e l a t e d t o t h e l e n g t h o f th e
g ro w in g s e a s o n . At a g iv e n p r i c e , t h e s h o r t e r t h e g ro w in g s e a s o n th e
l a r g e r t h e p l a n t s i z e and t h e g r e a t e r t h e a c r e a g e n e e d e d t o r e a c h b r e a k ­
e v e n v o lu m e . A c re a g e r e q u ir e m e n ts d e c r e a s e a s l e n g t h o f o p e r a t i n g
s e a s o n i n c r e a s e s b e c a u s e m ore c u t t i n g s can b e o b t a i n e d fro m e a c h f i e l d .
C o s t d a t a fro m t h e s u r v e y r e v e a l e d t h a t f o r p l a n t s o f s i m i l a r
c a p a c i t i e s , c o n v e r s io n c o s t s d e c r e a s e d a s a v e r a g e d a i l y p r o d u c t i o n and
p e r c e n t a g e o f c a p a c i t y a t w h ic h t h e p l a n t s o p e r a t e d i n c r e a s e d . T h e re
was n o i n d i c a t i o n o f e c o n o m ie s o f s c a l e i n t h i s a n a l y s i s . L a r g e r s i z e d
p l a n t s d id n o t , h o w e v e r, o p e r a t e a t as h i g h a p e r c e n ta g e c a p a c i t y as
s m a lle r s iz e d p l a n t s .
The c o s t s y n t h e s i s ty p e o f a n a l y s i s , w i t h a l l
s iz e p la n ts p r o je c te d to o p e ra te a t s im i la r c a p a c itie s , in d ic a te d th a t
e c o n o m ies o f s c a l e a r e , p o s s i b l e i n th e i n d u s t r y .
The p r i n c i p a l f a c t o r i n p l a n t l o c a t i o n was a v a i l a b i l i t y o f raw
a l f a l f a w i t h s i t e a t r a i l s i d i n g , n a t u r a l g a s s u p p ly , l o c a l m a rk e t
p o t e n t i a l , and l o c a t i o n w i t h r e s p e c t t o com m unity r e c e i v i n g c o n s i d e r a t i o n .
C o n t r a c t s w i t h a l f a l f a g ro w e rs g e n e r a l l y a r e o r a l .
T h is seem s t o b e
a g ro w e r p r e f e r e n c e .
A good r e p u t a t i o n w i t h g ro w e rs seem s t o b e m ore
i m p o r ta n t th a n c o n t r a c t u a l co m m itm en ts.
N in e ty p e r c e n t o f t h e a l f a l f a s u p p ly o f t h e s u r v e y p l a n t s came from
w i t h i n a 1 0 - m ile r a d i u s o f t h e p l a n t . H a r v e s t i n g and t r u c k i n g c o s ts
a r e a f f e c t e d by c o n d i t i o n o f r o a d s , r o u t e s a v a i l a b l e and y i e l d s and
c o n d itio n o f f i e l d s .
M a rk e tin g f u n c t i o n s w e re g e n e r a l l y p e rf o r m e d by t h e p l a n t m a n a g e rs .
M ost s a l e s w e re t o f e e d m i l l s and l i v e s t o c k f e e d e r s and w i t h i n a 100m ile r a d i u s o f t h e p l a n t .
M o s t, o f t h e p l a n t s i n t h e s u r v e y h a d i n e r t
g a s s t o r a g e and i n d i c a t e d t h a t a p l a n t s h o u ld h a v e i n e r t g a s s t o r a g e f o r
about o n e -h a lf o f i t s an n u al p r o d u c tio n ..
CHAPTER I
INTRODUCTION
P ro b le m S i t u a t i o n
F a rm e rs a r e c o n s t a n t l y s e e k in g w ays t o s t a b i l i z e and i n c r e a s e farm
re tu rn s .
I n many a r e a s o f t h e U n ite d S t a t e s a l f a l f a i s an im p o r ta n t
s o u r c e o f fa rm in co m e .
I n r e c e n t y e a r s i n c r e a s e d y i e l d s , and r e s t r i c t i o n s
on o t h e r c a s h c ro p s h a v e c o n t r i b u t e d t o t h e im p o r ta n c e o f a l f a l f a i n t h e
e n te rp ris e s tr u c tu r e .
A f i e l d o f a l f a l f a y i e l d s from one t o s e v e n c u t t i n g s p e r s e a s o n ,
d e p e n d in g on t h e a r e a i n w h ic h i t i s p r o d u c e d .
r e q u i r e s f a v o r a b l e w e a th e r c o n d i t i o n s .
r e q u i r e s s p e c i a l i z e d m a c h in e r y .
S u n - c u r in g o f a l f a l f a
The p r o c e s s i n g o f a l f a l f a hay
The p r o d u c t i s b u lk y and d o e s n o t e a s i l y
le n d i t s e l f t o a u to m a te d h a n d l i n g , th u s r e q u i r i n g a c o n s i d e r a b l e amount
o f h a n d l i n g when h a r v e s t e d and f e d .
T h e se c h a r a c t e r i s t i c s o f a l f a l f a
h a y p r o c e s s i n g ( r e p e a t e d c u t t i n g s , d e p e n d e n c e on f a v o r a b l e w e a th e r c o n d i­
t i o n s , s p e c i a l i z e d m a c h in e r y and n e c e s s i t y o f - p h y s i c a l h a n d li n g ) e n c o u ra g e
d e v e lo p m e n t o f o t h e r m eans o f p r o c e s s i n g t h a t w i l l b e a m ore e f f i c i e n t
m eans o f u t i l i z i n g
a lfa lfa .
A l f a l f a h a y i s a h i g h b u lk - lo w v a l u e p r o d u c t .
f o r t h i s ty p e o f p r o d u c t a r e r e l a t i v e l y h i g h .
T r a n s p o r ta tio n c o s ts
The r e s u l t i s a m a rk e t w i t h
a s m a l l g e o g r a p h ic a r e a and few b u y e r s and s e l l e r s .
Many h a y p r o d u c e r s
f e a r t h a t demand f o r a l f a l f a h a y w i l l . . n o t k e e p up w i t h t h e i n c r e a s e s i n
s u p p ly .
Many h a y m a r k e ts a r e s u b j e c t t o w id e y e a r - t o - y e a r and s e a s o n -
to -s e a so n p r ic e f lu c tu a tio n s .
C o n s e q u e n tly , f a r m e r g ro u p s f r e q u e n t l y
r e q u e s t i n f o r m a t i o n c o n c e r n in g th e e c o n o m ic f e a s i b i l i t y
o f d i f f e r e n t " m eans
2
o f p r o c e s s i n g a l f a l f a a s a m eans o f a d d in g v a l u e t o t h e i r p r o d u c t ,
e x p a n d in g t h e i r m a r k e t a r e a , and t h e r e b y i n c r e a s i n g demand and s t a b i l i z i n g
t h e m a r k e t.
O th e r f a r m e r - f e e d e r g ro u p s may b e i n t e r e s t e d i n s u c h
p r o c e s s i n g a s a m e a n s . o f o b t a i n i n g a m ore e c o n o m ic a l o r d e p e n d a b le s o u r c e
o f feed in g re d ie n ts .
B u s in e s s and com m unity l e a d e r s so m e tim e s a r e
i n t e r e s t e d i n t h e p r a c t i c a l i t y o f s u c h an e n t e r p r i s e a s a m eans o f
b r i n g i n g a new i n d u s t r y and a d d i t i o n a l em ploym ent to an a r e a .
r e q u e s ts r e g a rd in g th e f e a s i b i l i t y
S e v e ra l
o f e s t a b l i s h i n g an a l f a l f a d e h y d r a tio n
p l a n t h a v e b e e n r e c e i v e d by M ontana S t a t e U n i v e r s i t y and t h e U n ite d S t a t e s
s
D e p a rtm e n t o f A g r i c u l t u r e w i t h i n t h e l a s t t h r e e y e a r s .
D e h y d ra te d A l f a l f a
•
A l f a l f a d e h y d r a t io n i s a p r o c e s s w h e re b y m o is t u r e i s rem oved from
g r e e n a l f a l f a th ro u g h e x p o s u r e t o h i g h , a r t i f i c i a l l y m a i n ta i n e d te m p e ra ­
tu re s .
D e h y d ra te d a l f a l f a i s d e f i n e d i n t h e T ra d e R u le s and Code o f
E t h i c s o f t h e A m erican D e h y d r a to r s A s s o c i a t i o n as f o ll o w s :
The te rm ’ D e h y d ra te d A l f a l f a P r o d u c t ' a p p l i e s t o any o f
t h e v a r i o u s form s and g ra d e s o f p r o d u c t s o b t a i n e d from a l f a l f a
p r o v id e d t h a t :
(a )
The a l f a l f a i s r e a s o n a b ly f r e e from o t h e r c ro p p l a n t s
and w e e d s , and
(b )
JL/
The f r e s h l y c u t a l f a l f a , h a v in g a m o is t u r e c o n t e n t o f
n o t l e s s th a n s i x t y (60) p e r c e n t , h a s b e e n a r t i f i c i a l l y
d r i e d a t a te m p e r a tu r e o f n o t l e s s th a n 212 d e g r e e s
F a r e n h e i t and t h a t t h e D ry in g p r o c e s s h a s c o v e re d a
p e r i o d o f n o t m ore th a n f o r t y (40) m in u t e s . _1/
T ra d e R u le s and Code o f E t h i c s , A m erican D e h y d r a to r s A s s o c i a t i o n ,
K a n sa s C i t y , M i s s o u r i , p . 7 7 .
3
D e h y d ra te d a l f a l f a i s u s e d .a s an i n g r e d i e n t i n p o u l t r y , s w in e , c a t t l e ,
and s h e e p r a t i o n s .
I t is
many f e e d s b e c a u s e i t
a r i c h s o u r c e o f V ita m in A.
c o n t a i n s c e r t a i n , as y e t u n i d e n t i f i e d , h e a l t h ,
g r o w th , and r e p r o d u c t i v e f a c t o r s .
it
I t i s used in p o u ltr y fe e d s b ecau se
c o n t a i n s t h e p ig m e n tin g a g e n t x a n t h o p h y l l .
a h ig h q u a li ty p r o te i n .
and 19 am ino a c i d s .
I t i s in c l u d e d i n
D e h y d ra te d a l f a l f a c o n ta i n s
I t a l s o c o n t a i n s 11 o t h e r v i t a m i n s , 13 m i n e r a l s ,
I t i s s o l d on t h e b a s i s o f i t s p r o t e i n and V ita m in A
c o n te n t.
The l o c a t i o n s o f d e h y d r a t in g p l a n t s o p e r a t i n g i n t h e U n ite d S t a t e s i n
a 1954 s tu d y a r e shown i n F i g u r e I .
I,
TJ
Of t h e 321 p l a n t s shown i n F ig u r e
157 a r e l o c a t e d i n t h e s t a t e s o f C o lo r a d o , K a n s a s , and N e b r a s k a .
D e h y d ra te d a l f a l f a p r o d u c t i o n th r o u g h 1963 i s shown i n T a b le I .
In
1 9 6 2 -1 9 6 3 , y e a r b e g in n in g i n May, t o t a l a l f a l f a p r o d u c t i o n i n th e U n ite d
S t a t e s was e s t i m a t e d a t .1 ,5 9 8 ,0 0 0 t o n s .
Of t h i s t o t a l ,
8 6 1 ,0 0 0 to n s o r
57 p e r c e n t o f t o t a l p r o d u c t i o n o c c u r r e d i n C o lo r a d o , K a n s a s , and N e b ra s k a .
C a l i f o r n i a i s t h e s e c o n d l a r g e s t p r o d u c in g a r e a w i t h 3 6 4 ,0 0 0 t o n s .
The
f i v e - y e a r a v e r a g e from 1 9 5 7 -1 9 6 1 was 1 ,3 8 4 ,0 0 0 to n s o f w h ic h 7 3 1 ,0 0 0
t o n s , o r 52 p e r c e n t , w e re p ro d u c e d i n C o lo r a d o , K a n s a s , and N e b r a s k a .
H i s t o r i c a l D ev elo p m en t o f A l f a l f a D e h y d ra tio n
Some o f t h e e a r l i e s t d e h y d r a t o r s i n t h e U n ite d S t a t e s w e re t u n n e l
d r i e r s b u i l t by F u lm e r. J3/
T h e se d e h y d r a t o r s w e re l o c a t e d a ro u n d th e
2/
L a t e r a c c u r a t e d a t a o f t o t a l p o p u l a t i o n o f num bers o f p l a n t s i s n o t
a v a ila b le .
3/
R ic h a r d L . K a th e , " S i l v e r A n n iv e r s a r y B a n q u e t— H i s t o r i c a l R e v ie w ,"
P r o c e e d i n g s , A m erican D e h y d r a to r s A s s o c i a t i o n , (K an sa s C i t y , M o .,
1 9 6 6 ), p . I .
TABLE I .
ALFALFA MEAL: PRODUCTION BY REGIONS AND STATES, YEAR BEGINNING MAY, AVERAGE 1957-61,
ANNUAL 1 9 5 7 - 6 2 ;* ! /
R egion and S t a t a
!A v e ra g e :
:
:
;1 9 5 7 -6 I r 1957-58. .: ' 1 9 5 8 -5 9 .': 1959-60 : 1 9 6 0 -6 1 ': '1961-62 : 1 9 6 2 -6 3 '2 /
- 1 ,0 0 0 ■T o n s -------------N o r th A t l a n t i c 3 /
E a s t N o r th C e n t r a l
O hio
M ic h ig a n & W is c o n s in
I l l i n o i s & I n d ia n a
T o ta l
W est N o r th C e n t r a l
N e b ra s k a
K a n sa s
M is s o u r i
M in n e s o ta
Iow a
T o ta l
S o u th - C e n t r a l
A rk a n sas & T en n essee
Oklahom a
T exas
T o ta l
W e ste rn
C a lifo rn ia
■ C o lo ra d o
W a sh in g to n & U ta h
T o ta l
O th e r S t a t e s
T o ta l U. S.
33
24
34
36
35
35
33
93
21
19
' 133
88
.24
22
134
91
• 16
' '19
■' 126
76
• 20
'
19
' 115
94
• 20
134
115
.24
16
155
69
16
16
101
- 451
142
46
• ■19
’ 26
684
493
125
• 46
■ 22
26
712
. 492
149
46
22
29
738
490
160
43
.. .34
' 34
761-
522
195
39
. .39
35
830
14
11
27
21
7
26
52
54
30
7
24
61
26
6
22
54
23
8
21
52
218
240
108
. 44
266
118
35
419
364
144
30
473
142
- 46
24
■ 29
716
22
8
25
55
233
116
39
392
436
135
50
■ -21
• '27
6b5 4 /
20
10
26
56
187
123 ■■
31 5 /
359 TJ
..
20
378
392
257
114
41
412
118 •
42 6 /
•
548 8 /
55
30
54
76
67
49
34
1,3 8 4
1 ,2 8 8
1 ,3 2 8
1,385
1,447
1,473
1 ,5 9 8
( t a b l e c o n tin u e d )
6
F o o tn o te s f o r T a b le I
* S o u rce:
I/
2/
3/
4/
5]
6/
7_/
8/
J a c k S„ R o s s , R e c e n t T re n d s and S e a s o n a l i t y i n A l f a l f a M eal
P r o d u c t i o n , Use and P r i c e s , E conom ic and S t a t i s t i c a l A n a ly s is
D i v i s i o n , E conom ic R e s e a rc h S e r v i c e , U. S . D e p a rtm e n t o f
A g r i c u l t u r e , F D S -200, A u g u st 1 9 6 3 , p „ 37.
I n c l u d e s t o t a l o f s u n c u r e d and d e h y d r a te d .
P re lim in a ry .
P e n n s y lv a n i a o n l y .
T o t a l i n c l u d e s 1 6 ,0 0 0 to n s p r o d u c e d i n N o rth and S o u th D a k o ta .
In c lu d e s s m a ll q u a n tity p ro d u ced in Id a h o .
I n c l u d e s s m a l l q u a n t i t y p ro d u c e d i n A r iz o n a .
I n c l u d e s 1 8 ,0 0 0 t o n s p r o d u c e d i n A r iz o n a and New M ex ico .
I n c l u d e s 1 0 ,0 0 0 to n s p r o d u c e d i n New M exico and N ev a d a .
7
tow ns o f N a z a r e th and A lle n to w n , P e n n s y lv a n i a , and c o n s i s t e d o f a t u n n e l
w i t h a b e d o f h a n d - f i r e d c o a ls o v e r w h ic h t h e g re e n a l f a l f a was c o n v e y e d . 4 /
The f i r s t r o t a r y drum d r i e r was b u i l t by J u l i u s H e i l i n 1929 u s in g a
p a t e n t owned by J e r r y A r n o ld . 5 /
I n t h i s p r o c e s s g r e e n a l f a l f a i s draw n
by a i r flo w th ro u g h a r o t a t i n g drum f i r e d by n a t u r a l g a s o r f u e l o i l .
The H e i l drum was i n s t a l l e d and o p e r a t e d a t th e A rn o ld f a m ily fa rm n o r t h
o f G a l e s v i l l e , W i s c o n s i n .' I n 1 9 31, H e i l i n s t a l l e d a n o t h e r drum on a
M is s is s ip p i p la n ta tio n .
The drum d i d n o t p r o v e o u t and was b r o u g h t by
W. J . S m a ll who moved i t
t o N e o d e s h a , K a n s a s , w o rk ed o u t t h e b u g s and
b e g a n p r o d u c in g a f a i r g ra d e o f a l f a l f a m e a l. 6 /
The e a r l y 1 9 3 0 's a l s o
saw r o t a t i n g drum m a c h in e s p i o n e e r e d i n N e b ra s k a and O h io .
grew s lo w ly a t f i r s t .
TJ
The i n d u s t r y
D e h y d ra te d a l f a l f a was g e n e r a l l y t h o u g h t o f i n
te r m s o f d ry h a y .
The o n ly b e n e f i t was t h e a v o id a n c e o f w e a th e r h a z a r d s
i n m ak in g h a y . 8 /
W orld War I I saw r a p i d g ro w th b r o u g h t a b o u t by an
i n c r e a s e d demand f o r f e e d i n g r e d i e n t s due t o th e r a p i d i n c r e a s e i n th e
f e e d m a n u f a c tu r in g b u s i n e s s .
I n v e s t i g a t i o n s show ed d e h y d r a te d a l f a l f a was
a r i c h s o u r c e o f c a r o t e n e f o r V ita m in A, x a n t h o p h y l l , and o t h e r f a c t o r s
w h ic h c o u ld n o t b e i d e n t i f i e d . 9_/
4/
J o s e p h C h rism an and J e r r y W. F i e l d e r , " P r o g r e s s o f an I n d u s t r y , "
S e v e n th T e c h n ic a l A l f a l f a C o n f e r e n c e , (A lb a n y , C a l . , 1 9 6 1 ) , p . 3.
5_/
K a th e , o p . c i t . , p . I .
6/
Ib id .
Tj
C h rism a n and F i e l d e r , £ £ . c i t . , p . 3.
8/
Ib id .
9_/
K a th e , op^ c i t . , p . 2 .
8
The p r o d u c t u n t i l a f t e r W orld War I I was d i r t y , d u s t y , v a r i e d g r e a t l y
i n p h y s i c a l and n u t r i t i o n a l p r o p e r t i e s and c o u ld n o t b e g u a r a n t e e d f o r
q u a lity
t h e y e a r ro u n d .
L im ite d k n o w le d g e o f i t s
F eed m i l l s fo u n d t h e p r o d u c t d i f f i c u l t t o h a n d l e .
v a lu e s com bined w i t h l o s s o f some o f th e m a jo r
n u t r i e n t s th r o u g h o x i d a t i o n s e r v e d t o r e d u c e i t s w o r th t o t h e u s e r . 1 0 /
The f i r s t a tt e m p t s t o r e d u c e t h e r a t e o f o x i d a t i o n to o k t h e form o f
c o ld s t o r a g e and p r o v e d u n s a t i s f a c t o r y .
A m i l e p o s t i n t h e i n d u s t r y was
t h e c o n c u r r e n t d e v e lo p m e n t o f p e l l e t i n g and i n e r t gas s t o r a g e .
The
p e l l e t i n g o f a l f a l f a m eal red u ced th e b u lk in e s s o f th e p r o d u c t, a l l e v i a t e d
t h e d u s t p ro b le m and made i t e a s i l y a d a p t a b l e t o a u to m a tio n and b u lk
h a n d lin g .
M ethods w e re i n t r o d u c e d f o r s t o r i n g p e l l e t e d a l f a l f a m eal
u n d e r i n e r t '' g a s .
The n e e d t o p r o t e c t t h e p r o d u c t th r o u g h t h i s
ty p e o f
s t o r a g e and r e d u c e d c q s t l e d t o t h e g e n e r a l a c c e p ta n c e o f p e l l e t i n g .
11/
The i n t r o d u c t i o n and a c c e p ta n c e o f an a n t i - o x i d a n t known a s e i t h e r
s a n t o q u i n o r e th o x y q u in f u r t h e r p r e s e r v e d t h o s e n u t r i e n t s s u b j e c t t o
o x id a tio n .
E a r l y . f i e l d e q u ip m e n t c o n s i s t e d o f m ow ers, w in d r o w e rs , r a k e s , and
p itc h fo rk s .
The s t a n d i n g a l f a l f a was mowed,, w in d ro w e d , a n d p i t c h e d by
h an d i n t o a t r a n s p o r t f o r h a u lin g to th e p l a n t .
The a d v e n t o f th e
R e d p a th h a r v e s t e r , a m ac h in e w h ic h c u t and lo a d e d a l f a l f a i n one
10/
C h rism an and F i e l d e r , o p . c i t . , p . 5 .
11/
Ib id .
9
o p e r a t i o n , e l i m i n a t e d t h e u s e o f r a k e s and w in d r o w e rs .
A t th e d e h y d r a t in g
drum g r e e n h a y s t i l l h a d t o b e p i t c h e d by h a n d i n t o a s i l a g e c h o p p e r
p r io r to e n te rin g th e d ry e r.
F i e l d c h o p p e r s , w h ic h c u t ,
c h o p p e d , and
b le w t h e a l f a l f a i n t o a tow ed u n i t e l i m i n a t e d t h e p i t c h f o r k i n t h e f i e l d .
An a u to m a ti c f e e d e r e n d e d t h e u s e o f t h e p i t c h f o r k a t: t h e p l a n t . 1 2 / '
The D e h y d r a tio n P r o c e s s
R o ta ry Drum D ry e rs
T h e re a r e tw o g e n e r a l ty p e s o f r o t a r y drum d r y e r s —- th e s i n g l e p a s s
and t h e t r i p l e p a s s .
The s i n g l e p a s s d r y e r u s e s a s i n g l e r o t a t i n g drum .
F l i g h t s r u n n in g t h e l e n g t h o f t h e w a l l s o f t h e drum a r e a r r a n g e d s o t h a t
t h e a l f a l f a i s p i c k e d up and sh o w e re d e v e n ly a c r o s s t h e e n t i r e a r e a o f
t h e drum as i t i s r o t a t e d .
A s in g le b a f f l e , s t r a t e g i c a l l y
lo c a te d to
i n c r e a s e a i r v e l o c i t y d u r in g t h e tim e th e a l f a l f a i s s u b j e c t e d t o th e
d i r e c t fla m e o f t h e f u r n a c e a t t h e f r o n t o f t h e drum , r a p i d l y moves i t
th r o u g h t h i s h i g h t e m p e r a t u r e a r e a .
T he l e a v e s o f t h e a l f a l f a p l a n t ,
d r i e d a lm o s t i n s t a n t l y by t h e i n i t i a l e x p o s u r e , a r e q u i c k l y draw n o u t
o f t h e drum by t h e e x h a u s t f a n .
The s te m s r e t a i n m ore m o i s t u r e and
r e q u i r e a l o n g e r e v a p o r a t i o n tim e .
They a r e h e a v i e r th a n t h e l e a v e s ,
and a r e tu m b le d a t lo w e r te m p e r a t u r e s i n t h e r e d u c e d v e l o c i t y a i r s tr e a m
to w a rd t h e d i s c h a r g e e n d o f t h e drum .
F i g u r e 2 shows a cu taw ay v iew o f t h e t h r e e - p a s s drum .
of th re e c o n c e n tr ic a lly a rra n g e d c y lin d e r s .
12/
I b i d . , p . 4.
I t c o n s is ts
T h ese c y l i n d e r s a r e
10
F ig u re 2 .
Cutaw ay View o f T h r e e - P a s s Drum.
'i
11
m e c h a n ic a l ly i n t e r l o c k e d and a l l r o t a t e a t t h e same s p e e d .
The h i g h e s t
t e m p e r a t u r e s a r e i n th e i n n e r c y l i n d e r w i t h p r o g r e s s i v e l y lo w e r te m p e ra ­
t u r e s i n th e i n t e r m e d i a t e and o u t e r c y l i n d e r .
The a i r s tr e a m c r e a t e d by
t h e e x h a u s t f a n draw s th e m a t e r i a l th ro u g h t h e i n n e r c y l i n d e r , b a c k
th ro u g h t h e i n t e r m e d i a t e c y l i n d e r and fo rw a r d a g a in th r o u g h t h e o u t e r
c y l i n d e r t o th e d i s c h a r g e en d o f t h e drum .
The a l f a l f a i s
c a r r i e d t o t h e to p o f e a c h c y l i n d e r by b u i l t - i n
th r o u g h h o t g a s e s .
re p e a te d ly
f l i g h t s and sh o w e red
As i n t h e s i n g l e p a s s drum , t h e l e a v e s o f th e p l a n t
a r e d r i e d a lm o s t i n s t a n t l y and c a r r i e d away fro m t h e s o u r c e o f th e h e a t .
The ste m s r e t a i n m o is t u r e and ta k e l o n g e r t o d r y .
T h e i r ad d e d w e ig h t
s lo w s t h e i r p r o g r e s s th r o u g h t h e drum t h e r e b y i n c r e a s i n g t h e e x p o s u re
tim e .
The c a p a c i t y o f a d r y in g drum i n te rm s o f d e h y d r a te d a l f a l f a
p ro d u c e d w i l l v a r y w i d e l y , d e p e n d in g p r i m a r i l y on t h e m o is t u r e c o n te n t
o f th e f r e s h ly c u t a l f a l f a .
The c a p a c i t y o f a d r y in g drum i s
r a t e d i n te rm s o f w a t e r e v a p o r a te d p e r h o u r .
th e re fo re
The num ber o f pounds o f
w a t e r a drum w i l l e v a p o r a te p e r h o u r i s known as i t s
e v a p o ra tio n c a p a c ity .
P r o d u c t Flow
A t t h e p l a n t , th e ch o p p ed a l f a l f a i s d e p o s i t e d i n t o a a u to m a tic
f e e d e r w hose f u n c t i o n i s
t o m a i n ta i n an e v e n flo w i n t o t h e d r y in g drum.
P a s s a g e th ro u g h t h e drum t a k e s t h r e e t o f i v e m in u t e s , and r e s u l t s i n
th e e v a p o r a t i o n o f m o st o f t h e m o is t u r e c o n t e n t o f t h e a l f a l f a .
Two
s y s te m s o f p r o d u c t flo w from d r y in g drum t o p e l l e t m i l l a r e i l l u s t r a t e d .
12
I n t h e p r o c e s s d ia g ra m e d i n F ig u r e 3 , t h e e x h a u s t f a n p r o v id e s a i r
f o r c o m b u s tio n and d r y in g and g e n e r a t e s t h e a i r s tr e a m f o r a d v a n c in g
th e p ro d u c t.
The p r o d u c t p a s s e s th r o u g h t h e e x h a u s t f a n i n t o
c o l l e c t o r w h e re i t i s s e p a r a t e d from t h e h o t , m o is t g a s e s .
th e d r y e r
The d ry
p r o d u c t th e n p a s s e s th r o u g h t h e c o o li n g f a n and i s blow n i n t o t h e c o o lin g
c o lle c to r fo r f u rth e r a e ra tio n .
From h e r e th e p r o d u c t flo w s t o th e
h a m m e rm ill t o b e g ro u n d i n t o a f i n e m e a l.
A p l a n t e m p lo y in g t h is ; ,
p r o c e s s i s shown i n F i g u r e 4 .
I n th e p r o c e s s d ia g ra m e d i n F i g u r e 5 , th e e x h a u s t f a n p r o v id e s a i r
f o r c o m b u s tio n and draw s t h e h o t a i r c u r r e n t s c a r r y i n g t h e p r o d u c t th ro u g h
t h e drum i n t o t h e v a c o l l e c t o r .
e x h a u st fan .
The p r o d u c t does n o t p a s s th ro u g h th e
I n th e v a c o l l e c t o r , a l l p r o d u c t s e t t l e s
o u t o f the. a i r
flo w w h i l e h o t g a s e s and m o is t u r e la d e n a i r a r e w ith d ra w n by a n e g a t i v e
a i r s y s te m and d i s c h a r g e d i n t h e a tm o s p h e re th ro u g h t h e e x h a u s t s t a c k .
The d r i e d p r o d u c t flo w s d i r e c t l y from t h e v a c o l l e c t o r i n t o t h e h am m erm ill
w h e re i t i s g ro u n d t o d e s i r e d p a r t i c l e s i z e .
to t h e 'p e l l e t m ill.
A p l a n t e m p lo y in g '
From h e r e t h e p r o d u c t flo w s
t h i s p r o c e s s i s shown i n F ig u r e 6 .
The p r e c e d in g flo w d ia g ra m s a r e i n t e n d e d o n ly t o d e m o n s tr a te th e
flo w o f a l f a l f a th ro u g h t h e d r y in g p r o c e s s .
illu s tra te
A lth o u g h t h e s e d ia g ra m s
t h e g e n e r a l fo rm o f t h e flo w p r o c e s s , t h e r e a r e many o t h e r
v a ria tio n s .
T h is i s a l s o t r u e o f t h e p r o d u c t flo w from h a m m e rm ill to
l o a d o u t o r s t o r a g e w h ic h i s d ia g ra m e d i n F i g u r e . 7.
F ig u re 7 i s
com m ent.
l a r g e l y s e l f - e x p l a n a t o r y w i t h o n ly a few ite m s r e q u i r i n g
The a l f a l f a m e a l s u r g e b i n a c t s as a te m p o ra ry s t o r a g e f a c i l i t y
H ot
M o is t
G ases
C o o le r
[ C o lle c to r
C o lle c to r
F o r e ig n
M a te ria l
S e p a ra to r
E x h a u st
C ooling
Fan
D ry in g
Drum
F o re ig n
M a te ria l
S e p a ra to r
H a m m e m ill
F ig u re 3 .
P r o d u c t Flow fro m D ry in g Drum t o H am m erm ill.
F ig u re 4 .
P l a n t E m ploying P ro c e s s Diagrammed i n F ig u re 3 .
E xhaust S ta c k
Flow to
P e lle t
M l l l tk
V a c o lle c to r
Z '
F o r e ig n
M a te ria l
S e p a ra to r
D ry in g
F ig u re
5.
Drum
P r o d u c t Flow from D ry in g Drum t o P e l l e t M i l l .
F ig u r e 6 .
P l a n t E m p lo y in g P r o c e s s D iagram m ed i n F ig u r e 5 .
Flow from H a m m e m lll
C o o le r
L o lle c to r
P e lle t
C o lle c to r
A lfa lfa
Roof L in e
A u to m a tic
Dump S c a le
S team from
B o ile r
V e rtic a l
S crew L i f t
A utom atic
P e lle t
C o o le r
P e l l e t M ill
P e lle t
C o o le r Fan
Check
.S c a lp e r
W eighei
f\ / \ /•
A / W-Vf-Vg
H o riz o n ta l R e c irc u la tin g
S crew C onveyor
P n e u m a tic
C onveyor
F ig u r e 7 .
P r o d u c t Flow from H am m erm ill t o L o ad o u t o r S t o r a g e .
F l o o r L ine'
L o ad o u t
and S to ra g e
H
18
i n t h e e v e n t t h e flo w o f a l f a l f a th r o u g h t h e p e l l e t m i l l i s i n t e r r u p t e d .
T h is a llo w s t h e flo w th r o u g h t h e d r y e r a n d h a m m e rm ill t o c o n ti n u e ev en
th o u g h t h e r e i s
a te m p o ra ry s to p p a g e a t t h e p e l l e t m i l l .
I n a n o th e r
s y s te m , s u r g e b i n s m ig h t b e l o c a t e d t o h a n d le s to p p a g e s a t b o th ham m erm i l l and p e l l e t m i l l .
m o is tu re .
S team i s ad d ed p r i o r t o p e l l e t i n g
to c o n tro l
The p r e s s u r e u s e d t o p e l l e t t h e d e h y d r a te d a l f a l f a p r o d u c e s
c o n s i d e r a b l e h e a t , th u s t h e p e l l e t s go fro m t h e p e l l e t m i l l t o a c o o l e r .
The p e l l e t c o o li n g f a n , i n a d d i t i o n t o p r o v i d i n g t h e a i r flo w f o r c o o lin g
p e l l e t s , draw s f i n e m a t e r i a l o u t o f th e flo w and p r o p e l s i t
c o lle c to r fo r r e c irc u la tio n .
t h e c o o le d p e l l e t s
to a c o o le r
The p n e u m a tic c o n v e y o r i s u s e d t o convey
to s to r a g e o r s h ip p in g p o in ts .
H a r v e s t i n g an d T r u c k in g
H a r v e s t e r s ( e i t h e r s e l f - p r o p e l l e d o r t r a c t o r draw n) mow t h e a l f a l f a ,
chop i t i n t o s h o r t l e n g t h s and b lo w i t i n t o a tow ed t r a i l e r o r t r u c k .
I f a t r a i l e r i s to w e d , th e a l f a l f a m u st b e t r a n s f e r r e d t o a t r u c k f o r
h a u l i n g t o th e p l a n t s i t e .
I f t h e tow ed v e h i c l e i s a t r u c k , i t i s
u n h o o k ed when lo a d e d and r e p l a c e d w i t h an em pty t r u c k .
R e s e a rc h P ro b le m
W h ile some t e c h n i c a l i n f o r m a t i o n on t h e p h y s i c a l o p e r a t i o n o f
a l f a l f a d e h y d r a t io n and on t h e m a r k e tin g o f d e h y d r a te d a l f a l f a i s
a v a i l a b l e , t h e m a t e r i a l n e e d s t o b e u p d a te d .
P r e v io u s s t u d i e s h a v e
shown t h a t p l a n t c o s t s a r e i n v e r s e l y r e l a t e d t o a n n u a l p r o d u c t i o n v o lu m e ,
b u t have n o t s p e c i f i c a l l y r e l a te d th e s e c o s t d iff e re n c e s to s iz e of p la n t.
19
T h u s , e c o n o m ie s o f s c a l e s h o u ld b e e x a m in ed i n o r d e r t o d e te r m in e b e s t
p l a n t s i z e u n d e r g iv e n c o n d i t i o n s and t h e c o m p e t it iv e p o s i t i o n o f v a r i o u s
s iz e d p la n ts a s se s s e d .
T h e re i s
little
i n f o r m a t i o n a v a i l a b l e on t h e o r g a n i z a t i o n a l and
m a n a g e r i a l a s p e c t o f s u c h o p e r a t i o n s o r on m a rk e t d e v e lo p m e n t, i n c l u d i n g
p o t e n t i a l an d p e n e t r a t i o n .
is
I n f o r m a t io n and g u i d e l i n e s i n a l l th e s e a r e a s
t h e r e f o r e n e e d e d by f a r m e r s and o t h e r s t o a s s e s s t h e f e a s i b i l i t y o f
a l f a l f a p r o c e s s i n g i n t h e i r a r e a s and t o p r o v id e c r i t e r i a f o r s u c c e s s f u l
o r g a n i z a t i o n , m anagem ent, and o p e r a t i o n .
H y p o th e s is
A l f a l f a g ro w e rs i n t e r e s t e d i n w ays o f a d d in g v a lu e t o t h e i r p r o d u c t ,
i n c r e a s i n g demand and s t a b i l i z i n g
th e m a r k e t, f a r m e r - f e e d e r g ro u p s
i n t e r e s t e d i n a m ore e c o n o m ic a l o r d e p e n d a b le s o u r c e o f f e e d i n g r e d i e n t s ,
and b u s i n e s s e s and com m unity l e a d e r s i n t e r e s t e d i n new i n d u s t r y and
a d d i t i o n a l em ploym ent h a v e p r o p o s e d t h e e s t a b l i s h m e n t o f a d e h y d r a tin g
p l a n t as a m eans o f a t t a i n i n g t h e s e e n d s .
I n o r d e r t h a t a l f a l f a d e h y d ra ­
t i o n b e an e f f e c t i v e m eans o f a t t a i n i n g t h e s e e n d s , th e e s t a b l i s h m e n t o f
a p l a n t m u st b e e c o n o m ic a lly f e a s i b l e .
I t i s h y p o t h e s i z e d t h a t th e
f o l l o w i n g w i l l p r o v e t o b e p r i n c i p a l f a c t o r s i n d e te r m in in g econom ic
fe a s ib ility
1.
o f a l f a l f a d e h y d r a t io n .
The a v a i l a b l e s u p p ly o f a l f a l f a i n c o n ju n c t io n w i t h t h e l e n g t h
of h a rv e st seaso n .
2.
P l a n t l o c a t i o n w i t h r e s p e c t t o c o m p e tin g i n c e n t r a l m a rk e ts and
p o t e n t i a l f o r e s t a b l i s h m e n t o f l o c a l m a r k e ts .
20
3.
L e g a l o r g a n iz a tio n , p a r t i c u l a r l y w ith r e s p e c t to th e r e l a ti o n s h ip
o f t h e p o lic y - m a k in g body and m anagem ent.
O b j e c ti v e s
The o b j e c t i v e s o f t h i s s tu d y a r e a s f o l l o w s :
1.
To d e te r m in e t h e n a t u r e o f t h e lo n g - r u n c o s t f u n c t i o n f o r a l f a l f a
d e h y d r a t io n and t h e r e b y p r o v id e a b a s i s
f o r p l a n n i n g optim um p l a n t s i z e
f o r a g iv e n volum e and l e n g t h o f o p e r a t i n g s e a s o n .
2.
To d e v e lo p g u i d e l i n e s f o r e s t a b l i s h i n g a l f a l f a d e h y d r a tio n p l a n t s
u n d e r v a r i o u s p h y s i c a l and eco n o m ic c o n d i t i o n s .
3.
To s p e c i f y c r i t e r i a f o r s u c c e s s f u l o r g a n i z a t i o n , m anagem ent, and
o p e ra tio n o f a l f a l f a , p ro c e s s in g s e r v ic e s .
CHAPTER TI
THEORY AND METHODOLOGY
"T he t h e o r e t i c a l fram ew o rk f o r s t u d i e s o f c o s t and e f f i c i e n c y i s b a s e d
on e l a b o r a t i o n s and m o d i f i c a t i o n s o f th e c o n v e n ti o n a l e c o n o m ic t h e o r y o f
p ro d u c tio n .
. . . I n c o r p o r a t i o n o f m o d i f i c a t i o n s i n t h e c o n v e n ti o n a l
t h e o r y . . . p r o v id e s a m ore w o rk a b le b a s e f o r s t u d i e s o f c o s t and
e ff ic ie n c y ."
13/
C o n v e n tio n a l T h e o ry
L e a s t - C o s t C o m b in a tio n o f I n p u t s
The p ro b le m i s one o f f i n d i n g t h e l e a s t - c o s t i n p u t c o m b in a tio n f o r
t h e p r o d u c t i o n o f a s p e c i f i e d l e v e l o f o u t p u t Y by a s i n g l e p r o d u c t f ir m .
A ssum ing a p r o d u c t i o n f u n c t i o n
f ( V1 ’ . . . ’ Vk l Vk + l , " ' ,Vn )
w h e re
a r e v a r i a b l e i n p u t s and ^ + 1 .......... vn a r e
" p l a n t " i n t h e s h o r t ru n )
in p u ts (th e
t h e p ro b le m may b e f o r m u la te d a s one o f m in i­
m iz in g t o t a l c o s t s a s f o l l o w s :
TC ( t o t a l c o s t) = TVC ( t o t a l v a r i a b l e c o s t)
+ TFC ( t o t a l f i x e d c o s t)
or
k+1
TC =
^
13/
+ i= l
Vi
F r e n c h , B . C ., L . L . S am m ett, and R. G. B r e s s l e r , "E conom ic E f f i c i e n c y
w i t h S p e c i a l R e f e r e n c e t o t h e M a rk e tin g o f C a l i f o r n i a P e a r s , " H i l g a r d i a ,
V o l. 2 4 , No, 1 9 , U n i v e r s i t y o f C a l i f o r n i a , B e r k e le y , J u l y , 19 5 6 , p . 5 4 4 .
22
s u b je c t to th e o u tp u t c o n s tr a in t
Y = f C v p . . . , v k |v k + 1 , . . . , v n )
I n t h e c a s e o f i m p e r f e c t c o m p e t i t i o n b e tw e e n f i r m s i n t h e p u r c h a s e
of in p u t f a c t o r s , the p r ic e
(P
) o f any i n p u t i s a f u n c t i o n o f t h e q u a n t i t y
Vi
of a l l in p u ts used, or:
P
v.
qi ( v V
)
Thus:
k
TVC
i= l
[q i ( v l ’ * * ' ’ V
^ i - 1;
■n
n
TFC=
I ■P v =
I [q . ( v v . . . , v ) ]
■ i= k + l vi 1
i= k + l 1 1
n
[v ] ;
i
and
k
I Iqi C v
i= l
.)]
Iqi Cv1, .
[ v. ] +
i= k + l
’V
]
Iv.].
The L a g r a n g i a n m u l t i p l i e r m ethod o f s o l v i n g a c o n s t r a i n e d extremum
p r o b le m i n v o l v e s t h e f o r m in g o f an a u g m e n ted o b j e c t i v e f u n c t i o n w h ic h i n
th is
case i s :
Z = TC + A [ y - f C v ^ . . . , v k | vk + 1 , . . . , v n ) ]’
F o r c r i t i c a l v a l u e s o f Z r e g a r d e d as a f u n c t i o n o f t h e v a r i a b l e s V1 , . . . , V n
and A t h e n e c e s s a r y c o n d i t i o n s f o r c o s t m i n i m i z a t i o n a r e
23
9v
,v k \ + l ’ " ' ’ v ) = O
y - f(v1.
3A
The f i r s t k e q u a l i t i e s
3TC
9TC
- —- i s
3TC
above may b e r e s t a t e d as
3TC
the m arg in al u n it c o s t of th e i
tli
i n p u t .i n th e p ro d u c tio n - of
vi
QY
p r o d u c t Y ( i . e . , MUC^ ) , and - — i s r e f e r r e d t o a s t h e m a r g i n a l p h y s i c a l
i
p r o d u c t i v i t y o f t h e i t h i n p u t i n t h e p r o d u c t i o n o f Y ( i . e . , MPP ) ,
'i .
T h u s , when c o s t s a r e m in i m i z e d :
MUC
MUC
MUC
2
MPP
That i s ,
MPP
.
MPP
V1
a t th e p o in t of o p tim a l ( l e a s t - c o s t )
i n p u t c o m b i n a t i o n , th e
m a r g i n a l u n i t c o s t - m a r g i n a l p r o d u c t i v i t y r a t i o m ust b e t h e same f o r e a c h
in p u t.
S i n c e t h i s r a t i o m e a s u r e s t h e amount o f o u t l a y p e r u n i t o f
m a r g i n a l p h y s i c a l p r o d u c t o f Y , t h e L a g r a n g e m u l t i p l i e r , A, can b e
i n t e r p r e t e d as th e m a r g in a l c o s t o f p r o d u c t i o n .
The a b o v e c o n d i t i o n
24
t h e n am ounts t o e q u a t i n g t h e m a r g i n a l c o s t of- e a c h i n p u t s u b j e c t t o
th e o u tp u t c o n s tr a in t.
F o r any g i v e n o u t p u t , t h e l e a s t - c o s t c o m b i n a t i o n o f i n p u t s and t h e
o u t p u t c o n s t r a i n t e q u a t i o n c a n b e u s e d t o d e t e r m i n e t h e a b s o l u t e amounts
of each in p u t to u s e .
T h e s e v a l u e s can t h e n b e " p l u g g e d " i n t o th e
c o s t f u n c t i o n to d e r iv e t o t a l c o s t o f p r o d u c tio n f o r o u tp u t Y g iv en
in p u ts fix e d .
I n t h i s m a n n e r, t h e t o t a l and a l s o a v e r a g e (TC/Y) c o s t s
can b e d e t e r m i n e d f o r a p a r t i c u l a r " p l a n t " .
se v e ra l shapes.
T h e s e c o s t c u r v e s may t a k e
The c o n v e n t i o n a l s h o r t - r u n c o s t f u n c t i o n s a r e shown
i n F i g u r e s 8 a and 8b b e lo w .
T o t a l c o s t s f o r a tim e a t a " d e c r e a s in g r a t e •
'i
up t o o u t p u t OY^ and t h e n i n c r e a s e a t an i n c r e a s i n g r a t e .
A v e ra g e c o s t s
r e a c h a minimum a t o u t p u t OY2 .
M a r g i n a l c o s t r e a c h e s a minimum a t t h e
p o i n t o f i n f l e c t i o n and c u t s a v e r a g e t o t a l c o s t a t i t s minimum p o i n t .
The e x p l a n a t i o n o f t h i s b e h a v i o r o f t h e c o s t f u n c t i o n l i e s i n t h e
law o f d i m i n i s h i n g . r e t u r n s .
Because o f i n c r e a s i n g m a rg in a l p r o d u c t i v i t i e s ,
e q u a l a d d i t i o n a l i n c r e a s e s i n t h e am ounts o f v a r i a b l e r e s o u r c e s w i l l f o r
a tim e r e s u l t i n s u c c e s s i v e l y l a r g e r u n i t s o f t o t a l o u t p u t p r o d u c e d .
T h i s means t h a t t o t a l c o s t s w i l l i n c r e a s e a t a d e c r e a s i n g r a t e .
But
when m a r g i n a l p r o d u c t i v i t i e s b e g i n t o d e c l i n e as d i m i n i s h i n g r e t u r n s s e t
in ,
a d d i t i o n a l am ounts o f v a r i a b l e r e s o u r c e s w i l l p r o d u c e s u c c e s s i v e l y
s m a lle r u n its of o u tp u t.
in cre asin g ra te .
T o t a l c o s t s w i l l t h e r e f o r e i n c r e a s e a t an
25
T o ta l C ost
in f le c tio n p o in t
F i x e d C ost
O u tp u t (Y)
F ig u re 8a.
T o t a l C o s t C u rv e .
Cos t / U n i t
I
I
0
F i g u r e 8b .
O u tp u t (Y)
A v e ra g e C o s t C u rv e .
26
O p tim a l L e v e l o f O u tp u t
The d i s c u s s i o n o f t h e p r e c e d i n g s e c t i o n s e t s f o r t h t h e c o n d i t i o n s
n e c e s s a r y f o r m in im iz in g th e c o s t o f a g iv e n l e v e l o f o u tp u t.
U nder
c o n v e n t i o n a l t h e o r y t h e o p t i m a l l e v e l o f o u t p u t i s t h a t w h ic h m axim izes
n e t r e v e n u e ( tt) .
N e t r e v e n u e i s e q u a l t o t o t a l r e v e n u e (TR) m inus t o t a l
c o s t (TC) and i s m a x im iz e d when
dir
dY
—
as
dTR
dY
——
dTC
dY
— ,
_
= 0
o r w h e re m a r g i n a l c o s t (MG) = m a r g i n a l r e v e n u e (MR).
S u b stitu tin g fo r
MC t h e e q u a t i o n f o r o p t i m a l l e v e l o f o u t p u t becom es
MUC
MUC
MPP
MPP
V.
v
MUC
'
* **
MPP
V1
The a b o v e c o n d i t i o n may a l s o b e r e w r i t t e n as
MUC
= MVP
V1
V1
MUC
\
= MVP
\
I n v e r b a l te rm s, t h i s e q u a tio n s t a t e s t h a t a n e c e s s a ry c o n d itio n f o r th e
o p tim a l l e v e l o f o u tp u t ( i . e . , p r o f i t m a x im iz a tio n ) i s t h a t th e m a rg in a l
u n i t c o s t of each f a c t o r be e q u a l to i t s m a rg in a l v a lu e p r o d u c t i v it y .
27
Long-R un C o s t F u n c tio n
So f a r i n t h e d i s c u s s i o n , i n p u t s - v ^ + ^ , . . . ,v n h a v e b e e n h e l d c o n s t a n t
and c o n s i d e r e d t o r e p r e s e n t a f i x e d " p l a n t " .
w h e re t h e p l a n t i s f i x e d ,
In c o n tr a s t to the s h o r t- r u n
t h e l o n g - r u n i s d e f i n e d as a p e r i o d o f tim e
lo n g e n ough t o a l l o w a l l f a c t o r s o f p r o d u c t i o n t o v a r y .
fo re c o n sta n t in p u ts
I f th e h e re to ­
a r e a l l o w e d t o v a r y o v e r tim e ah i n f i n i t e
num ber o f f i x e d p l a n t s c a n t h e o r e t i c a l l y e x i s t .
w i l l be. an i n f i n i t e num ber o f c o s t c u r v e s .
C o rre sp o n d in g ly th e r e
F o r c o n v e n i e n c e , o n ly a few
a r e shown i n F i g u r e s 9 a and 9 b .
The l o n g - r u n t o t a l c o s t c u r v e (LRTC) shows t h e l e a s t - c o s t a t w hich
any o u t p u t c$n b e p r o d u c e d a f t e r t h e f i r m h a s h a d t i m e t o make a l l
a p p r o p r ia te a d ju stm e n ts i n i t s p l a n t s i z e .
The l o n g - r u n c o s t c u rv e does
n o t i n t e r s e c t any o f t h e s h o r t - r u n c u r v e s .
I t i s t a n g e n t i a l to th o se t h a t
a l l o w minimum c o s t s f o r e a c h o u t p u t .
an e n v e lo p e c u r v e t o t h e c o s t
I t is
c u r v e s w h ic h a r e l o w e s t f o r e a c h p a r t i c u l a r o u t p u t .
The t o t a l c o s t c u r v e s o f F i g u r e 9 a a r e c o n v e r t e d t o t h e a v e r a g e c o s t
curves of F ig u re 9b.
The l o n g - r u n a v e r a g e c o s t c u rv e (LRAC) i s d e r i v e d
i n t h e same m an n e r as t h e LRTC c u r v e and i s known a s t h e e c o n o m ie s o f
s c a l e o r p l a n n i n g c u r v e . ■ T h i s c u r v e i s u s u a l l y shown t o h a v e a U s h a p e .
E conom ies o f s c a l e e x p l a i n t h e downward s l o p i n g p a r t o f t h e LRAC
curve.
As s i z e o f p l a n t i n c r e a s e s , a n u m ber o f c o n s i d e r a t i o n s w i l l f o r
a tim e g i v e r i s e t o l o w e r a v e r a g e c o s t s o f p r o d u c t i o n .
fo llo w s:
T h e s e a r e as
28
T o t a l C o st
LRTS
S h o r t- R u n P l a n t
T o t a l C ost
E conom ies o f S c a l e
F ig u re 9a.
_O u tp u t (Y)
Sf1 D is e c o n o m ie s o f S c a l e
Long-Run T o t a l C o s t Curve
A ve ra g e
Cost
LRAC
E conom ies o f S c a l e
F ig u re 9b.
O u tp u t (Y)
f 1 D is e c o n o m ie s o f S c a l e
Long-Run A v e ra g e C o s t C u r v e .
2.9
1.
In c re a se d s p e c i a li z a t i o n in th e use of la b o r i s
f e a s i b l e as
p la n t siz e in cre ase s.
2.
L a rg e -s c a le p ro d u c tio n a ls o p e rm its b e t t e r u t i l i z a t i o n
o f , and
g r e a t e r s p e c i a l i z a t i o n i n m anagem ent.
3.
S m a ll f i r m s a r e o f t e n n o t a b l e t o u t i l i z e t h e m o st e f f i c i e n t
p r o d u c t i v e eq u ip m en t.
m ach in ery i s
I n many a r e a s o f p r o d u c t i o n t h e m o st e f f i c i e n t
a v a i l a b l e o n l y i n v e r y l a r g e and e x t r e m e l y e x p e n s i v e u n i t s .
A lso , e f f e c t i v e u t i l i z a t i o n
o f t h i s e q u ip m e n t demands a h i g h volume o f
p ro d u ctio n .
4.
L a r g e r p l a n t s t h r o u g h l a r g e - s c a l e p u r c h a s i n g may e x p e r i e n c e
c e r t a i n " p e c u n ia ry " eco n o m ies.
That i s , purchase in p u ts a t r e l a ti v e ly
l o w e r p r i c e s b e c a u s e o f volum e b u y i n g .
I n t im e t h e e x p a n s i o n o f t h e f i r m w i l l g i v e r i s e t o d i s e c o n o m ie s o f
s c a le u s u a lly " a t t r i b u t e d to th e in c r e a s in g d i f f i c u l t i e s
faced in
c o o r d i n a t i n g and m an a g in g f i r m o p e r a t i o n s and i n c r e a s i n g p r o c u r e m e n t
and p r o d u c t s e l l i n g c o s t s
(d u e t o t r a n s p o r t a t i o n , e t c . )
as p l a n t s iz e
in c r e a s e s ." 14/
S h o r t- C o m i n g s o f C o n v e n t i o n a l T h e o ry
L i n e a r C o s t C u rv e s R e s u l t i n g fro m V a r i a t i o n s i n t h e Time D im ension
The c o n v e n t i o n a l t h e o r y , by a s su m in g a t i m e l e s s p r o d u c t i o n f u n c t i o n , ■
o v e r l o o k s t h e f a c t t h a t p l a n t o u t p u t may b e v a r i e d e i t h e r t h r o u g h a
14/
L i t s c h a u e r , J . G . , "The Econom ies o f D e t e r m in i n g P l a n t E f f i c i e n c y and
E c onom ies o f S c a l e w i t h i n t h e P o u l t r y F eed M i l l i n g I n d u s t r y , " u n p u b l i s h e d
re s e a rc h e ssa y in a g r i c u l t u r a l m a rk e tin g , U n iv e rs ity of C a lif o r n ia ,
B e r k e l e y , S e p te m b e r 1 9 6 5 , p p . 7 - 9 .
30
v a r i a t i o n o f r a t e o r tim e o f o p e r a t i o n .
I f r a te s of p la n t o u tp u t are
h e l d c o n s t a n t and t o t a l o u t p u t v a r i e d by v a r y i n g tim e o f o p e r a t i o n ,
m a r g i n a l c o s t s w i l l b e c o n s t a n t and t h e t o t a l c o s t f u n c t i o n l i n e a r .
T h i s w i l l h o l d t r u e e v e n th o u g h t h e c o s t f u n c t i o n i s c u r v i l i n e a r i n t h e
r a t e d im e n sio n .
T h is s i t u a t i o n i s i l l u s t r a t e d i n F i g u r e 10.
F a c to r
p r i c e s a r e assum ed t o b e c o n s t a n t .
T o ta l C o st/P e rio d
R a te o f O u tp u t (X)
F i g u r e 10.
Time o f O p e r a t i o n ( t ) K
L i n e a r C o s t C u rves R e s u l t i n g from V a r i a t i o n s i n t h e
Time D im e n s io n .
31
The c o s t s u r f a c e i n t h e r a t e d i m e n s io n h a s t h e c o n v e n t i o n a l fo rm and
re p r e s e n ts th e le a s t- c o s t"
is
c o m b i n a ti o n o f p r o d u c t i v e s e r v i c e s .
l i n e a r i n t h e tim e d i m e n s io n f o r ahy r a t e o f o u t p u t ( x ) .
t h e t o t a l u n i t s o f t im e a v a i l a b l e i n t h e p e r i o d .
The s u r f a c e
K rep re sen ts
I f p r o d u c t p r i c e (P) i s
g r e a t e r t h a n minimum AVC, t h e p l a n t s h o u l d o p e r a t e a t t h e minimum AVC
r a t e o f o u t p u t ( x ) , w h ic h i s OA and e x p a n d o u t p u t a lo n g t h e t i m e d i m e n s io n
f o r t h e f u l l amount o f t i m e , K, a v a i l a b l e .
and TVC i s shown i n F i g u r e 10,
The r e l a t i o n s h i p b e tw e e n TR
When t o t a l tim e a v a i l a b l e , K, i s r e a c h e d ,
a d d i t i o n a l o u t p u t c a n , r e s u l t o n l y fro m i n c r e a s e s i n t h e r a t e o f o u t p u t
(x ).
I t w o u ld t h e n p a y t h e p l a n t t o i n c r e a s e t h e r a t e o f o u t p u t u n t i l
MC = MR.
I n F i g u r e 1 0 , t h i s i s assum ed t o o c c u r a t r a t e o f o u t p u t OR. 1 5 /
L i n e a r C o s t C u rv es R e s u l t i n g fro m S e g m e n t a t i o n
The e x p l a n a t i o n o f t h e b e h a v i o r o f t h e c o n v e n t i o n a l c o s t f u n c t i o n s
( t h e i n v e r t e d S t o t a l c o s t f u n c t i o n and U - s h a p e d a v e r a g e c o s t f u n c t i o n s ) ,
l i e s i n t h e law o f d i m i n i s h i n g r e t u r n s w h ic h r e q u i r e s t h a t m a r g i n a l
p r o d u c t i v i t i e s f i r s t i n c r e a s e and t h e n d e c r e a s e .
S u c c e ssiv e uses of
i d e n t i c a l m a c h in e s and s u c c e s s i v e a d d i t i o n o f w o r k e r s t o p e r f o r m i d e n t i c a l
j o b s w i t h n o r e a l i n t e n s i f i c a t i o n on a f i x e d f a c t o r o r c h a n g e s i n t h e
p r o p o r t i o n s o f i n p u t s m ay, h o w e v e r , r e s u l t i n c o n s t a n t m a r g i n a l p r o d u c ­
tiv itie s
o r a l i n e a r l y hom ogeneous p r o d u c t i o n f u n c t i o n .
The r e s u l t i n g
t o t a l c o st fu n c tio n w i l l ten d to be l i n e a r .
15/
F o r a more c o m p le te c o v e r a g e o f t h i s c o n c e p t , s e e F r e n c h , B . C . ,
L. L . S a m m e tt, and R. G. B r e s s l e r , _op. c i t . , p p . 5 5 7 - 5 7 2 .
32
D i s c o n t i n u o u s C o st F u n c t i o n s
C o n v e n tio n a l th e o ry f a i l s
cost curv es.
t o m e n t io n t h e p o s s i b i l i t y o f d i s c o n t i n u o u s
A c o s t f u n c t i o n w h ic h i s
l i n e a r i n t h e tim e d im e n s io n may
a l s o be d i s c o n t i n u o u s i f i n p u t c o s t s a r e n o t c o n s t a n t .
e x a m p l e , i s u s u a l l y p a i d a prem ium f o r o v e r t i m e w o rk .
L abor, fo r
As a r e s u l t
t h e c o s t c u r v e i n t h e tim e d i m e n s io n may a p p e a r as b e lo w i n F i g u r e 11.
At tim e t ^ t h e f i r m i s r e q u i r e d t o p a y t im e and o n e - h a l f and a t tim e t^
d o u b l e tim e p re m iu m s .
T o ta l C o st/P e rio d
Time o f O p e r a t i o n
F i g u r e 11.
E f f e c t o f O v e r tim e Premium on T o t a l C o st C u rv e .
33
The f i r m may e x p e r i e n c e some d i s c o n t i n u i t i e s i n i t s
c o s t fu n ctio n in
t h e r a t e d i m e n s io n when e m p lo y in g a d d i t i o n a l , i d e n t i c a l p r o d u c t i o n l i n e s .
T h e s e d i s c o n t i n u i t i e s may r e s u l t " i f t h e r e i s some 1f i x i t y '
in th e
' v a r i a b l e c o s t c o m p o n e n ts ' t h a t can i n t r u t h b e a v o id e d b y n o t o p e r a t i n g
th e a d d it io n a l l i n e s . " 1 6 /
T h is c o s t may t a k e t h e fo rm o f p r e p a r i n g
c e r t a i n e q u ip m e n t f o r o p e r a t i o n .
C o s t f u n c t i o n s o f t h i s t y p e a r e shown
i n F i g u r e s 12a an d 1 2 b .
I n F i g u r e s 12a and 1 2 b ,
d e s ig n a te s th e o u tp u t c a p a c ity a t th e
l i m i t o f t h e t im e d i m e n s io n f o r p r o d u c t i o n l i n e o n e , w h i l e
d e sig n a te s
t h e o u t p u t c a p a c i t y a t t h e l i m i t o f t h e tim e d im e n s io n f o r p r o d u c t i o n l i n e s
one and tw o.
FVC i s
c a lle d a " f i x e d - v a r ia b le c o st" a s s o c ia te d w ith
b r i n g i n g an a d d i t i o n a l l i n e i n t o p r o d u c t i o n .
I n many c a s e s t h e v a r i a b l e i n p u t s a s s o c i a t e d w i t h a d u r a b l e f a c t o r
can on ly be v a r i e d i n d i s c r e t e u n i t s .
The i n p u t - o u t p u t r e l a t i o n s h i p s
t h e n may a p p e a r as a s e r i e s o f d i s c o n t i n u o u s s t e p s .
F ig u re 13a.
T h i s i s shown i n
One d i s c r e t e u n i t o f t h e i n p u t c o u ld p r o d u c e any o u t p u t
from z e r o up t o Xa.
The s e c o n d d i s c r e t e u n i t com bined w i t h t h e f i r s t
c o u l d p r o d u c e any o u t p u t fro m z e ro ' t o Xb.
p r o d u c e any o u t p u t fro m z e r o t o Xe, e t c .
T hree d i s c r e t e u n i t s c o u ld
In t h is c a s e , th e shaded a reas
above t h e s l o p i n g l i n e t h r o u g h t h e o r i g i n r e p r e s e n t u n u t i l i z e d c a p a c i t i e s
f o r th e p a r t i c u l a r d is c r e te u n i ts .
16/
L itsc h a u e r,
op . c i t . , p . 2 0 .
The a v e r a g e c o s t c u r v e s c o r r e s p o n d i n g
34
F ig u re 12a.
Average
T o t a l C o st F u n c t i o n f o r a P l a n t O p e r a t i n g w i t h Two P r o d u c t i o n
L i n e s i n t h e Time D im ension Only .
Cost
O u t p u t (Y)
F i g u r e 12b.
A v e ra g e C o s t F u n c t i o n C o r r e s p o n d i n g t o t h e T o t a l C ost
F u n c t i o n o f F i g u r e 12a.
R a te o f I n p u t (No. o f D i s c r e t e U n i t s )
35
Xe
F ig u re 13a.
R a te o f O u tp u t (X)
D is c o n tin u ity in T o ta l In p u t-O u tp u t R e la tio n s h ip s .
A v e ra g e C o s t
Xe
F i g u r e 13b.
R a t e o f O u tp u t (X)
A v e ra g e C o s t - O u t p u t R e l a t i o n s h i p s C o r r e s p o n d i n g t o T o t a l
In p u t-O u tp u t R e la tio n s h ip s above.
36
t o t h e t o t a l c o s t c u r v e s f o r t h i s t y p e o f r e l a t i o n s h i p a r e shown i n F i g u r e
13b„
T h e s e a v e r a g e c o s t c u r v e s become d i s c o n t i n u o u s a t c a p a c i t y r a t e s
o f o u t p u t and r e a c h a minimum a t t h e same l e v e l when e a c h d i s c r e t e u n i t
of in p u t i s u t i l i z e d to c a p a c ity .
Long-Run C o s t F u n c t i o n s ' fro m L i n e a r S h o r t- R u n C o s t F u n c t i o n s
I t i s t h e o r e t i c a l l y p o s s i b l e t o h a v e e c o n o m ies and d i s e c o n o m ie s o f
s c a le w ith s t r a i g h t - l i n e t o t a l co st curves.
F i g u r e 14 i l l u s t r a t e s
c o s t curves ( l i n e a r )
a l o n g - r u n t o t a l c o s t c u r v e drawn t o s h o r t - r u n
s u b je c t to c a p a c ity c o n s tr a in ts .
P o in ts a, b , c,
d , an d e on t h e p l a n n i n g c u r v e a r e d e t e r m i n e d by t h e e f f e c t o f p l a n t
c a p a c itie s Y , Y t - Y , Y t ,
a
b
c’ d’
f u n c t i o n s ..
i t is
and Y on t h e r e l e v a n t s h o r t - r u n c o s t
e
The l o n g - r u n t o t a l c o s t c u r v e shown h e r e i s c u r v i l i n e a r b u t
a ls o p o s s ib le f o r i t to be lin e a r .
'
The P r o b le m o f D u r a b l e s
C o n v e n t i o n a l t h e o r y makes n o a s s u m p t i o n s c o n c e r n i n g t h e n a t u r e o f
th e f a c to r s "h e ld fix e d " in d e fin in g a p la n t.
In a p la n t,
th ese fix e d
f a c t o r s a r e d u r a b l e c a p i t a l goods s u c h a s b u i l d i n g s and e q u i p m e n t .
d u ra b le f a c t o r c o n tr ib u te s to p r o d u c tio n d u rin g s e v e r a l p e r i o d s .
A
The
two m a j o r p r o b le m s a s s o c i a t e d w i t h a d u r a b l e good a r e ( I ) m e a s u r i n g t h e
am ount o f t h e d u r a b l e good " u s e d up" d u r i n g any g i v e n p r o d u c t i o n p e r i o d
and (2) e s t a b l i s h i n g t h e " p r i c e " t o b e a p p l i e d t o s u c h u s e .
17/
B ressT er 17/
B r e s s l e r , R. G . , " E f f i c i e n c y i n t h e P r o d u c t i o n o f M a r k e t i n g S e r v i c e s , "
Soc. S c i . R e s. C o u n c il. P r o j e c t i n A gr. Ec o n ., E con. E f f i c ie n c y P a p e r
No. 6 , U n i v e r s i t y P a p e r No. 6 , U n i v e r s i t y o f C h i c a g o , p . 14.
37
T o t a l C ost
P l a n t T o t a l C o s ts
Yd
F i g u r e 14.
LRTC
Ye
O u tp u t (Y)
An I l l u s t r a t i o n o f Long-Run E conom ies and D is e c o n o m ie s
o f S c a l e Due t o C a p a c i t y C o n s t r a i n t s on t h e I n d i v i d u a l
P Iant .
38
p o in ts o u t:
I t seem s t h a t o v e r t h e u s e f u l l i f e o f t h e c a p i t a l go.od t h e s e p r i c e s m u l t i p l i e d b y t h e i n p u t s o r u s e m ust a g g r e g a t e enough
t o r e p a y t h e o r i g i n a l i n v e s t m e n t , p a y i n t e r e s t on c a p i t a l
i n c l u d i n g a r e t u r n f o r r i s k , and k e e p t h e e q u ip m e n t i n a
u s e fu l s t a t e of r e p a ir .
I n a d d i t i o n , g o v e rn m e n t s e r v i c e s
a r e f i n a n c e d i n p a r t by p r o p e r t y t a x e s l e v i e d on t h e b a s i s
o f some v a l u a t i o n o f t h e s e i n v e s t m e n t s , and t h e s e a r e c o s t s
t h a t a l s o m u st b e c o v e r e d . To s u m m a riz e , t h e c a p i t a l goods
g iv e r i s e to c e r t a i n ' f ix e d ' c o s ts , in c lu d in g d e p re c ia tio n ,
i n t e r e s t , i n s u r a n c e ( p a r t o f r i s k p a y m e n t ) , r e p a i r s , and
t a x e s ..
The d e c i s i o n t o i n v e s t i n a c a p i t a l good i s d e t e r m i n e d by w h e t h e r
th e p r e s e n t v a lu e of th e e x p ected n e t r e tu r n s p lu s s a lv a g e v a lu e exceeds
t h e p u r c h a s e p r i c e o f t h e m a c h in e .
r e f e r r e d to as th e " q u a s i - r e n t s "
p erio d s under c o n s id e ra tio n .
These e x p e c te d n e t r e t u r n s a re
(v ) o f t h e c a p i t a l good f o r t h e
The p r e s e n t v a l u e (V) i s g i v e n by t h e
e q u a tio n :
S
+
( 1 + r)
( 1 + r)
(1+r)*
(l+ r)n
w h e r e r i s t h e r a t e o f i n t e r e s t and S t h e s a l v a g e v a l u e .
There i s
c o n s id e ra b le u n c e r ta in ty in v o lv e d in th e c a lc u la t io n of
th e q u a s i- r e n ts .
D e te rm in a tio n o f th e l e a s t - c o s t c o m b in a tio n o f i n p u t s ,
r e q u ir e s t h a t a t o t a l c o s t fu n c tio n be p r o je c te d f o r each p e rio d .
C a lc u la tio n of o p tim a l o u tp u t f u r t h e r r e q u i r e s t h a t a v erag e revenue
curves be p r o j e c t e d f o r each p e rio d .
F o r t h e s e and o t h e r r e a s o n s i t
i s d i f f i c u l t t o r e l a t e t h i s approach t o r e a l - l i f e p ro b le m s.
purposes, i t is
For p r a c tic a l
c o n s i d e r e d a d e q u a t e i f t h e sum o f t h e d i s c o u n t e d q u a s i ­
r e n t s and s a l v a g e v a l u e o f t h e d u r a b l e i s s u f f i c i e n t t o o f f s e t t h e sum
39
o f th e " fix e d " c o s ts p e r p e rio d over th e u s e f u l l i f e
of th e d u rab le .
That
i s f o r any g i v e n p e r i o d t h e f i x e d c o s t s may e x c e e d , b e e q u a l t o o r b e l e s s
th an th e d is c o u n te d q u a s i - r e n t s f o r t h a t p e r io d .
H ow ever, t h e sum o f t h e
sum o f t h e q u a s i - r e n t s m u st e x c e e d t h e sum o f t h e f i x e d c h a r g e s .
Most o f t h e d e p r e c i a t i o n c o s t s a r e a f u n c t i o n o f t i m e .
t h e y may b e e x p r e s s e d a s a c o n s t a n t f o r e a c h t im e p e r i o d .
reason f o r th e use of " s t r a i g h t - l i n e "
u sefu l l if e
T herefore,
T h is i s th e
d e p r e c ia tio n over th e expected
of th e a s s e t.
The N a t u r e o f A l f a l f a D e h y d r a t i o n
A c t i v i t y w i t h i n p l a n t s u s u a l l y c o n s i s t s o f an i n t e g r a t i o n and
a g g r e g a t i o n o f many d i f f e r e n t o p e r a t i n g s t a g e s .
D r e s s i e r , Sammet,
and F r e n c h 18_/ d e f i n e a s t a g e a s c o n s i s t i n g o f a l l p r o d u c t i v e s e r v i c e s —
d u ra b le o r n o n d u r a b l e - - th a t c o o p e ra te in perfo rm in g a s i n g l e o p e ra tio n
o r a g ro u p o f m in o r b u t c l o s e l y r e l a t e d o p e r a t i o n s .
The v a r i o u s s t a g e s
a r e c o n n e c t e d by t r a n s p o r t a t i o n l i n k s .
T r a n s p o r t a t i o n l i n k s a r e o f two
t y p e s —w i t h i n s t a g e and b e tw e e n s t a g e .
W i t h i n - s t a g e t r a n s p o r t a t i o n may
b e c o n s i d e r e d as p a r t o f t h e o p e r a t i o n s o f t h e s t a g e i t s e l f .
In a sen se,
b e t w e e n - s t a g e t r a n s p o r t a t i o n i s a s t a g e i t s e l f i n w h ic h t h e o n l y o p e r a t i o n s
p e r f o r m e d a r e t o move t h e p r o d u c t fro m one p l a c e t o a n o t h e r .
Two t y p e s o f s t o r a g e o c c u r w i t h i n a p l a n t .
T e m p o ra ry s t o r a g e b e tw e e n
t h e v a r i o u s s t a g e s p l a y s an i m p o r t a n t r o l e i n c o o r d i n a t i n g and l e v e l l i n g
o u t t h e f lo w o f m a t e r i a l s and p r o d u c t s t h r o u g h t h e p l a n t .
18/
M a t e r i a l s may
D r e s s i e r , R. G . , L. L. Sammet, and R. G. F r e n c h , o p . c i t . , p . 5 45.
40
b e r e c e i v e d a t i r r e g u l a r i n t e r v a l s and y e t a f a i r l y
c o n t i n u o u s flo w t h r o u g h
t h e p l a n t m a i n t a i n e d by f e e d i n g i n t o and w i t h d r a w i n g from te m p o r a r y s t o r a g e .
T h e re i s
a l s o t h e s t o r a g e r e q u i r e d t o s t o r e p r o d u c t i o n i n e x c e s s o f demand
o r p r o d u c t i o n w i t h h e l d fro m t h e m a r k e t i n a n t i c i p a t i o n o f f a v o r a b l e p r i c e
changes.
A p l a n t p r o c e s s flo w d ia g r a m f o r a l f a l f a d e h y d r a t i o n i s shown
i n F i g u r e 15.
The m e c h a n ic s o f a l f a l f a d e h y d r a t i o n i s g i v e n i n more
d e t a i l e d tre a tm e n t in C hap ter I I I .
(
I
H arv estin g
S tag e \
I
^ H a r v e s t i n g Raw A l f a l f a
— T ra n s p o rta tio n to P la n t
T ru ck in g
^
— F e e d e r w i t h T e m porary S t o r a g e
^ ^ ^ ^ ^ s - D e h y d r a t i on
0
ammem i l l
P ro c essin g
(G rin d in g )
0
O
Q
S tag e
/~ \ Tem porary
V-/ S t o r a g e
\ y S to rag e
T ra n sp o rtatio n
Loadout
F i g u r e 15.
P l a n t P r o c e s s Flow D ia g ra m f o r A l f a l f a D e h y d r a t i o n .
41
H y p o t h e t i c a l Cost F u n c tio n s f o r A l f a l f a D e h y d ra tio n
F i g u r e 1 4 , p a g e 3 7 , i l l u s t r a t e d a l o n g - r u n t o t a l c o s t f u n c t i o n drawn
t o s h o r t - r u n l i n e a r c o s t -curves s u b j e c t t o c a p a c i t y l i m i t a t i o n s .
The
l o n g - r u n t o t a l c u r v e was drawn as a c o n t i n u o u s c u r v e a n d , t h e r e f o r e ,
assum ed a c o n t i n u o u s r a n g e o f p l a n t c a p a c i t i e s was a v a i l a b l e .
In a l f a l f a
d e h y d ra tio n p l a n t c a p a c itie s a re g e n e ra lly v a rie d in d i s c r e t e u n i ts .
T h is
i m p l i e s t h a t t h e l o n g - r u n t o t a l c o s t f u n c t i o n may a p p e a r a s a s e r i e s o f
d i s c o n t i n u o u s s t e p s a s shown b y t h e h e a v y l i n e s i n F i g u r e 1 6 a .
The
s m a l l e s t s i z e p l a n t c o u l d b e u s e d t o p r o d u c e any o u t p u t up t o Y , t h e
n e x t l a r g e r p l a n t any o u t p u t
, e tc .
In a l f a l f a d e h y d ra tio n th e la b o r in p u ts ten d to be a s s o c ia te d w ith
d u rab le f a c to r s in fix e d p ro p o rtio n s .
That i s , p la n ts have " fix e d
s t a t i o n " j o b s w h e re t a s k s r e q u i r e a minimum o f one w o r k e r r e g a r d l e s s o f
o u tp u t r a t e .
O t h e r i n p u t s , s u c h as f u e l and p o w e r, t e n d t o v a r y d i r e c t l y
w ith o u tp u t.
T h e s e i n p u t c h a r a c t e r i s t i c s w o u ld t e n d t o g i v e t h e s h o r t -
r u n a v e r a g e c o s t c u r v e s t h e s h a p e s shown i n F i g u r e 16 b , i . e . , downward
s l o p i n g and r e a c h i n g a minimum a t c a p a c i t y .
a r e i n d i c a t e d by t h e h e a v y l i n e s .
L o n g -ru n a v e r a g e c o s t s
F i g u r e 16b i s f o r i l l u s t r a t i v e
p u r p o s e s and n o t m ea n t t o im p ly t h a t e c o n o m ie s o f s c a l e e x i s t i n a l f a l f a
d e h y d ra tio n .
W ith an a v e r a g e c o s t - a v e r a g e r e v e n u e r e l a t i o n s h i p s u c h as t h a t shown
i n F i g u r e 16b i t w ould o b v i o u s l y pa y an a l f a l f a d e h y d r a t i o n f i r m t o b u i l d
a maximum s i z e p l a n t and o p e r a t e i t
a t c a p a c i t y f o r t h e maximum num ber o f
42
T o t a l Cost
LRTC
LRTC
.O utput (Y)
F ig u re 16a.
D i s c o n t i n u o u s Long-Run T o t a l C o s t F u n c t i o n R e s u l t i n g
from D i s c r e t e V a r i a t i o n s i n P l a n t C a p a c i t i e s .
A v e ra g e C o s t
O u tp u t (Y)
F i g u r e 16b.
D i s c o n t i n u o u s Long-Run A v e ra g e C o s t F u n c t i o n R e s u l t i n g
from D i s c r e t e V a r i a t i o n s i n P l a n t C a p a c i t i e s .
43
hours p o s s ib le .
T h e re a r e , h o w e v e r , i n s t i t u t i o n a l r e s t r i c t i o n s w hich
p r e v e n t t h e f i r m fro m d o in g t h i s .
The a v a i l a b l e s u p p l y o f a l f a l f a may
b e s u c h t h a t maximum o u t p u t w i l l b e Yb^ and p l a n t Id c a n n o t b e o p e r a t e d
a t c a p a c ity .
tio n .
I n a d d i t i o n t h e l e n g t h o f h a r v e s t s e a s o n im p o s e s a r e s t r i c ­
The s e a s o n may b e s o s h o r t a s to' n o t a l l o w p l a n t Id t o a t t a i n
volum e Yb^.
I n t h i s c a s e , a p l a n t o f s i z e c w o u ld n e e d t o b e b u i l t .
C o s t A n a l y s i s U s in g C o s t A c c o u n t in g and O u tp u t D a t a
P r e v i o u s s t u d i e s o f a l f a l f a d e h y d r a t i o n h a v e u s e d a c c o u n t i n g c o s t and
o u t p u t d a t a t o show t h a t d i f f e r e n c e s i n p r o d u c t i o n c o s t s among p l a n t s w e r e
i n v e r s e l y r e l a t e d t o a n n u a l p r o d u c t i o n v o lu m e .
These s t u d i e s f a i l e d to
a s c e r t a i n w h e t h e r t h e v a r i a t i o n i n a n n u a l volum e among p l a n t s was due t o
v a r i a ti o n in hours of o p e ra tio n , v a r i a ti o n in r a te of o u tp u t, or v a r ia ­
tio n in p la n t s iz e .
I n t h i s s t u d y a c c o u n t i n g c o s t and o u t p u t d a t a a r e . u s e d i n an a t t e m p t
t o d e t e r m i n e w h e t h e r d i f f e r e n c e s i n p r o d u c t i o n c o s t s among p l a n t s a r e due
to v a r ia tio n s in r a te of o u tp u t or v a r ia tio n s in p la n t s iz e .
is
The a p p r o a c h
t o h o l d c o n s t a n t v a r i a t i o n s i n t h e tim e d im e n s io n by c a l c u l a t i n g h o u r l y
o u t p u t and t h e n e x a m in e t o w h a t e x t e n t p r o d u c t i o n c o s t s v a r y w i t h d i f f e r ­
e n c e s i n d a i l y o u t p u t ( a v a r i a t i o n i n t h e r a t e d im e n s io n )
p lan t s iz e s .
f o r v ario u s
T h is a p p r o a c h i s u s e d f o r e a c h t y p e o f c o s t ( i . e . ,
f u e l , pow er, e t c . )
lab o r,
in o rd e r to observe i n d i v i d u a l c o s t b e h a v io r w ith
r e s p e c t t o v a r i a t i o n s i n o u t p u t and p l a n t s i z e .
44
A d v a n ta g e s and D i s a d v a n t a g e s o f U s in g A c c o u n t in g C o st and O u tp u t D a ta
Some o f t h e a d v a n t a g e s o f u s i n g a c c o u n t i n g c o s t and o u t p u t d a t a a r e
(I)
th e g e n e ra l a v a i l a b i l i t y of d a ta ,
and (3)
(2) r e l a t i v e l y low r e s e a r c h c o s t ,
th e r e f l e c t i o n of r e a l-w o rld o p e ra tin g c o n d itio n s .
C r o s s - s e c t i o n a l d a t a a r e em ployed*'In' t h i s p a r t o f t h e s t u d y .
Some o f
"the p r o b le m s e n c o u n te r e d " i n u s i n g t h i s . t y p e o f d a t a a r e a s f o l l o w s :
1.
A c c o u n t in g r e c o r d s b e tw e e n f i r m s a r e n o t c o m p l e t e l y hom ogeneous.
T h u s , " b o o k v a l u e s " o f p l a n t a n d .e q u i p m e n t d i f f e r b e c a u s e o f d i f f e r e n t
p u rc h a s in g l o c a t io n s a n d /o r d i f f e r e n t tim es o f p u rc h a s e .
D e p re cia tio n i s
c h a r g e d d i f f e r e n t l y by d i f f e r e n t f i r m s .
t a x e s and
i n t e r e s t p a y m e n ts v a r y among l o c a l i t i e s .
Insurance r a te s ,
The q u a l i t y o f b u i l d i n g s and
e q u ip m e n t may r e n d e r " b o o k v a l u e s " u s e l e s s .
F in a lly ac co u n tin g reco rd s
a r e m a n i p u l a t e d i n d i f f e r e n t ways t o e a s e t h e f i r m ’ s t a x b u r d e n .
2.
P la n ts in a c r o s s - s e c tio n a l a n a ly sis u su a lly o p e ra te in d if f e r e n t
e n v iro n m en ts.
H ence t h e c o n d i t i o n s u n d e r w h ic h t h e y o p e r a t e d i f f e r ,
t e c h n i q u e s o f p r o d u c t i o n v a r y , i n p u t p r i c e s may v a r y among p l a n t s and
d i f f e r e n t p r o d u c t s may b e p r o d u c e d .
3.
Each o b s e r v a t i o n g i v e s o n ly one o u t p u t l e v e l and d o es n o t p r o v i d e
t h e p o s i t i o n o f e a c h p l a n t on i t s
s h o r t- r u n c o s t cu rv e.
T h u s , i t w o u ld
be p o s s ib le to e s tim a te the lo n g -ru n av erag e c o st fu n c tio n a c c u ra te ly
o n l y i f minimum c o s t p l a n t s a r e o b s e r v e d f o r e a c h o u t p u t .
u n lik e ly to occu r.
T h is i s
45
C o s t S y n t h e s i s M ethod o f A n a l y z i n g P l a n t C o s t s '
P l a n t c o s t s y n th e s i s b e g in s w ith th e d e te rm in in g o f in p u t- o u tp u t
r e l a t i o n s f o r the v a rio u s s ta g e s of p ro d u c tio n .
A p p ro p ria te p r ic e s a re
a p p lie d to a r r i v e a t s ta g e c o s t- o u tp u t r e l a t i o n s h i p s t h a t p ro v id e a
f u n d a m e n t a l b a s i s f o r c o m p a rin g t h e c o s t s , o f a l t e r n a t i v e t e c h n o l o g i e s .
The s y n t h e s i s
( o r d e v e lo p m e n t)
o f a l o n g - r u n c o s t f u n c t i o n from t h e
v ario u s sta g e co st fu n ctio n s is
sta g e c o st-o u tp u t re la tio n s h ip s .
a case of a g g re g a tin g th e in d iv id u a l
I f th e r e are a l t e r n a t i v e tec h n o lo g ie s
a v a i l a b l e a t v a r i o u s s t a g e s t h a t c o m b i n a t i o n o f t e c h n o l o g i e s a t ea ch
r a t e o f o u t p u t t h a t g i v e s a lo w e r t o t a l c o s t t h a n any o t h e r c o m b i n a ti o n
m u st b e f o u n d .
I n t h i s m anner an " i n t e r n a l l y e f f i c i e n t " p l a n t c o s t
fu n ctio n i s d eriv ed .
T h is s y n t h e t i c a l l y e f f i c i e n t p l a n t can t h e n b e u s e d
f o r c o m p a r is o n p u r p o s e s w i t h a c t u a l p l a n t c o s t s i n t h e i n d u s t r y and a l s o
t o e s t i m a t e an e c o n o m ie s o f s c a l e c u r v e f o r t h e i n d u s t r y .
A lso c o s t
e s t i m a t e s o b t a i n e d w i t h t h i s m ethod may b e a d j u s t e d f o r v a r y i n g c o n d i t i o n s
i n i n d i v i d u a l p l a n t s and f o r v a r i a t i o n s i n p r i c e s o f i n p u t s .
The d i s a d v a n t a g e s o f t h e c o s t s y n t h e s i s m ethod a r e ( I )
c a s e s i t i s t im e consum ing and q u i t e c o s t l y ,
t h a t i n many
(2) t h a t t h e g r e a t d e a l o f
s i m p l i f i c a t i o n i n v o l v e d i n m o st c o s t s y n t h e s i s s t u d i e s
(use of c o rre c t
l o g i c s h o u l d h o l d e r r o r t o a m inim um ), and (3) t h e e x t r e m e d i f f i c u l t y o f
o b ta in in g s t a t i s t i c a l p ro o f of r e s u l t s .
Cost S y n th e s is i n A l f a l f a D eh y d ratio n
The p r o b l e m a s s o c i a t e d w i t h t h e u s e o f c o s t a c c o u n t i n g d a t a and
o u t p u t d a t a p r o m p te d t h e i n c l u s i o n o f t h e c o s t s y n t h e s i s m eth o d o f
46
p r o d u c t i o n c o s t a n a l y s i s as a s u p p le m e n t t o t h e m ethod d i s c u s s e d i n t h e
p rev io u s s e c tio n .
The c o s t s y n t h e s i s m eth o d can b e u s e d t o d e r i v e an
e c o n o m i e s - o f - s c a l e c u r v e and t h e r e s u l t s com pared w i t h t h e i m p l i c a t i o n s
d e r i v e d fro m t h e r e s u l t s
d a ta .
I t is
o f t h e a n a l y s i s o f a c c o u n t i n g c o s t and o u t p u t
a l s o f e l t t h a t t h i s ap p ro ach w i l l e n a b le th e d e te r m in a tio n
o f o p t i m a l p l a n t s i z e and h o u r s o f o p e r a t i o n g i v e n t h e s u p p l y o f a l f a l f a
in what i s
c o n s id e r e d as eco n o m ical h a u lin g d i s ta n c e of th e p l a n t .
The
in p u t- o u tp u t r e l a ti o n s h ip s f o r th e v a rio u s s ta g e s of p ro d u c tio n in .
a l f a l f a d e h y d ra tio n a re such th a t th e re i s
little
a d d itio n a l research
c o s t i n v o l v e d i n e m p lo y in g c o s t s y n t h e s i s as a m ethod o f a n a l y z i n g
p ro d u ctio n c o s ts .
M ethods o f E s t i m a t i n g C o s ts i n A l f a l f a D e h y d r a t i o n
Labor
In a l f a l f a d e h y d ra tio n ,
a l l sta g e s of p ro d u ctio n have " fix e d
s t a t i o n " j o b s w h e r e t h e t a s k s t o b e p e r f o r m e d r e q u i r e a minimum o f one
w orker r e g a r d le s s of o u tp u t r a t e .
Some q u a l i f i c a t i o n i s n e c e s s a r y h e r e .
R e f e r r i n g t o F i g u r e 1 5 , p a g e 4 0 , t h e f lo w f tom f e e d e r t h r o u g h t o l o a d o u t
or sto ra g e is
a u to m a te d and r e q u i r e s n o human h a n d l i n g .
T here a re th en
e s s e n t i a l l y t h r e e s t a g e s o f p r o d u c t i o n — h a r v e s t i n g , t r u c k i n g , and p r o c e s s i n g .
Labor re q u ire m e n ts i n each s ta g e vary d i s c r e t e l y a c c o rd in g to c a p a c ity .
F o r e x a m p l e , s m a l l e r s i z e p l a n t s may r e q u i r e one o p e r a t o r a t t h e p r o c e s s i n g
s t a g e , r e g a r d l e s s o f o u t p u t , and l a r g e r p l a n t s two o r t h r e e .
th ere fo re ,
I t is,
f e l t t h a t p l a n t p a y r o l l and o u t p u t r e c o r d s a l o n g w i t h t h e
47
e c o n o m i c - e n g i n e e r i n g a p p r o a c h o f d e t a i l e d d e s c r i p t i o n Of p l a n t o p e r a t i o n s
f
w i l l s u f f i c e h e r e as a m ethod o f d e t e r m i n i n g l a b o r i n p u t - o u t p u t and l a b o r
c o st-o u tp u t r e la tio n s h ip s „
M a te ria ls
A ll m a te r ia ls used in a l f a l f a d e h y d ra tio n a re c o n ta in e d in th e f i n a l
p ro d u ct„
A l f a l f a g r o w e rs a r e p a i d on t h e b a s i s o f t o n s o f d e h y d r a t e d
a l f a l f a p r o d u c e d fro m , t h e raw a l f a l f a s u p p l i e d .
In o r d e r t o d eterm in e
raw m a t e r i a l c o s t i t i s o n l y n e c e s s a r y t o o b t a i n u n i t p r i c e s p a i d t o
g ro w ers.
A d d i t i v e s a l s o e n t e r i n t o t h e f i n a l p r o d u c t i n some c a s e s , b u t
a r e in . f i x e d p r o p o r t i o n t o o u t p u t a n d , t h e r e f o r e , p r e s e n t n o d i f f i c u l t y
in d e te rm in in g t h e i r c o s t.
Fuel
F u e l u s e d i n a l f a l f a d e h y d r a t i o n i s n a t u r a l gas u s e d t o f i r e t h e
f u r n a c e s o f t h e d r y i n g drum.
e stim a te s.
T h e re a r e t h r e e s o u r c e s o f f u e l c o s t
P l a n t a c c o u n t i n g r e c o r d s a r e one s o u r c e o f f u e l c o s t e s t i m a t e s .
M a n u f a c t u r e r s o f e q u ip m e n t o f t e n p r o v i d e e s t i m a t e s o f f u e l c o n s u m p tio n
w h ic h com bined w i t h f u e l c o s t s o b t a i n e d fro m u t i l i t i e s
c o m p a n ies p r o v i d e
an e s t i m a t e o f f u e l c o s t s i n v o l v e d i n a l f a l f a d e h y d r a t i o n .
The t h i r d
s o u r c e i s somewhat more c o m p l i c a t e d and i n v o l v e s a p h y s i c s f o r m u l a f o r
d e t e r m i n i n g t h e amount o f n a t u r a l g a s r e q u i r e d t o e v a p o r a t e a g i v e n amount
of w a te r.
Knowing t h e e v a p o r a t i v e c a p a c i t y o f a d r y i n g drum and t h e
m o i s t u r e c o n t e n t o f t h e raw a l f a l f a e n a b l e s d e t e r m i n a t i o n o f f u e l consump­
t i o n f o r a g i v e n amount o f d e h y d r a t e d a l f a l f a p r o d u c t i o n .
48
Pow er
E i t h e r e n g i n e e r i n g e s t i m a t e s o f pow er c o n s u m p tio n f o r p l a n t c a p a c i t y
o r p l a n t a c c o u n t i n g r e c o r d s may b e u s e d t o e s t i m a t e pow er c o s t s .
Gas and O i l
Gas and o i l i s u s e d p r i m a r i l y by t h e f i e l d h a r v e s t e r s and t h e t r u c k s .
E s t i m a t i n g g a s and o i l c o s t s p r e s e n t s a c o n s i d e r a b l e p r o b l e m .
P lan t
a c c o u n t i n g r e c o r d s a r e one s o u r c e , b u t u s u a l l y t h e r e i s n o b reakdow n o f
t h e s e c o s t s b e tw e e n t h e h a r v e s t i n g and t h e t r u c k i n g o p e r a t i o n .
Gas and
o i l c o s t s a l s o t e n d t o v a r y n o t. o n l y w i t h d i f f e r e n c e s i n p r i c e s b e tw e e n
a r e a s , b u t a l s o w i t h d i s t a n c e t r a v e l l e d from f i e l d t o p l a n t ,
types of
r o a d s and a l f a l f a y i e l d s .
M i s c e l l a n e o u s S u p p l i e s and G e n e r a l E x p e n s e
D a t a on t h e s e e x p e n s e s a r e o b t a i n e d p r i m a r i l y fro m p l a n t a c c o u n t i n g
reco rd s.
M i s c e l l a n e o u s s u p p l i e s i n c l u d e s u c h i te m s as p a p e r , p e n c i l s ,
s ta p le rs , e tc .
The q u a n t i t i e s o f t h e s e i t e m s u s e d may b e a f u n c t i o n o f
p la n t s iz e b u t have l i t t l e
r e l a t i o n to r a t e of o u tp u t.
in c lu d e lic e n s e s , d o n a tio n s, dues, e tc .
G e n e ra l expenses
These expenses a r e u s u a l l y a
v ery sm a ll p a r t of th e o v e r a ll c o st p i c t u r e .
A d m i n i s t r a t i v e C o s ts
A d m i n i s t r a t i v e c o s t s c o n s i s t o f t h e s a l a r i e s o f m a n a g e rs
e x e c u tiv e s.
and
A c c o u n t in g r e c o r d s a r e u s u a l l y u s e d t o e s t i m a t e t h e s e c o s t s .
49
S e p a ra tio n of s a l a r i e s
fro m p r o f i t i s
s o m e tim e s d i f f i c u l t .
T here i s a
p r o b le m i n a l l o c a t i n g a d m i n i s t r a t i v e c o s t s t o d i f f e r e n t p l a n t f u n c t i o n s .
I t is
lik e ly th a t th is a llo c a tio n w i l l be h ig h ly a r b i t r a r y .
D u r a b l e Goods
T h e r e a r e t h r e e m ain s o u r c e s o f d a t a u s e d t o e s t i m a t e
d u rab le goods:
(I) p l a n t a c c o u n tin g r e c o r d s ;
th e co st of
(2) e n g i n e e r i n g - a r c h i t e c t u r e
e s t i m a t e s o f b u i l d i n g s and e q u ip m e n t; and (3) d a t a s u p p l i e d by m a n u f a c t u r e r s
o f e q u ip m e n t and b u i l d i n g s .
c o st s y n th e s is stu d y .
Two t y p e s o f d u r a b l e s a r e c o n s i d e r e d i n a
D u r a b l e goods s u c h as m a c h i n e s , w h ic h a r e u s e d i n
a p a r t i c u l a r s t a g e and w hose c o s t s a r e d i r e c t l y i n t e g r a t e d i n t o t h e s t a g e
C o sts.
D u r a b l e goods s u c h a s b u i l d i n g s h o u s i n g t h e p l a n t w h ic h a r e n o t
c o n n e c t e d w i t h any one s t a g e and w hose c o s t s a r e a g g r e g a t e d t o t h e t o t a l
s ta g e c o s t fu n c tio n to o b ta in th e t o t a l c o s t fu n c tio n .
P r o b le m s i n v o l v e d
in e s tim a tin g th e c o s t o f d u ra b le s a re d e te rm in in g c o r r e c t d e p r e c ia tio n
r a t e s and b o o k v a l u e s .
S a m p lin g
The s a m p le was s e l e c t e d t o c o v e r a r a n g e o f p l a n t s i z e s fro m w hich
t o d e v e lo p b a s i c c o s t s t a n d a r d s .
ju d ic ia l s e le c tio n .
No a t t e m p t was made t o d e s i g n t h e s a m p le i n a m anner
t h a t w o u ld b e s t a t i s t i c a l l y
out th e in d u s tr y .
P l a n t s w e r e c h o s e n on t h e b a s i s o f
r e p r e s e n t a t i v e o f average c o n d itio n s th ro u g h ­
50
I n o r d e r t o d e v e lo p an a n a l y s i s o f e c o n o m ie s o f s c a l e t h e s a m p l e , i t
was f e l t , s h o u l d b e s e l e c t e d a c c o r d i n g t o s i z e .
of s c a l e ,
(2) e f f i c i e n t p l a n t s ,
I t sh o u ld in c lu d e (I)
range
and (3) hom ogeneous o u t p u t .
The m a j o r p o r t i o n o f t h e s a m p le was drawn from t h e t h r e e - s t a t e a r e a
o f C o l o r a d o , K a n s a s , and N e b r a s k a ,
co n cen trated in th ese s t a t e s
The a l f a l f a d e h y d r a t i n g i n d u s t r y i s
and t h e a r e a i s
com pact e nough t o be
c o m p a tib le w ith th e l i m i t e d b u d g et o f th e p r o j e c t .
In o rd e r to in clu d e
a l l form s o f l e g a l o r g a n i z a t i o n and r e c e n t l y e s t a b l i s h e d f i r m s i n t h e
s a m p l e , f i r m s i n I d a h o and M in n e s o t a w e r e i n t e r v i e w e d .
In te rv ie w
s c h e d u l e s f o r t h r e e c o o p e r a t i v e p l a n t s i n Ohio w e re o b t a i n e d by Mr.
C h a r l e s Reed o f t h e F a r m e r s C o o p e r a t i v e S e r v i c e .
T h e re a r e 16 f i r m s o r g a n i z e d as e i t h e r c o r p o r a t i o n s o r p a r t n e r s h i p s
i n th e sam p le.
F i v e o f t h e s e w e r e e s t a b l i s h e d a f t e r 1961.
There a re
f o u r c o o p e r a t i v e s i n t h e s a m p l e , one o f w h ic h was e s t a b l i s h e d a f t e r 1961,
L o c a t i o n , l e g a l o r g a n i z a t i o n , and w h e t h e r e s t a b l i s h e d a f t e r 1961 o f e a c h
p l a n t i n t h e s a m p le a r e shown i n F i g u r e 17.
P r e lim in a ry R esearch
P u b l i s h e d l i t e r a t u r e and o t h e r i n f o r m a t i o n a v a i l a b l e fro m u n i v e r s i ­
t i e s , m a n u fa c tu re rs , m ark e tin g a g e n c ie s,
t r a d e a s s o c i a t i o n s , and o t h e r
s o u r c e s on a l f a l f a d e h y d r a t i o n was a s s e m b le d and r e v i e w e d i n o r d e r t o
g a i n f a m i l i a r i t y w i t h t h e s u b j e c t , d i s c o v e r r e s u l t s a l r e a d y o b t a i n e d and
Ieam
o f t h e m eth o d s u s e d t o o b t a i n them .
I n te r v ie w s w ere h e ld w ith
r e p r e s e n t a t i v e s o f s e l e c t e d d e h y d r a t i n g e q u ip m e n t c o m p a n ie s , f e e d
Wash
Mont
N. Dak
M aine
Minn
Id a h o
S . Dak
Michv
Iow a
N e b r.
•N. J
OhioO
U tah
OO
C o lo .
C a lif
Kans
No. C ar
A r iz
New Mex
Tenn
O k la
So. C a?
T exas
V X
\
\
I
I V
\ *
F i g u r e 17
\
P
I.
f
\
'
J
\
L eg e n d :
o C o r p o r a tio n o r
P a rtn e rs h ip
0 C o o p e r a tiv e
\
vX
J
\^ /
* S h a d in g i n d i c a t e s p l a n t was e s t a b l i s h e d
a f t e r 1961
L o c a t i o n , O r g a n i z a t i o n a l S t r u c t u r e o f P l a n t s i n t h e Sam ple and W h e th e r E s t a b l i s h e d
52
m a n u f a c t u r e r s , b r o k e r s o r co m m issio n a g e n t s , t h e A m erican D e h y d r a t i n g
A s s o c i a t i o n , and s e l e c t e d l a n d g r a n t u n i v e r s i t i e s .
Source of D ata
The p r i m a r y s o u r c e o f d a t a was fro m q u e s t i o n n a i r e s c o m p l e te d a t
s e le c te d a l f a l f a d e h y d ra tin g p la n ts .
o b t a i n e d fro m m a n u f a c t u r e r s .
p u b lish e d l i t e r a t u r e
D a t a on e q u ip m e n t c o s t s w ere
S e c o n d a r y d a t a w e re o b t a i n e d fro m p r e v i o u s l y
on a l f a l f a d e h y d r a t i o n a n d p u b l i c a t i o n s o f t h e
U n i t e d S t a t e s D e p a r tm e n t o f A g r i c u l t u r e .
CHAPTER I I I
FACTORS IN ALFALFA DEHYDRATION
P l a n t L o c a tio n
The f i r s t r e q u i r e m e n t f o r an a l f a l f a d e h y d r a t i n g p l a n t i s t h a t t h e r e
b e a v a i l a b l e t h r o u g h o u t t h e o p e r a t i n g s e a s o n an a d e q u a t e , c o n s i s t e n t
a l f a l f a su p p ly .
The s o u r c e o f s u p p l y m u st b e w i t h i n an e c o n o m i c a l h a u l i n g
d is ta n c e o f th e p l a n t .
P e r s o n s i n t e r v i e w e d i n t h i s s t u d y w e r e a s k e d why
t h e y e s t a b l i s h e d an a l f a l f a d e h y d r a t i n g p l a n t i n t h e p r e s e n t l o c a t i o n . .
I n f o u r c a s e s , t h e p r e s e n t m anagem ent h a d p u r c h a s e d t h e p l a n t from
p r e v i o u s m anagem ent and c o u l d n o t a n s w e r t h e q u e s t i o n .
Of t h e r e m a in i n g
p l a n t s , 15 g a v e t h e a v a i l a b i l i t y o f raw a l f a l f a as a r e a s o n f o r e s t a b l i s h ­
in g t h e i r p l a n t s a t the l o c a tio n chosen.
Two o f t h e o t h e r t h r e e p l a n t s w e r e e s t a b l i s h e d by f a r m e r g ro u p s i n
d e h y d r a t e d a l f a l f a p r o d u c i n g a r e a s who w a n t e d t h e i r own p r o c e s s i n g f a c i l ­
itie s.
The a v a i l a b i l i t y o f raw a l f a l f a i s i m p l i e d .
The t h i r d p l a n t was
e s t a b l i s h e d t h r o u g h t h e com bined e f f o r t o f a l o c a l I n d u s t r i a l D evelopm ent
C o r p o r a t i o n and a p e r s o n w i t h c o n s i d e r a b l e e x p e r i e n c e i n t h e p r o d u c t i o n
o f d e h y d r a t e d a l f a l f a who w a n t e d t o l o c a t e i n t h e a r e a .
T his e x p e rie n c e d
dehy-m an h a d a s s u r e d h i m s e l f t h a t an a d e q u a t e s u p p l y o f a l f a l f a was
a v a ila b le .
In a d d itio n to th e a v a i l a b i l i t y of a lfa lfa -, s e v e r a l o th e r reasons fo r
e s ta b l is h m e n t w ere g iv e n .
I n two c a s e s t h e r e Tqad b e e n a g ro u p i n t e r e s t e d
i n e s t a b l i s h i n g a p l a n t , b u t n a t u r a l g a s was n o t a v a i l a b l e .
a ga s l i n e was l a i d i n t h e a r e a , a p l a n t was e s t a b l i s h e d .
As soon as
One p l a n t
'54
v i s i t e d had o r ig i n a ll y b een p a r t o f
a c h a in o f d e h y d r a t in g p l a n t s e s t a b ­
l i s h e d by a f a m ily w i t h n a t u r a l
g a s i n t e r e s t t o p r o v id e a summer m a rk e t
fo r n a tu ra l g as.
was e s t a b l i s h e d b e c a u s e a p l a n by one farm
A n o th e r p l a n t
o p e r a t o r t o s e t up a s m a l l drum
f o r h i s own u s e g e n e r a te d enough i n t e r e s t
t o a llo w e x p a n s io n i n t o a c o m m e rc ia l v e n t u r e .
L o c a l m a r k e t p o t e n t i a l was a f a c t o r i n t h e e s t a b l i s h m e n t o f s e v e r a l
p la n ts .
L o c a tio n w i t h r e s p e c t t o m a r k e t i s an im p o r ta n t f a c t o r .
a l o c a l m a r k e t f o r t h e p r o d u c t and i f n o t , i s
th e p l a n t such t h a t i t
Is th e re
th e g e o g r a p h ic l o c a t i o n o f
can com pete i n t h e m a r k e ts o f t h e m a jo r p ro d u c in g
a re a s?
I f t h e s u p p ly o f raw a l f a l f a w i t h i n an e c o n o m ic a l h a u l i n g d i s t a n c e
is
c o n s id e r e d a d e q u a t e , t h e d e h y d r a t in g p l a n t s h o u ld b e l o c a t e d on a
r a i l s id in g .
L o c a tio n on a r a i l s i d i n g a llo w s a u to m a te d d e l i v e r y o f t h e
p r o d u c t t o a r a i l r o a d h o p p e r c a r f o r t r a n s p o r t a t i o n t o m a r k e t.
U n le s s
a l l s a l e s a r e d e l i v e r e d l o c a l l y by t r u c k , a p l a n t l o c a t e d away from a
r a i l s i d i n g m u st a b s o rb t h e a d d i t i o n a l c o s t s o f t r u c k i n g t o a r a i l s i d i n g .
Raw a l f a l f a i s t h r e e o r f o u r tim e s a s h e a v y and much b u l k i e r th a n th e
d e h y d r a te d a l f a l f a p e l l e t s .
T h erefo re, i f
t h e r e i s no r a i l s i d i n g ,
.
f a v o r a b l y l o c a t e d w i t h r e s p e c t t o th e raw a l f a l f a s u p p ly a v a i l a b l e , th e
co st of tra n s fe rrin g p e lle ts
t o i th e :
r a i l s i d i n g may b e l e s s th a n th e
a d d i t i o n a l c o s t s o f h a u l i n g raw a l f a l f a w h ic h w ould h a v e b e e n i n c u r r e d
h a d t h e p l a n t b e e n l o c a t e d on a r a i l s i d i n g .
I n su c h s i t u a t i o n s , l o c a t i o n
to w a rd t h e raw m a t e r i a l s o u r c e S h o u ld t a k e p r e f e r e n c e o v e r l o c a t i o n on a
r a i l s id in g .
.55
Of 20 p l a n t s i n t e r v i e w e d , 5 w e re n o t l o c a t e d on a r a i l s i d i n g .
One
o f t h e s e d e l i v e r e d a l l o f i t s p e l l e t s by t r u c k — e i t h e r t o l o c a l s a l e s o r
to fe e d p la n ts o f th e p a re n t o r g a n iz a tio n .
its
p r o d u c t t o t r u c k e r s a s b a c k h a u l.
A n o th e r s o l d 75 p e r c e n t o f
The t h r e e o t h e r s t r u c k e d m ost o f
t h e i r p e l l e t s t o a r a i l s i d i n g and f e l t i t was a d i s a d v a n t a g e n o t t o b e
l o c a t e d on a r a i l s i d i n g .
In th e case o f fo u r o f th e s e f iv e p la n ts a
r a i l r o a d s i d i n g f a v o r a b l y l o c a t e d w i t h r e s p e c t to th e raw a l f a l f a s u p p ly
was n o t a v a i l a b l e .
s tra te g ic a lly
T h e r e f o r e , th e y f e l t i t was t o t h e i r a d v a n ta g e to ,
l o c a t e t h e i r p l a n t s i t e s i n t h e a r e a from w h ic h th e y w o u ld
d e r i v e t h e i r raw a l f a l f a s u p p ly a n d , i f n e c e s s a r y , t r u c k t h e d e h y d r a te d
a lf a lf a p e lle ts
to a r a i l s id in g .
The d u s t p r o d u c e d d u r in g th e d e h y d r a t io n p r o c e s s p o s s e s s e s an o d o r
t h a t i s u n p l e a s a n t t o many p e o p le .
The s e t t l i n g o f t h i s pow dery d u s t
o v e r a com m unity ad d s t o t h e d i f f i c u l t y i n m a i n t a i n i n g c l e a n l i n e s s .
T h e re i s
a v a ila b le a p ro ce ss th a t c o lle c ts
n o t le n d i t s e l f
t h is d u st so th a t i t w i l l
t o a i r p o l l u t i o n p ro b le m s f o r t h e com m unity.
i t h as n o t re c e iv e d p o p u la r a c c e p ta n c e .
H ow ever,
C o n s i d e r a t io n s t i l l s h o u ld b e
g iv e n t o a l o c a t i o n downwind from t h e com m unity, a l o c a t i o n i n t h e
open c o u n t r y , o r b o t h .
p la n t s i t e
O th e r f a c t o r s t o b e c o n s id e r e d i n c h o o s in g a
a r e f i r e p r o t e c t i o n , f i r e i n s u r a n c e r a t e s , and t a x e s .
Raw M a t e r i a l
R e q u ire m e n ts
A c re a g e r e q u ir e m e n ts f o r a p l a n t o f g iv e n c a p a c i t y c a n b e e s t i m a t e d
by t h e m o is t u r e c o n t e n t o f t h e raw a l f a l f a and th e y i e l d p e r a c r e m e a su re d
56
i n to n s o f d e h y d r a te d a l f a l f a p r o d u c e d .
D e h y d ra te d a l f a l f a p r o d u c t i o n
f o r a drum o f g iv e n c a p a c i t y can b e fo u n d by t h e f o rm u la 1 9 /
Y = L ( l - r ) 4- r - t
w h e re Y = p r o d u c t i o n p e r h o u r o f d e h y d r a te d a l f a l f a
L = c a p a c i t y o f d r y in g drum i n p o unds o f m o is t u r e e v a p o r a te d
per hour
r = m o i s t u r e c o n t e n t o f raw a l f a l f a
t = m o is t u r e c o n t e n t o f d e h y d r a te d a l f a l f a
F o r e x a m p le , assum e
Y = p r o d u c t i o n o f d e h y d r a te d a l f a l f a
L = a d r y in g drum w i t h e v a p o r a t i v e c a p a c i t y o f 9 ,0 0 0 pounds
p er hour
r = raw a l f a l f a m o is t u r e c o n t e n t o f 70 p e r c e n t
t = d e h y d r a te d a l f a l f a m o is t u r e c o n te n t o f 10 p e r c e n t
Y = 9 ,0 0 0 ( 1 - .7 0 )
Y = 9 ,0 0 0
( .3 0 )
Y = 2 ,7 0 0
4 .6 0
4 ( .7 0 -
.1 0 )
4 ( .6 0 )
Y = 4 ,5 0 0 p o u n d s o f d e h y d r a te d a l f a l f a p ro d u c e d p e r h o u r
I f th e p l a n t o p e r a t e s on a 2 4 - h o u r d a y , d a i l y p r o d u c t i o n i s
p o u n d s o r 54 to n s
(24 x 4 ,5 0 0 ) .
'178,000
I f th e p l a n t o p e r a t e s 100 d a y s , s e a s o n a l
p r o d u c t i o n i s 5 ,4 0 0 to n s (5 4 x 1 0 0 ),
I f y i e l d s a v e ra g e t h r e e to n s p e r
a c r e th e n t h e a c r e a g e r e q u ir e m e n ts f o r . t h i s p l a n t a r e e s t i m a t e d a t 1 ,8 0 0
a c re s
19/
( 5 ,4 0 0
4 3 ).
D e r i v a t i o n o f f o r m u la u s e d i s shown i n A ppendix A.
57
The S u p p ly A re a
A l f a l f a d e h y d r a t io n p l a n t s a r e c l o s e l y t i e d to t h e f i e l d s
th e y o b t a i n t h e i r s u p p ly o f raw a l f a l f a .
Raw a l f a l f a i s
from w h ich
th re e to fo u r
tim e s as h e a v y and many tim e s as b u lk y a s t h e d e h y d r a te d p e l l e t s .
t h i s way i t i s
In
a t r a n s p o r t a t i o n s e n s i t i v e ite m — h i g h i n w e ig h t and b u l k
and low i n v a l u e .
C ost o f tr a n s p o r tin g i t to th e d e h y d ra to r r e s t r i c t s
t h e a r e a fro m w h ic h :'it: may b e o b t a i n e d .
As d i s t a n c e fro m t h e p l a n t
i n c r e a s e s f u e l , m a in te n a n c e , and r e p a i r c o s t s i n c r e a s e .
As tim e r e q u i r e d
f o r t r a n s p o r t a t i o n i n c r e a s e s , m ore men and e q u ip m e n t a r e r e q u i r e d t o
m a i n ta i n t h e flo w o f raw a l f a l f a t o t h e p l a n t .
The tim e f a c t o r i s
a l s o i m p o r ta n t i n a n o th e r r e s p e c t .
r e a s o n f o r d e h y d r a t in g a l f a l f a i s n u t r i e n t , p r e s e r v a t i o n .
th e n u t r i t i o n a l v a lu e o f d e h y d r a te d a l f a l f a w i t h i t s
c o n te n t.
th is
The p rim a ry
B u y e rs a s s o c i a t e
c a r o t e n e o r v ita m in A
C a r o te n e l o s s i s g r e a t e s t j u s t a f t e r t h e a l f a l f a i s c u t and
lo s s i s
a f a c t o r i n k e e p in g t h e e l a p s e d tim e b e tw e e n c u t t i n g and
d r y in g t o a minimum.
R eed , i n 1 9 5 8 , fo u n d t h a t o v e r t h e U n ite d S t a t e s a s a w h o le , 60 p e r c e n t
o f t h e a c r e a g e c u t f o r d e h y d r a t io n was h a r v e s t e d w i t h i n f i v e m ile s o f t h e
p l a n t and 90 p e r c e n t w i t h i n 10 m ile s o f t h e p l a n t . 2 0 /
20/
S c h r e n k , e_t. a l .
R eed , C h a r le s E . , e_t. a l . , M a rk e tin g D e h y d ra te d A l f a l f a , A g r i c u l t u r a l
M a rk e tin g S e r v i c e , M a rk e t R e s e a rc h D i v i s i o n , USDA, M a rk e tin g R e s e a rc h
R e p o r t N o. 2 5 4 , J u l y 1953, p . 2 6 .
58
i n 1959 fo u n d p l a n t s t o se ld o m d r i v e m ore th a n 10 m il e s f o r t h e i r a l f a l f a .
21/
R ic k e y i n 1956 fo u n d few p l a n t s o b t a i n e d t h e i r a l f a l f a b ey o n d a
r a d iu s - o f 20 m ile s and u s u a l l y o b t a i n m o st o f t h e i r a l f a l f a w i t h i n 5
m il e s o f t h e p l a n t . 2 2 /
T a b le I I c o n t a i n s a c r e a g e d i s t r i b u t i o n f o r a c r e s h a r v e s t e d by p l a n t s
in th is su rv e y .
F i f t y - f o u r p e r c e n t o f a l l a c r e a g e was h a r v e s t e d by p l a n t s
w i t h i n 5 m il e s o f t h e p l a n t and 92 p e r c e n t w i t h i n 10 m il e s o f t h e p l a n t .
P l a n t s w i t h l a r g e p r o d u c t i o n volum e t r a v e l l e d no f a r t h e r f o r t h e i r a l f a l f a
s u p p ly th a n s m a l l volum e p l a n t s .
I t w o u ld t h e r e f o r e seem t h a t one o f th e
f a c t o r s d e te r m i n in g t h e am ount o f d e h y d r a te d a l f a l f a w h ic h can b e p ro d u c e d
p r o f i t a b l y i s t h e s u p p ly o f raw a l f a l f a w i t h i n a p p r o x im a te ly a 1 0 -m ile
ra d iu s .
H o w ev er, i t i s p o s s i b l e t o go f u r t h e r i n l o c a t i o n s su c h as
C a l i f o r n i a w h e re a l f a l f a i s p ro d u c e d t h e y e a r - r o u n d a ll o w i n g f o r g r e a t e r
u tiliz a tio n
o f e q u ip m e n t.
P l a n t s w i t h s u c h c h a r a c t e r i s t i c s w e re n o t
in c lu d e d in t h is su rv e y .
S e v e r a l f a c t o r s a r e i n v o lv e d i n t h e d e t e r m i n a t i o n o f how f a r a p l a n t
w i l l re a c h o u t to o b ta in i t s
s u p p ly o f raw a l f a l f a .
Tim e e n r o u t e b e tw e e n
p l a n t and f i e l d i s e x te n d e d when t h e r o u t e o f t r a v e l i s
o t h e r c o n g e s te d a r e a s .
th ro u g h tow ns o r
Roads m a i n ta i n e d i n good c o n d i t i o n , p a v e d r o a d s ,
21/
S c h r e n k , W. G ., e rt. _ a l . , D e h y d ra te d A l f a l f a , B u l l e t i n 4 0 9 , K ansas
A g r i c u l t u r a l E x p e rim e n t S t a t i o n , M a n h a tta n , K a n s a s , A p r i l 1959.
22/
R ic k e y , L acey F . , C o o p e r a tiv e A l f a l f a D e h y d r a to r s , C o s ts and
O p e r a t i o n s , FCS C i r c u l a r 1 2 , F a rm e rs C o o p e r a tiv e S e r v i c e , USDA,
Ju n e 1956.
.59
TABLE T I .
ALFALFA ACRES HARVESTED, DISTRIBUTION OF ACREAGE AND MEANS OF
ACQUISITION BY PLANT, 1966 SURVEY.
T o t a l A c re s
H a rv e s te d /P la n t
A c re s
Num ber o f H a r v e s te d
A l f a l f a A cres
On W hich
A l f a l f a was
P u rc h ase d
L e a s e d Owned
A c re s A c re s
A c re s
P e r c e n t o f A c re ag e
H a r v e s te d W ith in
F iv e M ile s
10 M ile s
o f P la n t
' o f P la n t
P e rce n t
' P e rce n t
400
400
100
, 100
600
600
25
100
700
700
25
75
700
400
40
. 80
850
850
30
100
900
900
20
90
1 ,0 0 0
1 ,0 0 0
30
100
1 ,2 0 0 .
1 ,2 0 0
50
90
85
100
90
100
50
90
300
1 ,2 0 0
740
460
1 ,3 5 0
1 ,0 0 0
50
1 ,6 0 0
1 ,6 0 0
1 ,6 5 0
. 1 ,3 2 0
330
60
90
1 ,7 5 0
1 ,3 0 0
450
30
85
2 ,0 0 0
2 ,0 0 0
30
80
2 ,0 3 0
1 ,0 0 0
700
330
40
90
2 ,3 0 0
1 ,7 3 0
340
230
60
98
2 ,5 0 0
2 ,5 0 0
70
90
2 ,5 0 0
2 ,5 0 0
50
90
3 ,0 0 0
2 ,7 0 0
300
65
100
4 ,0 0 0
2 ,3 8 0
1 ,1 0 0
70
100
.
300
■ 520
■ ■
"60
an d l o n g , s t r a i g h t s t r e t c h e s o f r o a d t e n d t o s h o r t e n tim e e n r o u t e .
A
p l a n t t h a t h a s t r u c k s o f 8 -1 0 to n s g r e e n chop c a p a c i t y c a n h a u l s l i g h t l y
l o n g e r d i s t a n c e s th a n p l a n t s w i t h t r u c k s o f 4 -5 to n s c a p a c i t y .
p o s s ib le t h a t a l f a l f a f i e l d s
te ris tic s
I t is
and p l a n t s w i t h one o r m ore o f t h e s e c h a r a c ­
o f a c c e s s i b i l i t y may b e h a r v e s t e d a s p r o f i t a b l y a s f i e l d s
c lo s e r to th e p l a n t , b u t le s s a c c e s s ib le .
T h is i s e s p e c i a l l y t r u e i f
th e y f i t w e l l i n t o th e h a r v e s t i n g c y c l e .
H a r v e s t i n g i s done m o st e f f i c i e n t l y i n f i e l d s r e q u i r i n g a minimum o f
t u r n i n g and m a n e u v e rin g .
h a rv e s te r.
F i e l d s t h a t a r e ro u g h te n d t o slo w .d o w n th e
H a rd o b j e c t s , s u c h as r o c k s and i r o n , may damage t h e c h o p p in g
k n iv e s r e s u l t i n g i n a d e la y i n o p e a ti o n s w h i l e r e p a i r s a r e m ade.
F ie ld s
w h ic h d r a i n w e l l and d ry q u i c k l y m in im iz e t h e e f f e c t o f w e a t h e r on th e
h a r v e s t i n g c y c le by p e r m i t t i n g e a r l y r e - e n t r y .
F ie ld s w ith h ig h .y ie ld s
a re p r e f e r r e d to lo w -y ie ld f i e l d s b e c a u se th e r a t e o f h a r v e s tin g i s
i n c r e a s e d . ' The d e h y d r a t o r o p e r a t o r i s n o t i n t h e b u s i n e s s o f s e l l i n g
d e h y d r a te d w eeds and t h e r e f o r e p r e f e r s f i e l d s w i t h a minimum o f f o r e i g n
g r o w th .
T h e r e f o r e , i n d e te r m in in g w h ic h f i e l d s
to c u t, c o n s id e r a tio n i s
g iv e n t o s i z e , s h a p e , c o n d i t i o n , y i e l d and q u a l i t y .
F ie ld s w ith a
c o m b in a tio n o f t h e s e c h a r a c t e r i s t i c s may b e h a r v e s t e d i n p r e f e r e n c e to
p o o rer f ie ld s
lo c a te d n e a r e r to th e p l a n t .
P ro c u re m e n t
A l f a l f a i s p u r c h a s e d fro m g ro w e rs b y t h e to n on t h e b a s i s o f dry
w e ig h t a f t e r d e h y d r a t i o n .
M ost f ir m s b a r g a i n f o r a l f a l f a on a s e a s o n a l
61
b a s i s i n o r d e r t o a s s u r e t h e i r s u p p ly .
A f te r th e h e a v ie r f i r s t c u tt in g ,
a d d i t i o n a l a c r e a g e may b e b a r g a i n e d f o r i n o r d e r t o c o m p e n sa te f o r th e
d e c re a se d y ie ld s p e r a c re .
The p r i c e p a i d f o r s t a n d i n g a l f a l f a may be
e s t a b l i s h e d f o r a l L c u t t i n g s a t t h e b e g in n i n g o f t h e o p e r a t i n g s e a s o n o r
n e g o tia te d p r io r to each c u ttin g .
Shown i n T a b le I I I a r e c o n c lu s io n s
draw n by R eed , a t . _ al. 2 3 / i n 1958 as com pared t o d a t a fro m t h e 1966 s u r v e y
o f t h e f a c t o r s d e h y d r a t o r o p e r a t o r s r e p o r t e d i h c o n s i d e r i n g when a r r i v i n g
a t a p r i c e t o p a y g ro w e rs f o r s t a n d i n g a l f a l f a .
M a rk e t p r i c e o f d e h y d r a te d a l f a l f a i s s t i l l th e m o st i m p o r ta n t f a c t o r
when a r r i v i n g a t t h e p r i c e t o p a y f o r s t a n d i n g a l f a l f a ( T a b le I I I ) .
R e tu rn s
fro m o t h e r c ro p s i n t h e a r e a a r e th e s e c o n d m o st i m p o r ta n t now w h e re a s i n
1958 th e y w e re n o t one o f t h e m a jo r f a c t o r s c o n s id e r e d .
T h is s u g g e s t s t h a t
t h e p r i c e s p a i d by a l f a l f a d e h y d r a t in g f ir m s m ust r e f l e c t t h e m a rk e t, p r i c e
o f d e h y d r a te d a l f a l f a and b e c o m p e t it iv e w i t h r e t u r n s fro m o t h e r c r o p s .
T h e se f a c t o r s h e l p d e te r m in e a ra n g e o v e r w h ic h p r i c e s p a i d t o g ro w e rs may
v a ry .
The r e l a t i o n s h i p b e tw e e n p r i c e s p a i d g ro w e rs and t h e m a rk e t p r i c e
o f d e h y d r a te d a l f a l f a i s a t l e a s t p a r t i a l l y e x p l a i n a b l e i n te rm s o f
r e l a t i o n s w ith g ro w e rs.
When p r i c e o f dehy i s
d e p r e s s e d a g ro w e r may go a lo n g w i t h th e
d e h y d r a t in g f i r m and a c c e p t a p r i c e f o r h i s a l f a l f a lo w e r th a n t h a t w h ic h
h e m ig h t r e c e i v e f o r b a l e d h a y , a n t i c i p a t i n g t h e m a r k e t p r i c e o f d e h y d r a te d
23/
R e e d , e_t. _al. , op I "c i t . , p . 2 5 .
62
TABLE I I I .
FACTORS CONSIDERED BY ALFALFA DEHYDRATING FIRMS IN ARRIVING
AT A PRICE TO PAY GROWERS FOR STANDING ALFALFA 1958 AND
1966. I /
F a c t o r s C o n s id e re d
M a rk e t p r i c e o f d e h y d r a te d a l f a l f a
Number o f F irm s
M e n tio n in g and P e r c e n t o f T o t a l
1958 2 /
1966 3 /
Number P e r c e n t Num ber P e r c e n t
28
2 4 .7
14
3 6 .0
6
5 .3
9
2 3 .6
S u p p ly and demand f o r a l f a l f a
19
1 6 .8
4
1 0 .5
P r i c e s p a i d by c o m p e tin g f ir m s
21
1 8 .5
5
1 3 .1
P r ic e of b a le d hay
19
1 6 .8
4
1 0 .5
3
2 .6
2
5 .2
17
1 5 .0
0
0 .0
R e tu r n s fro m o t h e r c ro p s i n t h e a r e a
O p e r a tin g c o s t s
O th e rs
I/
If
3/
N o te : D a ta fro m 1958 in c l u d e d a s a m p le o f 35 p l a n t s a n d t h e 1966
d a t a i s fro m 20 p l a n t s .
D a ta ta k e n fro m R eed , C h a r l e s , et,- _ a l . , M a rk e tin g D e h y d ra te d A l f a l f a ,
A g r i c u l t u r a l M a rk e tin g S e r v i c e , M a rk e t R e s e a rc h D i v i s i o n , USDA,,
M a rk e tin g R e s e a rc h R e p o rt No. 2 5 4 , J u l y 1 9 53, p . 2 6 .
S o u rc e:
O b ta in e d i n 1966 s u r v e y .
63
w i l l come b a c k and h e w i l l a g a in r e c e i v e fro m t h e d e h y d r a t in g f ir m a
c o m p e t it iv e p r i c e f o r h i s a l f a l f a .
a lfa lfa
A ls o , i f th e g ro w e r h a s b e e n s e l l i n g
t o a d e h y d r a t in g f i r m f o r some tim e h e may h a v e p h a s e d o u t h i s
h a y in g e q u ip m e n t.
T h e r e f o r e , h e c a n n o t r e a d i l y ch an g e t o b a l e d h ay i f
p r i c e f o r h a y i s t e m p o r a r i l y f a v o r a b l e a n d .h e may f e e l t h e p u t t i n g up o f
b a le d hay i s
an u n p l e a s a n t t a s k .
A g ro w e r may b e w i l l i n g t o a c c e p t a
r e t u r n lo w e r t h a n t h e a l t e r n a t i v e c ro p r a t h e r th a n make t h e a d ju s tm e n ts
n e c e s s a ry to ta k e a l f a l f a o u t o f th e r o t a t i o n .
I f t h e low p r i c e s
c o n ti n u e o v e r an e x te n d e d tim e p e r i o d th e n t h e p r o d u c e r w i l l p r o b a b ly
make a l t e r n a t i v e
c ro p p in g a d j u s t m e n t s „
I n an a r e a w h e re t h e r e a r e s e v e r a l d e h y d r a t in g f i r m s , th e s m a l l e r
o n e s may f o llo w t h e p r i c e s e t by a. l a r g e r f ir m o r f i r m s .
O th e r f i r m s , <
s u c h as one r e c e n t l y e s t a b l i s h e d , may f o llo w th e e s t a b l i s h e d p r i c i n g
p a tte rn .
In th e e v e n t th e r e i s
an i n c r e a s e i n t h e m a r k e t p r i c e o f
d e h y d r a te d a l f a l f a , f ir m s may r a i s e p r i c e s p a i d t o g r o w e r s , p a r t i c u l a r l y
if
a l a r g e num ber o f g ro w e rs a r e s t o c k h o l d e r s .
O nly two f ir m s r e p o r t e d c o n s i d e r i n g t h e i r p r o d u c t i o n c o s t s when
a r r i v i n g a t a p r i c e t o p a y g r o w e rs .
The p r i n c i p a l r e a s o n , i t
ap p e ars,
i s t h a t t h e p r i c e p a i d g ro w e rs m ust r e f l e c t m a rk e t p r i c e o f dehy and
b e c o m p e t i t i v e w i t h r e t u r n s from a l t e r n a t i v e c r o p s .
P r o d u c ti o n c o s t s o f
t h e f i r m v a r y i n v e r s e l y w i t h t h e am ount o f d e h y d r a te d a l f a l f a p ro d u c e d .
The am ount o f d e h y d r a te d a l f a l f a p ro d u c e d i s d i r e c t l y r e l a t e d t o t h e am ount
o f s t a n d i n g a l f a l f a p u r c h a s e d w h ic h , i n t u r n , may d e p e n d on t h e p r i c e
p a id to g ro w e rs.
T h is t o g e t h e r w i t h t h e u n p r e d i c t a b i l i t y o f y i e l d s and
64
w e a t h e r c o n d i t i o n s make i t
d i f f i c u l t f o r t h e d e h y d r a t o r o p e r a t o r to
e s t i m a t e a c c u r a t e l y p r o d u c t i o n c o s t s f o r t h e com ing o p e r a t i n g s e a s o n .
A ls o , a t t h e tim e th e p r i c e p a i d t o g ro w e rs f o r s t a n d i n g a l f a l f a i s
n e g o tia te d th e firm can n o t e a s i l y change c a p a c ity o r l i q u i d a t e .
s i t u a t i o n s u c h as t h i s
In a
t h e d e c i s i o n o f t h e f ir m on w h e th e r o r n o t t o
o p e r a t e w i l l r e s t on w h e th e r o r n o t p r o d u c t p r i c e w i l l c o v e r a v e ra g e
v a ria b le c o s ts .
The d e h y d r a t o r . o p e r a t o r i s
aw are t h a t a s lo n g as
p ro d u c t p r ic e ex ceed s a v e ra g e v a r ia b le c o s ts i t i s to h i s b e n e f i t to
o p e r a t e t h e p l a n t and t o g e n e r a t e a s much volum e a s p o s s i b l e i n o r d e r
to c o v e r f ix e d c o s ts o f p ro d u c tio n .
He w i l l a tt e m p t t o o b t a i n th e s u p p ly
o f a l f a l f a n e c e s s a r y t o m a i n ta i n t h e p l a n t a t an a c c e p t a b l e l e v e l o f
p r o c e s s in g a c t i v i t y
a t t h e lo w e s t p o s s i b l e p r i c e .
P r o d u c e r A g reem en ts
C o n t r a c t s w i t h g ro w e rs a r e b o t h w r i t t e n and o r a l .
Of 20 f ir m s i n t e r ­
v ie w e d , 14 c o n t r a c t e d f o r t h e i r a l f a l f a o r a l l y , 4 em ployed w r i t t e n
c o n t r a c t s , one em ployed b o t h , and one f i r m l e a s e d i t s
e n t i r e a c re a g e .
P l a n t s u s in g a w r i t t e n c o n t r a c t r e a s o n e d t h a t i t was m ore b i n d in g
th a n an o r a l c o n t r a c t and t h e r e f o r e r e s u l t e d i n a f i r m e r com m itm ent to
s u p p ly on t h e p a r t o f g r o w e r s .
The p l a n t u s in g b o t h t y p e s o f c o n t r a c t s
i n d i c a t e d i t w o u ld l i k e t o u s e a l l w r i t t e n c o n t r a c t s , b u t t h a t some
g ro w e rs o b j e c t e d .
Of t h e 14 f ir m s u s in g o r a l c o n t r a c t s , 11 s t r e s s e d e i t h e r g ro w e r
p r e f e r e n c e o r m a in te n a n c e o f good r e l a t i o n s w i t h g ro w e rs a s a r e a s o n f o r
65
e m p lo y in g t h i s ty p e o f c o n t r a c t .
T he r e m a in in g t h r e e s a i d t h e o r a l form
o f c o n t r a c t was an e s t a b l i s h e d c u sto m i n t h e a r e a .
S e v e ra l c lo s e ly r e la te d
r e a s o n s w e re g iv e n as t o why g ro w e rs p r e f e r r e d an o r a l a rra n g e m e n t,.
g e n e ra l,
In
t h e o r a l c o n t r a c t i s m ore f l e x i b l e f o r b o th t h e p l a n t and g ro w e r.
B o th o r a l and w r i t t e n c o n t r a c t s a r e s u b j e c t t o m i s i n t e r p r e t a t i o n on
t h e p a r t o f t h e g ro w e r.
The l e g a l w o rd in g o f a w r i t t e n c o n t r a c t so m etim es
le a d s to e r r o r s in i n t e r p r e t a t i o n .
An a g re e m e n t e x p r e s s e d o r a l l y may b e
c l e a r e r t o t h e g ro w e r b u t i s a l s o s u b j e c t t o m i s i n t e r p r e t a t i o n .
P l a n t s i n o p e r a t i o n f o r a lo n g p e r i o d o f tim e o r o p e r a t i n g i n an
e s t a b l i s h e d a l f a l f a d e h y d r a t in g a r e a u s e d o r a l c o n t r a c t s a lm o s t e x c lu ­
s iv e ly .
I n th e s e c irc u m s ta n c e s , i t
re s p o n s ib ilitie s
can b e e x p e c te d t h a t t h e m u tu a l
o f g ro w e rs and f ir m s h a v e b e e n w e l l - d e f i n e d .
From th e
s t a n d p o i n t o f p l a n t o p e r a t i o n s , some o f t h e f ir m s th o u g h t t h a t a w r i t t e n
c o n t r a c t , i n r e a l i t y , i s no m ore e n f o r c e a b l e th a n an o r a l c o n t r a c t .
is
I n v o lv e d
t h e c o s t o f e n fo r c e m e n t and t h e b a d p u b l i c i t y t h e p l a n t r e c e i v e s among
g ro w e rs.
I n a d d i t i o n t o t h e p u r c h a s e o f s t a n d i n g a l f a l f a fro m g r o w e r s , some
f ir m s e i t h e r own a n d / o r l e a s e a l l o r p a r t o f t h e i r a c r e a g e .
The amount
o f l e a s e d and owned a c r e a g e i n t h e s u r v e y i s shown i n T a b le I I .
The
p r im a r y a d v a n ta g e i n l e a s i n g o r ow ning a c r e a g e i s t h e d e g r e e o f c o n t r o l
e x e r c i s e d by t h e f i r m .
A p l a n t w h ic h h a s l e a s e d o r owned a c r e a g e i s
a b s o l u t e l y a s s u r e d o f t h a t a c r e a g e f o r t h e s e a s o n , and h a s c o m p le te
c o n tro l o v er h a rv e s tin g .
66
Q u a l i t y C o n t r o l D u rin g H a r v e s t i n g and P r o c e s s i n g
A l f a l f a h a r v e s t e d i n t h e l a t e b u d o r e a r l y bloom s t a g e r e s u l t s i n
t h e b e s t q u a l i t y d e h y d r a te d a l f a l f a p r o d u c t .
D a le S m ith o f t h e D e p a rtm e n t
o f A gronom y, U n i v e r s i t y o f W is c o n s in , s t a t e s :
The h i g h e s t y i e l d o f m ost o f th e im p o r ta n t c h e m ic a l c o n s t i t ­
u e n ts is - o b t a i n e d a t n e a r t h e 1 /1 0 s t a g e o f g ro w th . A lth o u g h
t h e y i e l d o f h a y may c o n ti n u e t o i n c r e a s e b e tw e e n 1 /1 0 bloom
and f u l l b lo o m , i t i s due l a r g e l y t o an i n c r e a s e i n t h e y i e l d o f
fib e r.
The y i e l d o f p r o t e i n and m in e r a l s may a c t u a l l y d e c r e a s e
a f t e r 1 /1 0 blo o m p r i n c i p a l l y b e c a u s e o f t h e l o s s o f t h e lo w e r ,
o ld e r , l e a v e s fro m d i s e a s e s , lo d g in g and o t h e r f a c t o r s . W h ile
th e am ounts o f l e a v e s (w h ich c o n t a i n a l a r g e r p r o p o r t i o n o f th e
n u t r i e n t s t h a n th e s te m s ) a r e d e c r e a s i n g , t h e u p p e r in te r m o d e s
o f t h e s te m s a r e c o n t i n u i n g t o e l o n g a t e and t h e p r o d u c t i o n o f
f i b e r c o n ti n u e s t o i n c r e a s e .
S a v in g le a v e s h a s p rim e im p o r ta n c e
i n h a y m ak in g and t h i s can b e done b e s t by c u t t i n g b e f o r e many
o f th e lo w e r le a v e s a r e l o s t . . . 2 4 /
S t u d i e s h a v e shown m o st o f t h e c a r o t e n e l o s s i n a l f a l f a o c c u rs
d u r in g t h e f i r s t few h o u r s a f t e r c u t t i n g , n e c e s s i t a t i n g k e e p in g tim e
b e tw e e n c u t t i n g and d r y in g t o a minimum.
S t u d i e s made a t t h e W e s te rn R e g io n a l R e s e a rc h L a b o r a t o r y , A lb a n y ,
C a l i f o r n i a , show ed t h a t u n d e r d r y in g o r o v e r d r y in g a l f a l f a i n a c o m m e rc ia l
d e h y d ra to r d id n o t in c r e a s e c a ro te n e s t a b i l i t y
and c o n te n t any m ore th a n
m a t e r i a l p ro d u c e d u n d e r m ore optim um d r y in g c o n d i t i o n s .
W ith r e s p e c t t o q u a l i t y c o n t r o l d u r in g h a r v e s t i n g , d e h y d r a t o r
o p e r a t o r s i n t e r v i e w e d i n t h e 1966 s u r v e y re s p o n d e d as f o l l o w s .
N ine
m e n tio n e d c u t t i n g a t an e a r l y s t a g e r o f blo o m a s a m ethod o f c o n t r o l l i n g
24/
S m ith , D a le , " A l f a l f a C u t t in g P r a c t i c e s f o r Q u a l i t y and L o n g e v ity ,"
N in th T e c h n ic a l A l f a l f a C o n fe re n c e P r o c e e d i n g s , A g r i c u l t u r a l
R e s e a rc h S e r v i c e , USDA, 1 9 6 5 , p . 13.
. 6 7
q u a l i t y d u r in g h a r v e s t i n g .
m a tu rity .
S ix m e n tio n e d c u t t i n g a t t h e p r o p e r s t a g e o f
F iv e o p e r a t o r s m e n tio n e d c u t t i n g on a s e t c y c l e ;
same f i e l d e v e r y 2 5 -3 5 d a y s , d e p e n d in g on t h e a r e a .
c u t t i n g th e
F iv e o p e r a t o r s
m e n tio n e d t h e im p o r ta n c e o f g e t t i n g th e a l f a l f a t o t h e d e h y d r a t o r as
so o n a s p o s s i b l e .
W ith r e s p e c t t o q u a l i t y c o n t r o l d u r in g d e h y d r a t i o n , r e s p o n s e s w e re
as f o llo w s .
E i g h t o p e r a t o r s m e n tio n e d p r o p e r h e a t c o n t r o l a s a f a c t o r
in q u a lity c o n tro l.
F iv e o p e r a t o r s m e n tio n e d p r o p e r drum o p e r a t i o n
s t r e s s i n g im p o r ta n c e o f h a v in g a s k i l l e d p e r s o n o p e r a t i n g t h e d r y in g
drum .
O nly f i v e o p e r a t o r s a n a ly z e d t h e p r o d u c t d a i l y .
Two o f t h e s e
s t r e s s e d t h e im p o r ta n c e o f m a i n t a i n i n g t h e m o is t u r e c o n t e n t o f th e
d e h y d r a te d a l f a l f a a t b e tw e e n 7 1 /2 and 8 p e r c e n t .
I n g e n e r a l , q u a l i t y c o n t r o l i n t h e f i e l d i s c o n c e rn e d w i t h p r e s e r ­
v a tio n o f n u t r i e n t s , e s p e c ia lly c a ro te n e .
A t th e p l a n t i t i s
w i t h t h i s an d th e a p p e a r a n c e o f th e d e h y d r a te d p e l l e t s .
c o n c e rn e d
U n ifo rm b r i g h t
g r e e n p e l l e t s o f tire p r o p e r t e x t u r e a r e e a s i e r t o m a r k e t th a n p e l l e t s
n o t m e e tin g t h e s e s t a n d a r d s .
A l f a l f a t h a t i s b u r n t i n t h e d r y in g p r o c e s s
d o e s n o t make an a t t r a c t i v e p e l l e t .
d rie d enough.
N e i t h e r does a l f a l f a t h a t h a s n o t
P r o p e r m o is t u r e c o n t r o l i s
an i m p o r ta n t f a c t o r i n b e in g
a b le t o t u r n o u t h a r d , u n ifo r m p e l l e t s w h ic h do n o t c ru m b le e a s i l y .
O p e r a tio n s P r o c e d u r e
I n t e r r u p t i o n s 'i n p r o c e s s i n g a c t i v i t y
a r e r e f e r r e d t o a s " d o w n tim e ".
T h e se i n t e r r u p t i o n s a r e u s u a l l y c a u s e d b y w e a t h e r , m e c h a n ic a l b re a k d o w n ,
.6 8
l a c k o f c o o r d i n a t i o n b e tw e e n p l a n t and f i e l d o p e r a t i o n s „ and l a c k o f raw
m a te ria l.
U n e x p e c te d s h o r t tim e i n t e r r u p t i o n s w i t h e m p lo y e e s d ra w in g p a y
in c r e a s e la b o r c o s ts p e r to n .
I f th e i n te r r u p t io n s a re o f a lo n g e r
n a t u r e , f i x e d c o s t s p e r to n a r e l i k e l y
p la n ts ,
to be in c re a s e d .
D e h y d r a tin g
t h e r e f o r e , a t t e m p t t o k e e p "d o w n tim e " t o a minimum.
t o m a i n t a i n a c o n tin u o u s and maximum o p e r a t i o n .
They a tte m p t
Maximum i s u s e d h e r e i n
t h e s e n s e t h a t a p l a n t w i l l a tt e m p t t o m a i n t a i n , up t o f u l l c a p a c i t y , t h e
maximum l e v e l o f p r o c e s s i n g a c t i v i t y p e r m i t t e d by t h e s u p p ly ' o f a l f a l f a
a v a i l a b l e w i t h i n . a n e c o n o m ic h a u l i n g d i s t a n c e o f t h e p l a n t .
The W e a th e r F a c t o r
The d e h y d r a t in g p l a n t can do l i t t l e
w e a th e r.
a b o u t "d o w n tim e" due t o in c le m e n t
L ack o f p r e c i p i t a t i o n r e s u l t s i n low y i e l d s c a u s i n g sh u td o w n s
due t o a s h o r t a g e o f raw a l f a l f a .
in w et f ie l d s .
R a in d u r in g th e o p e r a t i n g s e a s o n r e s u l t s
F i e l d s may n o t b e c u t i f
e q u ip m e n t c a n n o t m a n e u v e r.
th e y a r e s o w e t t h a t h a r v e s t i n g
O fte n d e h y d r a t o r o p e r a t o r s a r e h e s i t a n t t o
e n t e r a w e t f i e l d , e v e n i f e q u ip m e n t can m a n e u v e r, f o r f e a r o f f i e l d damage
and i t s
e f f e c t on r e l a t i o n s w i t h t h e g r o w e r s .
D e h y d r a to r s c o m p e n sa te t o
some e x t e n t f o r t h i s w e a t h e r f a c t o r by u s in g " h ig h f l o a t a t i o n " f i e l d e q u ip ­
m e n t.
T h is e q u ip m e n t h a s w id e t i r e s
little
o r n o dam age.
on w e t s o i l , i t
t h a t r o l l o v e r so g g y f i e l d s l e a v i n g
B e c a u s e t h i s e q u ip m e n t i s m ore a d a p t a b l e t o o p e r a t i o n
can c o n ti n u e t o o p e r a t e l o n g e r i n t o a r a i n y p e r i o d .
A fte r
r a i n w h ic h h a s s to p p e d h a r v e s t i n g h a s s u b s i d e d , r e - e n t r y i n t o t h e f i e l d s
i s h a s t e n e d w i t h h i g h f l o a t a t i o n e q u ip m e n t.
69
Many d e h y d r a t in g f ir m s owned o r l e a s e d a l f a l f a a c r e a g e .
T h e re a r e
tim e s d u r in g r a i n y p e r i o d s when t h e d e h y d r a t o r o p e r a t o r w i l l f e e l t h a t
a l f a l f a can b e h a r v e s t e d w i t h o u t f i e l d damage w h i l e th e g ro w e r f e a r s f i e l d
damage w i l l r e s u l t .
I n d e f e r e n c e t o t h e w is h e s o f t h e g r o w e r, th e
o p e r a t o r w i l l h a r v e s t on a c r e a g e owned b y t h e p l a n t . r a t h e r th a n r i s k
a l i e n a t i n g t h e g r o w e r.
of fie ld s
S om etim es a d e h y d r a t in g f ir m w i l l g a in p o s s e s s i o n
th a t d ra in e x c e p tio n a lly w e ll.
T h e se f i e l d s c a n b e e n t e r e d
v e r y so o n a f t e r t h e r a i n c e a s e s „
E f f e c t o f M o is tu r e C o n te n t on Raw A l f a l f a on D e h y d ra te d A l f a l f a P r o d u c ti o n
The am ount o f raw a l f a l f a w h ic h can b e d e h y d r a te d i n a g i v e n p e r i o d
o f tim e i s
d e te r m in e d by ( I )
c a p a c i t y o f t h e d r y in g drum .
i t s m o is t u r e c o n te n t and (2 )
th e e v a p o ra tiv e
F o r a d r y in g drum o f g iv e n c a p a c i t y th e
am ount o f raw a l f a l f a p r o c e s s e d , and c o n s e q u e n tly t h e am ount o f d e h y d r a te d
a l f a l f a p r o d u c e d , i s i n v e r s e l y r e l a t e d t o i t s m o is t u r e c o n t e n t .
r e l a t i o n s h i p i s i l l u s t r a t e d i n T a b le IV .
The m o is t u r e c o n t e n t o f th e .
d e h y d r a te d a l f a l f a u s u a l l y ru n s fro m 8 t o 10 p e r c e n t .
is
assum ed t o b e 10 p e r c e n t .
T h is
The d r y in g drum i s
e v a p o r a t i v e c a p a c i t y o f 9 ,0 0 0 p o u n d s p e r h o u r .
I n t h i s exam ple i t
assum ed t o h a v e an
The raw a l f a l f a i s
assum ed t o h a v e an i n i t i a l m o is t u r e c o n t e n t o f 80 p e r c e n t .
T he fo rm u la
u s e d t o a r r i v e a t t h e w e ig h ts i n T a b le IV and t h e i r d e r i v a t i o n a r e i n
A p p en d ix A.
T a b le IV shows t h a t a d e c r e a s e i n t h e m o is t u r e c o n t e n t o f raw a l f a l f a
r e s u l t s i n an i n c r e a s e i n d e h y d r a te d a l f a l f a p r o d u c t i o n .
E ach pound o f
70
TABLE IV .
•
EFFECT OF MOISTURE CONTENT OF RAW ALFALFA ON POTENTIAL
PRODUCTION OF DEHYDRATED ALFALFA ASSUMING DEHYDRATED ALFALFA
WITH A MOISTURE CONTENT OF 10 PERCENT AND A DRYING DRUM WITH
AN EVAPORATIVE CAPACITY OF 9-, 000 POUNDS PER HOUR.
M o ig tu re C o n te n t
o f Raw A l f a l f a
P ercen t
Change i n
Change i n Dehy­
Raw A l f a l f a
d ra te d A lfa lfa
P r o c e s s i n g D e h y d ra te d
P r o d u c tio n
C a p a c ity
C a p a c ity
A lfa lfa
Raw A l f a l f a
fro m
P ro d u c e d
from
P r o c e s s e d /H o u r 80% L e v e l ' P e r H our
80% L e v e l
P ounds
P ounds
P ounds
P ounds
80
1 1 ,5 7 1
75
1 2 ,4 6 1
890
3 ,4 6 1
890
70
1 3 ,5 0 0
1 ,9 2 9
4 ,5 0 0
1 ,9 2 9
65
1 4 ,7 2 7
3 ,1 5 6
5 ,7 2 7
3 ,1 5 6
2 ,5 7 1
.
71
raw a l f a l f a y i e l d s m ore d ry m a t t e r th a n p r e v i o u s l y a n d , i n a d d i t i o n ,
m ore raw a l f a l f a can b e p r o c e s s e d p e r e a c h h o u r o f o p e r a t i o n .
C o n v e r s e ly ,
an i n c r e a s e i n t h e m o is t u r e c o n t e n t o f raw a l f a l f a r e s u l t s i n d e c r e a s e d
d e h y d r a te d a l f a l f a p r o d u c t i o n .
The i n c r e a s e i n d e h y d r a te d a l f a l f a p r o d u c ­
t i o n i n T a b le IV i s e q u a l t o t h e i n c r e a s e i n t h e am ount o f raw a l f a l f a
p ro cessed .
T h is i s b e c a u s e t h e d r y in g drum , no m a t t e r w h a t t h e m o is t u r e
c o n te n t o f t h e raw a l f a l f a , e v a p o r a te s 9 ,0 0 0 pounds o f w a t e r p e r h o u r a t
c a p a c ity .
T h e r e f o r e , any c h an g e i n t h e am ount o f raw a l f a l f a p r o c e s s e d
i s i n t h e fo rm o f d ry m a t t e r ( d e h y d r a te d a l f a l f a ) . • F o r e x a m p le , when t h e
raw a l f a l f a m o is t u r e c o n te n t i s 80 p e r c e n t , 1 1 ,5 7 1 p o u n d s o f raw a l f a l f a
can b e p r o c e s s e d p e r h o u r a t maximum c a p a c i t y .
t i o n i s 2 ,5 7 1 p o u n d s .
D e h y d ra te d a l f a l f a p r o d u c ­
When th e raw a l f a l f a m o is t u r e c o n t e n t i s
75 p e r c e n t ,
1 2 ,4 6 1 p o u n d s o f raw a l f a l f a p e r h o u r c a n b e p r o c e s s e d a t maximum c a p a c i t y ;
an i n c r e a s e o f 890 p o u n d s .
D e h y d ra te a l f a l f a p r o d u c t i o n i s
3 ,4 6 1 p o u n d s ;
a l s o an i n c r e a s e o f 890 p o u n d s .
S c h e d u lin g o f H a r v e s t i n g .
I n o r d e r t o m a i n ta i n a c o n tin u o u s and maximum o p e r a t i o n an a d e q u a te
s u p p ly o f a l f a l f a m u st b e a v a i l a b l e a t t h e f e e d e r a t a l l t i m e s .
The
m a in te n a n c e o f an a d e q u a te s u p p ly o f raw a l f a l f a a t t h e f e e d e r r e q u i r e s
t h a t m anpow er and e q u ip m e n t c o m b in a tio n s b e s u c h t h a t t h e f u n c t i o n s o f
h a r v e s t i n g and t r u c k i n g b e tim e d t o t h e raw a l f a l f a c o n s u m p tio n o f th e
d r y in g drum .
The f i e l d r o t a t i o n e s t a b l i s h e d d u r in g t h e f i r s t c u t t i n g s e t s th e
g e n e r a l p a t t e r n f o r s u c c e e d in g c u t t i n g s .
T he d e h y d r a t o r o p e r a t o r
72
a tt e m p t s t o e s t a b l i s h a p a t t e r n o f movem ent fro m f i e l d
t o f i e l d su c h t h a t
t h e i n t e r r u p t i o n o f h a r v e s t i n g a c t i v i t y i s n o t s o lo n g a s t o -cause an
i n t e r r u p t i o n o f p r o d u c t flo w a t t h e p l a n t .
D ep en d in g on t h e a r e a
h a r v e s t i n g i s u s u a l l y done on a 25 t o 3 5 -d a y c y c l e .
a t th e p l a n t w i l l cau se a d is r u p tio n in th e c y c le .
O fte n "dow ntim e"
I n o r d e r t o c o n tin u e
h a r v e s tin g a l f a l f a a t th e p ro p e r s ta g e o f m a tu r ity , a p l a n t w i l l o fte n
b a l e h a y on f i e l d s
o f a d v a n c e d m a t u r i t y and go on t o f i e l d s
f a r t h e r down
i n t h e c y c le and o c c a s i o n a l l y th e y w i l l p r o c e s s a l f a l f a b e y o n d o n e - t e n t h
b lo o m i f th e y h a v e o t h e r h i g h q u a l i t y a l f a l f a t o b l e n d w i t h i t .
h a s owned a c r e a g e i t w i l l u s u a l l y b a l e h a y on i t s
I f a p la n t
own a c r e a g e and h a r v e s t
a l f a l f a p u r c h a s e d fro m g r o w e r s .
The f i r s t c u t t i n g i s n e a r l y a lw a y s much h e a v i e r th a n l a t e r o n e s .
T h e r e f o r e , i t i s u s u a l l y n e c e s s a r y t o add f i e l d s t o t h e h a r v e s t i n g
p a tt e r n as th e o p e ra tin g se a so n p r o g r e s s e s .
I n a d d i t i o n , i t may b e
n e c e s s a r y t o go o u t f a r t h e r t o o b t a i n ' th e. a l f a l f a a c r e a g e ;.to ' k eep : t h e
p l a n t o p e ra tin g a t th e d e s ir e d le v e l of p ro c e s s in g a c t i v i t y .
s itu a tio n s ,
I n some
t h e g ro w e r w a n ts some o f t h e l a t e r c u t t i n g s f o r h i s own u s e .
I n t h e s e c a s e s , i t may b e n e c e s s a r y t o f i n d a l t e r n a t e s o u r c e s o f s u p p l y .
Some p l a n t s 'm a y o p e r a t e o n ly one s h i f t d u r in g t h e l a t t e r p a r t o f th e
o p e ra tin g se a s o n .
B e c a u s e o f t h e n e c e s s i t y o f g e n e r a t i n g t h e volum e n e c e s s a r y t o c o v e r
t h e f i x e d c o s t s o f p r o d u c t i o n , d e h y d r a t in g p l a n t s l i k e t o s t a r t p r o c e s s i n g
a s so o n as p o s s i b l e i n t h e s p r i n g .
G ro w e rs , on t h e o t h e r h a n d , b e c a u s e
.7.3
th e y a r e p a i d on t h e b a s i s o f d ry t o n , p r e f e r t o h a v e t h e i r a l f a l f a
h a rv e s te d a t l a t e r s ta g e s o f m a tu r ity .
T h e r e f o r e , d e h y d r a t in g p l a n t s
l i k e t o own some a c r e a g e w h ic h th e y can h a r v e s t a t an e a r l i e r s t a g e o f
m a t u r i t y th a n t h a t p r e f e r r e d by g r o w e r s .
, H a r v e s t i n g and T r u c k in g E q uipm ent
F i e l d e q u ip m e n t i s
owned by t h e p l a n t and moved fro m f i e l d t o f i e l d . ,
I n o r d e r t o m a i n ta i n t h e c o n t i n u i t y o f t h e o p e r a t i o n many p l a n t s k e e p i n
o p e ra tin g c o n d itio n a r e s e r v e h a r v e s te r .
T h is i s u s u a l l y a h a r v e s t e r
t h a t h a s b e e n r e p l a c e d by a n e w e r m o d e l.
I n c a s e o f b rea k d o w n th e r e s e r v e
c h o p p e r c a n b e s u b s t i t u t e d f o r th e r e g u l a r c h o p p e r.
M ost p l a n t s a l s o h a v e a p ic k u p o r t r a i l e r r ig g e d w i t h w e ld in g e q u ip ­
m ent and s to c k e d w i t h t h e t o o l s and p a r t s n e c e s s a r y t o do m o st m a in te n a n c e
and r e p a i r i n g i n th e f i e l d .
H a r v e s t e r and t r u c k c o m b in a tio n s u s e d by t h e p l a n t s i n t h i s s u rv e y
a r e shown i n T a b le V.
The. num ber o f h a r v e s t e r s r e q u i r e d w i l l o b v io u s ly
v a ry d i r e c t l y w ith p l a n t c a p a c ity .
H a r v e s t e r r e q u ir e m e n ts v a r y i n v e r s e l y
w i t h t h e c a p a c i t i e s o f t h e h a r v e s t e r s b e in g u s e d .
S even p l a n t s i n T a b le V
h a d d a i l y c a p a c i t i e s o f 48 to n s o r l e s s p e r h o u r ; t h r e e i n d i c a t e u s in g
tw o t r a c t o r - d r a w n h a r v e s t e r s w i t h a 7 o r 8 - f o o t c u t .
in th is
T h re e o t h e r p l a n t s
c a p a c i t y r a n g e u s e d one s e l f - p r o p e l l e d h a r v e s t e r w i t h a 1 0 - f o o t
c u t.
The p r i n c i p a l i te m a f f e c t i n g t h e num ber o f t r u c k s r e q u i r e d i s t h e
s i z e o f t h e t r u c k and t h e d i s t a n c e fro m f i e l d
to p l a n t .
The g r e a t e r
t h e d i s t a n c e fro m f i e l d t o p l a n t , th e g r e a t e r th e t r u c k i n g ' d i s t a n c e ,
7'4
TABLE V.
ALFALFA DEHYDRATION HARVESTING AND TRUCKING' EQUIPMENT BY
PLANT S IZ E , 1966 SURVEY.
S e lf-P ro p e lle d
2 4 -H o u r
H a rv e ste rs
W id th
P la n t P la n t
C
a
p
a
c
ity
Code
' N o.
o f C ut
Feet
Tons
3
I
6
5
12
8
2
9
10
15
11
4
16
19
13
7
18
14
20
17
a/
b/
30
30
36
36
48
48
48
60
60
60
78
84
72
90
96
96
102
78
120
140
I
10
I
I
2
10
10
10
I
10
2
2
2
2
2
2
4
10
10
10
10
10
10
10
3
10
T r a c to r- D ra w n
H a rv e ste rs
W idth
o f C ut
No.
Feet
2
2
7
8
2
7
4
2
I
3
I
7
7 b/
7
7
8
I
I
I
I
7
7
7
7
4
10
T i n d i c a t e s f ir m u s e d t r a i l e r s .
A d d i t i o n a l u n i t s r e n t e d when n e e d e d .
________T ru c k s
Tons .'of Raw
A l f a l f a C a p a c ity
N o. '
P e r T ru c k
4
5T a /
2
2
2
2
2
5
4
3
5
4
5
7
6
5
5
5
9
5
6
6 ■
6
6
6
6
5
5
5
6 .
5
5
6
6
6
6
6
7
6
6
75
The e q u ip m e n t c o m b in a tio n s i n T a b le V i n c l u d e any r e s e r v e e q u ip m e n t
t h e p l a n t m ig h t h a v e .
T h is e q u ip m e n t i s u s u a l l y a h a r v e s t e r t h a t h a s b e e n
r e p l a c e d b y a n e w e r m o d el and i s n o t i n f u l l u s e th r o u g h o u t th e o p e r a t i n g
se aso n b u t i s e s s e n t i a l to a s u c c e s s f u l o p e ra tio n .
may b e i n t e r p r e t e d h e r e i n two ways..
The te rm " r e s e r v e "
F i r s t , i n th e c o n t e x t o f a s u b s t i ­
t u t e t r u c k o r h a r v e s t e r em p lo y ed i n c a s e a r e g u l a r l y u s e d t r u c k o r
h a r v e s t e r b r e a k s down.
of f le x ib ility .
The s e c o n d c o n n o t a t i o n o f " r e s e r v e " i s i n te rm s
D u rin g t h e h e a v i e r f i r s t c u t t i n g r e s e r v e e q u ip m e n t may
b e i d l e a g r e a t d e a l o f t h e tim e and u s e d o n ly t h e c a s e o f b reakdow n o f
r e g u l a r l y u s e d e q u ip m e n t.
D u rin g l a t e r c u t t i n g s when y i e l d s a r e re d u c e d
r e s e r v e h a r v e s t e r s may b e i n . u s e f u l l tim e .,. I f ,
d u r in g l a t e r c u t t i n g s ,
th e p la n t i s fo rc e d to tr a v e l g r e a t e r d is ta n c e s to s e c u re i t s
s u p p l y , r e s e r v e t r u c k s may b e i n u s e f u l l tim e .
h a r v e s t e r s a l s o add f l e x i b i l i t y
a lfa lfa
R e s e rv e t r u c k s and
t o t h e o p e r a t i o n i n t h a t , d u r in g any
c u t t i n g , some f i e l d s y i e l d h i g h e r th a n o t h e r s , a r e d i f f e r e n t i n s i z e and
s h a p e , and d i s t a n c e s b e tw e e n f i e l d s
and p l a n t s v a r y .
T h u s , a t any g iv e n
t im e , an e x t r a h a r v e s t e r o r t r u c k may h a v e t o b e em ployed t o m a in ta in
a c o n tin u o u s flo w o f raw a l f a l f a t o t h e p l a n t .
L abor
P la n t L abor
A t t h e p r o c e s s i n g p l a n t , h a n d li n g o f a l f a l f a , fro m t h e a u to m a tic
f e e d e r th r o u g h t o s t o r a g e i s e s s e n t i a l l y t a u t o m a t i c .
s i z e d p l a n t s u s u a l l y r e q u i r e o n ly one o p e r a t o r .
S m a ll and m o d e ra te
H ow ever, some s m a l l
p l a n t s , b e c a u s e o f p o o r p l a n t d e s i g n , r e q u i r e t h a t two men b e e n g a g ed
76
in p ro c e s s in g .
"T he f u n c t i o n o f t h e man o r men r e s p o n s i b l e f o r p l a n t
o p e r a t i o n s c o n s i s t s p r i m a r i l y i n a d j u s t i n g r a t e s o f f e e d i n g , d r y i n g , and
p r e v e n t i n g c lo g - u p s o r o t h e r t r o u b l e fro m a r i s i n g . " 2 5 /
L a rg er p la n ts
r e q u i r e m ore th a n one e m p lo y e e a t t h e p l a n t .
L a b o r r e q u i r e m e n ts f o r t h e p l a n t s i n t h i s s u r v e y a r e shown i n T a b le V I.
E x c l u s i v e o f s a c k i n g p e r s o n n e l , m o st p l a n t s w i t h a 2 4 - h o u r c a p a c i t y o f 60
to n s o r l e s s r e q u i r e d o n ly one man t o o p e r a t e t h e p l a n t .
p l a n t s 8 , 2 , and 1 5 .
E x c e p tio n s a r e
P l a n t 8 i s an o l d e r p l a n t w h ic h h a s n o t b e e n m o d if ie d
f o r one man o p e r a t i o n .
The o n e - h a l f man i n P l a n t 2 i s a g e n e r a l h e l p e r
who d i v i d e s h i s tim e b e tw e e n p l a n t and f i e l d .
T h is p a r t i c u l a r p l a n t does
a c o n s i d e r a b l e am ount o f b l e n d i n g and m u st a l s o h a u l i t s p r o d u c t by t r u c k
to a r a i l s id in g .
o p e ra tio n s .
The g e n e r a l h e l p e r ad d s f l e x i b i l i t y
t o a l l o f th e s e
M ost p l a n t s w i t h a 2 4 - h o u r c a p a c i t y o f 60 t o n s o r m o re ' em p lo y ed
two o p e r a t o r s o r a c o m b in a tio n o f one o p e r a t o r and one h e l p e r t o h a n d le
p r o c e s s in g o p e ra tio n s a t th e p l a n t .
F ie ld Labor
F i e l d l a b o r r e q u i r e m e n ts w i l l c o r r e s p o n d t o th e num ber o f h a r v e s t e r s
and t r u c k s i n u s e .
W ith t h e e x c e p t io n o f P l a n t s 2 , 9 , an d 1 0 , a l l p l a n t s
w i t h a 2 4 - h o u r c a p a c i t y o f 60 to n s o r l e s s u s e d one h a r v e s t e r o p e r a t o r .
P la n t 2 s p l i t s
an e x t r a h e l p e r b e tw e e n p l a n t and f i e l d .
P l a n t s 9 and 10
u s e a t r a c t o r - d r a w n h a r v e s t e r w i t h a 7 - f o o t c u t w h i l e t h e r e m a in in g p l a n t
25/
R eed , E s t a b l i s h i n g D e h y d r a tin g P l a n t s i n K a n s a s , E x t e n s i o n S e r v i c e ,
K a n sa s S t a t e U n i v e r s i t y , M a n h a tta n , K a n s a s , p . 9 .
TABLE V I .
P la n t
Code
3
I
6
5
8
12
2
9
id
15
16
14
11
4
19
7
13
18
20
17
I/
2/
3/
*
LABOR REQUIREMENTS,
2 4 -H o u r
C a p a c ity
o f P la n t
Tons
30
30
36
36
48 ■
48
48
60
60
60
72
78
78
84
90
96
96
102
120
140
2 4 -H o u r
D a ily
P r o d u c t io n *
Tons
2 5 .6 0
1 9 .9 8
3 3 .4 8
3 3 .3 3
3 9 .9 4
4 8 .2 1
2 4 .3 9
4 0 .0 0
4 3 .9 2
5 3 .3 8
5 6 .2 0
5 2 .4 5
4 5 .0 2
27 #50
7 5 .6 4
3 9 .2 0
5 0 .0 0
7 5 .4 8
1 0 0 .0 0
6 9 .5 7
■
1 9 6 6 SURVEY.
F ie ld
M a in te n a n c e
T ru ck
H a r v e s te r
and
T o ta l
O p e r a to r s S a c k e r s
T o t a l I / O p e r a to r s D r i v e r s
T o ta l
H e lp e r s
R e p a ir 2 / L a b o r e r s 3 /
M e n / S h i f t M e n / S h i f t M e n / S h i f t M e n /S h if t M e n /S h if t M e n /S h if t M e n /S h if t M e n /S h ift
M e n /S h if t
P la n t
I
I
3
—
——
I
I
2
I
I
I
I
I
2
I
I
2
I
2
2
2
2
2
—
—
——
——
M
——
3
——
——
—
2
—
——
——
I
I
——
——
I
——
——
——
0 .5
——
—
1 .0
——
1 .0
——
——
1 .0
——
—
——
——
--
1 .0
1 .0
1 .0
1 .0
2 .0
1 .0
1 .5
1 .0
1 .0
2 .0
2 .0
2 .0
1 .0
2 .0
2 .0
2 .0
2 .0
2 .0
2 .0
2 .0
(4 )
(4 )
(4 )
(3 )
(3 )
(3)
1 .0
1 .0
• 1 .0
1 .0
1 .0
1 .0
1 .5
3 .0
2 .0
1 .0
2#0
3 .0
1 .0
2 .0
2 .0
2 .0
2#0
2 .0
3 .0 .
2 .0
I
I
I
I
I
2
I
3
2
I
2
3
3
2
2
2
2
2
3
2
2 .0
2 .0
2 .0
2 .0
2 .0
3 .0
2 .5
6 .0
4 .0
2 .0
4 .0
6 .0
4 .0
4 .0
4 .0
4 .0
4 .0
4 .0
6 .0
4 .0
0 .5
0 .5
0 .5
0 .5
0 .5
1 .0
0 .5
1 .0
1 .0
2 .0
——
1 .0
0 .5
2 .0
1 .5
1 .5
1 .0
1 .0
1 .5
3 .0 (6)
3 .5
3 .5
3 .5
4 .5
4 .5
5 .0
7 .5 (11)
6 .0
5 .0
8 .0
8 .0 (10)
6 .0
6 .5
8 .0
7 .5
7 .5
7 .5
9 .0
7 .5
T o t a l s I n p a r e n t h e s e s I n c lu d e s a c k in g p e r s o n n e l .
The 0 . 5 o f a man I n d i c a t e s one m a in te n a n c e man f o r tw o w ork s h i f t s #
The man w o rk s t h e m ain s h i f t and i s on c a l l th e
o th e r s h i f t .
T o ta ls i n p a r e n th e s e s in c lu d e s a c k in g p e r s o n n e l.
D a i ly p r o d u c t i o n d u r i n g d a y s w hen t h e p l a n t i s o p e r a t i n g (d o e s n o t i n c l u d e d o w n tim e ).
78
w i t h a 2 4 - h o u r c a p a c i t y o f 60 to n s ( P l a n t 15) u s e d a s e l f - p r o p e l l e d
h a r v e s t e r w ith a 1 0 -fo o t c u t.
Beyond a 2 4 - h o u r c a p a c i t y o f 60 t o n s , two
o r t h r e e h a r v e s t e r o p e r a t o r s w e re r e q u i r e d .
P l a n t s 9 and 20 u s e d t r a c t o r -
draw n h a r v e s t e r s w i t h a 7 - f o o t c u t and r e q u i r e d t h r e e m a c h in e s i n u s e
and th u s t h r e e o p e r a t o r s .
The d a t a i n T a b le VI i n d i c a t e s t h a t t r u c k d r i v e r r e q u ir e m e n ts v a r y
d i r e c t l y w ith p l a n t c a p a c ity .
I n m o st c a s e s a p l a n t w i l l h a v e m ore t r u c k s
i n o p e r a t i o n th a n t h e r e a r e d r i v e r s f o r them .
w i l l d e l i v e r a lo a d e d t r u c k t o th e p l a n t ,
f i e l d an a l r e a d y u n lo a d e d t r u c k .
T h is i s b e c a u s e a d r i v e r
l e a v e i t and d r i v e b a c k t o th e
A t t h e f i e l d h e w i l l l e a v e t h e u n lo a d e d
t r u c k and d r i v e b a c k t o t h e p l a n t a t r u c k t h a t i s lo a d e d and w a i t i n g f o r
d e liv e ry .
O th e r L a b o r
W ith t h e •e x c e p t io n o f P l a n t s 3 and 1 4 , a l l p l a n t s h i r e m a in te n a n c e
and r e p a i r p e r s o n n e l .
feed m ill.
P l a n t 3 h a d a c c e s s t o t h e p e r s o n n e l o f an a f f i l i a t e d
P l a n t 1 4 , a t t h e tim e t h e s u r v e y w as t a k e n , i n d i c a t e d t h a t i t
was h a v in g d i f f i c u l t y i n h i r i n g a p e rm a n e n t m a in te n a n c e and r e p a i r man.
Some m a in te n a n c e and r e p a i r w ork i s done b y t h e p l a n t h e l p e r a t t h i s
I
p la n t.
In g e n e ra l,
th e num ber o f m a in te n a n c e and r e p a i r p e r s o n n e l r e q u i r e d
in c r e a s e d as p la n t c a p a c ity in c r e a s e d .
The im p o r ta n c e o f r e l i a b l e m a in te n a n c e and r e p a i r p e r s o n n e l c a n n o t
b e o v e re s tim a te d ,
be rec o v e red .
'L oss o f p r o d u c t i o n due t o m e c h a n ic a l b rea k d o w n c a n n o t
I f e m p lo y e es a r e d ra w in g p a y d u r in g b re a k d o w n , l a b o r c o s t s
79
p e r to n a r e i n c r e a s e d .
B o th s h o r t - t i m e i n t e r r u p t i o n s w i t h em p lo y ees
d ra w in g p ay and l o n g e r - t e r m i n t e r r u p t i o n s i n c r e a s e f i x e d c o s t s p e r t o n .
I n m o st p l a n t s t h e p l a n t m a n a g e rs , n o n -m a n a g e r o w n e r s , and many
o p e r a t o r s h a v e a th o ro u g h k n o w led g e o f t h e m e c h a n ic a l a s p e c t s o f p l a n t
and f i e l d e q u ip m e n t.
A s t r u c t u r e o f s k i l l e d p e rs o n n e l su ch as t h i s
can
k e e p dow ntim e t o a b a r e minimum.
The d e h y d r a t in g i n d u s t r y h a s e x p e r i e n c e d d i f f i c u l t y
k e e p in g a r e l i a b l e
p r o b le m .
la b o r fo rc e .
i n a c q u i r i n g and
T h e re a r e tw o m a jo r c a u s e s o f t h i s •
One o f t h e s e i s w age r a t e s ;
th e o th e r i s s e a s o n a lity o f o p e ra tio n ,
As i n d i c a t e d by T a b le V I I , th e w age r a t e s i n t h e a l f a l f a d e h y d r a tin g
in d u s try a re r e la tiv e ly
lo w .
H ow ever, an em ployee o f t h e d e h y d r a tin g
i n d u s t r y , b e c a u s e o f th e lo n g h o u r s w o rk e d , m akes a w e e k ly w age som ew hat
h i g h e r th a n t h a t i n d i c a t e d by t h e b a s i c w age r a t e s .
F o r e x a m p le , assum e
t h e em p lo y ee i s e a r n i n g t h e minimum w age o f $ 1 .2 5 p e r h o u r and w o rk in g
12 h o u r s a d a y , 7 d ay s p e r w e e k .
tim e w i l l b e $ 1 3 2 .5 0 .
H is e a r n i n g s f o r one w eek w i t h o v e r ­
T h is h a s h e lp e d t o e s t a b l i s h a w o rk in g f o r c e . •
The l a b o r e r s w ork lo n g h o u r s d u r in g t h e o p e r a t i n g s e a s o n an d i n many
c a s e s draw unem ploym ent c o m p e n s a tio n d u r in g t h e o f f s e a s o n .
The s e a s o n a l i t y o f a l f a l f a d e h y d r a t io n i s th e s e c o n d m a jo r c a u s e o f
t h e em ploym ent p ro b le m .
To r e d u c e th e t u r n o v e r from s e a s o n t o s e a s o n
d e h y d r a t in g p l a n t s a tt e m p t t o k e e p a c o r e o f s k i l l e d p e r s o n n e l by e m p lo y in g
them d u r in g t h e o f f - s e a s o n .
Some f ir m s h a v e s u p p le m e n ta l e n t e r p r i s e s su c h
as f e e d l o t s and farm s w h e re t h e s e m en, a lth o u g h p r o b a b ly u n d e re m p lo y e d ,
can w ork d u r in g th e o f f - s e a s o n .
Many f ir m s l i t e r a l l y
t e a r down and
80
TABLE V I I .
AVERAGE WAGES RATES AND RANGES, 1966 SURVEY.
P e r s o n n e l _____________ A v erag e Wage R a te P e r H our
D o lla rs
' '
Range P e r H our
D o lla rs
P la n t o p e ra to rs
1 .4 9
1 .3 0 - 1 .7 8
H a rv e s te r o p e ra to rs
1 .4 0
1 .2 5 - 1 .5 0
T ru c k d r i v e r s
1 .3 6
1 .2 5 - 1 .6 5
M a in te n a n c e and r e p a i r
1 .6 0
1 .2 5 - 2 .0 0
81
r e b u i l d p l a n t and f i e l d e q u ip m e n t d u r in g t h e o f f - s e a s o n a n d r e t a i n
p e rs o n n e l to p e rfo rm t h i s
ta s k .
The low w age s c a l e a l s o r e s u l t s i n a h i g h em ployee t u r n o v e r d u r in g
th e o p e ra tin g s e a s o n .
The s e a s o n a l h e l p i s p r i m a r i l y em p lo y ed i n th e
f i e l d o p e r a t i o n and t e n d s t o b e som ew hat c a r e l e s s i n t h e c a r e and u s e o f
m a c h in e r y „
T h is r e s u l t s i n m a c h in e ry b rea k d o w n and n e c e s s i t a t e s o u t la y s
f o r e i t h e r r e p a i r o r r e p la c e m e n t.
Some d e h y d r a t in g f ir m s a tt e m p t t o
re d u c e t h e s e a s o n a l t u r n o v e r by o f f e r i n g b o n u s e s t o e m p lo y e e s c o m p le tin g
an e n t i r e s e a s o n .
w o rk e d .
The w o r k e r a c c u m u la te s a f i x e d am ount f o r e a c h h o u r
I f h e le a v e s b e f o r e th e o p e ra tin g se a so n i s
a c c u m u la te d b o n u s r e v e r t s
c o m p le te d , h is .
to th e firm .
Some d e h y d r a t in g f i r m s h i r e c o l l e g e o r h i g h s c h o o l s t u d e n t s d u r in g
s c h o o l v a c a tio n ..
The c o m p l ic a t in g f a c t o r h e r e i s t h a t - t h e d e h y d r a tin g
s e a s o n b e g in s b e f o r e and e n d s a f t e r th e s c h o o l v a c a t i o n p e r i o d .
is ,
t h e r e f o r e , a v o id to be f i l l e d
d u r in g t h e s e tim e-
p e rio d s .
T h e re
I n one
c a s e th e p l a n t m a n a g e r w o u ld h i r e s t u d e n t s o n ly i f t h e f a t h e r w o u ld f i l l
i n o r g u a r a n t e e som eone t o f i l l i n d u r in g t h e p e r i o d s t h e s t u d e n t c o u ld
n o t w o rk .
A d e h y d r a t in g f i r m w o u ld p r o b a b ly f i n d i t d i f f i c u l t t o k e e p a r e l i a b l e
l a b o r f o r c e i f t h e r e w as c o m p e titio n f o r t h e l a b o r f o r c e fro m a c o n c e n t r a ­
t i o n o f h i g h p a y in g i n d u s t r i e s .
F o r i n s t a n c e , t h e d e h y d r a t in g f ir m s
a ro u n d W i c h i t a , K a n s a s , h a v e h a d s e r i o u s l a b o r p ro b le m s s i n c e th e
e x p a n s io n o f t h e a i r c r a f t i n d u s t r y i n W ic h i ta .
CHAPTER IV
•
COSTS AND RETURNS
A v e ra g e P r o d u c ti o n C o s ts
P r e v io u s R e s e a rc h
Two o f t h e m o st r e c e n t and th o ro u g h i n v e s t i g a t i o n s i n t h e a r e a o f
a l f a l f a d e h y d r a t io n h a v e b e e n c o n d u c te d by L acey F . R ic k e y , ^ 6 / u s in g
1 9 5 3 -5 4 d a t a and a l a t e r s tu d y by C h a r le s E . Reed u s in g 1957 and 1959
d a ta .
The e a r l y s tu d y by R ic k e y h a d p e r to n p r o c e s s i n g c o s t s o f $ 3 3 ,3 3
f o r p l a n t s u n d e r 3 ,0 0 0 to n s a n n u a l p r o d u c t i o n and $ 2 2 .5 0 p e r to n f o r
p l a n t s o v e r 3 ,0 0 0 t o n s p r o d u c t i o n .
The l a t e r s tu d y c o n d u c te d by C h a r le s R e e d , 2 7 / a n a ly z e d th e p ro d u c ­
t i o n c o s t s o f 35 d e h y d r a t in g p l a n t s l o c a t e d i n t h e M idw est f o r th e 1958
and 1959 p l a n t y e a r s .
P r o c e s s i n g c o s t s f o r p l a n t s u n d e r 3 ,0 0 0 to n s
a n n u a l p r o d u c t i o n w e re $ 2 6 .5 4 p e r t o n ; f o r 3 ,0 0 0 ^ 6 ,9 9 9 t o n s , c o s t s ,
w e re $ 2 2 .6 4 p e r t o n ; and o v e r 7 ,0 0 0 t o n s , p r o c e s s i n g c o s t s w e re re d u c e d
t o $ 1 8 .0 5 p e r t o n .
P e l l e t i n g was common when t h i s s tu d y w as c o n d u c te d .
C o n s e q u e n tly , t h e n e e d f o r s a c k i n g was r e d u c e d b e c a u s e b u l k h a n d li n g was
p o s s ib le .
F ix e d and V a r i a b l e C o s ts
Some c o s t s a r e s u b j e c t t o ch an g e a s t h e r a t e o f p r o d u c t i o n c h an g es
and o t h e r c o s t s w i l l c o n ti n u e u n c h a n g e d .
If
t h e tim e p e r i o d i s e x tr e m e ly
26/
R ic k e y , 0£ . c i t . , p . 2 5 .
27/
R e e d , C h a r le s E . , C o s ts and E f f i c i e n c y i n A l f a l f a D e h y d r a tio n P l a n t s ,
T e c h . B u i. 1 2 4 , K a n sa s A g r. E x p t. S t a . , K a n s a s ■S t a t e U n i v e r s i t y ,
M a n h a tta n , K a n s a s , A u g u st 1962.
83
s h o r t , a l l c o s t s w i l l re m a in u n c h a n g ed o r f i x e d .
I f t h e tim e p e r i o d i s
v e r y lo n g s u c h a s 10 y e a r s , a l l c o s t s w i l l b e s u b j e c t t o c h a n g e .
I t w ill
b e u s e f u l h e r e t o u s e a tim e p e r i o d w h ic h we c a l l " t h e s h o r t ru n " i n w h ic h
i t i s p o s s i b l e t o v a r y t h e r a t e o f p r o d u c t i o n , b u t s h o r t enough s o t h a t
c a p a c ity o r s iz e o f o p e ra tio n can n o t be changed.
I n t h i s p e r i o d o f one
y e a r o r one o p e r a t i n g s e a s o n f o r an a l f a l f a d e h y d r a t io n p l a n t , some c o s t s
w i l l b e v a r i a b l e a s a r e s u l t o f c h an g e i n t h e o p e r a t i o n s s u c h a s :
am ount o f a l f a l f a p u r c h a s e d , l a b o r , f u e l , p o w e r, g a s and o i l ,
and
m a in te n a n c e and r e p a i r .
O th e r c o s t s a r e f i x e d .
They re m a in c o n s t a n t f o r t h e s e a s o n r e g a r d ­
l e s s o f th e q u a n tity o f th e o u tp u t.
T h e s e c o s t s i n t h e d e h y d r a t in g p l a n t s
i n t e r v i e w e d a r e th e m a n a g e rs and t h e s a l a r i e s and o t h e r w ages t h a t a r e
on a y e a r l y b a s i s s
D e p r e c i a t i o n o f t h e p l a n t e q u ip m e n t, i n s u r a n c e on
t h e p l a n t and e q u ip m e n t, t a x e s , i n t e r e s t ,
and some o t h e r m is c e lla n e o u s
fix e d c o s ts .
C l a s s i f i c a t i o n o f t o t a l c o s t s i n t o v a r i a b l e and f i x e d c o s t s a s s i s t s
m anagem ent i n i d e n t i f y i n g s p e c i f i c p ro b le m a r e a s i n p l a n t o p e r a t i o n and
a llo w s f o r s p e c i f i c c o r r e c t i v e a c t i o n t h a t w i l l c o n ti n u e t o k e e p th e
p l a n t i n an o p e r a t i o n a l c o m p e t it iv e p o s i t i o n .
V a t i a b l e C o s ts
B o th s t u d i e s by R ic k e y and Reed fo u n d t h a t , i n g e n e r a l , a v e ra g e
v a r i a b l e c o s t s v a r i e d i n v e r s e l y w i t h a n n u a l p r o d u c t i o n v o lu m e .
T h is
r e s u l t i m p l i e s t h a t l a r g e r p l a n t s can p r o d u c e d e h y d r a te d a l f a l f a a t
lo w e r c o s t s th a n s m a l l e r p l a n t s .
P l a n t and f i e l d l a b o r , f u e l , p o w e r.
84
g a s and o i l ,
and m a in te n a n c e and r e p a i r c o s t s , b e c a u s e th e y a r e d i r e c t l y
i n v o lv e d i n c o n v e r t i n g raw a l f a l f a i n t o d e h y d r a te d a l f a l f a ,
a re o fte n
r e f e r r e d t o a s c o n v e r s io n c o s t s .
I n t h i s c h a p t e r , u s i n g t h e c u r r e n t s u r v e y d a t a , an a t t e m p t w i l l b e
made t o d e te r m in e i f
th e ab o v e i m p l i c a t i o n i s
c o n v e r s io n c o s t w i l l b e e x a m in ed s e p a r a t e l y .
c o rre c t.
E ach ty p e o f
A v erag e c o s t s i n t h i s
s t u d y a r e e x a m in ed i n te rm s o f a v e r a g e d a i l y p r o d u c t i o n r a t h e r th a n
an n u al p ro d u c tio n .
T h is p e r m i ts c o m p a ris o n o f p l a n t o u t p u t on th e
b a s i s o f a common tim e p e r i o d .
The 2 4 - h o u r day was c h o s e n a s t h e tim e
p e r i o d b e c a u s e a l l b u t two o f th e p l a n t s i n t h e s tu d y o p e r a t e d a ro u n d
th e c l o c k .
The two e x c e p t io n s w o rk ed one 12- h o u r s h i f t p e r d a y .
P l a n t 3 w o rk e d 125 tw e lv e - h o u r d ay s d u r in g th e o p e r a t i n g s e a s o n .
T h e se w e re c o n v e r te d t o 6 2 .5 t w e n t y - f o u r - h o u r d a y s .
P l a n t 9 w o rk ed 120
tw e lv e - h o u r d ay s w h ic h w e re c o n v e r te d t o 60 t w e n ty - f o u r - h o u r d a y s .
The
m eth o d o f a n a l y s i s i s t h e sam e f o r e a c h ty p e o f c o s t and i s o u t l i n e d
i n th e s e c t i o n on l a b o r c o s t .
L abor
L a b o r c o s t s p e r to n o f o u tp u t a r e shown i n T a b le V I I I ,
fro m t h i s
t a b l e a r e p r o j e c t e d o n to F i g u r e 1 8 .
The d a ta
I n F i g u r e 1 8 , th e 2 4 - h o u r
p l a n t c a p a c i t i e s a r e d i v i d e d i n t o f o u r r a n g e s (3 0 -4 0 t o n s , 4 1 -7 0 t o n s ,
7 1 -9 0 t o n s , and o v e r 90 t o n s ) . 2 8 /
28/
The 3 0 -4 0 to n r a n g e h a s p l a n t s w ith
T h e se g r o u p in g s w e re c h o s e n i n an a t t e m p t t o g ro u p t o g e t h e r p l a n t s
m o st s i m i l a r i n s i z e and y e t h a v e a r e p r e s e n t a t i v e num ber o f p l a n t s
in each s iz e g ro u p .
TABLE y i l l .
PLANT AND FIELD LABOR COSTS PER TON, 1966 SURVEY.
2 4 -H o u r
P l a n t . . C a p a c ity
Code
of P la n t
Tons
3
I
5
6
.
P r o d u c ti o n
P e r 2 4 -H o u r
O p e r a tin g
Day ■ '
' Tdns
30
30
36
36
2 5 .6 0
1 9 .9 8
3 3 .3 3
3 3 .4 8
71
56
93
93
2 .5 6
i—
2 .3 4
2 .1 2
4 .5 3
——
2 .9 7
2 .6 3
7 .0 9
7 .0 8
5 .3 1
4 .7 5
2 .5 6
—
2 .3 4
2 .1 2
2 .0 0
—
2 .9 7
2 .6 3
4 .5 6 2 /
• 7 .0 8
5 .3 1
4 , 75
48
48
47
1 .3 8
2 .6 5
——
5 .7 5
4 .4 6
—
——
8 .1 3
7 .1 1
3 .2 6
2 .3 8
2 .6 5
5 .7 5
4 .4 6
—
8.6 8
——
8 .1 3
7 .1 1
5 .2 6
7 .5 0 2 /
■ 5 .6 0
4 .0 5 .
2
8
12
9
10
15
60
60
60
2 4 ,3 9
3 9 ,9 4
4 8 .2 1
■ 4 0 .0 0
4 3 .9 2
5 3 .3 8
16
11
14
4
19
72
78
78
84
90
7
13
18
20
96
96
102
120
48
17
.
'
. . . .L a b o r C o st P e r Ton o f O u tp u t
P e rc e n t. of
In c lu d in g
E x c lu d in g
C a p a c ity a t
S a c k in g P e r s o n n e l 2 /
w h ic h P l a n t .' S a c k in g P e r s o n n e l
O p e ra te d I / ' '. 'F i e l d ' ' P l a n t ' ' T o ta l. ' F i e l d ' ' P l a n t ■■ T o t a l
' P e rce n t
—
.140
'
83
100
67
73
——
—
89
2 .0 2
2 .0 3
5 6 .2 0
4 5 .0 2
5 2 .4 5
2 7 .5 0
7 5 .6 4
78
58
67
33
84
2 .0 1
4 .6 8
2 .2 3
2 .4 2
3 .0 0
2 .8 5
4 .0 0
1 .6 1
3 9 .2 0
5 0 .0 0
7 5 .4 8
41
52
74
3 .8 2
6 .6 1
5 .4 3
2 .4 2
100.00
83
——
6 9 .5 7
.
50
—
—
88
38
.
.37
—
.3 .9 1 .
5 .6 0
4 .0 5
—
—
——
2 .0 2
2 .0 3
5 .2 4
7 .1 0
6 .1 6
7 .0 0
4 .4 6
2 .0 1
2 .2 3
2 .4 2
3 .0 0
2 .8 5
4 .0 0
1 .6 1
4.46
1 0 .4 3
1 0 .3 1
4 .8 0
6 .0 2
3 .8 2
5.9 8
9 .8 0 2 /
4.88
4 .3 9
2 .4 2
9 .2 7
7.6 8
4.6 8
—
2 .3 8
——
.
3.37..
—
—
3 .0 1 .
5 .2 4
7 .1 0
.
5 .5 6
2/
7 .0 0
2/
4 .8 0
6 .0 2
.6 .3 8 .2 /
P e r c e n t o f c a p a c i t y i s t h e p e r c e n t o f c a p a c i t y f o r an o p e r a t i n g d a y . I t does n o t i n c l u d e
t h o s e d a y s d u r in g t h e s e a s o n t h a t t h e e n t i r e p l a n t i s c lo s e d down .
2_/ I n d i c a t e s l a b o r c o s t s p e r to n o f o u tp u t h a v e b e e n . a d j u s t e d n o t t o i n c l u d e 's a c k i n g p e r s o n n e l . .
F o r p l a n t s w h e re s a c k i n g c o s t s w e re n o t s p e c i f i e d , p l a n t l a b o r c o s t s p e r to n o f o u tp u t
w e re - m u l ti p li e d by t h e r a t i o o f w eekly- c o s t o f s a c k i n g p e r s o n n e l to t o t a l w e e k ly p l a n t
..l a b o r c o s t .
I/
10
•7
•1 3
9
• 2
8
*9
•I
-J
a
H
. 8
« 1 1 ,,
'4
„
. 12
•1
A v e ra g e L a b o r C o s t f o r a l l
P l a n t s = $ 6 .2 5 P e r Ton
6 .2 5
6
-
•20
S
•5
5
4
* 10
* 16
•18
6
*3
•
* 15
4
Af
3
_vV.___
^ 30
AVERAGE LABOR COST/TCN
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
AVERAGE DAILY PRODUCTION
(TONS)
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om b in ed A v e ra g e
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
F ig u re 18.
I
I
80
90
100
2 4 -H o u r C a p a c i t y o f P l a n t (T o n s)
I
40
50
i
60
Ii
•
HO
I
I
120
130
$ 7 .0 8
4 .8 7
5 .4 2
$ 7 .5 8
4 .9 7
6 .2 7
$ 7 .0 5
5 .4 0
6 .2 3
$ 8 .4 8
5 .4 1
6 .7 8
1 9 .9 8
3 0 .8 0
2 8 .0 9
3 4 .7 8
4 8 .5 0
4 2 .9 7
3 6 .2 6
6 1 .4 3
5 3 .7 0
5 2 .9 2
8 7 .7 4
6 6 .8 4
56%
85
78
66%
87
76
46%
76
64
48%
78
60
A n a l y s i s o f P e r Ton L a b o r C o s t s .
F o u r P l a n t S i z e G ro u p s b y 2 4 -H o u r C a p a c i t y .
14
87
2 4 - h o u r c a p a c i t i e s o f '30 and 36 t o n s ; t h e 4 1 -7 0 to n r a n g e h a s p l a n t s w i t h
2 4 - h o u r c a p a c i t i e s o f 48 and 60 t o n s ; t h e 7 1-90 ra n g e h a s p l a n t s w ith
2 4 - h o u r c a p a c i t i e s o f 7 2 , 7 8 , 8 4 , an d 90 t o n s ; th e o v e r 90 to n ra n g e h a s
p l a n t s w i t h 2 4 - h o u r c a p a c i t i e s o f 9 6 , 1 0 2 , 1 2 0 , and 140 t o n s .
The p e r to n l a b o r c o s t o f e a c h p l a n t i s p l o t t e d i n t h e s i z e ra n g e
c o r r e s p o n d in g t o i t s
2 4 -h o u r c a p a c ity .
T he d o t t e d l i n e r e p r e s e n t s th e
a v e r a g e p e r to n l a b o r c o s t o f a l l p l a n t s .
h a v e a b o v e - a v e r a g e p e r to n l a b o r c o s t s ;
P l a n t s ab o v e t h e d o t t e d l i n e
t h o s e b e lo w t h e d o t t e d l i n e h a v e
b e lo w - a v e r a g e p e r t o n l a b o r c o s t s .
W ith in e a c h c a p a c i t y r a n g e i n F i g u r e 1 8 , p l a n t s w i t h a b o v e -a v e ra g e
p e r to n l a b o r c o s t s h a v e a lo w e r a v e r a g e d a i l y p r o d u c t i o n th a n th o s e
p l a n t s w i t h l e s s th a n a v e r a g e l a b o r c o s t s .
W ith in e a c h s i z e g ro u p t h e
a v e r a g e p e r to n l a b o r c o s t s v a r i e d i n v e r s e l y w i t h t h e a v e r a g e p e r c e n t o f
c a p a c i t y a t w h ic h t h e p l a n t s o p e r a t e d ( F ig u r e 1 8 ) .
The e v id e n c e i n d i c a t e s t h a t p e r to n l a b o r c o s t s do n o t d e c r e a s e as
p l a n t c a p a c i t y o r o u t p u t i n c r e a s e s b u t e x h i b i t an i n v e r s e r e l a t i o n s h i p
w i t h t h e p e r c e n t o f c a p a c i t y a t w h ic h t h e p l a n t o p e r a t e s .
o f c a p a c ity i s r e a l l y
a ra tio
T h is p e r c e n ta g e
o f o u t p u t t o c a p a c i t y , w h ic h i s n o t a m e a s u re
o f e f f ic ie n c y b e c au se in p u ts a re n o t s p e c if ie d .
To d e te r m in e w h e th e r
p l a n t s w i t h b e lo w - a v e r a g e p e r to n l a b o r c o s t s u s e d l a b o r m ore e f f i c i e n t l y
(h a d g r e a t e r o u t p u t p e r u n i t o f l a b o r )
th a n p l a n t s w i t h a b o v e -a v e ra g e , p e r
to n l a b o r c o s t s , i t i s n e c e s s a r y t o d e te r m in e w h e th e r t h e y u s e d e s s e n t i a l l y
t h e same am ount o f l a b o r i n p u t .
88
I n T a b le IX th e a v e r a g e num ber o f e m p lo y e es em p lo y ed a t t h e p l a n t ,
in th e f i e l d
g ro u p o
and f o r m a in te n a n c e and r e p a i r , a r e shown f o r e a c h s i z e
The p l a n t s w i t h a b o v e - a v e r a g e p e r to n l a b o r c o s t s d id n o t
em ploy a p p r e c i a b l y g r e a t e r am ounts o f l a b o r th a n p l a n t s w i t h b e low a v e r a g e p e r to n l a b o r c o s t s .
D i f f e r e n c e s i n p e r to n l a b o r c o s t s among p l a n t s , w i l l , o f c o u r s e ,
e x is t i f
t h e r e a r e d i f f e r e n c e s i n w age r a t e s .
I t is ,
th e r e fo r e , n e c e ssa ry
t o d e te r m in e w h e th e r p l a n t s w i t h ab o v e a v e r a g e p e r to n l a b o r c o s t s p a i d
a h i g h e r h o u r l y w age r a t e th a n p l a n t s w i t h b e lo w - a v e r a g e p e r to n l a b o r
c o s ts .
I n t h e 3 0 -4 0 t o n c a p a c i t y ra n g e t h e a b o v e - a v e r a g e p l a n t s em ploy
0 .1 7 m ore men p e r s h i f t th a n t h e b e lo w - a v e r a g e p l a n t s b u t p a y 13 c e n ts
le s s h o u r ly .
I n t h e 4 1 -7 0 to n c a p a c i t y r a n g e . th e a b o v e - a v e r a g e p l a n t s
em ploy 1 .7 5 l e s s men th a n th e b e lo w - a v e r a g e p l a n t s and p a y 2 c e n ts p e r
h o u r m o re .
I n th e 9 1 -1 4 0 t o n ra n g e t h e ab o v e a v e ra g e p l a n t s em ploy 0 .0 5
m ore men p e r s h i f t t h a n t h e b e lo w - a v e r a g e p l a n t s and p a y 4 c e n ts p e r h o u r
m o re .
T h e re i s no c l e a r i n d i c a t i o n t h a t a v e r a g e a d j u s t e d h o u r l y wage r a t e s
a r e a p p r e c i a b l y h i g h e r f o r p l a n t s w i t h above- a v e ra g e p e r t o n l a b o r c o s t s
t h a n f o r p l a n t s w i t h b e lo w a v e ra g e p e r to n l a b o r c o s t s .
do e x i s t ,
W here d i f f e r e n c e s
th e y a r e a p p a r e n t l y n o t l a r g e enough t o ch an g e t h e f i n d i n g s
d e p ic te d in F ig u re 18.
I t , , th e r e f o r e a p p e ars t h a t w ith in th e e s ta b lis h e d
c a p a c i t y r a n g e s , p e r to n l a b o r c o s t s v a r y w i t h t h e r a t e o f o u t p u t .
TABLE IX .
NLtMBEE OE EMPLOYEES AND AVERAGE HOURLY WAGE RATES PER SH IFT: PLANTS WITH ABOVEAVERAGE LABOR COSTS AS COMPARED TO PLANTS WITH BELOW-AVERAGE LABOR COSTS, BY
SIZE GROUPS, 1966 SURVEY.
A v erag e Num Ber' o f E m ployees P e r S h i f t
M a in te n a n c e
T o ta l
A ve. H o u rly
P la n t'
P l a n t S iz e
F ie ld "
' ' a n d R e p a ir 'E m p lo y e e s /S h if t
Wage R a te s a /
Above Below. A b o v e .. Below Above Below Above Below P l a n t s
Group By .
P la n ts
2 4 -H o u r C a p a c i t y AVd. ' AVe.' ' AVe. ' ' A ve. ' ' Ave. ' A v e . ' ' Ave.
A v e . ' Above Ave. Below Ave.
------ - -N um ber o f Men-------------------------------—D o l l a r s —
' TOns_
30 - 40
1 .0
1 .0
2 .0
2 .0
0 .5
0 .3 3
3 .5
3 .3 3
1 .6 8
1 .8 1
41 - 70
1 .5
1 .3 3
3 .5
3 .0
0 .6 7
0 .6 7
5 .6 7
5 .0
1 .7 1
1 .6 2
71 - 90
1 .5
2 .0
4 .0
4 .6 7
0 .7 5
1 .3 3
6 .2 5
9 .0
1.68
1.66
91 & o v e r
2 .0
2 .0
4 .0
4 .0
1 .5
1 .0
7 .5
7 .0
1 .7 2
1 .6 8
a / Xn o r d e r t h a t t h e y r e f l e c t o v e r - t im e prem ium s ( o v e r - ti m e prem ium s a r e in c l u d e d i n p e r to n
l a b o r c o s ts .) t h e h o u r l y w age r a t e was a d j u s t e d i n t h e f o llo w in g m a n n e r. The w e e k ly wage
p e r w o r k e r w as d e te rm in e d b y a d d in g t o t h e r e g u l a r h o u r s w o rk ed p e r w eek t h e o v e r - tim e
prem ium h o u r s and m u l t i p l y i n g t h i s t o t a l by t h e h o u r ly w a g e . The w e e k ly w ages o f a l l
w o r k e r s w e re th e n summed and d i v id e d b y t o t a l m a n -h o u rs w o rk ed p e r w eek t o g e t th e
a d j u s t e d h o u r l y w age r a t e .
90
T h e re was n o i n d i c a t i o n t h a t p e r t o n l a b o r c o s t s d e c r e a s e d as p l a n t
s iz e in c re a s e d .
T h is s u g g e s t s t h a t p l a n t s w i t h s m a ll c a p a c i t i e s a r e
c a p a b le o f k e e p in g l a b o r c o s t s c o m p e t i t i v e w i t h p l a n t s o f l a r g e r
c a p a c itie s .
T h e re i s , h o w e v e r, a q u a l i f i c a t i o n t o t h i s a s s e r t i o n .
q u a lific a tio n is
The
t h a t , i n g e n e r a l , i n c r e a s e s i n p l a n t s i z e w e re a c c o m p a n ie d
by d e c re a s e s in p e rc e n ta g e o f o p e ra tin g c a p a c ity .
Fuel
F u e l c o s t s p e r t o n o f o u t p u t a r e shown i n T a b le -X and a r e p r o j e c t e d
o n to F i g u r e 1 9 .
$ 3 .4 8 p e r t o n .
The a v e r a g e f u e l c o s t i s
$ 3 .7 5 p e r to n an d t h e m ed ian i s
A t o t a l o f e i g h t p l a n t s o r 40 p e r c e n t h a d f u e l c o s t s o f
b e tw e e n $3 and. $4 p e r t o n .
T h e re i s
a s i g n i f i c a n t d i f f e r e n c e b e tw e e n
p l a n t s w i t h a b o v e - a v e r a g e c o s t s a n d t h o s e w i t h b e lo w - a v e r a g e c o s t s p e r
to n .
The 7 0 -9 0 to n s i z e g ro u p h a s t h e l e a s t d i f f e r e n c e .
th e d i f f e r e n c e i s
In t h i s g ro u p ,
75 c e n t s p e r to n w h i l e t h e o t h e r s go fro m $ 1 .5 5 t o
$ 2 .2 5 p e r to n d i f f e r e n c e b e tw e e n b e lo w - and a b o v e - a v e r a g e p l a n t s .
In
e a c h c a p a c i t y r a n g e , p l a n t s w i t h b e lo w a v e r a g e p e r to n f u e l c o s ts o p e r a t e d a t a g r e a t e r p e r c e n t a g e o f c a p a c i t y th a n p l a n t s w i t h above
a v e r a g e p e r to n f u e l ' c o s t s ; .
I n g e n e r a l , p e r to n f u e l c o s t s seem t o i n c r e a s e a s p l a n t c a p a c i t y
in c re a s e s .
T h is seem s t o d i s c o u n t any a rg u m e n t t h a t p e r to n f u e l c o s t s
d e c re a s e as p la n t c a p a c ity in c r e a s e s .
T h e re a l s o e x i s t s
an i n v e r s e
r e l a t i o n s h i p b e tw e e n p l a n t c a p a c i t y and t h e p e r c e n ta g e o f c a p a c i t y a t
w h ic h t h e p l a n t o p e r a t e s .
R e l a t i n g b a c k t o c o s t s , t h i s m eans t h a t
TABLE X.
P la n t.
Code '
CONVERSION COSTS PER TON OF OUTPUT, 1966 SURVEY. I f
O u tp u t P e r
2 4 -H o u r
2 4-H o u r
C a p a c ity O p e r a tin g
Day.:'' ■
of P la n t' •
' Tons
' Tons
' Fuel
P e rce n t of
. P ow er
Gas and M a in te n a n c e
T o ta l
C o st
C o st
O i l C o s ts and R e p a ir
C a p a c ity a t
C o n v e rs io n
w h ic h P l a n t ' P e r Ton
P e r Ton
P e r Ton C o s ts /T o n
C o st P e r
o f O u tp u t Of O u tp u t o f O u tp u t •' o f ' O u tp u t ' Ton o f O u tp u t
O p e r a te d
------ - D o l l a r s -----------------' P e rce n t
3
I
5
6
30
30
36
25.60
71
2 .3 3
1 9 .9 8
56
4 .3 2
33.33
' 93
36
33.48
93
3 .2 2
2 .8 3
2
8
12
9
10
15
48
48
48
60
60
60
24.39
47
2 .90
3 9 .9 4
4 8 .2 1
: 4 0 .0 0
83
2 .6 4
3 .4 5
' 4 .7 1
2 .5 2
3 .2 0
16
11
14
4
19
72
78
78
84
90
7
< 96
13
96
102
18
120
20
. .17 ‘ . : 140.
I/
43.92
100
67
73
5 3 .3 8
89
56.20
2 7 .5 0
78
58
67
33
7 5 .6 4
84
39.20
41
52
74
83
. .50
■ 4 5 .0 2
52.45
5 0 .0 0
7 5 .4 8
1 0 0 ,0 0
. 69.57.
..
3 .4 8
2 .9 1
3 .7 5
4 .3 8
3 .5 4
1 .8 8
0 .6 0
1 .3 3
1 .9 3
0 .8 6
1 .6 1
0 .5 2
1 .0 0
1 .5 6
1 .3 5
2 .8 0
2 .8 5
■
1 .4 0
1 .7 3
3 .1 2
1 .3 5
1 .7 1
1 .0 9
1 .5 6
0 .9 7
5 .1 0
4 .4 7
1 .6 1
’
2.4 8
1 .6 5
1 .8 2
1 ,4 6
2 .0 8
1 .5 3
2 .9 8
1 .7 6
5 .68
1 .8 5
5 .8 7
2 .3 6
3.6 2
1 .6 5
1 .4 6
1 ,7 4 . .
3 .5 6
5,94.
0.8 6
0 .9 1
1 .1 5
1.36
1 .2 3
0 .7 1
2 .8 2
2 .1 2
1 8 .8 8
1 7 .6 6
1 4 .5 3
2 3 .8 1
1 3 .5 6
1 2 .0 5
3 .7 8
2 .7 1
1 .5 8
3 .4 5
2 .9 6
1 4 .8 8
1 5 .9 5
1 4 .3 8
1 9 .0 4
1 3 .4 3
6.3 8
1 .1 3
3 .4 0
0 .9 0
3 .5 6
4 .3 3
0.8 8
2 .4 0
4 .4 3
1 .0 3 .
1 3 .7 2
1 4 .9 6
• 1 3 .1 8
1 3 .3 6
2 .6 2
C o st d a t a i s b a s e d on a c t u a l o u tp u t o f t h e p l a n t and n o t c a p a c i t y o f t h e p l a n t
'
2 2 .6 5
2 6 .2 7
1 3 .5 9
1 4 ,3 2
2 0 .8 2
.
A v e ra g e F u e l C o s t f o r a l l
P la n ts
$ 3 .7 5 p e r Ton
11 _
2 4 -H o u r C a p a c i t y o f P l a n t (T o n s)
AVERAGE FUEL COST PER TON
A bove Ave P l a n t s
$ 4 .3 2
B e lc w Ave P l a n t s
2 .7 7
C om bined A v e ra g e
3 .1 7
AVERAGE DAILY PRODUCTION (TONS)
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om b in ed A v e ra g e
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om b in ed A v e ra g e
F ig u r e 19.
UD
N
J
$ 4 .7 1
2 .9 4
3 .2 3
$ 4 .0 6
3 .3 1
3 .6 1
$ 5 .8 3
3 .5 9
4 .9 3
1 9 .9 8
3 0 .8 0
2 8 .1 0
4 0 .0 0
4 1 .9 7
4 2 .9 7
3 9 .9 8
5 8 .9 5
4 3 .2 9
5 2 .9 2
8 7 .7 4
6 6 .8 5
56%
86
78
67%
78
76
50%
73
64
48%
79
60
A n a l y s i s o f P e r Ton F u e l C o s ts
F o u r P l a n t S i z e G ro u p s b y 2 4 - h o u r C a p a c i t y
93
when v ie w e d w i t h r e s p e c t t o c h a n g e s i n c a p a c i t y , p e r to n f u e l c o s ts
in c r e a s e as p e rc e n ta g e o f o p e ra tin g c a p a c ity d e c re a s e s .
a p p e ars t h a t la r g e r p la n ts a re n o t u t i l i z i n g
It,
th e re fo re ,
t h e i r c a p a c ity as f u lly
a s s m a l l e r p l a n t s an d t h a t t h i s may b e a r e a s o n f o r t h e h i g h e r p e r to n
f u e l c o s t s e x p e r i e n c e d b y them .
Pow er
P ow er c o s t s p e r to n o f o u t p u t a r e shown i n T a b le X and a r e p r o j e c t e d
o n to F i g u r e 2 0 .
is
$ 1 .4 5 p e r t o n .
c a p a c ity .
The a v e r a g e pow er c o s t i s
$ 1 .8 4 p e r to n and t h e m ed ian
Pow er c o s t s a r e lo w e s t f o r th e p l a n t s u n d e r 4 0 - to n
T h e re i s no c o n s i s t e n t r e l a t i o n s h i p
to i n d i c a t e t h a t p l a n t s
w i t h b e lo w a v e r a g e pow er c o s t s o p e r a t e d a t a g r e a t e r p e r c e n t a g e o f
c a p a c i t y th a n p l a n t s w i t h ab o v e a v e r a g e p e r to n pow er c o s t s .
I n th e
f i r s t two c a p a c i t y r a n g e s a b o v e - a v e r a g e p l a n t s o p e r a t e d a t a g r e a t e r
p e r c e n t a g e o f c a p a c i t y th a n b e lo w - a v e r a g e p l a n t s .
I n t h e l a s t two
c a p a c i t y r a n g e s t h e b e lo w - a v e r a g e p l a n t s o p e r a t e d a t a g r e a t e r p e r c e n ta g e
o f c a p a c i t y th a n th e a b o v e - a v e r a g e p l a n t s .
As p l a n t s i z e i n c r e a s e s , p e r
to n pow er c o s t s seem t o d e c r e a s e d e s p i t e d e c r e a s e s i n t h e p e r c e n ta g e o f
o p e r a t i n g c a p a c i t y (3 0 -4 0 to n r a n g e e x c l u d e d ) .
W ith t h e f i r s t c a p a c i t y
r a n g e e x c lu d e d t h e d i f f e r e n c e b e tw e e n t h e h i g h e s t and lo w e s t p e r to n
p o w er c o s t i s 23 c e n t s ( $ 2 . 0 4 - $ l . 81) i n d i c a t i n g t h a t i t may b e p o s s i b l e
t o c u r t a i l . , t h e u s e o f e l e c t r i c i t y when t h e r e a r e s h o r t tim e i n t e r r u p t i o n s
in p ro c e s s in g a c t i v i t y .
4
• 12
• 4
• 9
3
S
cd
• 13
• 11
i—
i
: 28
i—i
:
Io 5
»16 • 14
S
A v e ra g e P o w e r C o s t f o r a l l
P l a n t s = $ 1 .8 4 P e r Ton
1Q«
*7
.2 0
17'
I
I
30
AVERAGE POWER COST/TON
A bove Ave P l a n t s
B elc w Ave P l a n t s
C om b in ed A v e ra g e
AVERAGE DAILY PRODUC­
TION (TONS
A bove Ave P l a n t s
B e low Ave P l a n t s
C o m b in ed A v e ra g e
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om b in ed A v e ra g e
F ig u r e 2 0 .
40
50
I
_ _ _ _ _ _ I_ _ _ _ _ _ --------- 1_______ »
60
70
80
90
100
HO
2 4 -H o u r C a p a c i t y o f P l a n t ( t o n s )
■
120
$ 1 .9 1
0 .9 7
1 .4 3
$ 2 .8 0
1 .6 5
2 .0 4
$ 2 .5 3
1 .5 8
1 .9 6
2 9 .5 4
2 6 .6 7
2 8 .1 1
4 4 .1 2
4 0 .4 0
4 1 .6 5
3 6 .2 6
6 1 .4 3
5 1 .3 6
4 4 .6 0
8 1 .6 8
6 6 .8 5
82%
75
78
84%
73
77
47%
76
64
47%
69
60
A n a l y s i s o f P e r Ton P o w e r C o s t s .
$
130
140
2 . 11
1 .6 2
1 .8 1
F o u r P l a n t S i z e G ro u p s b y 2 4 -H o u r C a p a c it y
VO
95
Gas and O il
Gas and o i l c o s t s p e r to n o f o u t p u t a r e shown i n T a b le X and a r e
p r o j e c t e d o n to F i g u r e 2 1 .
The g a s and o i l c o s t s p e r to n o f o u tp u t h o l d ,
r a t h e r c o n s i s t e n t l y a t a l l s i z e g ro u p s f o r p l a n t s w i t h b e lo w a v e ra g e
c o s ts .
T h is c o s t i s a b o u t $1 as com pared t o t h e o v e r a l l a v e r a g e o f
$ 1 .2 1 p e r t o n .
E ig h ty p e r c e n t o r 16 o f t h e p l a n t s h a d g a s and o i l c o s t s
b e tw e e n $ 0 .5 0 and $ 1 .5 0 p e r t o n .
T hose p l a n t s o p e r a t i n g ab o v e a v e ra g e
i n t h e two s m a l l e r s i z e g ro u p s ru n s l i g h t l y
o v e r $ 1 .5 0 an d t h e l a r g e r
s i z e g ro u p h a s one p l a n t w i t h an e x tr e m e ly h i g h g a s and o i l c o s t o f
$ 3 .4 0 p e r to n w h ic h c a u s e s a much w i d e r v a r i a t i o n i n t h a t s i z e g ro u p
th a n i n any o t h e r g ro u p .
T hose p l a n t s t h a t h a v e th e b e lo w - a v e r a g e c o s t s a r e o p e r a t i n g , i n
g e n e r a l , a t a h i g h e r p e r c e n t a g e o f c a p a c i t y th a n t h o s e p l a n t s t h a t
h a v e t h e h i g h e r c o s t p e r to n o f o u t p u t , s u g g e s t i n g g a s and o i l c o s ts
p e r to n a r e l e s s as p e r c e n t o f o p e r a t i n g c a p a c i t y i n c r e a s e s .
T h e re i s no i n d i c a t i o n t h a t p e r to n g a s and o i l c o s t s d e c r e a s e as
p la n t s iz e in c re a s e s .
fro m f i e l d
T h is r e s u l t m ig h t b e e x p e c te d i n t h a t d i s t a n c e
t o p l a n t r a th e r '" th a n l e v e l o f p l a n t u t i l i z a t i o n w o u ld seem
t o b e t h e p r im a r y d e te r m i n a n t o f g a s and o i l c o s t s .
M a in te n a n c e and R e p a ir
M a in te n a n c e and r e p a i r c o s t s p e r to n o f o u tp u t a r e shown i n T a b le X
and p r o j e c t e d o n to F i g u r e 2 2 .
A v e ra g e m a in te n a n c e and r e p a i r c o s t i s
4
• 13
A v e ra g e G as a n d O i l C o s t f o r
a l l P l a n t s « $ 1 .2 1
. i
• 8
.9
•L2
:} 0
. 14
I
-
*3
.1 6 " 1 1
, 1 9 ‘ 7
'1 8
*20
*5
—
AVERAGE GAS AND OIL
COST PER TCN
A bove Ave P l a n t s
B e lc w Ave P l a n t s
C om b in ed A v e ra g e
AVERAGE DAILY PRODUC­
TION (TONS)
A bove Ave P l a n t s
B elo w Ave P l a n t s
C o m b in ed A v e ra g e
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B elo w Ave P l a n t s
C o m b in ed A v e ra g e
F ig u re 2 1 .
I
30
40
50
I
,
I
l
60
70
80
90
100
HO
2 4 -H o u r C a p a c i t y o f P l a n t (T o n s )
l
i
120
130
140
vo
Ov
$ 1 .6 1
0 .7 9
1 .0 0
$ 1 .5 4
0 .9 7
1 .2 6
$ 1 .3 0
0 .9 2
1 .0 7
$ 3 .4 0
0 .9 9
1 .4 5
1 9 .8 8
3 0 .8 0
2 8 .1 0
3 4 .7 7
4 8 .5 0
4 1 .6 4
4 0 .0 0
5 8 .9 5
5 1 .3 7
5 0 .0 0
7 1 .0 6
6 6 .8 5
56%
86
78
66%
87
77
50%
73
64
52%
62
60
A n a l y s i s o f P e r T on Gas a n d O i l C o s t s .
F o u r P l a n t S i z e G ro u p s b y 2 4 - h o u r C a p a c it y
7
A v e ra g e M a in te n a n c e an d
R e p a ir C o st f o r a l l P la n ts
= $ 3 .1 4 P e r Ton
•8
• 13
4
5
• 16
3 3 .1 4
<§
3
•
6
• 10
•5
.11
19
. 18
•
20
.1 4
• I
3
I
■1— A
,—
v
--------------------------------------- 1------------------- 1-------------------- ------------------- 1---------------------------------------- 1-------------------- 1------------------1-------------------1------------------
30
40
AVERAGE MAINTENANCE AND
REPAIR COST PER TON
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
$ 2 .1 4
$ 2 .1 4
AVERAGE DAILY PRODUCTION
(TONS)
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
2 8 .0 9
2 8 .0 9
F ig u re 2 2 .
»
.7
• 15
2
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om b in ed A v e ra g e
17
78%
78
50
60
70
80
90
100
2 4 -H o u r C a p a c i t y o f P l a n t (T o n s)
HO
120
$ 5 .3 2
2 .1 8
3 .7 5
$ 3 .6 2
2 .4 2
2 .9 0
$ 4 .1 1
2 .5 1
3 .4 7
3 4 .7 7
4 8 .5 0
4 2 .9 7
4 1 .8 5
5 7 .7 0
1 .3 6
5 2 .9 2
8 7 .7 4
6 6 .8 5
66%
87
76
56
70
64
48
79
60
A n a l y s i s o f P e r Ton M a i n te n a n c e a n d R e p a i r C o s t s .
2 4 -H o u r C a p a c i t y .
130
F o u r P l a n t S i z e G roups by
140
'O
98
$ 3 .1 4 p e r to n and t h e m ed ia n i s
$ 2 .8 2 p e r t o n .
The s m a l l e r p l a n t s , 3 0 -4 0
to n ra n g e ,, h a d t h e lo w e s t m a in te n a n c e and r e p a i r c o s t p e r t o n .
th is is
Much o f
th e r e s u l t o f t h e p l a n t m an a g e r h i m s e l f d o in g much o f th e
m a in te n a n c e and r e p a i r an d t h e a c c o u n t in g s y s te m n o t a l l o c a t i n g h i s tim e
t o m a in te n a n c e and r e p a i r .
T h is p a r t i a l l y e x p l a i n s t h e w id e ra n g e o f
th e s e c o s ts .
The p l a n t s w i t h b e lo w - a v e r a g e m a in te n a n c e and r e p a i r c o s t s o p e r a t e d
a t a p e r c e n t a g e o f c a p a c i t y g r e a t e r th a n t h a t o f a h o v e - a v e r a g e p l a n t s .
As p l a n t s i z e i n c r e a s e d , t h e r e seem ed t o b e no c o n s i s t e n t r e l a t i o n s h i p
b e tw e e n m a in te n a n c e and r e p a i r c o s t s and p l a n t s i z e n o r b e tw e e n m a in te n a n c e
and r e p a i r c o s t s and p e r c e n t a g e o f o p e r a t i n g c a p a c i t y .
T o t a l C o n v e rs io n C o s ts
The a v e r a g e t o t a l c o n v e r s io n c o s t s p e r to n o f o u t p u t a r e shown i n
T a b le X an d p r o j e c t e d o n to F ig u r e 2 3 .
c o s t w a s. $ 1 6 .5 5 and t h e m ed ia n $ 1 4 .7 0 .
T he a v e r a g e p e r t o n c o n v e r s io n
E le v e n p l a n t s
(55 p e r c e n t ) h a d
a v e r a g e c o n v e r s io n c o s t s o f b e tw e e n $13 and $15 p e r t o n .
W ith th e
e x c e p t i o n o f t h e 3 0 -4 0 to n r a n g e w h e re a l l p l a n t s w e re b e lo w a v e r a g e ,
p l a n t s w i t h b e lo w - a v e r a g e c o n v e r s io n c o s t s o p e r a t e d a t a g r e a t e r p e r c e n t a g e
o f c a p a c i t y th a n p l a n t s w i t h a b o v e - a v e r a g e c o s t s .
A v e ra g e c o n v e r s io n c o s t s a r e h i g h e s t f o r p l a n t s i n t h e 4 1 -7 0 and
o v e r 90 to n r a n g e s .
The a v e r a g e c o n v e r s io n c o s t s i n t h e o v e r 90 ra n g e
a r e h i g h b e c a u s e o f p l a n t s 7 , 1 3 , and 1 7 .
T h e se t h r e e p l a n t s o p e r a t e i n
a p p r o x im a te ly th e sam e g e o g r a p h i c a l a r e a .
T h e refo re, i t
c a n b e assum ed
E
r4
ft
O
A v e ra g e C o n v e r s io n C o s t f o r a l l P l a n t s
Q
$ 1 6 .5 5 P e r Ton
VO
NO
AVERAGE CONVERSION
COST PER TON
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
2 4 -H o u r C a p a c i t y o f P l a n t (T o n s)
$ 1 3 .8 8
$ 1 3 .8 8
$ 2 0 .1 2
1 3 .3 8
1 6 .7 5
$ 1 9 .0 4
1 4 .6 6
1 5 .5 4
$ 2 3 .2 5
1 3 .9 6
1 9 .5 3
2 8 .1 0
2 8 .1 0
3 4 -7 8
4 8 .5 0
4 1 .6 4
2 7 .5 0
5 7 .3 3
5 1 .3 6
5 2 .9 2
8 7 .7 4
6 6 .8 5
78%
78
66%
87
76
33%
72
64
48%
79
60
AVERAGE DAILY PRODUCT im
(T m s)
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
F ig u r e 2 3 .
A n a l y s i s o f P e r Ton C o n v e r s io n C o s t s .
F o u r P l a n t S i z e G ro u p s b y 2 4 - h o u r C a p a c i t y .
100
t h a t th e y o p e r a t e u n d e r s i m i l a r c o n d i t i o n s .
F o llo w in g i s
an a tte m p t t o
d e te r m in e w h e th e r t h e r e w e re c ir c u m s ta n c e s p e c u l i a r t o p l a n t s 7 , .1 3 , and
17 w h ic h te n d e d t o r e s u l t i n r e l a t i v e l y h i g h c o n v e r s io n c o s t s .
In th e a n a ly s is o f la b o r c o s ts
( F ig u r e 18) i t was f o u n d t h a t p l a n t s
7 , 1 3 , and 17 h a d an a v e r a g e l a b o r c o s t o f $ 8 .4 8 p e r to n a s o p p o sed t o
$ 5 .4 1 f o r p l a n t s 18 a n d 20 ( th e o t h e r p l a n t s i n th e o v e r 90 r a n g e ) .
P l a n t s I an d 13 h a d t h e h i g h e s t l a b o r c o s t o f a l l p l a n t s w h i l e p l a n t 17
was n e a r t h e a v e r a g e .
and 1 7 .
T h u s , t h e r e was v a r i a t i o n among p l a n t s 7 , 1 3 ,
The h o u r l y w age r a t e p a i d by p l a n t s 7 , 1 3 , and 17 was v e ry
c l o s e t o t h a t p a i d b y p l a n t s 18 and 20 ( $ 1 .7 2 t o $ 1 .6 8 ) a s was t h e am ount
o f l a b o r em p lo y ed ( 7 .5 t o 7 .0 e m p lo y e e s ) .
P l a n t s 7 , 1 3 , and 17 o p e r a t e d
a t 48 p e r c e n t o f c a p a c i t y w h i l e p l a n t s 18 and 20 o p e r a t e d a t 78 p e r c e n t
o f c a p a c ity .
T h is d i f f e r e n c e i n p e r c e n t a g e o f o p e r a t i n g c a p a c i t y p l u s
t h e v a r i a t i o n among p l a n t s 7 , 1 3 , and 17 m akes i t a p p e a r t h a t low
d a i l y p r o d u c t i o n r a t h e r th a n l o c a t i o n a l f a c t o r s i s t h e r e a s o n f o r t h e
h i g h l a b o r c o s t s e x p e r i e n c e d by p l a n t s 7 , 1 3 , and 17.
I n th e a n a ly s is o f f u e l c o s ts
( F ig u r e 19) i t was fo u n d t h a t p l a n t s
7 , 1 3 , and 17 w e re t h e p l a n t s w i t h t h e h i g h e s t f u e l c o s t s .
T h e se
o p e r a t e d a t 48 p e r c e n t o f c a p a c i t y as o p p o s e d t o 78 p e r c e n t f o r p l a n t s
18 and 2 0 .
H o w ev er, t h e f a c t t h a t p l a n t s 7 , 1 3 , and 17 a l l h a d f u e l
c o s t s c o n s i d e r a b l y h i g h e r th a n t h e o t h e r p l a n t s i n t h e s u r v e y i n d i c a t e s
o t h e r f a c t o r s may b e i n v o l v e d .
r e l a t i v e l y h ig h in t h i s a r e a .
I t may b e t h a t t h e c o s t o f f u e l i s
I t i s a l s o p o s s i b l e t h a t t h e raw a l f a l f a
101
m o is t u r e c o n t e n t may b e h i g h e r i n t h i s a r e a th u s r e q u i r i n g g r e a t e r
f u e l c o n s u m p tio n p e r to n o f d e h y d r a te d a l f a l f a p r o d u c e d .
P ow er c o s t a n a l y s i s
( F ig u r e 20) r e v e a l e d t h a t p l a n t s
com pered f a v o r a b l y w i t h t h e o t h e r p l a n t s i n th e s u r v e y .
7 , 1 3 , and 17
I t w i l l be
r e c a l l e d t h a t n o c o n s i s t e n t r e l a t i o n s h i p b e tw e e n pow er c o s t s and p e r c e n ta g e
o f o p e r a t i n g c a p a c i t y w as d i s c o v e r e d .
T h u s, p l a n t s 7 , 1 3 , a n d 17 com pare
f a v o r a b l y w i t h t h e o t h e r p l a n t s i n t h e s u r v e y i n a c o s t c a te g o r y w h e re
p e r c e n t a g e o f o p e r a t i n g c a p a c i t y d id n o t seem t o b e a s i g n i f i c a n t f a c t o r .
I n t h e a n a l y s i s o f g a s and o i l c o s t s
( F ig u r e 21) p l a n t s
7 and 17
h a d b e lo w a v e r a g e c o s t s w h i l e p l a n t 13 was above a v e r a g e a n d , i n a d d i t i o n ,
h a d t h e h i g h e s t g a s an d o i l c o s t o f a l l p l a n t s .
in d ic a te s
T h is d i s p e r s i o n
t h a t t h e g a s and o i l c o s t s e x p e r i e n c e d by p l a n t s 7 , 1 3 , and 17
b e c a u s e o f t h e i r l o c a t i o n d id p o t p l a c e them a t a d is a d v a n t a g e i n c o s t
c o m p a r is o n s ,w ith o t h e r p l a n t s . i n
th e s u r v e y .
I f th e re had been lo c a tio n a l
d i s a d v a n t a g e s , p l a n t s 7 , 1 3 , and 17 p r o b a b l y w o u ld a l l h a v e h a d
e x c e e d i n g ly h i g h g a s and o i l c o s t s .
To su m m a riz e , t h e r e i s some r e a s o n t o b e l i e v e t h a t l o c a t i o n a l f a c t o r s
( p r i m a r i l y r e g i o n a l d i f f e r e n c e s i n i n p u t p r i c e s and m o i s t u r e c o n te n t o f
raw a l f a l f a ) may h a v e r e s u l t e d i n r e l a t i v e l y h ig h f u e l c o s t s f o r p l a n t s
7 , 1 3 , and 1 7 .
I n g e n e r a l , h o w e v e r, t h e r e l a t i v e l y h i g h c o s t p o s i t i o n
o f t h e s e p l a n t s seem s t o r e s u l t fro m o p e r a t i n g a t a low p e r c e n t a g e o f
c a p a c ity .
P la n t 9 f a l l s
i n t h e ab o v e a v e r a g e g ro u p f o r a l l c o s t c a t e g o r i e s .
I t em p lo y ed one man a t t h e p l a n t w h i l e t h e o t h e r p l a n t s i n th e 41-70
102
to n r a n g e em p lo y ed I ,
1 .5 , o r 2.
I n t h e f i e l d , h o w e v e r, p l a n t 9 em ployed
6 men a s o p p o se d t o b e tw e e n 2 and 4 f o r t h e o t h e r p l a n t s i n t h e 4 1-70
ran g e .
The i n d i c a t i o n , i s t h a t p l a n t 9 may h a v e h a d t o o p e r a t e u n d e r
a d v e rse f i e l d
c o n d itio n s .
I n f a c t , t h e a r e a i n w h ic h t h i s p l a n t i s
l o c a t e d e x p e r i e n c e d an e x c e p t i o n a l l y d ry g ro w in g s e a s o n i n t h e y e a r f o r
w h ic h t h e c o s t d a t a was o b t a i n e d .
Low er th a n u s u a l a l f a l f a y i e l d s w o u ld
a l s o te n d t o i n c r e a s e f u e l , p o w e r, and g a s and o i l c o s t s .
P la n t 9
o p e r a t e d a t 67 p e r c e n t o f c a p a c i t y as o p p o se d t o 78 p e r c e n t f o r th e
o t h e r p l a n t s i n th e 4 1 -7 0 to n c a p a c i t y r a n g e .
The a v e r a g e t o t a l c o n v e r s io n c o s t s o f t h e b e lo w a v e r a g e p l a n t s
o r 65 p e r c e n t o f a l l p l a n t s i n t h e s u r v e y ) show l i t t l e
p la n t s iz e in c re a s e s .
The v a r i a t i o n
(13
v a r i a t i o n as
t h a t d o es e x i s t i s i n v e r s e l y r e l a t e d
t o p e r c e n t a g e o f o p e r a t i n g c a p a c i t y — h i g h a v e ra g e t o t a l c o n v e r s io n c o s t s
a r e a s s o c i a t e d w i t h low p e r c e n t a g e s o f o p e r a t i n g c a p a c i t y .
F ix e d C o s ts
F ix e d c o s t s p e r to n o f o u t p u t a r e shown i n T a b le XI an d p r o j e c t e d
o n to F i g u r e 2 4 .
is
The m a jo r p o r t i o n o f t h e f i x e d c o s t s f o r p l a n t s s u rv e y e d
t h e o w n e rs h ip c o s t .
The i n i t i a l i n v e s t m e n t i n f a c i l i t i e s
o v er t h e i r p ro d u c tiv e l i f e
o w n e rs h ip c o s t .
and d e p r e c i a t i o n ,
th e re fo re , is
i s sp re a d
t h e p rim e
A d m i n i s t r a t i v e p e r s o n n e l w h ic h was v e r y h i g h i n te rm s
o f s a l a r i e s in th e su rv e y p la n ts i s a s i g n i f i c a n t f ix e d c o s t.
T axes,
i n s u r a n c e , i n t e r e s t on in v e s tm e n t and o t h e r m is c e ll a n e o u s f i x e d c o s t s
p r o v i d e a t o t a l f i x e d c o s t r a n g in g fro m a low o f $ 4 .0 4 p e r t o n t o a
103
TABLE X I.
P la n t
Code
FIXED COSTS PER TON OF OUTPUT FOR 20 ALFALFA DEHYDRATION
PLANTS, 1966 SURVEY.
S a la rie s
and
Wages
D e p re c ia tio n In s u ra n c e
T axes
In te r e s t
O th e r
T o ta l
F ix e d
C o sts
2 .4 0
0 ,1 2
0 .8 8
0 .7 4
9 .3 4
7 .0 2
5 .9 0
7 .2 4
1 .1 7
0 .0 4
1 .3 8
7 .5 6
7 .0 8
8 .9 6
1 8 .09
7 .9 8
4 .0 4
-------- D o l l a r s -----3
I
5
6
I /
I /
3 .2 1
2 .7 3
1 .8 1
3 .0 0
1 .1 3
4 .0 0
0 .5 7
0 .0 3
0 .3 2
0 .6 9
0 .5 9
0 .5 9 :
2
8
12
9
10
15
4 .0 3
2 .1 8
2 .7 4
7 .3 7
0 .9 7
1 .3 4
1 .0 0
4 .0 0
2 .2 0
5 .2 5
4 .0 4
1 .1 3
0 .5 7
0 .0 4
0 .2 7
1 .5 1
0 .6 8
0 .5 3
0 .2 4
0 .8 2
0 .4 3 .
0 .7 0
0 .5 0
0 ,4 1
16
11
14
4
19
2 .1 9
2 .8 1
0 .7 9
2 .4 2
2 .1 1
0 .8 9
3 .8 3
4 .2 8
5 .0 9
1 .4 3
0 .3 5
1 .0 7
0 .4 9
0 .7 9
0 .5 5
0 .5 8
0 .2 8
0 .5 2
0 .2 7
0 .9 2
7
13
18
.20
17
3 .0 9
3 .3 7
0 .8 5
1 .3 8
1 .6 7 .
2 .0 2
3 .5 0
3 .4 9
1 .6 0
3 .0 3
0 .7 1
0 .6 0
0 .3 2
0 .8 9
0 .4 7
0 .6 4
1 .1 8
0 .5 5
0 .2 4
0 .5 7
I/
S a la rie s
0 .7 5
— —
0 .2 5
1 .9 4
3 .26
0 .6 9
0 .4 6
1 .4 8
2.6 2
0 .2 7
0 .5 7
1 .2 5
0 .4 2
1 .1 0
0 .6 3
1 .3 4
0 .5 8
2 .1 2
0 .5 3
0 .4 2
1 1 .7 2
5 .4 3
0 .2 5
0 .3 1
0 .6 4
0 .3 1
0 .3 1
9 .5 3
7 .1 0
4 .4 2
6 .4 7
and d e p r e c i a t i o n com bined f o r a t o t a l o f $ 5 .8 7 .
5 .3 5
9 .0 3
9.6 8
6 .98
$
1 8 . 0 9
l2_=_Sa,0S_Per_T2n____
60
70
80
90
100
I
2 4 -H o u r C a p a c i t y o f P l a n t (T o n s)
104
AVERAGE FIXED COST/TON
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
? 9 .3 4
6 .7 2
7 .3 8
$ 1 3 .5 3
6 .6 7
8 .9 5
$ 1 0 .1 5
5 .3 9
8 .2 4
$ 9 .5 3
6 .2 4
6 .9 0
2 5 .6 0
2 8 .9 3
2 8 .0 9
4 4 .1 1
4 0 .4 1
4 1 .6 4
4 1 .6 6
6 5 .9 2
5 1 .3 6
5 0 .0 0
7 1 .0 6
6 6 .8 5
71%
81
78
84%
73
76
53%
81
64
52%
62
60
AVERAGE DAILY PRODUCT im
(T m s)
A bove Ave P l a n t s
B elow Ave P l a n t s
C om bined A v e ra g e
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om bined A v e ra g e
F ig u re 2 4 .
c o s ts .
A n a l y s i s o f P e r Ton F ix e d C o s t s .
I/
F o u r P l a n t S i z e G ro u p s b y 2 4 -H o u r C a p a c it y
105
h i g h o f $ 1 8 .0 9 p e r to n i n th e p l a n t s s u r v e y e d .
The a v e r a g e f i x e d c o s t
p e r to n was $ 8 .0 5 f o r a l l p l a n t s and t h e m ed ian was $ 7 .4 0 p e r to n .
T h e re w e re 13 o f t h e 20 p l a n t s w i t h b e lo w - a v e r a g e f i x e d c o s t s and th e y
te n d t o c l u s t e r b e tw e e n $ 7 .4 0
and $8 p e r to n o f o u t p u t .
In g e n e ra l,
p l a n t s w h ic h h a d t h e lo w e s t a v e ra g e f i x e d c o s t s a l s o o p e r a t e a t a
h ig h e r p e rc e n ta g e o f c a p a c ity .
h o u r c a p a c ity ra n g e .
la rg e ly a ttr ib u ta b le
and b o o k k e e p in g .
The e x c e p t i o n i s i n th e 4 1 -7 0 to n p e r
P l a n t 9 h a d an u n u s u a l l y h ig h f i x e d c o s t t h a t was
to th e m an a g e r. ta k in g a h ig h e r r e tu r n f o r s a la r y
T h is c o n t r i b u t e d t o t h e h ig h a v e ra g e f i x e d c o s t o f
t h e 4 1 -7 0 t o n c a p a c i t y r a n g e .
P la n t 1 2 , th e o th e r a b o v e -a v e ra g e p la n t
i n th e 4 1 -7 0 to n r a n g e was c l o s e t o a v e r a g e .
D e p r e c i a t i o n f o r th e
p l a n t s ra n g e d fro m a low o f $ 0 .8 9 t o a h i g h o f $ 5 .2 5 p e r t o n .
S a la rie s
ra n g e d fro m $ 0 .7 9 t o $ 7 .3 7 p e r t o n .
T o t a l C o s ts
T o t a l c o s t s a r e shown i n T a b le X II a n d a r e p r o j e c t e d o n to F ig u r e 2 5 .
The com bined a v e r a g e o f a l l p l a n t s d o es n o t i n d i c a t e t h a t a v e r a g e t o t a l
c o s t d e c r e a s e d as p l a n t s i z e i n c r e a s e d .
H o w ev er, i t s h o u ld b e rem em bered
t h a t f o r t h e com bined a v e r a g e , p e r c e n t a g e o f o p e r a t i n g c a p a c i t y d e c r e a s e d
as p la n t s i z e in c r e a s e d .
W ith one e x c e p t i o n , t h e r e l a t i v e l y m ore e f f i c i e n t
(b e lo w a v e ra g e )
p l a n t s i n e a c h c a p a c i t y r a n g e e x h i b i t an i n v e r s e r e l a t i o n s h i p b e tw e e n
p l a n t s i z e and a v e r a g e t o t a l c o s t .
to n c a p a c i t y r a n g e .
The e x c e p t io n o c c u r s i n th e 71-90
I n t h i s r a n g e , t h e a v e r a g e t o t a l c o s t o f th e b e lo w -
a v e r a g e p l a n t s i s g r e a t e r th a n t h a t o f t h e b e lo w - a v e r a g e p l a n t s i n t h e
TABLE X I I .
TOTAL COSTS PER TON OF OUTPUT, 20 PLANTS, 1966 SURVEY.
O u tp u t P e r
. 2 4 -H o u r
O p e r a tin g
' Day
'
Tons
P e rce n t of
.C a p a c ity
at w hich
P la n t
O p e ra te d
P e rce n t
T o ta l
C o n v e rs io n
C o s ts P e r
Ton o f
O u tp u t
T o ta l
T o ta l
V a r ia b l e
C o s ts P e r
F ix e d C o s ts T o t a l C o st
Ton o f
P e r Ton
P e r Ton
O u tp u t I /
o f O u tp u t
o f O u tp u t
---- ,-------------! D o l la r s --------------
2 4 -H o u r
C a p a c ity
o f P la n t
' Tons
3
I
5
6
2
30
30
36
36
48
2 5 .6 0
1 9 .9 8
3 3 .3 3
3 3 .4 8
2 4 .3 9
71
56
93
93
47
13, 72
1 4 .9 6
1 3 .1 8
1 3 .3 6
1 8 .8 3
1 4 .0 3
1 4 .9 6
1 3 .1 8
1 3 .5 6
2 0 .4 0
9 .3 4
7 .0 2
5 .9 0
7 .2 4
7 .5 6
2 3 .0 6
2 1 .9 8
1 9 .0 8
2 0 .6 0
2 6 .4 4
8
12
9
10
15
48
48
60
60
60
3 9 .9 4
4 8 .2 1
4 0 .0 0
4 3 .9 2
5 3 .3 8
83
100
67
73
1 7 .9 1
1 4 .5 8
2 4 .7 9
1 5 .1 8
1 2 .0 5
7 .0 8
8 .9 6
1 8 .0 9
89
1 7 .6 6
1 4 .5 3
2 3 ,8 1
1 3 .5 6
1 2 .0 5
2 4 .7 4
. 2 3 .4 9
4 1 .9 0
2 1 .5 4
16 .0 9
16
11 '
14
4
19
72
78
78
84
5 6 .2 0
4 5 .0 2
78
58
67
33
84
1 4 .8 8
1 5 .9 5
14.3-8
1 9 .0 4
1 3 .4 3
1 5 .1 3
1 6 .5 5
1 8 .2 6
2 0 .1 9
1 3 .4 3
5 .3 5
. 9 .0 3
41
52
74
2 2 .6 5
2 6 .2 7
1 3 .5 9
1 4 .3 2
2 0 .8 2
2 2 .6 5
6.9 8
26.27
9 .5 3
7 .1 0
4 .4 2
7
13
18
20
' 17
JL/
90
96
96
102
120
■ "140 " "
.
.
52.45
2 7 .5 0
7 5 .6 4
3 9 .2 0
5 0 ,0 0
7 5 .4 8
1 0 0 ,0 0
6 9 .5 0
83
.
.50
. . .
.
1 6 .5 8
■14.32
2 0 .8 2
I n c l u d e s s t o r a g e , d e l i v e r y , and m is c e lla n e o u s - c o s t s .
7.9 8
4 .0 4
9.6 9
1 1 .7 2
5 .4 3
6.47
2 0 .2 3
2 4 .9 8
2 4 .0 7
3 0 .7 6
1 8 .8 6
2 9 .6 3
3 5 .8 0
2 0 .6 9
1 8 .7 4
2 7 .2 9
106
P la n t
Code '
42
40
. y
•
38
36
• 13
34
32
.4
30
.7
28
. 2
_8 A v e ra g e T o t a l . I l C o s t
26
24
20
.12
3
22
*14
]
-
18
17
f o r a l l P l a n t s = $ 2 4 .5 0
•10
. 16
•6
•5
• 18
19
.2 0
. 15
,
I
i
60
70
80
90
100
HO
2 4 -H o u r C a p a c it y o f P l a n t (T o n s)
AVERAGE TOTAL COST /TON
A bove Ave P l a n t s
B elo w Ave P l a n t s
C om b in ed A v e ra g e
AVERAGE DAILY PRODUCTION (TONS)
A bove Ave P l a n t s
B elo w Ave P l a n t s
C o m b in ed A v e ra g e
AVERAGE PERCENT OF
CAPACITY AT WHICH
PLANT OPERATED
A bove Ave P l a n t s
B e le w Ave P l a n t s
C om bined A v e ra g e
F ig u re 2 5 .
$ 2 1 .1 8
2 1 .1 8
$ 3 1 .0 3
2 0 .3 7
2 5 .7 0
$ 2 7 .8 7
2 1 .0 5
2 3 .7 8
$ 3 0 .9 1
1 9 .7 2
2 6 .4 3
2 8 .0 9
2 8 .0 9
3 4 .7 7
4 8 .5 0
4 1 .6 4
3 6 .2 6
6 1 .4 3
5 1 .3 6
5 2 .9 2
8 3 .7 1
6 6 .8 5
78%
78
66%
87
76
46%
68
64
48%
79
60
A n a l y s i s o f P e r T on T o t a l C o s t s .
I
120
I
130
140
F o u r P l a n t S ize 2 G ro u p s b y 2 4 -H o u r C a p a c i t y .
107
------------- 1_________ I_________
108
p r e c e d in g ' (4 1 -7 0 to n )
ran g e .
H ow ever, t h e b e lo w - a v e r a g e p l a n t s i n th e
7 1 -9 0 to n c a p a c i t y r a n g e o p e r a t e d a t 68 p e r c e n t o f c a p a c i t y a s o p p o sed
t o 87 p e r c e n t f o r t h e p l a n t s i n t h e 4 1 -7 0 to n c a p a c i t y r a n g e and 79
p e r c e n t f o r t h e p l a n t s i n t h e 9 1 -1 4 0 to n c a p a c i t y r a n g e .
B re a k e v e n A n a ly s is
B re a k e v e n a n a l y s i s i s
concept is
commonly u s e d a s an a n a l y t i c a l t o o l .
c o v e re d i n te x tb o o k s i n t h e a r e a s o f q u a n t i t a t i v e m anagem ent,
q u a n t i t a t i v e a n a l y s i s , m a n a g e r i a l e c o n o m ic s , e t c . 29_/
p o in t i s
The
The b r e a k e v e n
t h e volum e o r l e v e l o f o p e r a t i o n a t w h ich t o t a l re v e n u e i s e q u a l
to t o t a l c o s t.
B re a k e v e n a n a l y s i s may b e a p p ro a c h e d e i t h e r g r a p h i c a l l y
or a lg e b ra id a i l y .
The a p p ro a c h h e r e i s
a lg e b ra ic .
The b r e a k e v e n p o i n t o c c u r s w h e re t o t a l re v e n u e (TR) i s e q u a l to
t o t a l f ix e d c o s ts
(TFC) p l u s t o t a l v a r i a b l e c o s t s (TVC).
S in c e t o t a l
re v e n u e i s e q u a l t o s e l l i n g p r i c e tim e s q u a n t i t y s o l d (PQ) and t o t a l
v a r i a b l e c o s t e q u a ls a v e r a g e v a r i a b l e c o s t tim e s q u a n t i t y
(AVC x Q ), th e
ab o v e s t a t e m e n t may b e e x p r e s s e d s y m b o l i c a l l y a s :
29/
S e e , f o r e x a m p le : L e v in , R ic h a r d L and C. I . K i r k p a t r i c k , Q u a n t i t a ­
t i v e A p p ro a c h e s t o M anagem ent, (New Y o rk , 1 9 6 8 ), p p . 1 6 -4 6 ; B r a b b ,
G eo rg e J . , I n t r o d u c t i o n t o Q u a n t i t a t i v e M anagem ent, (New. Y o rk ,
1 9 6 8 ) , p p . 2 6 - 2 8 ; and H o w e ll, Jam es E . and D a n ie l T h e ic h ro e w , M athe­
m a t i c a l A n a ly s is f o r B u s in e s s D e c i s i o n s , (Homewood, I l l i n o i s , 1 9 6 3 ) ,
p p . 8 0 -9 4 .
109
PQ = TFC + (AVC x Q)
Q = ^ Z £ _
w h e re 0 = t h e b r e a k e v e n p o i n t i n te rm s o f vo lu m e.
The b a s i c b r e a k e v e n f o r m u la can b e m a n ip u la te d t o e x p o s e raw m a t e r i a l
c o s t as a v a r i a b le f a c t o r .
The f o r m u la th e n becom es
PQ = TFC + (AVC x Q) + (R x Q)
w h e re R = t h e p e r to n c o s t o f raw a l f a l f a p u r c h a s e d .
S o lv in g f o r Q, th e f o r m u la becom es
O . - I FC,
v
. P-AVC-R
P o s i t i v e . N e t R e tu rn s
At b r e a k - e v e n volum e a l l c o s t s o f p r o d u c t i o n b o t h f i x e d and v a r i a b l e
h av e b een c o v e re d .
F ix e d c o s t s , by d e f i n i t i o n , do n o t v a r y w ith vo lu m e.
A f t e r b r e a k - e v e n volum e i s
p o s itiv e n e t re tu rn s .
re a c h e d a d d it io n a l p ro d u c tio n r e s u l t s in
T h e se p o s i t i v e n e t r e t u r n s a r e in d e p e n d e n t o f f i x e d
c o s t s and can b e d e te r m in e d by t h e f o r m u la
P o s i t i v e n e t r e t u r n s = TR1 - TVCf - TAPf
w h e re TRf = T o t a l r e v e n u e a f t e r b r e a k - e v e n
TVCf = T o t a l v a r i a b l e c o s t s a f t e r b r e a k - e v e n
TAPf = T o t a l a l f a l f a p u r c h a s e s a f t e r b r e a k - e v e n
HO
<
The f o r m u la may b e r e w r i t t e n as
P o s i t i v e n e t r e t u r n s = PQ' - AVC x 0 ' - PO* = 0* (P-AVC-R)
. w h e re 0 ' = D a ily o u t p u t tim e s num ber o f o p e r a t i n g d a y s a f t e r
b rea k e v e n .
A p p l i c a t i o n o f B re a k -E v e n A n a ly s is
t o S u rv e y D a ta
The r e s u l t s o f t h e b r e a k - e v e n a n a l y s i s f o r t h e p l a n t s i n t h e s u rv e y ,
a r e p r e s e n t e d i n T a b le X I I I .
I n t e r e s t on in v e s tm e n t was n o t in c l u d e d a s
a c o s t i n d e te r m in in g b r e a k e v e n v o lu m e .
The a p p ro a c h u s e d was to
c a l c u l a t e p o s i t i v e n e t r e t u r n s a n d . c a p i t a l i z e them f o r an assum ed
d is c o u n t r a t e .
R e tu r n s e x p e c te d a t some tim e i n t h e f u t u r e a r e d i s c o u n t e d by th e
f o rm u la
( 1 + i)
+
(1 + i)
(1 + i)
w h e re V = p r e s e n t v a l u e o f t h e e x p e c t e d r e t u r n s
R^ = r e t u r n i n p e r i o d I
Rg = r e t u r n i n p e r i o d 2
R^ = r e t u r n i n p e r i o d n
i = t h e r a t e a t w h ic h t h e f u t u r e r e t u r n s a r e d i s c o u n t e d .
TABLE X IT I.
BREAKEVEN ANALYSIS APPLIED TO SURVEY DATA.
A v erag e
P ric e
P u rc h ase
P ric e
R e c e iv e d
O u tp u t P e r P e r c e n t o f
C o st
C a p a c ity a t
fo r
A v e ra g e
o f Raw
o f Sacks
C o st o f
2 4 -H o u r
2 4 -H o u r
V a ria b le
A lfa lfa
P l a n t . C a p a c ity O p e r a tin g w h ic h P l a n t D e h y d ra te d
P e r Ton A d d i t iv e s P e r
CR).
' O p e r a te d ’ A l f a l f a CP) C o s ts (AVC)
C ode' ' o f P la n t
Day
o f O u tp u t Ton o f O u tp u t
' Tons
' P e rce n t
' Tons
3
I
5
6
30
30
36
36
2 5 .6 0
1 9 .9 8
3 3 .3 3
3 3 .4 8
71
56
93
93
4 5 .0 0
2 9 .9 0
3 3 .4 5
4 5 .0 2
1 4 .0 3
1 4 .9 6
1 3 .1 8
1 3 .5 6
5 .0 0
9 .9 6
9 .4 6
1 3 .0 1
.7 0
2
8
12
9
10
15
48
48
48
60
60
60
2 4 .3 9
3 9 .9 4
4 8 .2 1
4 0 .0 0
. 4 3 .9 2
5 3 .3 8
47
83
100
67
73
89
4 0 .2 6
4 6 .0 2
3 9 .4 1
4 3 .5 0
3 5 .8 0
3 1 .7 0
2 0 .4 0
1 7 .9 1
1 4 .5 8
2 4 .7 9
1 5 .1 8
1 2 .0 5
1 0 :5 0
1 4 .6 1
1 3 .5 3
9 .0 0
1 0 .0 0
9 .4 2
.2 5 .
16
11
14
4
19
72
78
78
84
90
5 6 .2 0
4 5 .0 2
5 2 .4 5
2 7 .5 0
7 5 .6 4
78
58
67
33
84
3 4 .7 3
3 6 .1 2
3 9 .4 4
4 5 .0 0
3 1 .9 0
1 5 .1 3
1 6 .5 5
1 8 .2 6
2 0 .1 9
1 3 .4 3
9 .3 4
6 .8 5
1 0 .0 0
1 0 .2 7
9 .5 2
7
13
18
20
17
96
96
102
120
' .140
3 9 .2 0
5 0 .0 0
7 5 ,4 8
1 0 0 .0 0
. . 6 9 .5 7
3 9 .5 8
3 9 .5 8
3 1 .1 9
3 2 ,5 0
3 9 .5 8 .
2 2 .6 5
2 6 .2 7
1 6 .5 8
1 4 .3 2
2 0 .8 2
9 .1 9
9 .8 3
9 .0 7
9 .7 1
9 .0 5
1 .0 9
.90
.3 0
• .3 1
.30
.50
Ill
41
52
74
83
.50 .
•
.3 3
.3 4
.32
.
.72
.1 0
.5 1
.16
.35
.0 6
.4 8
.3 2
.39
: .9 0 .
.1 3
.1 4
..
TABLE XIXX.
P-AVC-R
'D o lla rs
BREAKEVEN ANALYSIS APPLIED TO SURVEY DATA ( c o n t 'd ) .
T o ta l
. E i x e d ■:
' '.C osts.,
' D o lla rs
B re a k e v e n
■Volume ■
' ' TFC ..
' " P t-AVC-R
Tons
Number o f
2 4 -H o u r
A c tu a l
O p e r a tin g
Number o f
Days R e q u ire d 2'4-H our
A c tu a l
W orking
t o B re a k e v e n
V o lu m e ' ' 0 /D S i Iy.. O u tp u t
Days
' Tons
' Days
' Days
Days from
B e g in n in g
P o s itiv e
t o end o f P o s i t i v e ' N e t R e tu rn s
O p e r a tin g
N et
C a p ita liz e d
S e a so n R e tu rn s a t 8 P e r c e n t
Days
------ D o ii& rs -------
2 5 .2 7
4 .9 8
1 0 .4 8
1 8 .4 5
1 4 ,9 4 4
1 6 ,1 3 2
3 0 ,2 8 4
3 5 ,1 4 3
801
3 ,2 3 9
2 ,8 9 0
1 ,9 0 5
1 ,6 0 0
2 ,2 9 8 *
5 ,1 3 3
4 ,8 5 4
32
162
87
56
6 2 .5
115
154
145
167
128
167
158
1 9 ,4 0 7
**
2 3 ,4 0 3
5 4 ,9 7 6 '
2 7 7 ,2 4 3
8 , 81
1 3 ,1 9
9 ,9 0
8 ,3 1
1 0 .6 7
9 .8 9
2 1 ,2 4 0
4 1 ,0 0 0
6 0 ,4 8 0
4 3 ,4 1 6
4 3 ,8 1 0
2 8 ,6 8 4
2 ,4 1 1
3 ,1 0 9
6 ,1 0 9
5 ,2 2 5
4 ,1 0 5
2 ,9 0 0
3 ,0 0 0
5 ,7 9 1
6 ,7 5 0
2 ,4 0 0 *
5 ,4 9 0
7 ,1 0 0
99
78
126
130
93
54
123
145
140
60
125
133
162
158
164
136
154
158
5 ,1 5 7
3 5 ,2 9 6
6 ,6 8 2
**
1 4 ,9 9 6
4 1 ,9 1 7
7 3 ,6 7 1
5 0 4 ,2 2 9
9 5 ,4 5 7
9 .9 4
1 2 .7 2
9 ,9 5
1 4 ,2 8
8 .6 0
4 8 ,4 0 7
5 7 ,3 3 1
6 1 ,5 0 2
3 8 ,6 7 6
5 5 ,4 4 6
4 ,8 9 6
4 ,8 0 7
6 ,1 8 1
2 ,7 0 8
6 ,4 4 7
87
106
118
98
85
101.
141
121
120
135
174
163
142
132
160
4 1 ,3 3 8
2 0 ,0 4 2
1 ,5 6 6
8 ,6 3 9
32,-525
5 9 0 ,5 4 3
2 8 6 ,3 1 4
2 2 ,3 7 1
1 2 3 ,4 1 4
4 6 4 ,6 4 3
102
102
134
115
138 .
154
154
160
158
182
1 ,7 3 1
**
AA
5 0 ,0 4 0
, 2 1 ,1 1 1
2 4 ,7 2 9
I/
**
.
2 7 ,9 0 6
4 8 ,6 0 3
7 1 ,8 0 9
4 5 ,5 2 6
.6Z,UZ. .
3 ,7 9 1
1 8 ,6 2 1
1 2 ,9 6 1
5 ,4 5 9
" .7 ,1 6 4 '" . . .
3 ,9 9 8
5 ,1 0 0 *
1 0 ,1 1 4 *
1 0 ,3 0 0
9,600.
96
55
'1 0 3 . .
'
2 1 4 ,2 2 9
5 9 8 ,8 1 4
7 1 4 ,8 5 7
3 0 1 ,5 8 5
I n t e r e s t on in v e stm e n t i s n o t in c lu d e d . ■^ 'In d ica te s B reakeven volum e e x c e e d e d a c t u a l volu m e„
I n d i c a t e s t h e r e ^ e r e no p o s i t i v e -r e tu r n s.
112
7 .3 6
2 .6 1
5 .5 4
8 .3 4
8.67
9 ,0 4 8
6 ,3 4 8
6 ,3 4 7
3 ,3 0 0
1 0 ,2 1 1
3 3 4 ,329
7 8 5 ,3 7 1
I
113
I f t h e p o s i t i v e n e t r e t u r n s fro m a d e h y d r a t in g p l a n t a r e d i s c o u n t e d
over i t s
e x p e c te d l i f e , th e n V, th e p r e s e n t v a l u e , i s an i n d i c a t i o n o f
th e v a lu e o f th e p l a n t .
V i s o f t e n r e f e r r e d t o a s t h e c a p i t a l i z e d v a lu e
o f t h e e x p e c te d f u t u r e , r e t u r n s .
When t h e r e t u r n s a r e e x p e c t e d t o c o n ti n u e
o v e r an e x te n d e d p e r i o d o f y e a r s t h e f o r m u la
g iv e s - a r e a s o n a b ly a c c u r a t e e s t i m a t e o f t h e c a p i t a l i z e d v a l u e .
T h is
f o r m u la was u s e d t o com pute t h e v a lu e s i n t h e l a s t colum n o f T a b le X.
F o u r o f t h e f ir m s d i d n o t a t t a i n b r e a k - e v e n v o lu m e .
F irm I s o l d i t s
p r o d u c t a t t h e lo w e s t p r i c e , h a d t h e h i g h e s t a v e ra g e v a r i a b l e c o s t , and
p a i d t h e s e c o n d h i g h e s t p r i c e f o r raw a l f a l f a i n t h a t c a p a c i t y r a n g e .
It
n e e d s 162 o p e r a t i n g d ay s t o b r e a k - e v e n i n an o p e r a t i n g s e a s o n l a s t i n g 128
days.
Low d a i l y o u t p u t and a p r o d u c t p r i c e t h a t i s
i n t h e s u r v e y seem t o b e t h e c r i t i c a l f a c t o r s .
p la n t in i t s
c a p a c ity ra n g e .
lo w e s t o f a l l p l a n t s
P la n t 9 i s
The p l a n t , h o w e v e r, o p e r a t e d o n ly th e
e q u i v a l e n t o f s i x t y 2 4 - h o u r d ays when 136 w e re p o s s i b l e .
to in d ic a te a s h o rta g e of a l f a l f a .
a re a b e c a u se o f d ro u g h t.
c a p a c ity ra n g e .
T h is w o u ld seem
Y i e l d s , i n f a c t , w e re low i n t h i s
P l a n t 13 i s
a l s o t h e h ig h c o s t p l a n t i n i t s
P l a n t 18 h a s r e l a t i v e l y
re c e iv e d a r e l a t i v e l y
t h e h ig h c o s t
low p r i c e f o r i t s
low a v e ra g e v a r i a b l e c o s t s b u t
p ro d u c t.
I n a d d i t i o n , p la n t, 18
h ad th e h ig h e s t f ix e d c o s ts o f a l l p la n ts in th e s u rv e y .
T h e re a r e 8 p l a n t s i n T a b le X I I I w h e re t h e c a p i t a l i z e d v a lu e s o f
t h e p o s i t i v e n e t r e t u r n s p r o b a b ly e x c e e d t h e in v e s tm e n t ( c o s t o f p l a n t
114
p lu s i n t e r e s t )
n e e d e d t o i n s t a l l and e r e c t t h e f a c i l i t y .
6 , 8 , 1 5 , 1 6 , 1 9 , and 2 0 .
T h e se a r e p l a n t s
P o s s i b l y p l a n t s 3 , 5 , 1 1 , and 17 c o u ld b e
b u i l t f o r th e c a p i t a l i z e d v a lu e o f th e p o s it i v e n e t r e t u r n s .
L i m i t a t i o n s o f P r e c e d in g A n a ly s is
I n a d d i t i o n t o t h e s h o r tc o m in g s o f c o s t a c c o u n tin g d a t a m e n tio n e d
i n C h a p te r I I ,
t h e p r e c e d in g a n a l y s i s h a s s e v e r a l o t h e r l i m i t a t i o n s . ■
T h e re w as n o i n d i c a t i o n o f e c o n o m ies o f s c a l e .
T h is may h a v e b e e n due
t o t h e f a c t t h a t p l a n t s w i t h l a r g e r c a p a c i t i e s u s u a l l y o p e r a t e d a t lo w e r
p e r c e n t a g e s o f c a p a c i t y th a n s m a l l e r s i z e d p l a n t s , w h i l e t h e lo n g - r u n
c o s t c u rv e i s
d e r i v e d fro m c o s t s o f m o st e f f i c i e n t p l a n t s .
The p r e v io u s
a n a l y s i s p r o v id e s no i n f o r m a t i o n r e l a t i n g s i z e o f p l a n t t o l e n g t h o f
o p e r a t i n g s e a s o n an d raw a l f a l f a s u p p l y .
T h e re i s
a l s o n o i n f o r m a t io n
w i t h r e s p e c t t o t h e r e l a t i v e p o s i t i o n s o f t h e a v e ra g e r e v e n u e and
m a rg in a l c o s t c u rv e s .
T he f o ll o w i n g i s
an a tt e m p t t o c o n s t r u c t c o s t i n f o r m a t i o n f o r
s e v e r a l p l a n t s i z e s commonly i n u s e i n o r d e r t o s u p p le m e n t t h e a n a l y s i s
o f th e p r e s e n t c h a p te r.
CHAPTER V
MODEL PLANT CONSTRUCTION
E s t i m a t i o n o f F ix e d C o s ts
C o s t e s t i m a t e s a r e b a s e d on d a t a r e c e i v e d from e q u ip m e n t m a n u f a c t u r e r s .
E q u ip m e n t r e q u ir e m e n ts and s e r v i c e l i f e
d u r in g th e p e r s o n a l i n t e r v i e w
a r e b a s e d on i n f o r m a t i o n r e c e i v e d
su rv e y .
The f o r m u la u s e d t o c a l c u l a t e a n n u a l c o s t o f in v e s t m e n t r e c o v e r y
and i n t e r e s t i s :
A n n u a l c o s t o f in v e s t m e n t
r e c o v e r y an d i n t e r e s t
(I-V
h
1+ 1>n
( l+ i) n- l
+ iS
n
w h e re I = i n i t i a l in v e s tm e n t
i = p e r c e n t a g e a t w h ic h i n t e r e s t c o s t s a r e t o b e ta k e n
n = s e rv ic e l i f e
o f e q u ip m e n t
S = s a l v a g e v a l u e o f e q u ip m e n t a t t h e en d o f n y e a r s o f
n
s e rv ic e 30/
I n t h i s s t u d y , t h e p e r c e n t a g e a t w h ic h i n t e r e s t c o s t s a r e t a k e n i s 7 p e r c e n t
H a rv e s tin g
The h a r v e s t e r r e q u i r e m e n t f o r t h e 1 .5 to n p e r h o u r p l a n t i s a s e l f p r o p e lle d u n i t w ith a 1 0 -fo o t c u t.
The a l t e r n a t i v e w o u ld b e two t r a c t o r -
draw n u n i t s w h ic h w o u ld e x c e e d t h e c o s t o f t h e s e l f - p r o p e l l e d u n i t and
a l s o r e q u i r e an a d d i t i o n a l o p e r a t o r .
30/
The h a r v e s t e r f o r t h e 2 - to n p e r
M o r r i s , W illia m T . , The C a p a c ity D e c i s i o n .S y s t e m , (Homewood, I l l i n o i s ,
1 9 6 7 ), p p . 9 -1 2 .
116
hour p la n t is
a s e l f - p r o p e l l e d u n i t w ith a 1 2 -fo o t c u t.
f o r th e 3 -to n p e r h o u r p l a n t i s
c u ttin g h e a d s .
The r e q u ir e m e n t
two s e l f - p r o p e l l e d u n i t s w i t h 1 0 - f o o t
C o s t e s t i m a t e s a r e p r e s e n t e d i n T a b le XIV.
T ru c k in g
E ach t r u c k i s assum ed t o h a v e a c a p a c i t y o f . s i x t o n s o f chopped
a lfa lfa .
W ith few e x c e p t i o n s , t h i s was t h e c a p a c i t y o f t h e t r u c k s u s e d
by t h e s u r v e y p l a n t s .
C o s t e s t i m a t e s a r e shown i n T a b le XV.
P ro c e s s in g
P l a n t c o s t s h a v e b e e n e s t i m a t e d on t h e b a s i s o f a " p a c k a g e d p l a n t , "
o r " tu r n k e y " i n s t a l l a t i o n .
The p l a n t i s i n s t a l l e d by t h e f ir m s e l l i n g
t h e e q u ip m e n t and s o l d t o t h e f i r m i n a c o m p le te d s t a t e .
I t s h o u ld b e
n o t e d , h o w e v e r, t h a t many o f t h e a l f a l f a d e h y d r a t in g p l a n t s i n th e
i n d u s t r y w e re e n g in e e r e d and i n s t a l l e d by ow ners a n d /o r e m p lo y e es w ith
a th o ro u g h k n o w le d g e o f t h e a l f a l f a d e h y d r a t in g p r o c e s s .
Many o f t h e s e
p l a n t s w e re b u i l t w i t h some o r a l l s e c o n d - h a n d e q u ip m e n t.
E n g in e e r in g
i n t h e i n d u s t r y w a s , and s t i l l i s , i n many c a s e s i n t h e a r t s t a g e .
o f p r o c e s s i n g a r e f a r fro m b e in g s t a n d a r d i z e d .
Some f ir m s f e e l th e y h a v e
fo u n d im p ro v e d m eth o d s o f p r o c e s s i n g and d i l i g e n t l y s t r i v e
o u t of th e h ands of c o m p e tito rs .
M ethods
t o k e e p them
T h e re a r e p l a n t s i n t h e i n d u s t r y ,
c o n s id e r e d t o b e m o d els o f e f f i c i e n c y , w h ic h w e re e n g in e e r e d and c o n s t r u c t e d
by ow ners a n d / o r e m p lo y e e s .
T h u s, i t i s n o t e s s e n t i a l th a t a "p ack ag e p la n t" be p u rc h a se d .
is i t
a b s o l u t e l y n e c e s s a r y t o i n s t a l l a l l new e q u ip m e n t.
N or
The a l t e r n a t i v e s ,
117
TABLE XIV.
HARVESTING— EQUIPMENT REQUIREMENTS AND COST.*
E q u ip m e n t D e s c r i p t i o n ,
R e q u ire m e n ts and C o st
H a rv e ste r
Number r e q u i r e d
R e p la c e m e n t c o s t
A n n u a l c o s t o f i n v e s tm e n t
rec o v e ry & i n t e r e s t I /
T ra ile r
Number r e q u i r e d
R e p la c e m e n t c o s t
A n n u a l c o s t o f in v e s tm e n t
rec o v e ry & i n t e r e s t 2 /
M a in te n a n c e and R e p a i r U n it 3 /
Number r e q u i r e d
,
R e p la c e m e n t c o s t
A n n u a l c o s t o f in v e s t m e n t
rec o v e ry & i n t e r e s t 4 /
* S o u rc e :
P l a n t C a p a c ity i n Tons P e r H our
2 .0
3 .0
1 .5
l( 1 0 - f t.)
$ 1 4 ,0 0 0
l( 1 2 - ft.)
$ 1 6 ,0 0 0
2 (1 0 -ft . )
$ 2 8 ,0 0 0
$ 1 ,7 7 6
$ 2 ,0 6 1
$ 3 ,5 5 2
I
$ 3 ,5 0 0
2
$ 7 ,6 0 0
$
$
330
661
I
$ 2 ,0 0 0
I
$ 2 ,0 0 0
I :
$ 2 ,0 0 0
$
$
$
285
285
. 285
C o s t e s t i m a t e s a r e b a s e d on d a t a r e c e i v e d fro m e q u ip m e n t
m a n u fa c tu re rs .
R e q u ire m e n ts a r e b a s e d on s u r v e y d a t a .
_1/ • B a se d on s t r a i g h t - l i n e d e p r e c i a t i o n o v e r a p e r i o d o f 10 y e a r s w ith
a s a l v a g e v a l u e o f $ 3 ,0 0 0 .
2 / B a se d on s t r a i g h t - l i n e d e p r e c i a t i o n o v e r a p e r i o d o f 20 y e a r s w ith
no s a lv a g e v a lu e „
3 / M a in te n a n c e and r e p a i r u n i t i s a s e c o n d - h a n d p ic k u p e q u ip p e d w ith
w e ld in g and c u t t i n g e q u ip m e n t and o t h e r t o o l s n e c e s s a r y t o make
r e p a ir s in th e f i e l d .
4 / B a se d on s t r a i g h t - l i n e d e p r e c i a t i o n o v e r a p e r i o d o f 10 y e a r s w i t h
no s a lv a g e v a lu e .
.
118
TABLE XV.
TRUCKING— EQUIPMENT REQUIREMENTS AND COST.
E q u ip m e n t D e s c r i p t i o n ,
R e q u ire m e n ts and C o st
P l a n t C a p a c ity i n Tons P e r H our
1 .5
3 .0
2 .0
Number R e q u ire d
2
3 I/
4
R epl a cem ent C o st
$ 1 6 ,0 0 0
$ 2 4 ,0 0 0
$ 3 2 ,0 0 0
A n n u a l C o s t o f I n v e s tm e n t
R e c o v e ry a n d I n t e r e s t 2 /
$ 4 ,0 4 8
$ 6 ,0 7 2
$ 8 ,0 9 0
I/
B o th t h e 1 .5 and 2 . 0 - t o n p e r h o u r p l a n t s r e q u i r e o n e 't r u c k d r i v e r .
The 2 . 0 - t o n p e r h o u r p l a n t i s a s s i g n e d an a d d i t i o n a l t r u c k as a
f l e x i b i l i t y f a c t o r . When h a u l i n g d i s t a n c e i s p a r t i c u l a r l y lo n g ,
o t h e r p l a n t p e r s o n n e l may s e r v e as s u p p le m e n ta ry t r u c k d r i v e r s .
The 3 . 0 - t o n p e r h o u r p l a n t i s a s s i g n e d tw o t r u c k d r i v e r s .
2_/
B a se d on s t r a i g h t - l i n e d e p r e c i a t i o n o v e r , a p e r i o d o f f o u r y e a r s w ith
a s a l v a g e v a l u e o f $ 1 ,5 0 0 p e r t r u c k .
119
h o w e v e r, s h o u ld b e v ie w e d w i t h e x tre m e c a u t i o n .
Many p l a n t s e n g in e e r e d
and i n s t a l l e d b y a m a te u rs h a v e b e e n m o d els o f i n e f f i c i e n c y .
On th e o t h e r
h a n d , some u s e d e q u ip m e n t p u r c h a s e d h a s b e e n e i t h e r o b s o l e t e o r u n w o rk a b le .
P l a n t e q u ip m e n t c o m b in a tio n s h a v e b e e n i n c o m p a t i b l e .
T hat i s ,
th e
c a p a c i t i e s o f . t h e v a r i o u s u n i t s s u c h a s f e e d e r , d r y in g drum , h a m m e rm ill,
p e l l e t m i l l , e t c . , h av e n o t b een p r o p e r ly c o o rd in a te d .
Im p ro p e r i n s t a l l a ­
t i o n h a s r e s u l t e d i n b o t t l e n e c k s i n t h e p r o d u c t flo w and i n e f f i c i e n t u s e
of la b o r.
I n e f f e c t , i t i s p o s s i b l e f o r a p e r s o n o r g ro u p o f p e r s o n s to
e n g i n e e r and i n s t a l l t h e i r own p l a n t .
if
They s h o u ld do s o h o w e v e r, o n ly
th e y a r e th o r o u g h ly f a m i l i a r w i t h t h e p r o c e s s i n g o f d e h y d r a te d a l f a l f a .
As an a l t e r n a t i v e ,
th e y may w is h t o h i r e an i n d i v i d u a l t o do th e e n g i n e e r i n g
and s u p e r v i s e th e i n s t a l l a t i o n .
be v e r if ie d .
H ow ever, t h a t p e r s o n ’ s co m p eten cy s h o u ld
T h e re a r e i n d i v i d u a l s i n t h e i n d u s t r y who h a v e on m ore th a n
one o c c a s io n b e e n a s s o c i a t e d w i t h u n s u c c e s s f u l e n t e r p r i s e s .
e q u ip m e n t^ i f
S e c o n d -h a n d
a v a i l a b l e , s h o u ld be. c a r e f u l l y s c r u t i n i z e d w i t h r e s p e c t t o
w o r k a b i l i t y , o b s o l e s c e n c e , and how t h e c a p a c i t y o f e a c h i n d i v i d u a l i te m
fits
i n t o t h e w h o le .
M a n u f a c tu r e r s r a t e d e h y d r a t in g drum s i n te rm s o f e v a p o r a t i v e c a p a c i t y
p e r h o u r.
The 1 . 5 - t o n p e r h o u r p l a n t h a s an e v a p o r a t i v e c a p a c i t y o f 9 ,0 0 0
p o u n d s p e r h o u r ; t h e 2 . 0 - t o n p e r h o u r p l a n t an e v a p o r a t i v e c a p a c i t y o f
1 2 ,0 0 0 p o u n d s p e r h o u r ; and th e 3 . 0 - t o n p e r h o u r p l a n t an e v a p o r a t i v e
c a p a c i t y o f 1 8 ,0 0 0 p o u n d s p e r h o u r .
raw a l f a l f a i s
The i n i t i a l m o is t u r e c o n t e n t o f th e
assum ed t o b e . 70 p e r c e n t .
C o st e s t i m a t e s a r e p r e s e n t e d
120
i n T a b le XVI.
The p l a n t s w e re a s s i g n e d one o p e r a t o r p e r s h i f t .
The 1 .5
and 2 . 0 - t o n p e r h o u r p l a n t s w e re a s s i g n e d one m a in te n a n c e and r e p a i r man
p e r day and th e 3 . 0 - t o n p e r h o u r p l a n t one m a in te n a n c e and r e p a i r man p e r
s h ift.
V a r i a b l e C o st
L abor
L a b o r c o s t p e r to n a r e shown i n T a b le X V II.
P l a n t s a r e assum ed t o
w ork tw o 12- h o u r s h i f t s p e r day w i t h o p e r a t i n g s c h e d u le s o f 4 , 5 , 6 , and
7 days p e r
w eek c o n s i d e r e d .
A round t h e c lo c k o p e r a t i o n w i t h a 12- h o u r
s h i f t w a s . t h e s t a n d a r d mode o f o p e r a t i o n f o r m o st p l a n t s i n t h e s u r v e y .
The s h o r t a g e o f l a b o r i n t h e i n d u s t r y m akes t h e 1 2 -h o u r s h i f t p r a c t i c a l .
The b a s i c w age r a t e was t a k e n fro m T a b le . V I I .
A d ju s tm e n ts w e re th e n
made f o r o v e r tim e p a y on th e b a s i s o f tim e and o n e - h a l f f o r w o rk in g h o u r s
i n e x c e s s o f 40 p e r w e e k .
The s t r a i g h t r a t e s a r e $ 1 .4 0 f o r h a r v e s t e r
o p e r a t o r s , $ 1 .3 6 f o r t r u c k d r i v e r s , $ 1 .4 9 f o r p l a n t o p e r a t o r s , $ 1 .2 5 f o r
p l a n t h e l p e r s , an d $ 1 .6 0 f o r m a in te n a c e and r e p a i r l a b o r .
The p l a n t
m a n a g e r 's s a l a r y i s p r o j e c t e d a t $1 0 ,0 0 0 p e r y e a r f o r t h e s m a l l e s t p l a n t
w i t h in c r e m e n ts o f $ 1 ,0 0 0 f o r th e n e x t tw o p l a n t s i z e s .
P a y r o l l ta x e s
a r e 3 .8 5 p e r c e n t .o f e a r n i n g s up t o $ 7 ,8 0 0 f o r FICA and 3 . 1 p e r c e n t o f
e a r n i n g s up t o $ 3 ,0 0 0 f o r unem ploym ent i n s u r a n c e .
D e h y d r a tin g F u e l
A l l p l a n t s a r e assum ed t o u s e n a t u r a l g a s .
tq n p e r h o u r p l a n t i s
C o n su m p tio n f o r t h e 1 . 5 -
1 4 ,0 0 0 c u b ic f e e t p e r h o u r (C FH ).
F o r th e 2 . 0 - t o n
TABLE X V I.
PR O C E SS IN G :
E q u ip m e n t D e s c r i p t i o n
EQUIPMENT AND C O ST. I /
1 .5 Ton P e r H o u r P l a n t
A n n u a l C o st
o f I n v e s tm e n t
R e p la c e m e n t R e c o v e ry and
In te re s t 2 /
C o st
D o lla rs
D o lla rs
2 .0 Ton P e r H o u r P l a n t
A nnual C ost
o f I n v e s tm e n t
R e p la c e m e n t R e co v e ry and
In te re s t
C o st
D o lla rs
D o lla rs
3 .0 Ton P e r H our P l a n t
A n n u al C o st
o f I n v e s tm e n t
R e p la c e m e n t R e co v e ry and
C o st
In te re s t
D o lla rs
D o lla rs
D e h y d r a to r
3 2 ,2 0 0
3 ,0 2 0
3 5 ,0 0 0
3 ,3 0 4
5 2 ,9 0 0
Feeder
1 0 ,5 0 0
991
1 0 ,5 0 0
991
1 0 ,5 0 0
991
6 ,1 2 0
1 ,4 9 3
8 ,0 0 0
1 ,9 5 1
9 ,2 0 0
2 ,2 4 4
H am m erm ill
P e l l e t t r a n s f e r s y s te m
P e lle t m ill
4 ,9 9 3
5 ,0 0 0
712
5 ,0 0 0
712
5 ,0 0 0
. 712
1 7 ,0 0 0
1 ,8 6 6
2 0 ,0 0 0
2 ,1 9 6
2 0 ,0 0 0
2 ,1 9 6
944
7 ,0 0 0
661
8 ,0 0 0
755
1 0 ,0 0 0
1 0 ,0 0 0
944
1 0 ,0 0 0
944
1 0 ,0 0 0
L o a d o u t s y s te m
5 ,0 0 0
472
5 ,0 0 0
472
5 ,0 0 0
Sc a le s
1 ,0 0 0
94
1 ,0 0 0
94
1 ,0 0 0
94
E l e c t r i c s e r v i c e and
l i g h t i n g e q u ip m e n t
3 ,0 0 0
283
3 ,0 0 0
283
3 ,0 0 0
283
B o i l e r & m is c . e q u ip .
M ill b u ild in g
944
.
472
283
3 ,0 0 0
283
3 ,0 0 0
283
3 8 ,0 0 0
3 ,5 8 7
6 7 ,0 0 0
5 ,3 8 0
9 5 ,0 0 0
8 ,9 6 7
I n e r t gas g e n e ra tin g &
d i s t r i b u t i o n - s y s te m
1 4 ,0 0 0
1 ,3 2 1
1 4 ,0 0 0
1 ,3 2 1
1 4 ,OOO
1 ,3 2 1
E l e c t r i c m o to r s t a r t e r s
and c o n tr o ls
1 8 ,0 0 0
1 ,7 0 0
2 1 ,0 0 0
1*982
2 5 ,0 0 0
2 ,3 6 0
I n s t a l l a t i o n & e r e c tio n
9 ,0 0 0
850
1 0 ,0 0 0
944
1 2 ,0 0 0
1 ,1 3 3
L and
4 ,0 0 0
378
4 ,0 0 0
378
4 ,0 0 0
378
1 8 2 ,8 2 0
1 8 ,6 5 5
2 1 4 ,5 0 0
2 2 ,3 6 8
2 7 9 ,6 0 0
2 8 ,6 9 3
to ta ls
I/
2/
3/
P l a n t e q u ip m e n t r e q u i r e m e n t s , w h e re a p p l i c a b l e , a r e one u n i t .
The d e h y d r a t io n s y s te m , s te a m g e n e r a t i o n , and d i s t r i b u t i o n e q u ip m e n t, l o a d o u t s y s te m , s c a l e s , e l e c t r i c
s e r v i c e and l i g h t i n g e q u ip m e n t, m i l l b u i l d i n g , o f f i c e b u i l d i n g , s t o r a g e t a n k s , i n e r t g a s g e n e r a t i n g
a n d d i s t r i b u t i o n s y s te m , a n d la n d h a v e an in v e s tm e n t r e c o v e r y p e r i o d o f 20 y e a r s . The in v e s tm e n t
r e c o v e r y p e r i o d f o r t h e p e l l e t m i l l i s 15 y e a r s ; f o r t h e h a m m e rm ill, 5 y e a r s ; a n d f o r t h e p e l l e t
t r a n s f e r e q u ip m e n t, 10 y e a r s .
S t o r a g e c o s t s f o r t a n k s a r e e s t i m a t e d a t $19 p e r to n o f s t o r a g e c a p a c i t y . The 1 . 5 - t o n p e r h o u r p l a n t
h a s a s t o r a g e c a p a c i t y o f 2 ,0 0 0 t o n s ; t h e 2 . 0 - t o n p e r h o u r p l a n t , 3 ,0 0 0 t o n s ; and t h e 3 . 0 - t o n p e r h o u r
p l a n t , 5 ,0 0 0 t o n s .
121
3 ,0 0 0
S to ra g e ta n k s 3 /
O ffic e b u ild in g
122
TABLE X V II.
LABOR COST PER HOUR. I /
Days o f .
O p e r a tio n P e r Week
JL/
H a rv e s te r
O p e r a to r s
P la n t
M a in te n a n c e
T ru c k D r i v e r s O p e r a to r
and R e p a ir
— D o l l a r s --------
4
1 .5 2
1 .4 7
1 .6 1
1 .7 3
5
1 .6 3
1 .5 9
1 .7 4
1 .8 7
6
1 .7 1
1 .6 6
1 .8 2
1 ,9 6
7
1 .7 7
1 .7 2
1 .8 8
2 .0 2
Wage r a t e s a r e a d j u s t e d f o r o v e r tim e p a y .
123
p e r h o u r p l a n t i t i s 2 2 ,0 0 0 CFH, and f o r th e 3 .0 - t o n , p e r h o u r p l a n t i t
i s 2 8 ,0 0 0 CFH.
C o s t e s t i m a t e s a r e b a s e d on a r a t e o f 39 c e n t s p e r 1 ,0 0 0
c u b ic f e e t f o r t h e f i r s t 6 ,0 0 0 ,0 0 0 c u b ic f e e t and 34 c e n t s p e r 1 ,0 0 0
c u b ic f e e t f o r u s a g e i n e x c e s s o f 6 , 0 0 0 ,0 0 0 c u b ic f e e t p e r y e a r .
P ow er
P ow er r e q u ir e m e n ts a r e 225 k i l o w a t t s f o r t h e 1 . 5 - t o n p e r h o u r p l a n t ,
250 k i l o w a t t s f o r t h e 2 . 0 - t o n p e r h o u r p l a n t , and 300 k i l o w a t t s f o r t h e
3 .0 - to n p e r h o u r p l a n t .
Pow er c o s t s f o r t h i s a n a l y s i s a r e assum ed t o b e
$ .0 1 5 p e r k i l o w a t t h o u r , b a s e d on i n f o r m a t i o n r e c e i v e d fro m pow er co m p an ies
Gas and O il
Gas and o i l c o s t s a r e b a s e d on t h e s u r v e y d a t a .
A v e ra g e g a s and
o i l c o s t s f o r p l a n t s i n t h e 1 . 5 - t o n p e r h o u r ra n g e w e re $ 1 .1 3 p e r t o n .
F o r p l a n t s i n t h e 2 . 0 - t o n p e r h o u r r a n g e th e y w e re $ 1 .3 8 and $ 1 .6 9 f o r
p la n ts in th e 3 .0 - to n p e r h o u r ra n g e .
Gas and o i l c o s t s a r e p a r t i c u l a r l y s u b j e c t t o v a r i a t i o n .
They a r e
a f f e c t e d by d i s t a n c e fro m p l a n t t o f i e l d , r o a d p a t t e r n s , ty p e o f r o a d ,
raw a l f a l f a y i e l d s , and o t h e r p h y s i c a l f a c t o r s i n a d d i t i o n t o c o s t
d i f f e r e n c e s b e tw e e n a r e a s .
M a in te n a n c e and R e p a ir
M a in te n a n c e and r e p a i r c o s t s a r e e s t i m a t e d a t 0 .0 2 5 p e r c e n t o f
r e p la c e m e n t c o s t o f e a c h day o f u s e .
la b o r.
/-
T h is e s t i m a t e i s e s e l u s i v e o f
124
O th e r C o s ts
C o st o f a n t i o x i d a n t s i s e s t i m a t e d a t 50 c e n ts p e r to n b a s e d on
i n f o r m a t i o n r e c e i v e d d u r in g t h e s u r v e y .
I n e r t g a s g e n e r a t i o n and
d i s t r i b u t i o n i s e s t i m a t e d a t $1 p e r to n b a s e d on i n f o r m a t i o n r e c e iv e d
fro m m a n u f a c t u r e r s .
su rv e y d a ta .
I n s u r a n c e and t a x c o s t e s t i m a t e s w e re b a s e d on
A d m in is tra tiv e c o s ts c o n s is t p r im a rily o f p a r t- tim e
s e c r e t a r i a l h e lp .
C o st I n t e g r a t i o n
The c o s t e s t i m a t e s d e v e lo p e d i n t h e p r e v i o u s s e c t i o n s a r e com bined
i n T a b le s X V III, XIX, an d XX t o a r r i v e a t p r o d u c t i o n c o s t s f o r o p e r a t i n g
s e a s o n s o f 1 2 , 1 6 , and 20 w e e k s .
O p e r a tin g s e a s o n r e f e r s
num ber o f d ay s t h e p l a n t i s i n o p e r a t i o n .
to th e a c tu a l
I n c o n v e r t in g fro m a gro w in g
s e a s o n t o an o p e r a t i n g s e a s o n , a llo w a n c e m u st b e made f o r d o w ntim e.
in fo rm a tio n i s
th e n u s e d t o d e v e lo p c o s t c u r v e s .
T h is
T h e se c o s t c u rv e s a r e
shown i n F i g u r e s 2 6 , 2 7 , and 2 8 .
F i g u r e 26 d e p i c t s t h e a v e ra g e c o s t c u r v e s f o r a 12-w eek o p e r a t in g
s e a s o n and w ork w eeks o f 4 , 5 , 6 , and 7 d a y s .
B e f o re t h e t a b u l a t e d
c o s t s w e re p l o t t e d a raw a l f a l f a c o s t o f $10 p e r to n was i n c l u d e d .
minimum b r e a k e v e n p o i n t i s
$ 4 8 .5 2 .
The
1 ,7 2 8 to n s an d r e q u i r e s a p r o d u c t p r i c e o f
The 1 . 5 - t o n p e r h o u r p l a n t can c o n ti n u e t o p r o d u c e and b r e a k ­
e v e n u n t i l p r o d u c t p r i c e d ro p s t o $ 3 8 .0 2 .
At t h is p o i n t, th e lim its of
p ro d u c tio n have b een re a c h e d f o r t h i s p l a n t ;
w eek and p r o d u c in g 3 ,0 2 4 to n s a n n u a l l y .
I t i s o p e r a t i n g 7 days p e r
A t a p r i c e j u s t b e lo w $ 3 8 .0 2
TABLE X V I II .
PLANT COSTS FOR 1 . 5 , 2 . 0 , AND 3 . 0 TON PER HOUR PLANTS DURING A 12-WEEK OPERATING SEASON.
1 .5 Ton P e r Hour P la n t
4 - Day Week 5-Day Week 6-Day Week 7-Day Week
(2 ,5 9 2 )
(3 ,0 2 4 )
(1 ,7 2 8 )
(2 ,1 6 0 )
A nnual C ost o f I n v e s t ­
ment R ecovery & I n t e r e s t
H a rv e s tin g :
$ 2 ,3 9 1
$2,3 9 1
$2,3 9 1
T o ta l
$ 2 ,3 9 1
.92
.79
1 .3 8
P e r Ton
1 .1 1
Type o f C ost
I/
2/
TTTT Ton P e r Hour P la n t
4-Day Week 5-Day Week 6-Day Week 7-Day Week
(3 ,4 5 6 )
(4 ,3 2 0 )
(5 ,1 8 4 )
( 6 ,0 4 8 ) 1 /
$2,676
1 .1 6
$2,676
.93
$2,676
.7 7
$2,6 7 6
.6 6
$4,4 9 8
1 .3 0
$4,498
1.04
$4,498
.87
$4,4 9 8
.74
4 ,0 4 8
2 .3 4
4 ,0 4 8
.1 .8 7
4 ,0 4 8
1 .5 6
4 ,0 4 8
1 .3 4
6 ,0 7 2
2 .6 4
6 ,0 7 2
2 .1 1
6 ,0 7 2
1 .7 6
6 ,0 7 2
1 .5 1
8,0 9 0
2 .3 4
8,090
1 .8 7
8,0 9 0
1 .56
8,0 9 0
1 .3 4
18,655
1 0 .80
18,655
8 .6 4
18,655
7 .2 0
18,655
6 .1 7
2 2 ,3 6 8
9 .7 1
2 2 ,3 6 8
7 .7 7
2 2 ,3 6 8
6 .4 7
2 2 ,3 6 8
5 .5 5
28,6 9 3
8 .3 0
28,6 9 3
6 .6 4
2 8 ,6 9 3
5 .5 3
2 8 ,6 9 3
4 .7 4
2 ,5 0 0
1.4 5
2,5 0 0
1 .1 6
2 ,5 0 0
.96
2 ,5 0 0
.8 3
3,000
1 .3 0
3 ,0 0 0
1 .0 4
3,0 0 0
.87
3,0 0 0
.7 4
4 ,0 0 0
1 .1 6
4,000
.9 3
4,0 0 0
.77
4 ,0 0 0
.66
2 ,0 0 0
1.1 6
2,0 0 0
.93
2 ,0 0 0
.77
2 ,0 0 0
.66
2 ,5 0 0
1.09
2 ,5 0 0
.87
2 ,5 0 0
.7 2
2 ,5 0 0
.62
3,0 0 0
.87
3,000
.69
3,0 0 0
.59
3,0 0 0
.50
10,000
5 .7 9
10,000
4 .6 3
10,000
3 .8 6
10,000
3 .3 1
11,000
4 .7 7
11,000
3 .8 2
11,000
3 .1 8
11,000
2 .7 3
12,000
3 .4 7
12,000
2 .7 8
12,000
2 .3 1
12,000
1 .9 8
2 ,0 0 0
1 .1 6
2,0 0 0
.93
2 ,0 0 0
.77
2 ,0 0 0
.66
2 ,5 0 0
1 .0 8
2 ,5 0 0
.87
2,5 0 0
.72
2 ,5 0 0
.62
3,000
.87
3,000
.69
3,000
.59
3,0 0 0
.50
1 ,7 5 1
1 .0 1
2 ,3 4 7
1.09
2 ,9 5 6
1 .1 4
3 ,5 6 8
1 .1 8
1 ,7 5 1
.7 6
2 ,3 4 7
.82
2 ,9 5 6
.8 5
3 ,5 6 8
.89
3 ,502
1 .0 1
4 ,694
1.09
5,9 1 2
1 .1 4
7,1 3 6
1 .1 8
1,6 9 3
.9 8
2 ,290
1.0 6
2 ,8 6 8
1 .1 1
3 ,4 6 7
1 .1 5
1 ,6 9 3
.7 4
2 ,2 9 0
.80
2 ,8 6 8
.83
3,467
.8 6
3 ,387
.9 8
4,5 7 9
1.06
5 ,7 3 7
1 .1 1
6 ,9 3 5
1 .1 5
1,8 5 5
1 .0 7
2/
3,5 5 6
2 .0 6
2 ,506
1.16
3,145
1 .2 1
3 ,7 9 0
1 .25
1,855
.80
2 ,5 0 6
.87
3 ,1 4 5
.9 1
3 ,7 9 0
.9 4
1 ,855
.5 4
2,506
.5 8
3,1 4 5
.6 1
3 ,7 9 0
.6 3
3,906
1 .8 1
4,2 5 3
1 .6 4
4,5 9 6
1 .52
3,5 5 6
1 .5 4
3 ,9 0 6
1 .36
4 ,2 5 3
1 .2 3
4 ,5 9 6
1 .1 4
5 ,5 1 3
1.60
6 ,213
1.44
6 ,9 0 7
1 .3 3
7,592
1.26
993
.57
1,272
.59
1,4 0 8
.54
1 ,4 9 8
.5 0
1,165
.5 1
1,3 0 7
.4 5
1 ,443
.4 2
1,5 3 3
.3 8
1 ,452
.42
1,616
.37
1,786
.34
1,919
.32
5 ,7 8 3
3 .3 5
7 ,1 5 4
3 .3 1
8,5 2 5
3 .2 9
9 ,8 9 6
3 .2 7
8,9 1 7
3 .8 7
1 1 ,0 7 1
3 .8 4
13,225
3 .8 3
15,380
3 .8 1
11,267
3.26
14,009
3 .2 4
16,751
3 .2 3
1 9 ,503
3 .2 2
3 ,888
2 .2 5
4 ,860
2 .2 5
5.8 3 2
2 .2 5
6 ,8 0 4
2 .2 5
4,3 2 0
1 .8 8
5 ,4 0 0
1 .8 8
6 ,4 8 0
1 .8 8
7 ,560
1 .8 8
5 ,1 8 4
1.50
6 ,480
1.50
7,7 7 6
1 .50
9,0 7 2
1 .5 0
1 ,953
1 .1 3
2 ,4 4 1
1 .1 3
2,9 2 9
1 .1 3
3,4 1 7
1 .1 3
3,1 7 9
1 .3 8
3 ,9 7 4
1 .3 8
4 ,769
1 .3 8
5 ,5 6 4
1 .3 8
5 ,8 4 1
1 .69
7,3 0 1
1.69
8 ,7 6 1
1.69
10,221
1.69
2 ,6 2 0
1.5 2
3,275
1 .5 2
3,9 3 0
1.52
4,5 8 5
1 .52
3,162
1 .37
3 ,9 5 2
1.37
4 ,7 4 3
1 .3 7
5 ,5 3 4
1 .37
4 ,1 8 3
1 .2 1
5,229
1 .21
6,2 7 5
1 .2 1
7 ,321
1 .2 1
864
.50
6 6 ,550
38.52
1,080
.50
72,725
33 .6 7
1,296
.50
78,736
3 0 .3 8
1,512
.50
8 4 ,727
2 8.02
1,152
.50
80,866
35.10
1 ,440
.50
88,309
3 0.67
1 ,7 2 8
.50
9 5 ,7 2 6
2 7 .6 9
2 ,0 1 6
.50
103,124
2 5 .5 8
1,7 2 8
.50
107,193
3 1.02
2 ,160
.50
118,068
2 7 .3 3
2,5 9 2
.50
128,923
24.8 7
3 ,0 2 4
.50
139,794
2 3 .1 1
T o ta l a n n u al p ro d u c tio n .
C o s t i n c l u d e s y e a r - r o u n d m a i n t e n a n c e a n d r e p a i r man f o r t h e 1 .5 a n d 2 . 0 - t o n p e r h o u r p l a n t s a n d tw o y e a r - r o u n d m a in te n a n c e a nd r e p a i r men f o r t h e
3 .0 -to n p e r h o u r p l a n t.
A 4 0 - h o u r w o rk w e e k w as a ssu m e d f o r o f f - s e a s o n e m p lo y m e n t.
125
T o ta l
P e r Ton
P ro c e s s in g :
T o ta l
P e r Ton
In s u ra n c e :
T o ta l
P e r Ton
T a x e s:
T o ta l
P e r Ton
M an ag er's S a la r y :
T o ta l
P e r Ton
A d m in i s t r a ti v e :
T o ta l
P e r Ton
L abor
H a rv e s tin g :
T o ta l
P e r Ton
T ru c k in g :
T o ta l
P e r Ton
P r o c e s s in g :
T o ta l
P e r Ton
M ain ten an ce & R e p a ir
T o ta l
P e r Ton
P a y r o l l Taxes
T o ta l
P e r Ton
Fuel
T o ta l
P e r Ton
Power
T o ta l
P e r Ton
Gas and O il
T o ta l
P e r Ton
M aintenance & R e p a ir
T o ta l
P e r Ton
A n tio x id a n t
T o ta l
P e r Ton
TOTAL
TOTAL PER TON
2 .0 Ton P e r H our P la n t
4-Day Week 5-Day Week 6-Day Week 7-Day Week
(2 ,8 8 0 )
(2 ,3 0 4 )
(3 ,4 5 6 )
(4 ,0 3 2 )
TABLE X IX .
PLANT COSTS FOR 1 . 5 , 2 . 0 , AND 3 . 0 TON PER HOUR PLANTS DURING A 16-WEEK OPERATING SEASON.
17
2/
1
7
0
*Ton P e r Hour P la n t
4-Day Week 5 -Day Week 6-Day Week 7-Day Week
(3 ,8 4 0 )
(4 ,6 0 8 )
(5 .3 7 6 )
(3 .0 7 2 )
T
T
t
TTon P e r Hour P la n t
4-Day Week 5-Day Week 6-Day Week 7-Day Week
(4 ,6 0 8 )
(5 ,7 6 0 )
(6 ,9 1 2 )
( 8 ,0 6 4 ) 1 /
2 ,6 7 6
.87
2 ,6 7 6
.7 0
2 ,6 7 6
.5 8
2 ,6 7 6
.5 1
4 ,4 9 8
.97
4 ,4 9 8
.7 8
4 ,4 9 8
.65
4 ,4 9 8
.56
6 ,0 7 2
1 .9 8
6,0 7 2
1 .5 8
6 ,0 7 2
1 .32
6 ,0 7 2
1 .1 3
8,0 9 0
1 .76
8,0 9 0
1 .40
8,0 9 0
1 .17
8,0 9 0
1 .00
2 2 ,3 6 8
7 .2 8
2 2 ,3 6 8
5 .8 2
2 2 ,3 6 8
4 .8 5
2 2 ,3 6 8
4 .1 6
28,6 9 3
6 .2 3
2 8 ,6 9 3
4 .9 8
2 8 ,6 9 3
4 .1 5
2 8 ,693
3 .56
3,0 0 0
.9 8
3 ,0 0 0
.7 8
3 ,0 0 0
.65
3,0 0 0
.56
4,0 0 0
.87
4,0 0 0
.69
4,0 0 0
.58
4,0 0 0
.50
2,5 0 0
.8 1
2 ,5 0 0
.65
2 ,5 0 0
.54
2 ,5 0 0
.46
3,0 0 0
.65
3,0 0 0
.52
3,0 0 0
.43
3,000
.37
11,000
3 .5 8
11,000
2 .8 6
11,000
2 .3 9
11,000
2 .0 5
12,000
2 .6 0
12,000
2 .0 8
12,000
1 .7 4
12,000
1.49
2 ,5 0 0
.8 1
2 ,5 0 0
.65
2 ,5 0 0
.54
2,5 0 0
.46
3,0 0 0
.65
3,0 0 0
.52
3,0 0 0
.43
3 ,0 0 0
.37
2 ,3 6 7
.76
3 ,139
.82
3,9 4 0
.85
4 ,7 5 8
.89
4 ,654
1 .0 1
6 ,2 7 8
1 .09
7,8 8 0
1 .1 4
9,5 1 6
1 .1 8
2 ,2 5 8
.7 4
3 ,0 5 3
.80
3 ,8 3 6
.83
4 ,602
.86
4 ,516
.98
6,1 0 6
1.06
7,6 7 2
1 .1 1
9 ,2 7 4
1.15
2 ,4 6 5
.80
3 ,3 4 1
.87
4 ,1 8 2
.91
5 ,0 4 0
.9 4
2,4 6 5
.5 4
3 ,3 4 1
.5 8
4,1 8 2
.6 1
5,0 4 0
.63
3,6 3 2
1 .1 8
4,0 9 9
1 .07
4 ,5 6 2
.99
5,0 1 9
.93
7,265
1 .5 8
8 ,1 9 8
1 .42
9 ,1 2 4
1 .32
10,037
1.24
1 ,2 9 3
.42
1,4 6 4
.3 8
1,5 7 5
.3 4
1 ,687
.3 1
1,685
.37
1,895
.33
2 ,0 8 5
.30
2 ,2 7 8
.28
11,789
3 .8 4
14,662
3 .82
1 7 ,134
3 .80
2 0 ,406
3 .8 0
14,923
3 .2 4
18,578
3 .2 3
22,2 3 4
3 .2 2
26,0 1 8
3 .2 2
5 ,7 7 5
1 .8 8
7,219
1 .8 8
8 ,6 6 3
1 .8 8
10,107
1 .8 8
6,9 1 2
1.50
8,6 4 0
1 .50
1 0 ,368
1.50
12,096
1.50
4,2 3 9
1 .3 8
5,2 9 9
1 .3 8
6 ,3 5 9
1 .3 8
7 ,419
1 .3 8
7 ,788
1.69
9 ,7 3 4
1.69
1 1 ,681
1 .69
13,628
1.69
4,2 1 6
1 .37
5 ,2 7 0
1 .37
6 ,3 2 4
1.37
7 ,3 7 8
1 .3 7
5 ,5 7 8
1 .2 1
6,9 7 2
1 .2 1
8,3 6 6
1 .2 1
9 ,7 6 1
1 .2 1
1,536
.50
89,786
2 9 .2 3
1,920
.50
99,582
2 5 .9 3
2 ,3 0 4
.50
108,995
2 3.65
2 ,6 8 8
.50
119,240
2 2 .1 8
2 ,304
.50
121,371
2 6 .3 4
2,8 8 0
.50
135,903
23.5 9
3 ,456
.50
150,329
2 1 .7 5
4,032
.50
164,961
20.4 6
T o ta l a n n u al p ro d u c tio n .
C o s t I n c l u d e s y e a r - r o u n d m a i n t e n a n c e a n d r e p a i r man f o r t h e 1 . 5 - a n d 2 . 0 - t o n p e r h o u r p l a n t s a n d tw o y e a r - r o u n d m a in te n a n c e a n d r e p a i r men f o r t h e
3 .0 -to n p e r h o u r p l a n t .
A 4 0 - h o u r w o rk w e e k w as a ssu m e d f o r o f f - s e a s o n e m p lo y m e n t.
126
1
7
5
"Ton P e r H our P la n t
4-Day Week 5-Day Week 6-Day Week 7-Day Week
(4 ,0 3 2 )
(2 ,3 0 4 )
(2 ,8 8 0 )
(3 ,4 5 6 )
A nnual C ost o f I n v e s t ­
ment R ecovery & I n t e r e s t
H a rv e s tin g :
2 ,3 9 1
2 ,3 9 1
2 ,3 9 1
T o ta l
2 ,3 9 1
.59
.8 3
.69
P e r Ton
1.05
T ru c k in g :
4 ,0 4 8
4 ,0 4 8
4 ,0 4 8
4 ,0 4 8
T o ta l
1.00
1 .4 0
1 .1 7
P e r Ton
1.7 6
P r o c e s s in g :
18,655
18,655
T o ta l
18,655
18,6 5 5
5 .4 0
8.1 0
6 .4 8
4 .6 3
P e r Ton
I n s u ra n c e :
2 ,5 0 0
2 ,5 0 0
2 ,5 0 0
2 ,5 0 0
T o ta l
.62
1 .0 8
.87
.72
P e r Ton
T axes:
2 ,0 0 0
2 ,0 0 0
2 ,000
2 ,0 0 0
T o ta l
.50
.87
.69
.5 8
P e r Ton
M an ag er's S a la r y :
10,000
10,000
10,000
10,000
T o ta l
2 .4 8
4 .3 4
2 .8 9
3 .4 7
P e r Ton
A d m in is tr a tiv e :
2
,0
0
0
2 ,0 0 0
2 ,0 0 0
2 ,0 0 0
T o ta l
.50
.5 8
.87
.69
P e r Ton
L abor
H a rv e s tin g :
2 ,3 6 7
3 ,9 4 0
4 ,7 5 8
T o ta l
3,1 3 9
1 .1 8
1 .0 1
1 .09
1 .1 4
P e r Ton
T ru c k in g :
4,6 0 2
2 ,2 5 8
3 ,0 5 3
3 ,836
T o ta l
1 .06
1 .1 5
.98
1 .1 1
P e r Ton
P r o c e s s in g :
5 ,0 4 0
4 ,182
2,4 6 5
3 ,3 4 1
T o ta l
1.16
1 .2 1
1 .2 5
P e r Ton
1 .0 7
M ain ten an ce & R e p a ir 2 /
4 ,5 6 2
5 ,019
3,632
4,0 9 9
T o ta l
1.42
1.32
1 .2 4
P e r Ton
1.5 8
P a y r o l l T axes:
1,652
1 ,2 5 8
1,429
1 ,5 4 0
T o ta l
.4 1
.55
.50
.4 4
P e r Ton
F u e l:
11,267
13,095
T o ta l
7 ,6 1 1
9 ,4 3 9
3.3 0
3 .2 8
3 .2 6
3 .2 5
P e r Ton
Power:
5,1 8 4
6 ,4 8 0
7,7 7 6
9,0 7 2
T o ta l
2 .2 5
2 .2 5
P e r Ton
2 .2 5
2 .2 5
Gas and O il:
2 ,6 0 4
4.556
3 ,2 5 4
3,9 0 5
T o ta l
1 .1 3
P e r Ton
1.1 3
1 .1 3
1 .1 3
M ain ten an ce & R e p a ir:
4
,366
5
,2
4
0
6
,1 1 3
T o ta l
3 ,4 9 3
1 .5 2
1.5 2
1 .5 2
1 .5 2
P e r Ton
A n tio x id a n t:
1,152
1.4 4 0
1 ,7 2 8
2,0 1 6
T o ta l
.50
.50
.50
.50
P e r Ton
89,5 7 0
9 7 ,5 1 7
TOTAL
73,618
81 ,6 3 4
2 5 .9 2
24.1 9
TOTAL PER TON
3 1 .95
2 8 .3 5
Type o f C ost
TABLE XX.
PLANT COSTS FOR 1 . 5 , 2 . 0 , AND 3 . 0 TON PER HOUR PLANTS DURING A 20-WEEK OPERATING SEASON.
Tj
2/
~
270 Ton P e r H our P la n t
4-Day Week 5-Day Week 6-Day Week 7-Day Week
(3 ,8 4 0 )
(4 ,8 0 0 )
(6 ,7 2 0 )
(5 ,7 6 0 )
TTtr Ton P e r Hour P la n t
4-Day Week 5-Day Week 6-Day Week 7-Day Week
(5 ,7 6 0 )
(7 ,2 0 0 )
(8 ,6 4 0 )
(1 0 ,0 8 0 ) 1 /
2 ,6 7 6
.6 7
2 ,6 7 6
.56
2 ,6 7 6
.46
2 ,6 7 6
.40
4 ,4 9 8
.7 8
4 ,4 9 8
.62
4 ,4 9 8
.52
4 ,4 9 8
.4 5
6 ,0 7 2
1 .5 8
6 ,0 7 2
1.26
6 ,0 7 2
1 .05
6,0 7 2
.90
8,0 9 0
1 .4 0
8,0 9 0
1.12
8,0 9 0
.94
8,0 9 0
.80
2 2 ,3 6 8
5 .8 2
2 2 ,3 6 8
4 .6 6
2 2 ,3 6 8
3 .8 8
2 2 ,3 6 8
3 .3 3
28,6 9 3
4 .9 8
28,6 9 3
3 .9 8
28,6 9 3
3 .3 2
2 8 ,6 9 3
2 .8 5
3 ,0 0 0
.7 8
3 ,000
.62
3,0 0 0
.52
3 ,0 0 0
.45
4 ,0 0 0
.69
4,0 0 0
.56
4,0 0 0
.46
4 ,0 0 0
.40
2 ,5 0 0
.65
2 ,5 0 0
.52
2 ,5 0 0
.43
2 ,5 0 0
.37
3 ,0 0 0
.52
3,0 0 0
.41
3,0 0 0
.35
3 ,0 0 0
.30
1 1 ,000
2 .8 6
11,000
2 .2 9
11,000
1 .9 1
11,000
1 .6 4
12,000
2 .0 8
12,000
1 .67
12,000
1.39
12,000
1 .19
2 ,5 0 0
.6 5
2 ,5 0 0
.52
2 ,5 0 0
.43
2 ,5 0 0
.37
3 ,0 0 0
.52
3,000
.4 1
3,0 0 0
.35
3,0 0 0
.30
2 ,9 0 9
.7 6
3 ,9 2 4
.82
4,9 2 5
.85
5 ,9 4 7
.89
5 ,9 1 9
1 .0 1
7,8 4 8
1.09
9 ,8 5 0
1 .1 4
1 1 ,894
1 .1 8
2 ,8 2 2
.7 4
3 ,8 1 6
.80
4 ,7 9 5
.83
5 ,7 9 6
.86
5 ,6 4 5
.9 8
7,632
1.06
9 ,5 9 0
1 .1 1
11,592
1.15
3 ,082
.8 0
4 ,1 7 6
.87
5 ,2 2 7
.0 1
6 ,3 0 0
.94
3,0 8 2
.5 4
4,1 7 6
.5 8
5,2 2 7
.6 1
6 ,3 0 0
.63
3,7 0 9
.9 7
4,2 9 2
.89
4 ,8 7 0
.85
5 ,4 4 2
.8 1
7 ,4 1 8
1.29
8,582
1 .19
9 ,7 4 0
1 .1 3
1 0 ,884
1 .0 8
1 ,4 1 3
.37
1,563
.3 3
1,702
.30
1 ,8 4 3
.27
1 ,8 2 3
.32
2 ,0 6 1
.29
2 ,2 9 8
.27
2 ,5 4 0
.2 4
14,662
3 .8 2
18,252
3 .8 0
21,8 4 2
3 .79
2 5 ,433
3 .7 8
18,578
3 .2 3
2 3 ,148
3 .22
27,7 1 8
3 .2 1
32,2 6 0
3 .2 0
7,2 1 9
1 .8 8
9 ,0 2 4
1 .8 8
10,829
1 .8 8
1 2 ,634
1 .8 8
8 ,640
1 .5 0
10,800
1.50
12,960
1 .50
15,120
1 .5 0
5 ,2 9 9
1 .3 8
6 ,6 2 4
1 .3 8
7,949
1 .3 8
9 ,2 7 4
1 .3 8
9 ,7 3 4
1.69
12,168
1.69
14,602
1 .69
17,035
1 .69
5 ,2 7 0
1 .3 7
6 ,5 8 8
1 .3 7
7,9 0 5
1 .3 7
9 ,2 2 2
1.37
6,9 7 2
1 .2 1
8,715
1 .2 1
10,458
1 .2 1
1 2 ,201
1 .2 1
1,9 2 0
.50
9 8 ,4 4 1
2 5 .6 4
2 ,4 0 0
.50
110,799
2 3 .0 8
2 ,8 8 0
.50
123,026
2 1 .3 6
3 ,360
.50
135,360
2 0 .1 4
2 ,8 8 0
.50
133,972
2 3 .2 6
3,600
.50
152,011
2 1 .1 1
4,3 2 0
.50
170,044
1 9.68
5 ,0 4 0
.50
188,147
18.67
T o ta l a n n u a l p ro d u c tio n .
C o s t I n c l u d e s y e a r - r o u n d m a i n t e n a n c e a n d r e p a i r man f o r t h e 1 . 5 - a n d 2 . 0 - t o n p e r h o u r p l a n t s a n d tw o y e a r - r o u n d m a in te n a n c e a n d r e p a i r men f o r t h e
3 .0 -to n p e r h o u r p la n t.
A 4 0 - w o rk w e e k w as a ssu m e d f o r o f f - s e a s o n e m p lo y m e n t.
127
IT T Ton P e r iHour P l a n t
4-Day Week 5-Day Week 6-Day Week 7-Day Week
(4 ,3 2 0 )
(5 ,0 4 0 )
(2 ,8 8 0 )
(3 ,6 0 0 )
A nnual C ost o f I n v e s t ­
ment R ecovery & I n t e r e s t
H a r v e s tin g :
2 ,3 9 1
2 ,3 9 1
2 ,3 9 1
T o ta l
2 ,3 9 1
.47
.66
.55
P e r Ton
.83
T ru c k in g :
4 ,0 4 8
4 ,0 4 8
T o ta l
4 ,048
4,0 4 8
.80
1 .4 1
1 .1 2
.9 3
P e r Ton
P r o c e s s in g :
18,655
18,655
18,655
T o ta l
18,655
4 .3 2
3 .7 0
6 .4 8
5 .1 8
P e r Ton
In s u ra n c e :
2 ,5 0 0
2 ,5 0 0
2 ,500
T o ta l
2 ,5 0 0
.5 8
.49
.87
.69
P e r Ton
T axes:
2 ,0 0 0
2 ,0 0 0
2 ,0 0 0
2 ,0 0 0
T o ta l
.46
.40
.69
.56
P e r Ton
M an ag er's S a la r y :
10,000
10,000
10,000
10,000
T o ta l
1 .9 8
3 .4 7
2 .7 8
2 .3 1
P e r Ton
A d m in is tr a tiv e :
2 ,0 0 0
2,0 0 0
2 ,0 0 0
2 ,0 0 0
T o ta l
.46
.4 0
.69
.56
P e r Ton
L abor
H a rv e s tin g :
2 ,909
3 ,924
4 ,9 2 5
5 ,9 4 7
T o ta l
1 .1 4
1 .1 8
1 .0 1
1.09
P e r Ton
T ru c k in g :
5 ,7 9 6
T o ta l
2 ,822
3,816
4 ,795
1.06
.98
1 .1 1
1 .1 5
P e r Ton
P r o c e s s in g :
6
,3 0 0
3 ,0 8 2
5 ,2 2 7
T o ta l
4,176
1 .2 1
1 .2 5
1.16
P e r Ton
1 .0 7
M ain ten an ce & R e p a ir 2 /
4,292
4 ,8 7 0
5 ,4 4 2
T o ta l
3,709
1 .0 8
1.29
1.19
1 .1 3
P e r Ton
P a y r o l l T axes:
1 ,8 0 8
1,3 7 8
1 ,528
T o ta l
1 ,6 6 7
.36
.4 8
.42
.39
P e r Ton
F u e l:
14,009
16,2 9 4
T o ta l
9 ,4 3 9
11,724
3 .2 4
3 .2 3
P e r Ton
3 .2 8
3.2 5
Few er:
6 ,4 8 0
8,100
11,3 4 0
T o ta l
9 ,7 2 0
2 .2 5
2 .2 5
2 .2 5
P e r Ton
2 .2 5
Gas and O il:
4,8 8 2
5,6 9 5
T o ta l
3 ,2 5 4
4 ,0 6 8
P e r Ton
1 .1 3
1 .1 3
1 .1 3
1 .1 3
M ain ten an ce & R e p a ir:
5 ,4 5 8
6 ,5 5 0
7 ,6 4 1
4,3 6 6
T o ta l
1.5 2
1 .52
1.52
1 .5 2
P e r Ton
A n tio x id a n t:
1,800
2
,5 2 0
1
,440
2
,1
6
0
T o ta l
.50
.50
.50
.50
P e r Ton
110,377
90,480
100,399
TOTAL
8 0 ,4 7 3
2 3 .2 4
2 1 .9 0
TOTAL PER TON
2 7 .9 4
2 5 .1 3
Type o f C ost
1 .5 T o n /E o u r p l a n t
x 2 .0 T o n /H o u r p l a n t
C o s t/T o n
3 .0 T o n /H o u r P l a n t
3 8 .0 2
3 5 .5 8
128
4 ,0 0 0
5 ,0 0 0
A n n u al P r o d u c ti o n i n Tons
F ig u re 2 6 .
I/
A v erag e C o s ts f o r a 12-Week O p e r a tin g S e a so n w i t h 4 , 5 , 6 , and 7 Day Work Weeks
f o r P l a n t s w i t h C a p a c i t i e s o f 1 . 5 , 2 . 0 , and 3 .0 Tons P e r H o u r. \J
A v e ra g e c o s t s i n c l u d e a $10 p e r to n raw a l f a l f a c o s t .
C o s t/T o n
4 1 .9 5
^L. 5 T o n /H o u r P l a n t
^^5
2 .0 T o n/H our P l a n t
3 .0 T on /H o u r P l a n t
3 4 .1 9
3 2 .1 8
129
7 ,0 0 0
2,000
A n n u a l P r o d u c ti o n i n Tons
F ig u re 27.
I/
A v e ra g e C o s ts f o r a 16-Week O p e r a tin g S e a so n w i t h 4 , 5 , 6 , and 7 Day Work Weeks f o r
P l a n t s w i t h C a p a c i t i e s o f 1 . 5 , 2 . 0 , and 3 .0 Tons P e r H o u r. I /
A v erag e c o s t s i n c l u d e a $10 p e r to n raw a l f a l f a c o s t .
1 .5 T o n /H o u r P l a n t
3 7 .9 4
31.90
3 0 .1 4
3 .0 T on/H our P l a n t
130
C o st/T o n
2 .0 T on /H o u r P l a n t
3 ,0 0 0
F ig u r e 2 8 .
I/
4 ,0 0 0
5 ,0 0 0
6 ,0 0 0
7 ,0 0 0
8
A n n u al P r o d u c ti o n i n Tons
A v erag e C o s ts f o r a 20-Week O p e r a tin g S e a so n w i t h 4 , 5 , 6 , and 7 Day Work Weeks f o r
P l a n t s w i t h C a p a c i t i e s o f 1 .5 , 2 . 0 , and 3 .0 Tons P e r H o u r.
A v erag e c o s t s i n c l u d e a $10 p e r to n raw a l f a l f a c o s t .
131
th e f i r m m u st go t o t h e n e x t l a r g e r p l a n t .
T he b r e a k e v e n p o i n t h a s
i n c r e a s e d t o a p p r o x im a te ly 3 ,3 0 0 to n s o f a n n u a l p r o d u c t i o n .
The l i m i t s
o f p r o d u c t i o n f o r t h e 2 . 0 - to n p e r h o u r p l a n t a r e r e a c h e d when p r i c e f a l l s
j u s t b e lo w $ 3 5 ,5 .8 .
A t a p r i c e o f $ 3 5 .5 8 t h e 2 . 0 - t o n p e r h o u r p l a n t i s
w o rk in g 7 d a y s p e r w eek an d p r o d u c in g 4 ,0 3 2 to n s a n n u a l l y .
fa lls
When p r i c e
j u s t b e lo w $ 3 5 .2 0 t h e f ir m m u st go t o t h e 3 . 0 - t o n p e r h o u r p l a n t
w i t h a n n u a l p r o d u c t i o n r e q u ir e m e n ts ju m p in g t o a p p r o x im a te ly 4 ,5 5 0 t o n s .
F i g u r e 27 d e p i c t s t h e a v e ra g e c o s t c u rv e s f o r a 16-w eek o p e r a t i n g
s e a s o n and w o rk w eeks o f 4 , 5 , 6 , and 7 d a y s ,
The minimum b r e a k e v e n
p o i n t i s 2 ,3 0 4 to n s o f a n n u a l p r o d u c t i o n and r e q u i r e s a p r o d u c t p r i c e o f
$ 4 1 ,9 5 .
T h is i s
a d e c r e a s e o f $ 6 .5 7 o v e r t h e 12-w eek o p e r a t i n g s e a s o n .
The 1 . 5 - t o n p e r h o u r p l a n t r e a c h e s i t s p r o d u c t i o n l i m i t a t an a n n u a l
p r o d u c t i o n o f 4 ,0 3 2 to n s and a p r o d u c t p r i c e o f $ 3 4 .1 9 .
At a p ro d u c t
p r i c e j u s t b e lo w $ 3 4 .1 9 t h e f ir m m u st go t o t h e 2 . 0- t o n p e r h o u r p l a n t .
The to n n a g e r e q u ir e m e n t i n c r e a s e s t o a p p r o x im a te ly 4 ,2 5 0 .
At a p ric e
o f $ 3 2 .1 8 th e 2 . 0 - t o n p e r h o u r p l a n t r e a c h e s i t s p r o d u c t i o n l i m i t .
The-
to n n a g e r e q u ir e m e n t i n c r e a s e s ' from 5 ,3 7 6 t o a p p r o x im a te ly 6 ,3 5 0 t o n s .
F i g u r e 28 d e p i c t s t h e a v e ra g e c o s t c u r v e s f o r a 2 0 -w eek o p e r a t i n g
s e a s o n and w o rk w eeks o f 4 , 5 , 6 , and 7 d a y s ..
The minimum b r e a k e v e n
p o i n t i s 2 ,8 8 0 to n s o f a n n u a l p r o d u c t i o n and r e q u i r e s a p r o d u c t p r i c e
o f $ 3 7 .9 4 .
T h is i s
a d e c r e a s e o f $4.-01 o v e r th e 16-w eek o p e r a t i n g s e a s o n
and $ 1 0 .5 8 o v e r t h e 12-w eek o p e r a t i n g s e a s o n .
The 1 . 5 - t o n p e r h o u r
p l a n t r e a c h e s i t s p r o d u c t i o n l i m i t a t 5 ,0 4 0 to n s o f a n n u a l p r o d u c t i o n .
Minimum p r o d u c t p r i c e a t t h i s p o i n t i s
$ 3 1 .9 0 .
A t a p r i c e j u s t b elo w
132
$ 3 1 .9 0 t h e f i r m m u s t.g o t o th e 2 . 0 - t o n p e r h o u r p l a n t .
The p r o d u c t i o n
r e q u ir e m e n ts f o r t h e 2 . 0- t o n p e r h o u r p l a n t a t t h i s p o i n t a r e a p p r o x i­
m a te ly 5 ,6 0 0 t o n s .
The p r o d u c t i o n l i m i t f o r t h e 2 . 0 - t o n p e r h o u r p l a n t
i s r e a c h e d a t 6 ,7 2 0 to n s o f a n n u a l p r o d u c t i o n .
h e r e a t a p r o d u c t p r i c e o f $ 3 0 .1 4 .
to n n a g e r e q u i r e m e n t i s
The f i r m c a n b r e a k ev e n
A t a p r i c e j u s t b e lo w $ 3 0 .1 4 th e
a p p r o x im a te ly 8 ,2 5 0 t o n s .
The f i r m w i l l , o f c o u r s e , o p e r a t e b e y o n d b r e a k e v e n v o lu m e .
l i m i t i n g f a c t o r i s t h e am ount o f raw a l f a l f a a v a i l a b l e .
The
S in c e no n e o f
t h e c o s t c u rv e s t u r n up t h e m a r g i n a l c o s t c u r v e s — lo n g - a n d s h o r t - r u n —
m u st l i e b e lo w th em .
T h e r e f o r e , as lo n g as t h e a v e ra g e r e v e n u e c u rv e i s
su c h t h a t t h e f i r m can b r e a k e v e n , i t w i l l p ay t h e f i r m t o e x p a n d p ro d u c ­
t i o n up t o t h e raw a l f a l f a s u p p ly l i m i t a t i o n .
I f t h e s u p p ly l i m i t o c c u rs
b e f o r e th e 7 day w ork w eek i s r e a c h e d , t h e p l a n t w i l l n o t b e o p e r a t i n g a t
f u l l c a p a c i t y w i t h r e f e r e n c e t o t h e tim e d im e n s io n .
I t is
r e c o g n i z e d t h a t t h e c o s t c u rv e s s k e tc h e d i n t h e p r e c e d in g
f i g u r e s a r e e x tr e m e ly v a r i a b l e .
I t w as assum ed t h a t t h e m o is t u r e c o n te n t
o f t h e raw a l f a l f a w as 70 p e r c e n t .
The sam e p l a n t s o p e r a t i n g on a l f a l f a
w i t h a h i g h e r m o is t u r e c o n t e n t w i l l h a v e d e c r e a s e d h o u r l y c a p a c i t i e s
and c o n s e q u e n tly h i g h e r a v e ra g e c o s t .
C o s ts w i l l a l s o b e a f f e c t e d by
c o s t d i f f e r e n c e s among a r e a s f o r f u e l , p o w e r, g a s and o i l ,
and l a b o r .
The l o c a t i o n o f t h e raw a l f a l f a s u p p ly ■w i t h r e f e r e n c e t o t h e p l a n t w i l l
a f f e c t p ro d u c tio n c o s ts .
The c o s t p i c t u r e w i l l a l s o b e d e te r m in e d by
y i e l d s and p e r to n c o s t s o f raw a l f a l f a .
CHAPTER VI
MARKETING MANAGEMENT
A l f a l f a d e h y d r a t in g f ir m s h a v e h i s t o r i c a l l y
d ir e c t s a le s
c o u n te d p r i m a r i l y on
t o f e e d m a n u f a c tu r e r s and b r o k e r s a s th e p r i n c i p a l m a rk e t
f o r d e h y d r a te d a l f a l f a .
One o f th e m a jo r p a r t - t i m e f u n c t i o n s o f th e
p l a n t m an a g e r h a s b e e n t h e s e l l i n g o f t h e p r o d u c t t o l i v e s t o c k f e e d e r s ,
f e e d m i l l s , and o t h e r o u t l e t s .
The d e h y d r a te d a l f a l f a i n d u s t r y h a s h a d
c o m p a r a tiv e ly few b u y e r s and s e l l e r s
and a s a r e s u l t i n d i v i d u a l p a r t i e s
h a v e c o n s i d e r a b l e i n f l u e n c e on s u p p ly and p r i c e .
P r i c i n g t h e p r o d u c t i s t h e p r im a r y c o n c e rn o f m a r k e ti n g .
B oth
w h a t t h e p l a n t i s w i l l i n g t o p ay f a r m e r s f o r raw a l f a l f a a n d w h a t th e
p l a n t w i l l c h a rg e f o r p r o c e s s e d a l f a l f a .
How t h e p l a n t m a n a g e rs d e te r m in e
w h a t th e y w i l l p ay t h e p r o d u c e r s f o r raw a l f a l f a h a s b e e n d i s c u s s e d i n
C h a p te r I I .
E s ta b lis h m e n t o f p r ic e f o r th e f in is h e d p ro d u c t i s
i n t e g r a l p a r t o f t h e m a r k e tin g m anagem ent o f t h e f ir m .
an im p o r ta n t and
M an ag ers a r e
c o n c e rn e d w i t h t h e d i s t r i b u t i o n c h a n n e ls by w h ic h th e y m a r k e t t h e i r
p r o d u c t and fro m w h ic h one th e y w i l l r e a l i z e t h e g r e a t e s t r e t u r n .
M a rk e tin g m u st t a k e i n t o c o n s i d e r a t i o n any p r o m o tio n a l a c t i v i t i e s
a tt e m p t s t o i n c r e a s e s a l e s .
When p r i c i n g h i s
or
f i n i s h e d p r o d u c t , th e
m an a g e r m u st t a k e i n t o c o n s i d e r a t i o n t h e p r i c e o f t h e raw a l f a l f a ,
th e
d e h y d r a t in g c o s t s , t h e d i s t a n c e t o co n su m ers o f h i s p r o d u c t , t h e q u a l i t y
o f t h e a l f a l f a d e h y , t h e am ount o f tim e h e h a s s t o r e d i t ,
and t h e q u o te d
134
c e n t r a l m ark e t p r i c e .
p ric e s .
X X I).
D e h y d ra te d a l f a l f a h a s few q u o te d c e n t r a l m a rk e t
A l f a l f a dehy p r ic e s , h a s f l u c t u a t e d s e a s o n a l l y ( r e f e r t o T a b le
G e n e r a l l y , p r i c e s a r e h i g h e s t i n t h e e a r l y w i n t e r m o n th s.
The ab o v e d i s c u s s i o n c e n t e r s p r i m a r i l y a ro u n d t h e t h r e e b a s i c
u tilitie s
and fo rm .
t h a t a r e c o n c e r n e d w i t h m a r k e ti n g , t h a t i s
o f t im e , p l a c e ,
The s u r v e y a tt e m p t e d t o d e te r m in e w h a t k in d o f a s a l e s
o r g a n i z a t i o n e a c h f i r m h a d and how th e y s o l d t h e i r p r o d u c t .
The •’
d i s c u s s i o n w i l l p r o c e e d w i t h s a l e s o r g a n i z a t i o n , m a rk e t dem and, m a rk e t
o u t l e t s , s a l e s i n f o r m a t i o n , and s t o r a g e .
S a l e s O r g a n iz a ti o n
Of t h e f ir m s i n t e r v i e w e d t h e b u l k o f them d i d n o t b e lo n g t o any
p a r tic u la r s a le s o rg a n iz a tio n .
s e llin g .
s e lls
The m an a g e r i n m o st c a s e s d i d t h e
A few o f t h e f ir m s d i d b e lo n g t o a p a r e n t o r g a n i z a t i o n w h ich
th e b u lk o f t h e i r o u tp u t.
H a l f o f t h e p l a n t m a n a g e rs com m ented on w h e th e r o r n o t th e y th o u g h t
an o v e r a l l c o o p e r a t i v e s a l e s a g e n cy s p o n s o r e d by s e v e r a l f ir m s w o u ld b e
h e lp fu l.
F iv e o f th e p l a n t m an a g e rs d i d n ' t t h i n k i t w o u ld b e a t a l l
h e lp f u l f o r t h e f o ll o w i n g r e a s o n s :
They w o u ld n o t l i k e t o comm it t h e i r
to n n a g e and th e y w e re a f r a i d t h e r e m ig h t be, some ad d ed c o s t s i n s e l l i n g .
I n d i r e c t c o n f l i c t a n o t h e r f i v e m an a g e rs t h o u g h t i t w o u ld r e d u c e s e l l i n g
c o s t s and a l s o t h o u g h t t h a t t h e r e m ig h t b e a b e t t e r o p p o r t u n i t y f o r
f in a n c in g s a l e s .
S o m e .o f t h e m a jo r s e l l i n g d i f f i c u l t i e s
c i t e d by m a n a g e rs a r e
m a r k e t f l u c t u a t i o n s and t h e f a c t t h a t t h e r e i s no com m odity m a r k e t i n
WHOLESALE PRICE PER TON, BULK, OF DEHYDRATED ALFALFA' MEAL, 17 PERCENT PROTEIN,
1 0 0 ,0 0 0 UNITS VITAMIN A, AT KANSAS CITY.*
S e p t.
1 9 5 7 -5 8
4 5 .7 0
4 6 .0 0
4 4 .2 0
4 1 .1 0
4 2 .1 0
4 0 .6 0
3 8 .6 0
3 2 .0 0
3 0 .7 5
3 2 .0 0
3 1 .6 0
3 4 .7 0
3 8 .3 0
1958-59
4 3 .0 0
4 6 .0 0
4 9 .0 0
5 7 .0 0
,6 1 .0 0
6 1 .0 0
6 1 .0 0
5 4 .2 5
4 1 .6 0
4 1 .5 0
4 3 .0 0
4 3 .4 0
5 0 .1 5
1959-60
4 9 .5 0
5 3 .5 0
5 5 .0 0
5 5 .0 0
5 5 .0 0
5 3 .4 0
5 3 .0 0
4 1 .4 0
3 8 .0 0
3 8 .0 0
3 9 ,2 0
4 0 .1 0
4 7 .6 0
1 9 6 0 -6 1
4 5 .3 5 - 4 7 .9 0
4 7 ;1 0
4 6 .5 0
4 6 .5 0
4 8 .1 0
4 7 .5 0
4 6 .2 0
4 0 .7 5
4 0 .2 5
4 3 .0 0
4 3 .0 0
4 5 .1 5
1961-62
4 6 .2 0
4 9 .0 0 • 4 8 .0 0
4 9 .6 0
5 2 .7 0
5 4 .2 0
5 5 .0 0
4 4 .8 0
4 0 .0 0
3 9 .6 0
-4 3 .4 0
4 8 .2 0
4 7 .6 0
1 9 6 2 -6 3
5 2 .2 0
5 3 .5 0
5 2 .0 0
5 3 .0 0
5 4 .8 0
5 2 .2 2
4 6 .0 0
4 1 .5 0
4 1 .2 0
4 2 .4 0
4 6 .5 0
4 6 .5 0
4 8 .4 0
1 9 6 3 -6 4
4 7 .7 0
4 9 .9 0
4 8 .8 0
4 7 .6 0
4 5 .4 0
4 1 .2 0
3 8 .4 0
3 7 .2 0
3 5 .2 0
3 6 .0 0
3 8 .3 0
4 1 .0 0
4 2 .2 0
1964-65
4 2 .6 0 ■ 4 3 .5 0
4 3 .5 0
4 3 .5 0
4 1 .6 0
3 8 .8 0
3 7 .2 0
3 6 .0 0
3 5 .6 0
3 8 .5 0
4 1 .0 0
4 2 .0 0
4 0 .3 0
1 965-66
4 6 .6 0
4 9 .5 0 ' 4 9 .5 0 ' 4 9 .8 0
5 2 .6 0
5 5 .2 0
5 3 .2 0
4 8 .0 0
4 1 .5 0
4 7 .0 0
5 0 .0 0
5 3 .0 0
4 9 .7 0
1 966-67
5 3 .7 0
5 6 .3 0
5 9 .6 0
6 1 .3 0
6 1 .9 0
5 9 .5 0
5 3 .3 0
4 6 .4 0
4 5 .9 0
4 8 .0 0
4 7 .8 0
4 7 .0 0
5 3 .4 0
19 6 7 -6 8
47 ;00
4 7 .0 0
4 5 .7 0
4 3 .0 0
3 9 .2 0
3 7 .2 0
3 6 .8 0
3 6 .2 0
3 5 .5 0
3 5 .0 0
3 3 .5 0
3 3 .5 0
3 9 .1 3
1968-6.9' '3 7 ,3 0
4 1 .2 0
4 4 .4 0
4 6 ,5 0 . .4 7 .0 0
■' Y e a r
O c t.
N o v .'
D ec.
.'J a n i
Feb.
M ar.
A p r.
May
June
J u ly
A ve.
.4 6 ,5 0 .
* S o u rc e : ' F e e d 'm a r k e t N ew s, USDA, W a s h in g to n , D'. C . , V o l....4 5 , N o. 4 0 , O c to b e r 3 , 1 9 6 2 , p p . 2 2 -2 3 ;
V o l . - 48-, No, 4 0 , O c to b e r - 6 , 1 9 6 5 , p p „ 23--2 5 ; F e e d S t a t i s t i c s , S t a t . B u i. 4 1 0 ; S e p tem b e r
1 9 6 7 , p „ 87; F eed S i t u a t i o n , FDS-2 1 6 t o 2 2 2 , N ovem ber 1966 t o F e b ru a ry 1968.
135
I
TABLE XXI.
136
t h e i r im m e d ia te a r e a seem ed t o b o t h e r some o f t h e m a n a g e r s .
p e r c e n t o f th e p l a n t s s a i d th e y h a d n o m a jo r d i f f i c u l t i e s
t h e i r p ro d u c t in re c e n t y e a r s .
A bout 50
in s e llin g
T h e re was no r e l a t i o n b e tw e e n age o f
p l a n t and t h e i r s a l e s o r g a n i z a t i o n a c t i v i t i e s .
M a rk e t Demand
I n o n ly one i n s t a n c e d i d any one o f t h e p l a n t m a n a g e rs f e e l t h a t
l a c k o f demand l i m i t e d h i s p l a n t s p r o d u c t i o n .
The one i n s t a n c e w h e re th e
i n d i v i d u a l f i g u r e d t h a t p r o d u c t i o n w as l i m i t e d by demand t h o u g h t i t was
b a s ic a lly
a p r i c i n g p ro b le m .
E le v e n o f th e p l a n t s i n d i c a t e d th e y c o n s id e r e d c o s t o f p r o d u c t i o n
as one o f t h e f a c t o r s
a lfa lfa .
c o n s id e r e d when a r r i v i n g a t p r i c e f o r d e h y d r a te d
A l l f o u r p l a n t s t h r e e y e a r s o f ag e and u n d e r c o n s id e r e d c o s t
o f p r o d u c t i o n arid t h e c o m p e t it iv e m a rk e t p r i c e when e s t a b l i s h i n g p r i c e .
I n t o t a l , n i n e p l a n t s c o n s id e r e d m a rk e t p r i c e and t h e i r c o m p e t it o r s when
e s t a b l i s h i n g dehy p r i c e s .
T h e re w e re n o o t h e r f a c t o r s c o n s i s t e n t l y
m e n tio n e d a s i m p o r t a n t when e s t a b l i s h i n g p r i c e s f o r d e h y d r a te d a l f a l f a .
P r i c e s r e c e i v e d a t t h e p l a n t v a r i e s c o n s i d e r a b l y b e tw e e n p l a n t s and
w i t h i n p l a n t s , s u g g e s t i n g t h a t t h e r e i s n o u n ifo r m p r i c i n g m echanism .
M a rk e tin g O u t l e t s
The b u l k o f th e p l a n t s i n d i c a t e d t h e y s o l d m ost o f t h e i r dehy w i t h i n
a 1 0 0 - m ile r a d i u s o f t h e i r p r o c e s s i n g p l a n t .
100 p e r c e n t o f i t s
One 2 0 - y e a r o l d p l a n t s o l d
volum e w i t h i n a 2 5 - m ile r a d i u s o f t h e p l a n t , i n d i c a t i n g
137
th e y h a d a s t r o n g l o c a l dem and.
Some p l a n t s w e re p a r t o f a l a r g e r
o r g a n i z a t i o n and s h ip p e d d i r e c t t o t h e p a r e n t company w h ic h h a n d le d
th e s a l e s .
E le v e n p l a n t m a n a g e rs f e l t t h a t t h e r e was a d e f i n i t e o p p o r t u n i t y
t o i n c r e a s e p r o d u c t i o n o f dehy i n t h e i r a r e a s and th e y l i s t e d i n c r e a s e d
c a ttle
f e e d i n g a s t h e p r im a r y r e a s o n f o r i n c r e a s e d p o t e n t i a l .
F iv e o f
t h e s e p l a n t s w e re f i v e y e a r s o l d o r l e s s b u t f o u r p l a n t s h a d b e e n o p e r a t i n g
19 y e a r s o r l o n g e r .
I n a few c a s e s , d a i r i e s w e re l i s t e d
as c o n tr ib u tin g
t o an i n c r e a s e d dem and.
O nly o n e - h a l f o f t h e 'm a n a g e r s i n d i c a t e d t h a t th e y h a d done any m a rk e t
d e v e lo p m e n t w ork i n t h e i r a r e a and t h e s e w e re w i t h c a t t l e f e e d e r s a lm o s t
e x c lu s iv e ly .
a c tiv itie s .
B o th .n e w and o l d f ir m s p a r t i c i p a t e d i n m a r k e t d e v e lo p m e n t
I n two i n s t a n c e s s a l e s h a d i n c r e a s e d w i t h a f e e d m a n u f a c tu r in g
firm .
They i n d i c a t e d t h a t t h e i r m a jo r p ro b le m i n e n t e r i n g a new m a rk e t i s
t r y i n g t o c o n v in c e t h e b u y e r t h a t a l f a l f a dehy i s n o t j u s t h a y , t h a t i t
is
d e f i n i t e l y a f e e d and h a s e x c e l l e n t f e e d v a l u e .
I n some s i t u a t i o n s
th e y i n d i c a t e d t h e r e was some c o m p e t it io n fro m o t h e r f e e d p r o d u c t s and
t h e n e w e r p l a n t s i n d i c a t e d th e y h a d some p ro b le m s, i n e s t a b l i s h i n g t h e i r
r e p u t a t i o n and t h e q u a l i t y o f t h e i r p r o d u c t w i t h t h e p o t e n t i a l b u y e r s .
One o f t h e b a s i c s t r a t e g i e s o f m a r k e tin g a l f a l f a i s p r o d u c t i o n
d iffe re n tia tio n .
A l f a l f a dehy i s d i f f e r e n t from a l f a l f a h a y b u t p o t e n t i a l
c u s to m e rs a r e r e l u c t a n t t o a c c e p t t h i s a s v a l i d .
T h u s, p a r t o f e x p a n d in g
138
s a le s i s
an e d u c a t i o n e f f o r t .
d e v e lo p m e n t e f f o r t s
I
W ith e m p h a s is on e d u c a t i o n ; m a rk e t
c a n n o t r e l y on s a l e s p ro m o tio n g im ic k s and
a d v e r t i s i n g b u t m u st c o n c e n t r a t e m ore on p e r s o n a l s e l l i n g w h ic h i s t h e
I
p r o c e s s o f a s s i s t i n g and p e r s u a d i n g a p r o s p e c t t o buy a l f a l f a dehy i n
a fa c e -to -fa c e s itu a tio n .
t h e m o st p r a c t i c a l .
P e r s o n a l s e l l i n g n o t o n ly i s n e e d e d b u t i s
P o t e n t i a l b u y e r s w h ic h h a v e b e e n i d e n t i f i e d a s ;
f e e d m i l l s , l i v e s t o c k f e e d e r s , d a iry m e n , f e e d m a n u f a c tu r in g c o m p a n ie s ,
o t h e r l i v e s t o c k f e e d e r s i n a d d i t i o n t o b r o k e r s and c o m m issio n men can
b e r e a d i ly i d e n t i f i e d i n a p l a n t 's m ark et a r e a .
When c a l l i n g on a
p o t e n t i a l c u s to m e r t h e s a le s m a n n e e d s t o b e ,e q u ip p e d w i t h c o n s i d e r a b l e
m a t e r i a l r e l a t e d t o t h e n u t r i t i o n a l v a l u e . o f a l f a l f a dehy a s w e l l as
t h e e c o n o m ic s o f i t i n t h e n a t i o n .
The A m erican D e h y d r a tio n A s s o c i a t i o n
h a s s u g g e s t e d s a l e s m a t e r i a l t h a t can b e made a v a i l a b l e t o a dehy f ir m .
F irm s s h o u ld t r y
t o h o l d e x p e n d i t u r e s f o r a d v e r t i s i n g and s a l e s
p r o m o tio n gim m icks t o . a minimum and i n v e s t m a rk e t d e v e lo p m e n t money i n
p e rso n a l s e llin g .
B e f o r e any m a jo r e x p e n d i t u r e s h o u ld b e made on m a rk e t d e v e lo p m e n t,
th e f i r m s h o u ld make a c r i t i c a l a p p r a i s a l
its
tra d e a re a .
o f t h e m a rk e t p o t e n t i a l i n
T h is can b e done i n s e v e r a l w ays:
1)
D e te rm in e num ber and volum e o f f e e d m a n u f a c tu r in g p l a n t s
w i t h i n 150 m il e s o f th e f ir m ;
2)
Number and volum e o f a l f a l f a d e h y d r a t in g w i t h i n a 1 5 0 -m ile
ra d iu s ;
3)
Num ber and s i z e o f l i v e s t o c k f e e d e r s w i t h i n a 1 5 0 - m ile r a d i u s ;
139
4)
Number and s i z e o f d a i r y f a r m e r s w i t h i n a 1 5 0 - m ile r a d i u s ;
5)
W hat h a s b e e n t h e t r e n d i n l i v e s t o c k f e e d i n g , d a i r y i n g , and
f e e d m a n u f a c tu r in g i n t h e a r e a ( i n i t i n c r e a s i n g , d e c r e a s i n g ,
o r s ta b le ) .
Much o f t h e ab o v e i n f o r m a t i o n can b e o b t a i n e d fro m s e c o n d a r y s o u r c e s .
I f u n a v a i l a b l e th e p l a n t may h a v e t o t a k e r e p r e s e n t a t i v e s u r v e y s i n an
a tt e m p t t o d e te r m in e how much d e h y d r a te d a l f a l f a c o u ld b e u s e d i n t h e
a re a .
I n g e n e r a l , m o st o f t h i s i n f o r m a t i o n s h o u ld h a v e b e e n d e te r m in e d
p r i o r t o e s t a b l i s h m e n t o f t h e dehy p l a n t .
G r e a t e r d e t a i l on d e te r m in in g
th e s e f a c to r s i s in c lu d e d in a l a t e r c h a p te r.
Once t h e ab o v e i n f o r m a t io n
h a s b e e n d e te r m in e d , t h e p l a n t m anagem ent can a l l o c a t e t h e a p p r o p r i a t e
e f f o r t t o e x p l o i t t h e m a rk e t p o t e n t i a l i n t h e a r e a .
S a l e s I n f o r m a t io n
O ver t h r e e - f o u r t h s o f t h e p l a n t s i n d i c a t e d th e y made some s a l e s
w ith g u a r a n t e e d p r o t e i n c o n t e n t and 14 o u t o f 20 i n d i c a t e d th e y g u a r a n te e d
b e tw e e n 76 and 100 p e r c e n t o f t h e i r s a l e s b a s e d on p r o t e i n c o n te n t
( T a b le X X II).
O nly e i g h t o f t h e p l a n t s i n d i c a t e d t h a t a h i g h p e r c e n t a g e ,
o f t h e i r s a l e s w e re b a s e d on a g u a r a n t e e d c a r o t e n e c o n t e n t .
The t h r e e
n e w e s t p l a n t s made a 100 p e r c e n t o f t h e i r s a l e s 'o n . a g u a r a n t e e d p r o t e i n
c o n t e n t and 75 p e r c e n t o r m ore on g u a r a n t e e d c a r o t e n e c o n t e n t .
P r i c e prem ium s w e re r e c e i v e d i n m o st i n s t a n c e s ab o v e 17 p e r c e n t
p ro te in .
Prem ium s ra n g e d fro m a d o l l a r a p o i n t t o two d o l l a r s a p o i n t
a b o u t 17 p e r c e n t .
I n some c a s e s , t h i s seem ed t o b e . a s i g n i f i c a n t f a c t o r
I n te rm s o f t h e p r i c e s th e y r e c e i v e d and t h i n g s t h a t th e y c o n s id e r e d ,
in e s ta b lis h in g a p r ic e .
140
TABLE X X II.
NUMBER OF PLANTS WHO GUARANTEED PROTEIN AND CAROTENE IN
THEIR PRODUCT, 1 9 6 6 .*
% o f S a l e s w i t h G u a r a n te e d P r o t e i n & C a r o te n e C o n te n t
26-50%
0-25%
51-75%
76-100%
-N um ber o f P l a n t s --------------------C a r o te n e
0
I
3
8
P ro te in
I
.o
I
14
* D o e sn ?t t o t a l b e c a u s e n o t a l l p l a n t s a n sw e re d t h i s q u e s t i o n .
V ery few s a l e s w e re made on c r e d i t .
H ow ever, o v e r h a l f o f th e
p l a n t s made some s a l e s b a s e d on f u t u r e d e l i v e r y ,
F iv e o f t h e y o u n g e s t
p l a n t s s o l d 60 p e r c e n t o r m ore o f t h e i r s a l e s on f u t u r e d e l i v e r y .
In
e a c h c a s e w h e re th e y made s a l e s b a s e d on f u t u r e d e l i v e r y t h e r e was a
f i x e d p r i c e w i t h a dow n -p ay m en t.
They d i d n o t i n d i c a t e w h a t t h e down-
p a y m e n t was a s a p e r c e n t a g e o f t o t a l .
T hose p l a n t s who d i d make s a l e s
b a s e d on f u t u r e d e l i v e r y d id b e tw e e n 50 and 60 p e r c e n t o f t h e i r b u s i n e s s
on t h i s b a s i s .
One o f t h e o l d e s t p l a n t s made 95 p e r c e n t o f i t s
s a le s
b a s e d upon f u t u r e d e l i v e r y .
The p l a n t s in te rv ie w e d s e l l th ro u g h b r o k e r s , co m m issio n m en, d i r e c t ,
t o f e e d m i l l s , d i r e c t t o l i v e s t o c k f e e d e r s and many o f them s e l l th ro u g h
t h e i r own m ix ed f e e d s and some t o a p a r e n t o r g a n i z a t i o n .
Of t h e 11 p l a n t s who s o l d th ro u g h b r o k e r s th e s e l l i n g
c h a rg e f o r
e i g h t o f them was $1 p e r t o n ; f o r two o f th em , 75 c e n ts p e r t o n ; and
f o r one p l a n t ,
th e s e l l i n g
c h a rg e was o n ly 50 c e n ts p e r t o n .
The a v e ra g e
141
p r i c e r e c e i v e d v a r i e d a l l t h e way fro m $34 p e r to n t o $ 4 3 .5 0 (T a b le
X X III).
The p r i c e
c o m m issio n m en.
th ro u g h b r o k e r s g e n e r a l l y w a s . t h e sam e a s th ro u g h
H o w ev er, i n some c a s e s , was n o t as g r e a t as when th e
sam e p l a n t s s o l d d i r e c t t o f e e d m i l l s .
The p r i c e ;
s p r e a d when th e y s o l d
d i r e c t l y t o l i v e s t o c k f e e d e r s com pared f a v o r a b l y w ith t h o s e s a l e s d i r e c t l y
to fee d m ills .
T h re e o f t h e p l a n t s s o l d a f a i r p e r c e n t a g e o f t h e i r
volum e th r o u g h t h e i r own m ix ed f e e d s .
Two o t h e r s h a d a l l t h e i r s a l e s
h a n d le d th r o u g h t h e i r p a r e n t com pany.
S to r a g e
S to ra g e i s
a v e r y s i g n i f i c a n t p a r t o f t h e m a r k e tin g f u n c t i o n .
N in e
o f t h e f ir m s i n t e r v i e w e d i n d i c a t e d th e y h a d a d e f i n i t e s t o r a g e p o l i c y
( T a b le XXIV).
Age o f p l a n t seem ed t o h a v e v e r y l i t t l e
s to ra g e p o lic y „
i n f l u e n c e on
The a v e r a g e ag e o f b o th g ro u p s was o v e r 10 y e a r s w ith
a r a n g e fro m 2 t o 25 y e a r s w i t h t h o s e who h a v e a d e f i n i t e p o l i c y and
a r a n g e fro m 2 t o 20 y e a r s f o r t h o s e who d o n 't .
N in e p l a n t s s a i d th e y
h a v e a b o u t o n e - h a l f o f t h e i r p r o d u c t i o n in , s t o r a g e s o a s t o m a rk e t a t
a m ore o p p o r tu n e tim e .
T h re e p l a n t s i n d i c a t e d th e y s t o r e t h e lo w e r
g r a d e dehy t o s e l l l o c a l l y and s e l l t h e h i g h e r q u a l i t y p r o d u c t t o m ore
d i s t a n t m a r k e ts .
A few p l a n t s s t o r e t h e i r e a r l y s e a s o n p r o d u c t i o n f o r
a c o u p le o f m o n th s and th e n move i t o u t a s th e y do a d d i t i o n a l p r o c e s s i n g .
Some r e g u l a t e t h e i r s t o r a g e volum e a c c o r d in g t o t h e m a r k e t .
m ark e t i s
When th e
low th e y t e n d t o h o l d m ore i n s t o r a g e l o n g e r t h a n when th e
m ark e t i s h ig h .
TABLE X X I I I .
METHOD OF SE LL IN G DEHYDRATED ALFALFA , 2 0 PLA N TS,
S o l d T h ro u g h B ro k e rs
F irm
k j
T J
S o ld
S o ld
S o ld
S o ld
S o ld
S o ld
S o ld
--25
20
30
—
—
10
40
5
5
P e r c e n t A v e ra g e N e t
S e llin g
Of S a l e s P r i c e / T o n C h a rg e s /T o n
D o lla rs
P e t.
D o lla rs
_
3 5 .0 0
4 4 .5 0
4 0 .0 0
1 .0 0
0 .5 0
1 .0 0
—
——
—
——
—
——
™
——
—
—
—
—
——
——
——
——
-—
——
1 .0 0
0 .7 5
1 .0 0
1 .0 0
——
——
——
3 6 .0 0
3 9 .7 8
4 3 .5 0
—
——
50
4 0 .0 0
0 .7 5
25
10
25
3 4 .7 9
1 .0 0
1 .0 0
1 .0 0
——
3 4 .0 0
10
S o ld D i r e c t
to Feed M ills
P e rc en t
A v e rag e N e t
Of S a l e s
P ric e /T o n
P e t.
D o lla rs
—
—
——
—
——
—
—
1 .0 0
—
——
——
—
—
—
------
10
5
10
95
90
——
——
40
——
3 9 .7 8
—
0 .7 5
5
____
75
70
50
10
10
3 8 .0 0
3 5 .0 0
4 5 .0 0
4 5 .0 0
3 4 .9 6
4 5 .0 2
——
4 5 .0 2
3 5 .0 0
4 0 .8 0
4 3 .5 0
4 4 .0 0
——
—
—
—
50
4 0 .0 0
—
——
10
20
3 4 .7 9
10
25
3 4 .0 0
——
——
——
10
40
90
——
90
10
10
4 0 .0 0
——
—
5 0 .0 0
3 4 .9 6
4 5 .0 2
—
4 5 .0 2
3 5 .0 0
4 7 .0 1
____
__
—
- _
—
—
—
15
3 4 .7 9
—
—
—
—
1 .0 0
—
95 p e r c e n t th r o u g h a n o th e r com pany.
10 p e r c e n t th ro u g h i t s own m ix ed f e e d .
50 p e r c e n t t o a n o th e r Dehy f i r m .
100 p e r c e n t th r o u g h a n o th e r com pany.
75 p e r c e n t t o t r u c k e r s a t p l a n t .
5 p e rc e n t to p o u ltry fe e d e rs .
20 p e r c e n t f o r e x p o r t and 40 p e r c e n t d i r e c t a t p l a n t .
S o ld D i r e c t t o
L iv e s t o c k D e a le r s
P e rc en t
A v e rag e N e t
Of S a l e s
P ric e /T o n
P e t.
D o lla rs
—
142
JL/
2/
J3/
4/
5/
S o ld T h ro u g h C om m ission Men
P e r c e n t .A v era g e N e t
S e llin g
Of S a l e s P r i c e / T o n C h a rg e s /T o n
P e t.
D o lla rs
D o lla rs
I I/
2
3 2/
4
5 3/
6
7 4/
8
9 5/
10
11
12 6 /
13 4 /
14
15 4 /
16 3 /
17 T l
18 3 /
19 4 /
20 4 /
1966.
143
TABLE XXIV.
__________ •
STORAGE POLICY AND PROBLEMS, 17 ALFALFA DEHYDRATING PLANTS,
1966.
Number o f P l a n t s
_________________________________________ Yes____________________ No_
1 -
P la n t h as a d e f i n i t e s to ra g e p o lic y
2 -
P re s e n t s to ra g e i s
3 -
L im ite d s t o r a g e h a s f o r c e d e a r l y s e l l i n g
a d e q u a te
9
8
11
5
3
13
E le v e n o f t h e f ir m s i n d i c a t e d t h a t t h e i r p r e s e n t s t o r a g e was a d e q u a t e ,
and f i v e s a i d t h e i r s t o r a g e was n o t a d e q u a t e .
Only t h r e e f ir m s i n d i c a t e d
t h a t l i m i t e d s t o r a g e h a d f o r c e d them i n t o s e l l i n g b e f o r e t h e y r e a l l y w a n te d
t o ( r e f e r t o T a b le XXIV).
was a new o p e r a t o r .
Two o f t h e s e w e re f ir m s 2 0 - y e a r s o ld and one
T h i r t e e n s a i d th e y w e re n o t f o r c e d t o s e l l b e c a u s e
o f l a c k o f s t o r a g e and f o u r w e re n o n c o m m ita l s u g g e s t i n g t h a t m o st f ir m s
i n t h e s u r v e y h a v e a d e q u a te s t o r a g e f a c i l i t i e s .
P l a n t m a n a g e rs w e re a s k e d w h a t t h e minimum and maximum s t o r a g e
r e q u i r e m e n ts w e re f o r a p l a n t o f t h e i r s i z e .
In g e n e r a l, as th e
c a p a c i t y o f t h e p l a n t i n c r e a s e d p r o d u c t i o n c a p a c i t y i n c r e a s e d and th e
minimum s t o r a g e r e q u i r e m e n ts i n c r e a s e d ( T a b le XXV).
The maximum s t o r a g e
r e q u i r e m e n ts a r e a s h i g h a s 1 0 ,0 0 0 to n s f o r p l a n t s t h a t a r e p r o d u c in g
i n t h e n e ig h b o r h o o d o f 1 0 ,0 0 0 to n s p e r y e a r (T a b le XXV).
Minimum
144
TABLE XXV.
P la n t
Code
3
I
9
2
4
7
6
13
5
10
8
,14
11
12
15
16
17
18
19
20
_!/
2/
MINIMUM AND MAXIMUM STORAGE REQUIRED PER PLANT BY VOLUME OF
OUTPUT, 1 9 66.
P la n t
Age
Y e a rs
19
20
13
20
3
P la n t
P r o d u c ti o n
Tons .
1 ,6 0 0
2 ,2 9 8
2 ,4 0 0
3 ,0 0 0
3 ,3 0 0
26
3 ,9 9 8
4
8
19
2
NA 2 /
2
20
2
9
25
12
5
21
20
4 ,8 5 4
5 ,1 0 0 •
5 ,1 3 3
5 ,4 9 0
5 ,7 9 1
6 ,3 4 7
6 ,3 4 8
6 ,7 5 0
7 ,1 0 0
9 ,0 4 8
9 ,6 0 0
1 0 ,1 1 4
1 0 ,2 1 1
1 1 ,5 0 0
C a p a c ity
o f P la n t
Tons
P e r c e n t ■o f
C a p ita l P la n t
S t o r a g e N eeded
O p e ra te d
Minimum
Maximum
Tons ■
Tons
2 ,2 5 4
4 ,1 0 3
3 ,4 8 2
71
56
67
47
33
41
93
52
93
73
6 ,3 8 3
1 0 ,0 0 0
9 ,7 5 1
5 ,2 1 9
9 ,8 0 7
5 ,5 1 9
7 ,5 2 0
6 ,9 7 7
9 ,4 7 3
2 1 ,8 8 9
6 ,7 5 0
7 ,9 7 7
1 1 ,4 5 3
1 9 ,2 0 0
1 3 ,6 6 7
1 2 ,1 5 5
1 3 ,8 5 5
83
67
29
100
P la in s to r a g e ( a l l o th e r i s i n e r t gas) .
NA = n o t a v a i l a b l e .
89
79
50
74
84
83
1 ,5 0 0
70 I /
3 ,0 0 0
NA 2 /
3 ,0 0 0 I /
NA
1 ,5 0 0
NA
1 ,8 0 0
2 ,3 0 0
1 ,5 0 0
5 ,0 0 0
4 ,0 0 0
3 ,5 0 0
NA
7 ,0 0 0
3 ,6 0 0
3 ,5 0 0
' NA
NA
2*500
70
5 ,000
NA
3 ,0 0 0
NA
1 ,5 0 0
NA
1 ,8 0 0
2 ,3 0 0
1 ,5 0 0
8 ,0 0 0
6 ,0 0 0
3 ,5 0 0
NA
1 0 ,0 0 0
3 ,6 0 0
1 0 ,0 0 0
NA
NA
145
s t o r a g e r e q u ir e m e n ts d e p e n d upon how s t r o n g th e l o c a l m a r k e t i s and
how much a l f a l f a dehy moves d i r e c t t o f a r m e r s .
O nly two f ir m s h a d s t o r a g e t h a t was n o t g a s s t o r a g e .
f l a t s to ra g e i s
of lim ite d v a lu e .
I n e r t gas s to r a g e i s
The p l a i n o r
recom m ended i n
o r d e r t o m a i n ta i n t h e c a r o t e n e c o n t e n t , w h ic h d im in is h e s t h e p r e s e n c e
of oxygen.
CHAPTER V II
SUMMARY
T h e re a r e two p r i n c i p a l c r i t e r i a f o r d e te r m in in g t h e p r o b a b i l i t y o f
s u c c e s s f o r an a l f a l f a d e h y d r a t io n o p e r a t i o n .
F irs t of a ll,
t h e g ro w in g
s e a s o n m u st b e lo n g enough t o a llo w t h e p l a n t t o g e n e r a t e b r e a k - e v e n
v o lu m e .
S e c o n d ly , t h e r e m u st b e w i t h i n an e c o n o m ic a l h a u l i n g d i s t a n c e
o f t h e p l a n t , an a d e q u a te s u p p ly o f a l f a l f a .
O th e r f a c t o r s p l a y i n g an
i m p o r t a n t r o l e a r e p l a n t l o c a t i o n , v a r i a b l e i n p u t s , p l a n t and f i e l d
e q u ip m e n t, a v a i l a b l e m a r k e t, a n d ' o r g a n i z a t i o n s t r u c t u r e .
G row ing S e a s o n and A c re a g e R e q u ire m e n ts
The p l a n t s i n t h e s u r v e y h a d g ro w in g s e a s o n s - c a r r y i n g th r o u g h f o u r
o r m ore c u t t i n g s .
I t s h o u ld b e n o t e d , h o w e v e r, t h a t t h e tim e b e tw e e n
c u t t i n g s i s s h o r t e r when a l f a l f a i s
c u t f o r s u n -c u rin g .
c u t f o r d e h y d r a t io n t h a n when i t i s
T h e r e f o r e , a l f a l f a t h a t i s c u t t h r e e tim e s f o r s u n ­
c u r i n g may b e c u t f o u r o r m ore tim e s f o r d e h y d r a t io n .
is
B r e a k -e v e n volum e
d e te r m in e d b y t h e r e l a t i v e v a lu e s o f s e l l i n g p r i c e , p u r c h a s e p r i c e ,
and f i x e d and v a r i a b l e c o s t s .
Once t h e s e c o s t s a r e e s t i m a t e d i t i s
i m p o r t a n t t o b e c e r t a i n t h a t t h e r e i s eno u g h a l f a l f a s u p p ly t o e n a b le
t h e f i r m t o g e n e r a t e t h e volum e n e c e s s a r y t o b r e a k e v e n .
S h o r t e r g ro w in g
se a so n s r e q u ir e p l a n t s w ith la r g e c a p a c i ti e s in o rd e r to g e n e ra te b re a k
e v e n , v o lu m e .
T h e r e f o r e , a c re a g e r e q u ir e m e n ts , a re in v e r s e ly r e l a t e d to
l e n g t h o f g ro w in g s e a s o n .
From t h e s u r v e y r e s u l t s i t
d is ta n c e i s
a p p e a r s t h a t an e c o n o m ic a l h a u l i n g
an a r e a w i t h i n a 10- m i l e r a d i u s o r l e s s o f t h e p l a n t .
147
I t i s n o t enough t h a t t h e r e q u i r e d a c r e a g e i s p r o d u c e d i n t h e d e f i n e d
a re a .
T h a t a c r e a g e m u st b e a v a i l a b l e t o t h e p l a n t .
How much a l f a l f a i s
a v a i l a b l e t o t h e p l a n t w i l l u s u a l l y d e p e n d on w h a t t h e f i r m i s w i l l i n g t o
p a y t h e g ro w e r.
A l f a l f a m u st com pete w i t h t h e o t h e r c ro p s f o r t h e u s e o f l a n d .
v a rie ty
A
o f c ro p s a r e c o m p e t i t i v e w i t h a l f a l f a , d e p e n d in g on t h e a r e a i n
which t h e p l a n t i s
c o n s id e rin g lo c a tin g .
An e v a l u a t i o n o f w h e th e r p r e s e n t
a l f a l f a p r o d u c t i o n w i l l c o n ti n u e o r t h e o p p o r t u n i t y f o r e x p a n d e d p ro d u c ­
t i o n can b e made by b u d g e ti n g t h e p o t e n t i a l c o s t s and r e t u r n s f o r a l f a l f a
and c o m p e t i t i v e c r o p s .
P l a n t L o c a tio n
The i d e a l l o c a t i o n f o r an a l f a l f a d e h y d r a t in g p l a n t i s on a r a i l
s i d i n g in th e c e n te r o f th e a l f a l f a s u p p ly .
a re n o t id e a l.
M ost s i t u a t i o n s ,
h o w e v e r,
I n t h e l e s s th a n i d e a l s i t u a t i o n , w h ic h l o c a t i o n does
t h e p l a n t c h o se ?
From t h e f o r m u la
~ X
™
(l-t)Y
1 -t
w h e re t = 10 p e r c e n t
r = 75 p e r c e n t
i t is seen th a t i t
ta k e s 3 .6 to n s o f raw a l f a l f a t o p r o d u c e one to n o f
d e h y d r a te d a l f a l f a .
I n a d d i t i o n , raw a l f a l f a i s a b o u t t h r e e tim e s as
b u lk y a s t h e d e h y d r a te d p r o d u c t .
T h e se f a c t o r s s t r o n g l y s u g g e s t t h a t a
148
s t r a t e g i c l o c a t i o n w i t h r e s p e c t t o t h e a l f a l f a s u p p ly m ay, i n some c a s e s ,
b e p r e f e r a b l e t o l o c a t i o n on a r a i l s i d i n g .
W hich l o c a t i o n i s
c h o sen
w i l l d e p e n d on t h e l o c a t i o n s o f a v a i l a b l e r a i l s i d i n g s w i t h r e s p e c t t o
t h e a l f a l f a s u p p ly .
V a ria b le In p u ts
The s u r v e y d a t a a n a ly z e d i n d i c a t e s
t h a t th e p e r to n c o s t s o f l a b o r ,
d r y in g f u e l ( n a t u r a l g a s ) , p o w e r, g a s o l i n e and o i l ,
do n o t d e c r e a s e as p l a n t s i z e i n c r e a s e s .
and m a in te n a n c e r e p a i r
The p r i n c i p a l f a c t o r a f f e c t i n g
t h e s e c o s t s seem s t o b e t h e d e g re e t o w h ic h p l a n t c a p a c i t y i s u t i l i z e d .
On t h i s b a s i s , i t seem s t h a t s m a l l p l a n t s a r e c o m p e t it iv e w i t h l a r g e r
s iz e p la n ts .
N e e d le s s t o s a y , i t s h o u ld b e d e te r m in e d t h a t t h e a v a i l a b l e s u p p ly
of th e s e in p u ts i s
la b o r s it u a ti o n .
a d e q u a te .
P a r t i c u l a r a t t e n t i o n s h o u ld b e g iv e n t o t h e
Many o f t h e f ir m s i n t e r v i e w e d i n d i c a t e d c o n c e rn o v e r
th e la b o r s i t u a t i o n .
U s u a l ly i t i s n o t to o d i f f i c u l t t o d e te r m in e w h e th e r
t h e s u p p ly o f d r y in g f u e l ( p r i m a r i l y n a t u r a l g a s ) , p o w e r, an d g a s and o i l
is
a d e q u a te .
T h e re i s , h o w e v e r, one c a u t i o n .
Some p l a n t s r e p o r t e d
e x p e r i e n c i n g ' a - s h o r t a g e o f n a t u r a l g a s to w a rd t h e e n d o f t h e o p e r a t i n g
season.
T h is o c c u r r e d b e c a u s e t h e c o o l e r w e a th e r i n c r e a s e d t h e g e n e r a l
demand f o r n a t u r a l g a s f o r h e a t i n g p u r p o s e s .
When s h o r t a g e s o c c u r r e d ,
t h e n a t u r a l g a s s u p p ly o f t h e d e h y d r a t in g f ir m s was c u r t a i l e d .
P l a n t and F i e l d E q u ip m en t
An a l f a l f a d e h y d r a t io n p l a n t m u st s t a r t w i t h good e q u ip m e n t and
m a i n ta i n i t i n good c o n d i t i o n .
H eavy d u ty t r u c k s a r e recom m ended.
F ie ld
149
e q u ip m e n t, b e c a u s e o f t h e u s e i t r e c e i v e s , s h o u ld b e o f t h e i n d u s t r i a l t y p e .
F o r p l a n t s o p e r a t i n g on a 2 4 - h o u r b a s i s , l o s s e s i n p r o d u c t i o n c a n n o t b e
made u p .
I n a d d i t i o n , f i e l d s t h a t a r e c o n t r a c t e d t o b e c u t , m u st b e c u t
i n o r d e r t o m a i n ta i n good g ro w e r r e l a t i o n s .
None o f t h e f ir m s i n t e r v i e w e d
m e n tio n e d m e c h a n ic a l b rea k d o w n as a m a jo r c a u s e o f t im e .
W in te r o v e r h a u l
o f e q u ip m e n t i s p r o b a b ly a m a jo r f a c t o r i n k e e p in g e q u ip m e n t m a lf u n c tio n s
t o a minimum.
A v a i l a b l e M a rk e t
D e h y d r a te d a l f a l f a i s s o l d d i r e c t t o f e e d m a n u f a c t u r e r s , l i v e s t o c k
f e e d e r s , f a r m e r s and t o b r o k e r s and c o m m issio n men.
I n an e s t a b l i s h e d
d e h y d r a t in g a r e a , m a r k e tin g w i l l b e l e s s o f a p ro b le m t h a n "i n an o u t l y i n g
or is o la te d a re a .
P o t e n t i a l c u s to m e rs o f t e n n e e d t o b e c o n v in c e d t h a t
i t i s a f e e d and n o t j u s t a n o th e r fo rm o f h a y .
D i s t a n t m a r k e ts a r e
d i f f i c u l t t o s e r v e and m o st p l a n t s s e l l ' t h e b u l k o f t h e i r p r o d u c t w i t h i n
a 1 0 0 - m ile r a d i u s o f t h e p l a n t .
O rg a n iz a tio n a l S tr u c tu r e
T h i r t e e n o f t h e f ir m s i n t e r v i e w e d w e re o r g a n iz e d a s c o r p o r a t i o n s .
F o u r o f t h e s e w e re f a m ily owned.
w h ile a n o th e r h ad s e v e n .
S ix h ad th r e e o r le s s s to c k h o ld e r s ,
Of t h e r e m a in in g two c o r p o r a t i o n s , one h a d
10 s t o c k h o l d e r s and t h e o t h e r 4 6 . ’ T h re e o f t h e f ir m s w e re o r g a n iz e d
a s p a r t n e r s h i p s h a v in g tw o , t h r e e , and s i x p a r t n e r s .
owned by a c e n t r a l c o o p e r a t i v e .
m em bers.
T h re e p l a n t s w e re
One p l a n t was a c o o p e r a t i v e w i t h 230
W ith t h e e x c e p t i o n o f t h e c o r p o r a t i o n s w i t h 10 an d 46 s t o c k ­
h o l d e r s , t h e r e a p p e a r e d t o b e one p e r s o n e x e r t i n g c o n t r o l .
150
T a b le XXVI i s u s e d t o p r e s e n t i n t a b u l a t e d . form r e s p o n s e s p e r t a i n i n g
t o th e f e a s i b i l i t y
o f a l f a l f a g ro w e rs b e i n g s t o c k h o l d e r s i n t h e f ir m .
J u d g in g fro m t h e r e s p o n s e s , i t a p p e a r s t h a t d e h y d r a tin g f ir m s a r e w ary
o f g ro w e rs b e in g s t o c k h o l d e r s .
The f e e l i n g a p p e a r s t o b e t h a t m anagem ent
m u st e x e r t t i g h t c o n t r o l and t h a t i n t e r f e r e n c e w i t h m anagem ent w ould
in tr o d u c e i n e f f i c i e n c i e s i n t o th e o p e r a tio n .
Some p ro b le m s a r i s e i n c o o p e r a t i v e o r g a n i z a t i o n s .
f e e l th e p l a n t i s
G row ers may
o b lig a te d to p u rc h a se d t h e i r a l f a l f a .
I n th e case
o f one f i r m , n o l o n g e r o p e r a t i n g , t h e b y - la w s s t a t e d t h a t t h e firm '
was o b l i g a t e d t o p u r c h a s e a c e r t a i n am ount fro m e a c h m em ber.
By t h e same
to k e n i t i s n o t u n r e a s o n a b le t o e x p e c t t h a t g ro w e rs w i l l f e e l no o b l i g a ­
tio n to s e l l to th e p l a n t i f
The d a n g e r h e r e i s
th e y can g e t a b e t t e r p r i c e e ls e w h e r e .
t h a t t h e p l a n t may b e f o r c e d t o h a r v e s t f i e l d s o f
p o o r q u a l i t y , s m a ll a n d /o r i r r e g u l a r l y sh ap ed f i e l d s ,
c o n s i d e r a b l e d i s t a n c e fro m t h e p l a n t , e t c .
f ie ld s a t
T h e re may b e c a s e s w h ere
th e num ber o f members i s s o g r e a t t h a t t h e f i r m c a n n o t p u r c h a s e a l f a l f a
fro m a l l o f them .
I n t h e s e c a s e s , th e p a tr o n a g e d i v id e n d m eth o d o f
d i s t r i b u t i n g " s a v i n g s " may b e som ew hat d i f f i c u l t t o a p p ly w i t h o u t
a l i e n a t i n g some p a r t o f t h e m em b e rsh ip .
I t w o u ld se em , t h e r e f o r e , t h a t i f
th e p ro p o sed o r g a n iz a tio n a l
s t r u c t u r e i s s u c h t h a t a num ber o f g ro w e rs a r e s t o c k h o l d e r s , t h e o b l i g a ­
t i o n o f p l a n t and s t o c k h o l d e r s t o e a c h o t h e r s h o u ld b e c a r e f u l l y o u t l i n e d .
The p l a n t s h o u ld n o t b e o b l i g a t e d t o c u t f i e l d s
t h a t do n o t m ee t c e r t a i n
151
TABLE XXVI.
ADVANTAGES AND DISADVANTAGES OF GROWERS BEING STOCKHOLDERS
IN AN ALFALFA DEHYDRATING FIRM— RESPONSES FROM FIBMS
INTERVIEWED.
R e sp o n se s
Number o f F irm s M e n tio n in g
A d v a n ta g e s t o P l a n t :
None
W ould h e l p t o assum e a l f a l f a s u p p ly
13
7
D is a d v a n ta g e s t o P l a n t :
S to c k h o ld e r s w o u ld e x p e c t p r e f e r e n t i a l
t r e a t m e n t , e s p e c i a l l y w ith r e g a r d t o
s c h e d u lin g o f h a r v e s tin g
I n t e r f e r e n c e w i t h m anagem ent ( t o o many b o s s e s )
P l a n t o b l i g a t e d t o p u r c h a s e fro m g ro w e rs
11
9
2
■152
s p e c i f i e d s t a n d a r d s o f q u a l i t y o r a r e n o t w i t h i n an e c o n o m ic a l h a u l i n g
d is ta n c e o f th e p l a n t .
P e r h a p s a b o n u s s y s te m s h o u ld b e e s t a b l i s h e d
w h e re b y e x c e p t i o n a l f i e l d s
a r e e l i g i b l e f o r b o n u s p a y m e n t.
T h is
a p p ro a c h i s j u s t i f i e d b e c a u s e t h e a l f a l f a o f f good f i e l d s may b e p r o c e s s e d
a t lo w e r c o s t and t h e q u a l i t y may b e s u c h t h a t th e p r o d u c t may h a v e a
g r e a t e r m a rk e t v a l u e .
The b o a r d o f d i r e c t o r s s h o u ld d e f i n e t h e r e s p o n s i b i l i t y o f m anagem ent
and th e n a llo w i t . t o
o p e ra te w ith in t h i s d e fin e d a re a .
o p e r a t e as a c o m p e t i t i v e e n t e r p r i s e .
t h e whims o f i n d i v i d u a l m em bers.
fie ld s
The p l a n t m ust
M anagem ent s h o u ld n o t b e s u b j e c t t o
I t s h o u ld n o t b e c o e r c e d i n t o c u t t i n g
a t t h e d i s c r e t i o n o f i n d i v i d u a l m em bers. .
,
G row ers s h o u ld e x p e c t fro m t h e p l a n t no m ore th a n a c o m p e t it iv e p r i c e
f o r t h e i r a l f a l f a and t h e p l a n t s h o u ld n o t e x p e c t t o p u r c h a s e a l f a l f a
fro m g ro w e rs a t a l e s s th a n c o m p e t it iv e p r i c e .
th e firm i s
to e a rn a p r o f i t fo r i t s
U s u a lly t h e f u n c t i o n o f
s to c k h o ld e rs .
I n t h e c a s e w h ere
s t o c k h o l d e r s a r e g ro w e rs i t may b e t o p r o v i d e them w i t h an a c c e p t a b l e
m ark et f o r t h e i r a l f a l f a .
I f i t is
t o c o n ti n u e p e r f o r m in g t h e l a t t e r
f u n c t i o n , r e t u r n s m u st c o v e r a l l c o s t s o f p r o d u c t i o n .
I f t h e f ir m does
n o t p e r f o r m e i t h e r o f t h e s e f u n c t i o n s , t h e r e i s no r e a s o n f o r i t s
e x is te n c e ,
In f a c t, i t
cannot e x is t.
As w i t h any ty p e o f b u s i n e s s , t h e im p o r ta n c e o f a s k i l l e d and
c o n s c i e n t i o u s l a b o r f o r c e c a n n o t b e o v e re m p h a s iz e d .
E s ta b lis h e d a l f a l f a
d e h y d r a t io n p l a n t s make e v e r y e f f o r t t o p r e v e n t t h e d e f e c t i o n o f key
p e rs o n n e l.
The m a n a g e r .in an i n d u s t r y s u c h a s dehy i s
of p a rtic u la r
153
i m p o r ta n c e .
T he m an ag er m u st b e c a p a b le i n a t l e a s t f o u r d i f f e r e n t a r e a s .
He s u p e r v i s e s p r o d u c t i o n .
U s u a lly h e i s s k i l l e d i n m a in te n a n c e and r e p a i r .
He i s r e s p o n s i b l e f o r t h e p r o c u r e m e n t o f raw a l f a l f a w h ic h i m p l ie s t h a t
h e m u st p o s s e s s a c e r t a i n am ount o f d ip lo m a c y .
s e l l t h e i r a l f a l f a som ew here e l s e .
m a r k e tin g o f t h e p r o d u c t .
A l i e n a t e d g ro w e rs te n d t o
F i n a l l y , h e i s r e s p o n s i b l e f o r th e
I n e s s e n c e , t h e m o st s i g n i f i c a n t in v e s tm e n t
w h ic h w i l l y i e l d p o t e n t i a l i n v e s t o r s i n a d e h y d r a t io n f a c i l i t y
r e t u r n , i s p r o b a b l y t h e s a l a r y p a i d a c o m p e te n t m a n a g e r.
th e g r e a t e s t
T h is c e r t a i n l y
i s n o t th e p la c e to s t a r t c u ttin g c o s ts .
A l l th e ab o v e f a c t o r s n e e d t o b e c a r e f u l l y c o n s id e r e d by anyone o r
g ro u p i n t e r e s t e d i n e s t a b l i s h i n g an a l f a l f a p r o c e s s i n g p l a n t .
APPENDICES
APPENDIX A
D e r i v a t i o n o f f o rm u la s f o r d e te r m in in g am ount o f d e h y d r a te d a l f a l f a
o f g iv e n m o is t u r e c o n t e n t p ro d u c e d and am ount o f raw a l f a l f a o f g iv e n
m o is t u r e p r o c e s s e d f o r a d r y in g drum o f g iv e n c a p a c i t i e s „ JL/
L e t:
L = am ount o f m o is t u r e rem oved
r = m o is t u r e c o n t e n t o f t h e raw a l f a l f a
t = m o is t u r e c o n t e n t o f t h e d e h y d r a te d a l f a l f a
I f Y is
t h e am ount o f d e h y d r a te d a l f a l f a w i t h _r m o is t u r e c o n te n t
p r o d u c e d by rem o v in g L am ount o f m o is t u r e fro m X w e ig h t o f raw a l f a l f a
w i t h r m o is t u r e c o n t e n t , th e f o ll o w i n g e q u a t i o n s may b e fo rm e d :
X = Y + L
o r t h e w e i g h t o f raw a l f a l f a o f _r m o is t u r e c o n te n t p r o c e s s e d (X) i s e q u a l
t o th e am ount o f d e h y d r a te d a l f a l f a o f _t m o is t u r e c o n t e n t p r o d u c e d p l u s
t h e am ount o f m o is t u r e rem oved (L) .
rX = tY + L
o r t h e m o is t u r e c o n t e n t o f t h e raw a l f a l f a p r o c e s s e d (rX ) i s e q u a l t o t h e
m o is t u r e c o n t e n t o f th e d e h y d r a te d a l f a l f a p r o d u c e d (tX ) p l u s t h e am ount
o f m o is t u r e rem oved ( L ) .
When t h e s e e q u a t i o n s a r e s o lv e d s im u l ta n e o u s l y t h e f o ll o w i n g e q u a ti o n s
can b e d e r i v e d .
I)
I/
L i l r T)
r-t
C o n c e p ts u s e d i n d e v e lo p in g t h e s e f o r m u la s w e re i n t r o d u c e d by C h a r le s
E . R e e d , e jt. a l . i n M a rk e tin g D e h y d r a te d A l f a l f a , A g r. M a rk e tin g
S e r v i c e , U. S . D. A ., M a rk e tin g R e s e a rc h B u i. No. 2 5 4 , 1 9 58, p . 2 0 .
156
L (1-t)
r-t •
2)
X
3)
Y = X -L
4)
Y
(1 -r) X
i-t
APPENDIX B
TABLE B - I .
AVERAGE OPERATING COSTS PER TON FOR EIGHT COOPERATIVE
ALFALFA DEHYDRATING PLANTS, 1953 AND 1954 PLANT YEARS.*
Type o f C o s t
A v e ra g e o f 7 P l a n t A v e ra g e o f 9 P l a n t Y e a r s — U n d e r 3 ,0 0 0 Tons Y e a r s — O ver 3 ,0 0 0 Tons
- D o l la r s --------------------
F ie ld la b o r
P la n t la b o r
P ow er
Fuel
O il
N a tu ra l gas
F i e l d m a in te n a n c e an d r e p a i r
P l a n t m a in te n a n c e and r e p a i r
D e p re c ia tio n
T o t a l P r o c e s s i n g C o s ts
*S o u r c e :
4 .6 3
5 .8 9
2 .0 5
3 .5 6
4 .9 3
1 .7 7
7 .4 5
4 .3 8
2 .0 9
1 .8 5
4 .4 3
5 .5 4
3 .9 3
.90
1 .3 2
1 .6 5
3 3 .3 3
2 2 .5 0
R ic k e y , L acey F . , C o o p e r a tiv e A l f a l f a D e h y d r a t o r s , F a rm e rs
C o o p e r a tiv e S e r v i c e , USDA, C i r c u l a r 1 2 , J u n e 1 9 5 6 , p . 2 5 .
158
TABLE B - I I .
AVERAGE COSTS PER TON OE PRODUCING DEHYDRATED ALFALFA, THREE
PLANT SIZ E S , 19-57 AND 1959.*
L e ss Than
3 ,0 0 0 Tons
F ix e d C o s t s :
S a la rie s
D e p re c ia tio n
In su ra n c e
. T axes
In te re s t
7 ,0 0 0 Tons
and O ver
1 .6 5
2 .0 7
.4 1
. 66
1 .5 4
2 .4 2
.7 2
' .5 8
.5 8
T o t a l F ix e d C o s ts
7 .6 3
5 .8 4
5 .4 8
V a r i a b l e C o s ts :
P la n t la b o r
F ie ld la b o r
Fuel
Pow er
M a in te n a n c e and r e p a i r
G a s o lin e and o i l
O th e r v a r i a b l e c o s t s
2 .2 5
4 .4 2
2 .6 0
1 .9 7
3 .5 8
1 .2 7
2 .8 2
2 .4 4
4 .0 4
3 .1 2
1 .7 8
1 .9 0
1 .8 5
1 .6 7
2 .0 9
2 .1 7
3 .1 9
1 .5 6
T o t a l V a r i a b l e C o s ts
1 8 .9 1
1 6 .8 0
1 2 .5 7
TOTAL PRODUCTION COSTS
2 6 .5 4
22.64
18.05
* S o u rc e :
2 .7 8
.3 .1 6
A n n u a l P r o d u c ti o n
3 ,0 0 0 - 6 ,9 9 9
Tons
.62
.
.30
.34
1 .1 2
1 .7 8
.9 5
.8 3
R e e d , C h a r le s E . , C o s ts and E f f i c i e n c y I n A l f a l f a D e h y d r a tin g
P l a n t s , T e c h . B u i. 1 3 4 , K ansas A g r. E x p t. S t a . , K a n sa s S t a t e
U n i v e r s i t y , M a n h a tta n , A u g u st 1962.
LITERATURE CITED
B r a b b , G eorge J . I n t r o d u c t i o n ' t o Q u a n t i t a t i v e M anagem ent.
H o l t , R h i n e h a r t and W in s to n , I n c , , 1967.
New Y o rk :
B r a s s i e r , R. G. " E f f i c i e n c y i n t h e P r o d u c ti o n o f M a rk e tin g S e r v i c e s , "
S o c i a l S c ie n c e R e s e a rc h C o u n c il P r o j e c t i n A g r i c u l t u r a l E c o n o m ic s,
E conom ic E f f i c i e n c y P a p e r N o. 6 , U n i v e r s i t y P a p e r N o. 6 , U n i v e r s i t y
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