| Note: Estimates of the on-farm variable and fixed
costs of physical storage are drawn from a study conducted at Kansas State
University (Dhuyvetter, Hamman and Harner, 2000). The estimates assume
storage occurs in a 25,000 bushel round metal bin. The first component of
on-farm physical storage is a flat charge of 6.7 cents per bushel for
conveyance, aeration, insecticide and repairs. The second component of
on-farm physical storage is shrinkage. Corn shrinkage is assumed in the
Kansas State University study to start at one-percent per bushel for the
first month of storage and increase at a rate of one-tenth of one percent for
each month stored thereafter. The cost
of shrink is based on the harvest price. Commercial storage costs are drawn
from an informal telephone survey of nine central Illinois elevators. Interest opportunity costs are the same
for on-farm and commercial storage, and are computed as the harvest price
times the interest rate compounded daily from the end of harvest to the date
of sale. The interest rate is the
average rate for all other farm operating loans for Seventh Federal Reserve
District agricultural banks in the fourth quarter of 2004 as reported in the
Agricultural Finance Databook. |