| 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. Since the Kansas State study did not
estimate shrinkage costs for soybeans, agricultural engineering specialists
at the University of Illinois and Purdue University were consulted. The
resulting estimate for soybeans is a constant 0.25 percent shrink factor. 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. |