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STORAGE

STORAGE. TIME ASPECT OF MARKETING. THERE ARE BASICALLY TWO TYPES OF STORAGE THAT TAKE PLACE IN AGRICULTURE: 1)WORKING INVENTORY 2)SEASONAL OR MASS STORAGE. WORKING INVENTORY IS THE QUANTITY OF A COMMODITY THAT MUST BE ON HAND TO KEEP PROCESSING FACILITIES OPERATING.

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STORAGE

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  1. STORAGE TIME ASPECT OF MARKETING

  2. THERE ARE BASICALLY TWO TYPES OF STORAGE THAT TAKE PLACE IN AGRICULTURE: 1)WORKING INVENTORY 2)SEASONAL OR MASS STORAGE

  3. WORKING INVENTORY IS THE QUANTITY OF A COMMODITY THAT MUST BE ON HAND TO KEEP PROCESSING FACILITIES OPERATING

  4. SEASONAL STORAGE IS NEEDED TO EQUATE SEASONAL SUPPLY WITH DEMAND

  5. MOST IMPORTANT FOR GRAINS

  6. MOST GRAIN IS PRODUCED DURING A RELATIVELY SHORT PERIOD OF TIME,

  7. AND USED THROUGH OUT THE ENTIRE YEAR.

  8. WHO STORES GRAIN?

  9. FARMERS ELEVATORS PROCESSORS

  10. WHY?

  11. EXPECTED PRICE INCREASES

  12. COST OF STORAGE PRICE HARVEST PRICE HARVEST HARVEST TIME

  13. P (future) - P (current) > Storage Cost

  14. Dec Corn = $2.11 March Corn = $2.23 May Corn = $2.30 July Corn = $2.36

  15. Two Cost of Seasonal Storage 1) Physical Cost Buildings, Maintenance 2) Opportunity Cost Wealth in grain vs wealth in money

  16. OPPORTUNITY COST • PRICE OF THE COMMODITY • COST OF MONEY • THE TIME THE COMMODITY IS STORED

  17. OPPORTUNITY COST = (PRICE * COST OF MONEY* FRACTION OF YEAR GRAIN IS STORED)

  18. EXAMPLE: PRICE OF CORN = $6.10 COST OF MONEY = .08% STORAGE FROM OCT 1 TO MARCH 1 ( 5 MONTHS)

  19. (6.10 * .08 * 5/12) = $ .20/BU

  20. COMMERCIAL STORAGE: COMMON COST SYSTEM FLAT FEE TO JAN 1 THEN CENTS/BU/PER MONTH THEREAFTER

  21. EXAMPLE : $ .15/BU TO JANUARY 1, THEN $ .03/BU/MONTH

  22. 15 CENTS FLAT THE 3* 2 MONTHS = 21 CENTS

  23. 15 CENTS FLAT THE 3*2 MONTHS = 21 CENTS (6.10 * .08 * 5/12) = $ .20/BU TOTAL COST = $ .41/bu

  24. Bushels by Volume 1 volume bushel (vol bu) = 1.25 cubic feet (cu ft) of shelled grain, or1 cu ft of shelled grain = 0.8 vol bu 1 volume bushel (vol bu) = 2.5 cubic feet (cu ft) of ear corn, or1 cu ft of ear corn = 0.4 vol bu

  25. Cylindrical bins or cribs To calculate the volume of a round bin or crib with a level top surface,volume = [(pi x diameter squared) ÷ 4] x height[(3.14 x diameter x diameter) ÷ 4] x height0.785 x diameter x diameter x height

  26. IF YOU HAVE A BIN THAT HAS A DIAMETER OF 24 FT AND HAS A HEIGHT OF 40 FTHOW MANY BUSHELS DOES IT HOLD?

  27. (3.14*24*24)/4 * 40 =18,086 cubic ft18,086 * .80 =14,469 bushels

  28. ON -FARM VS COMMERCIAL (OFF-FARM) STORAGE

  29. ON -FARM VS COMMERCIAL (OFF-FARM) STORAGE COST -- INITIAL COST FOR ON-FARM STORAGE CAN BE HIGH -- OPERATING COST MAY BE LOW COMPARED TO COMMERCIAL STORAGE

  30. ON -FARM VS COMMERCIAL (OFF-FARM) STORAGE CONVENIENCE -- NO LINES

  31. ON -FARM VS COMMERCIAL (OFF-FARM) STORAGE MARKETING FLEXIBILITY

  32. ON -FARM VS COMMERCIAL (OFF-FARM) STORAGE REDUCED TRANSPORT COST

  33. ON -FARM VS COMMERCIAL (OFF-FARM) STORAGE LIVESTOCK FEEDING

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