CM SB252 Cibrarg SB252 kT87 ?fnrtlj (Carnltna g-talp ®°ll'*9'rEX. LIB. This book IS due on the date indicated below and IS subject to a fine of FIVE CENTS a day thereafter. T.,<.^ w au^^ Ginning n in ortii Carolina Published By THE NORTH CAROLINA AGRICULTURAL EXTENSION SERVICE North Carolina State College of Agriculture and Engineering of the University of North Carolina and the U. S. Department of Agriculture, Cooperating. State College Station, Raleigh, N C, D S. Weaver, Director. Distributed in furtherance of the Acts of Congress of May 8 and June 30, 1914. COST OF GINNING COTTON IN NORTH CAROLINA Prepared by W. Glenn Tussey, Formerly Extension Cotton Marketing Specialist and M. Elton Thigpen, Extension Cotton Marketing Specialist Volume Declining and Gins Decreasing Ginning volume in 1957 continued its long-run decline. Soil Bank partici- pation (24^ of alloted acreage) and unfavorable weather caused volume to decrease to 236,000 bales in 1957 from 351,000 bales in 1956. Favorable weather in 1958 contributed to a small increase in total production even though Soil Bank participation exceeded the 1957 level (39.5^ of the alloted acreage). Lack of volume leaves small hope for North Carolina ginners to recover more than their direct cash costs. The number of active gins in North Carolina decreased from 373 in 1956 to 312 in 1958. Volume of Cotton Handled by North 1956, 1957, and 1958 Sea Carolina sons Gins Bales ginned r*jmber of Gins 1956 1957 1958 500 or less 123 158 133 501 - 1,000 110 98 82 1,001 - 1,500 60 52 43 1,501 - 2,000 40 25 29 2,001 - 3,000 32 8 20 3,001 and over __8_ 1 — 5. TOTAL 373 342 312 -2- Excess Capacity Exists Excess capacity exists in the ^)o^th Carolina cotton ginning industry. The industry has handled only a fraction of its ginning potential in recent years, ^forth Carolina ginners are not only faced with the problem of excess capacity but are also faced with increased costs of doing business. A study of 25 randomly selected cotton gins showed that cash expenses in 1957 were approximately equal to ginning revenue, leaving very small re- turns to management and durable inputs. The ginners interviewed have very little incentive to replace their establishments as they wear out, inasmuch as only a fraction of each dollar invested can be recovered at present volumes. Many ginners will make minor repairs sufficient only to keep the gin in operat- ing condition until uneconomic repair bills force them to cease operations. Out-of-Pocket Cash Expenses Total out-of-pocket cash expenses per bale were found to be $9.36 at 2-stand gins, $10.35 at 3-stand gins, and $9.62 at 4-stand sample North Carolina gins during the 1957 season. For all gins studied, cash expenses averaged $9.94 per bale. Ginning labor expenses were found to be the largest single expense item during the 1957 season. Adverse weather which lengthened the ginning season increased the cost of ginning labor which averaged $2.89 per bale for the sample gins. Cash Expenses of Ginning Cotton in North Carolina At Sample Gins, by Size of Gin, 1957 Season Item Size of Gin Sample 2 Stands 3 Stands 4 Stands Gins in sample 3 13 9 25 Average bales ginned 233 599 1,035 711 Average capacity of gins* 1,602 2,310 3,114 2,342 (Dollars per Bale) Direct expenses 2.91 2.65 3.11 2.89 Ginning labor Bagging and ties 2.08 2.22 2.18 2.19 Operating expenses 1.66 3.36 2.62 2.93 Total direct expenses 6.65 8.23 7.91 8.01 Overhead cash expenses .78 .79 .91 .86 Office expenses Insurance 1.43 .88 .42 .66 Taxes and licenses .50 .45 .38 .41 Total overhead expenses 2.71 2.12 1.71 1.93 Total cash expenses 9.36 10.35 9.62 9.94 * Average gin capacity is based on a forty-hour per week for a season of 15 weeks. Average per bale labor expenses at sample gins fluctuated from a lov/ of $1.68 per bale during the busiest week of the season to as high as $17.65 per bale during early season weeks when ginning was just getting underway and $10.22 per bale late in the season when ginning was almost complete. Ginning Revenue Custom ginning receipts averaged $11.33 per bale at the sample hJorth Carolina gins for the 1957 season. In addition to the receipts from custom ginning, there are other ginnery receipts. Other revenue sources, closely related to ginning include receipts from seed cotton, lint cotton, cottonseed, and meal and hulls. Custom ginning receipts were supplemented by $3.31 per bale from sales of cotton, cottonseed and cottonseed products handled by the ginneries. Cash Receipts of Ginning Establishments in North Carolina At Sample Gins, by Size of Gin, 1957 Season Item Size of Gi n Sample Total 2 Stand s 3 Stands 4 Stands [Dollars per Bale) Ginning charges 10.82 11.00 11.65 11.33 Gross profit on purchases Seed cotton .25 .12 .15 .15 Lint cotton .19 .47 -.10 .16 Cottonseed 5.21 2.36 2.96 2.78 Meal and hulls .22 .15 .28 .22 Total 5.87 3.10 3.29 3.31 Total cash receipts 16.69 14.10 14.94 14.64 Returns to Durable Equipment North Carolina gins have very little incentive to replace their establish- ments as they wear out inasmuch as only a fraction of each dollar invested in durable goods could expect to be recovered. This is illustrated for 4-stand gins in Figure 1. Current volume levels and prices received for ginning are resulting in ginning services being sold below long-run cost. In view of this it appears certain that the number of cotton gins in the state will continue the decline which has been in evidence over the last thirty years. Although over 1,200 gins were in operation in 1930 only 312 were active in 1958. Increased volume per gin is necessary if the North Carolina ginning industry is to be economically healthy. Diversification and Integration of Ginners North Carolina ginners have a variety of business interests. Ginners have found the secret of business survival through business diversification and integration. During 1957, only 5.3% of North Carolina ginners had no other non-ginning activity. Sixteen per cent had gins and farms only. Fifty- two per cent operated farms and other businesses in addition to their ginning operations and 27/o operated gins and other businesses without farming operations. "Gin Days" Helps The designation of "gin days" or certain days during the slack weeks when the gin was operated helped to reduce labor costs. A few North Carolina -6- gins were on "gin days" all season because of the low volume of cotton to be ginned. By operating on "gin days" for greater portions of the season, ginners could materially reduce labor costs. Cooperation of all ginners in the area could be obtained through their associations. In the areas of the state where seed cotton storage is available, cotton could be stored for several days until enough is accumulated for a day of continuous ginning. Not only labor costs but other costs such as power costs would be less because of less frequent stopping and starting of the machinery. 36 32 28 16 Figure J, (8 Total receipts X Ginning receipts $1.00 per dollar invested 400 800 1200 1600 2000 2it00 Season volume (bales) 2800 3200 3600 Present Value of Durable Inputs per Dollar Invested, Replacement Cost Basis and Ginning Receipts at '+-Stand Sample Gins, 1957 Season