MARKETING Southern Illinois lorn Wheat Soybeans A report of research By C. P. Schumaier Bulletin 595 UNIVERSITY OF ILLINOIS AGRICULTURAL EXPERIMENT STATION CONTENTS PAGE OBJECTIVES OF THIS STUDY 3 PROCEDURE AND SOURCE OF DATA 3 DESCRIPTION OF THE REGION 4 PRODUCTION AND SALES OF GRAIN 5 COUNTRY ELEVATOR FIRMS 7 Volume of Grain Handled 7 Storage Space 7 Grain-Handling Equipment 10 Other Activities of Grain Firms 11 GRAIN PROCUREMENT AND DISPOSITION 11 Grain Sales to Elevators 11 Grain Sales by Elevators 12 Markets for Grain 12 Grain Transportation 16 PRICING AND SELLING PRACTICES 18 Gross Margins 18 Truck Premiums 19 Grading 19 Sales Agencies 20 RECENT DEVELOPMENTS IN GRAIN MARKETING 20 Extension of Elevator Facilities 20 Two New Types of Grain-Merchandising Operations 20 Increasing Truck-Barge Operations 21 Merchant Trucking of Corn 21 SUMMARY 22 Acknowledgment Grateful acknowledgment is made of the valuable suggestions received from L. J. Norton, Professor of Agricultural Economics at the University of Illinois, during his supervision of the au- thor's doctor's thesis on which this report is based. Urbana, Illinois October, 1955 Publications in the bulletin series report the results of investigations made or sponsored by the Experiment Station Marketing Southern Illinois Corn, Wheat, and Soybeans By C. P. SCHUMAIER, Assistant Professor of Agricultural Economics GRAIN PRODUCTION, particularly of soybeans, has increased so rapidly in southern Illinois that commercial surpluses have appeared in areas where no grain-marketing facilities existed. To cope with this increased production, the grain trade has had to expand. Since no accurate information was available about the position of the grain trade in southern Illinois, this study was inaugurated. OBJECTIVES OF THIS STUDY The objectives of this study were (1) to describe the conditions faced by the grain trade in southern Illinois in 1952 and 1953; (2) to trace the pattern of grain marketing in that region for those two years, particularly as country elevators, storage space, transportation, and markets were involved; (3) to compare wherever possible the south- ern Illinois grain trade with that of central and northern Illinois; and (4) to indicate the changes taking place in the southern Illinois grain trade. PROCEDURE AND SOURCE OF DATA A short questionnaire introducing the study and requesting infor- mation on the volume of grain handled in 1952 and 1953 was sent to 210 southern Illinois elevator firms. One hundred and fifty-five of these firms responded, and these responses were stratified according to the seven type-of -farming areas shown in Fig. 1, as well as according to grain storage capacity. The responses were then used to estimate variation in the volume handled in each stratum. Next, an optimum sample of 91 firms, based on variation in volume handled, was selected and interviews arranged with the managers of these firms. During those interviews a longer questionnaire was filled out for all but four of these 91 firms. To complete the sample, two elevator firms and two trucking firms not in the original selection were likewise interviewed and the questionnaire filled out for them as well. The information obtained from this sample was used to estimate the average character- istics of all the 210 elevator firms in southern Illinois. BULLETIN No. 595 [October, For the most part then this report is based on information covering the years 1952 and 1953, which was obtained from 89 elevator firms and 2 trucking firms. To analyze changes in crop production and to estimate grain sales, the U.S. Census and reports published by the Illinois Cooperative Crop Reporting Service were used. To describe the soil, topography, and climate of the region, publications issued by the Illinois Agricultural Experiment Station and Extension Service were used. In 1953, soybean production was reduced by dry weather, so the remarks concerning the demand for soybean storage may not hold under ordinary conditions. DESCRIPTION OF THE REGION The region that is referred to as southern Illinois in this bulletin comprises the 42 counties shown in Fig. 1. For purposes of analysis, these counties were grouped according to type-of- farming areas, except (PART OF) 5 GENERAL FARMING 7A MIXED FARMING 7B MIXED FARMING 7C MIXED FARMING GRAIN AND LIVESTOCK FRUIT AND VEGETABLE Type-of-farming areas in southern Illinois and average number of bushels of grain sold per acre of farmland in each area in 1950-1952. Except that Fayette and Effingham counties were included in Area 7b instead of Area 6, this map is based on Types of farming in Illinois: an analysis of differences by areas, by H. C. M. Case and K. H. Myers, Illinois Agricultural Experiment Station Bulletin 403, page 2 (1934). (Fig. 1) 1955] MARKETING SOUTHERN ILLINOIS CORN, WHEAT, AND SOYBEANS 5 that Fayette and Effingham counties, which are usually included in Area 6, were considered as part of Area 7b, because their grain production and marketing characteristics were similar to those of that area. The region under study includes most of the light-colored soils in Illinois. Except for those in the major river bottoms, these soils have low productivity and a very tight subsoil. They respond very well to treatment, however, and while, for example, treated light soils in southern Illinois cannot produce corn yields equal to those produced on treated dark soils in central Illinois, it was demonstrated on south- ern Illinois experiment fields over the period 1946-1950 that corn yields well above the 1949-1953 state average of 54 bushels an acre can be produced on them. Contrary to popular belief, much of the land in southern Illinois is level. The only extremely rough part is the group of seven unglaciated counties at the southern tip of the state. Twenty-one of the 42 counties in the region have half or more of their land in the 0-2 percent slope class. Grain production on this level land can be increased by planting more acreage to grain and by applying more fertilizers to areas already in grain. The climate is also favorable for the production of corn, wheat, and soybeans, except that during the growing season rainfall is slightly less dependable than in central and northern Illinois. PRODUCTION AND SALES OF GRAIN The most important addition to grain production in the region was soybeans. Before World War II, commercial production of this grain was limited to a few northern counties of the region, and it was not until after the war that soybean production became widespread throughout southern Illinois. Average soybean production for the three years 1930, 1935, and 1940 was 2,787,000 bushels. For the three years 1950, 1951, 1952 the average production had risen to 30,585,000 bush- els, or approximately one-third of the total soybean crop raised in Illinois (Table 1). Corn production virtually doubled during the same years, increas- ing from 44,819,000 bushels to 84,565,000 bushels, or approximately 18 percent of the total corn crop raised in Illinois (Table 1). Wheat production increased only slightly, rising from 15,026,000 bushels to 15,844,000 bushels, but this amount continued to constitute approxi- mately 46 percent of the total Illinois wheat crop (Table 1). BULLETIN No. 595 [October, 5 g ssll 't^flO * SS8 8S2g H 00 PS f5 00 t- O NO *<^IO NO IO NO NO t^ <-l (M Tf IO IO IO rtOOlOlO oo t-io IO *- NO CS ^NO^^ o\!ooo3 00 OlO ** jOWrONO cs ON ON O ON ON 00 ^ - CS -H r*5 00 a ; : : a, O 5 : | c'^ g,o S g >.x;H c ' SJ es ~ * o 7955] MARKETING SOUTHERN ILLINOIS CORN, WHEAT, AND SOYBEANS 7 Before 1940 there was an estimated annual surplus of 20 million bushels of grain in southern Illinois; by 1950-1952, this annual surplus rose to 70 million bushels (Table 1). Despite these great increases in grain production, the average sales per acre of farmland was still low in many areas of the region. The average of 1950, 1951, and 1952 shows that the range was from 3.4 bushels an acre in Area 9 to 10.1 bushels an acre in Area 5 ( Fig. 1 ) a marked contrast to the grain- producing counties of east-central Illinois that ordinarily have sales ranging from 25 to 30 bushels an acre. COUNTRY ELEVATOR FIRMS In 1953, 210 known firms operated about 269 country elevators in the region. The only counties that had no elevators were Calhoun, Hardin, Johnson, and Williamson. In addition to these elevators, at least four truckers bought grain (principally corn) directly from farmers, but these truckers owned no receiving stations. Volume of grain handled The median volume handled by these 210 elevator firms in 1952 and 1953 was 276,000 and 228,000 bushels respectively. The average handled by these firms was 317,000 bushels in 1952 and 292,000 bushels in 1953. The data reported in a 1951 study 1 of country elevators throughout the state, although not intended to be based on a represent- ative sample, indicate that the average volume of grain handled by southern Illinois elevators was considerably less than that handled by central and northern Illinois elevators. Storage space The total storage space available in southern Illinois elevators in 1953 amounted to 12 million bushels (Table 2). Areas 7a, 7b, 7c, and 8 had the highest volume of grain marketed per bushel of storage space from 7.3 to 10.2 a contrast to Areas 6 and 9 which had the lowest such volume, from 3.7 to 3.8 (Table 2). Elevators licensed as warehouses. An estimated 4,984,000 of the 12,071,000 bushels of elevator storage space was licensed for ware- housing in 1953, or about 40 percent of the total space (Table 3). 1 Mutti, R. J., Schumaier, C. P., and Stice, L. F. Business analysis of country grain elevators in Illinois, 1949-1950, page iii. Univ. 111. Col. Agr. Mimeo. AE2821. 1951. BULLETIN No. 595 [October, Table 2. Volume of Grain Handled by Southern Illinois Elevators in Relation to Total Storage Space, by Type-of-Farming Areas (Average of 1952-1953) Area 5 Area 6 Area 7a Area 7b Area 7c Area 8 Area 9 Region Estimated total elevator storage space (thousands of bushels) . . . 2,731 4,894" 682 1,168 203 1,243 1,150 12,071 Volume of grain handled (thousands of bushels) . . . 15,221 18,571 6,340 8,547 2,073 9,872 4,206 64,830 Volume handled per bushel of elevator storage space (bushels) 5 .6 3.8 9 ,3 7 .3 10 2 7 .9 3 .7 5 .4 Includes only one-fourth (750,000 bushels) of the total storage space at the three large flour mills that buy directly from farmers. Most of this space, however, was concentrated in Area 5 (all coun- ties), in Area 6 (Madison, Monroe, and St. Clair counties), and in Area 9 (at Cairo in Alexander county). In contrast to these three areas that had 25 elevators licensed as warehouses, the remaining areas had fewer than 15. Area 7c was the only area without a licensed ware- house. Table 3. Storage Space Actually and Potentially Available in Southern Illinois Elevators, by Type-of-Farming Areas, 1952-1953 (In thousands of bushels) Area 5 Area 6 Area 7a Area 7b Area 7c Area 8 Area 9 Region Estimated total storage space (average of 1952-1953). .2,731 Estimated licensed storage space (average of 1952- 1953) 1,450 Public storage space actually available (average of 4,894" 2,250 682 240 1,168 115 203 1,243 145 1,150 784 12,071 4,984 1952-1953) Any grain . 500 1,000 178 25 25 425 2,153 Soybeans only . 120 100 50 270 Total . 620 1,100 178 25 25 475 2,423 Percent of total available storage space in region . . . 25.6 45.4 7.4 1.0 1.0 19.6 100.0 Bushels stored in 1952 For farmers 290 500 74 8 25 225 1,122 For processors . 225 180 66 212 80 763 For CCC 12 12 For own account . 300 1,350 44 128 150 95 2,067 Total . 815 2,030 196 348 175 400 3,964 Bushels stored in 1953 b For farmers . 325 900 93 8 25 225 1,576 For CCC 110 75 185 For own account . 250 1,500 30 128 150 70 2,128 Total . 575 2,510 123 136 175 370 3,889 Storage space potentially available Any grain . 800 1,250 195 373 350 800 3,768 Soybeans only . 325 200 55 20 100 700 Total .1,125 1,450 195 428 20 350 900 4,468 Percent of total storage space in region . 25.2 32.5 4.4 9.6 .4 7.8 20.1 100.0 Includes only one-fourth (750,000 bushels) of the total storage at the three large flour mills that buy directly from farmers. b In 1953 processors used no storage space. 1955} MARKETING SOUTHERN ILLINOIS CORN, WHEAT, AND SOYBEANS 9 Public storage space available. An average of about 2,500,000 bushels of space was available for public storage in 1952-1953 (Table 3). Outside Madison, Monroe, and St. Clair counties (Area 6) and Cairo in Alexander county (Area 9), public storage space was avail- able only for soybeans, since other elevators refused to store wheat on account of the price-support storage regulations and the fact that wheat is sometimes hard to keep in condition. 1 About 70 percent of the available public storage space was concen- trated in Areas 5 and 6, where about 50 percent of the total grain produced in the region was marketed. Only about 10 percent was available in Areas 7a, 7b, 7c, and 8, where 41 percent of the grain produced in the region was marketed. In 1952 farmers used less than half the public storage space avail- able; in 1953, they used about three-fifths of that space. In areas where the available public storage space was low in relation to the amount of grain marketed (Areas 7a, 7b, 7c, and 8), the rate of oc- cupancy was just under half in 1952 (47 percent) and just over half in 1953 (55 percent). Although these figures would indicate that the demand in these areas for storage space was more than adequately met, it must be remembered that the space was restricted largely to soybeans, and that 1952 and 1953 were poor years for soybean storage because the 1952 price for soybeans declined during the season and the 1953 crop suffered a drouth. Relative demand for storage space. In 1952 elevator operators allocated more space to processors and to their own accounts than to farmers. In 1953, when processors demanded no storage space, the space allotted to farmers increased considerably. For the region, stor- age amounted to slightly less than 4 million bushels in 1952 and 1953 (Table 3). Much of this storage was for short intervals, so the rate of occupancy was low. The large volume of storage for elevators' own accounts in Area 6 consisted largely of wheat accumulated by the large flour mills operating in that area. Adequacy of storage facilities. Judged by proper space arrange- ment and by equipment necessary for storing and caring for grain, only 60 of the 210 firms had adequate storage facilities. Of these 60 firms, 22 had less storage capacity than 50,000 bushels; 15 had a storage capacity ranging from 50,000 to 99,000 bushels; and 23 had 100,000 bushels or more. 'The data in Table 3 show the space that actually could be made available for storing wheat, not the space that was in fact made available. 10 BULLETIN No. 595 [October, Of the 150 remaining firms, many were able to store soybeans of normal quality, and wheat if it was dry and of good quality, but they were not equipped to detect deterioration in grain or to blend and condition grain. Storage space potentially available. Elevator managers estimated that 4,468,000 bushels of space could be made available for storing grain, 3,768,000 to store wheat, corn, and soybeans, and 700,000 to store soybeans alone (Table 3). These figures represent 2,045,000 more bushels of public storage space than was available in 1953. Assuming that of the 60 firms having adequate facilities for storing grain, those with less than a 50,000-bushel capacity could each store an average of 15,000 bushels, those with a capacity between 50,000 and 99,000 could each store 40,000 bushels, 1 and those with over a 100,000- bushel capacity could each store 125,000 bushels, a storage space of 3,805,000 bushels could be made available. This estimate is fairly close to that made by the elevator managers. While it is hardly likely that the remaining 150 firms could make more space available, it is more than likely that more elevators will be built in the region. The reason most managers gave for not offering more space for grain storage was that they needed the space for their own merchan- dising operations. Having enough storage space to accumulate harvest receipts is imperative in a region where grain receipts are seasonal and there is a shortage of boxcars. Grain-handling equipment Farmers in some communities were very dissatisfied with the small grain-handling capacity of elevators because they had to wait a long time to unload. The reason that elevators in these communities did not install large-capacity grain-handling equipment was that the potential volume in their trade area did not justify the cost. The average volume of grain handled by southern Illinois elevator firms in 1952 and 1953 was only 304,000 bushels, with many elevators having volumes of less than 150,000 bushels. Some idea of the capacity of grain-handling equipment used by southern Illinois elevators may be gained from the size of their scales and the capacity of their legs and corn shellers. About 40 percent had modern, long-platform scales; about 20 percent had short-platform truck scales; and about 40 percent had either obsolete wagon or hopper 1 Elevators in this group as well as those in the first group used a fairly large percentage of their storage space for merchandising operations. 1955] MARKETING SOUTHERN ILLINOIS CORN, WHEAT, AND SOYBEANS 11 scales. About 33 percent had legs with an hourly capacity of 2,500 bushels or more, and about 66 percent had legs with an hourly ca- pacity of less than 2,500 bushels. Since almost all corn grown in southern Illinois is sold as ear corn, about 80 percent of the firms had shellers. About 40 percent of these shellers had capacities of 1,000 or more bushels per hour, and 60 per- cent had capacities of less than 1,000 bushels per hour. To install a large-capacity leg and corn sheller and a heavy-duty scale, as well as to have the storage space necessary to use this equip- ment effectively, an elevator usually needs about one-third more than the median volume reported by southern Illinois elevator operators in 1952 and 1953. Other activities of grain firms Grain firms, to help defray overhead expenses when grain receipts were low, usually engaged in service and merchandise sidelines. Some also undertook the manufacturing of feed, the milling of flour, and the processing of soybeans. Less than 10 percent of southern Illinois ele- vator firms, in fact, handled grain exclusively. About 50 percent had grinding and mixing equipment, and about 25 percent had seed- cleaning equipment. Another 6 percent were engaged in spreading lime and fertilizer. In addition to these service sidelines, 85 percent of the elevators had merchandise sidelines. The volume of merchandise handled ranged from $6,000 to over $500,000 and in 1953 averaged $135,000. Com- pared with 1949 data on elevators in central and northern Illinois, indications are that on the average southern Illinois elevators handled only a few thousand dollars less merchandise volume. 1 Four large flour mills and only nine of the thirty-five small local flour mills were operating in the region in 1952 and 1953 evidence that milling in the small local mills was declining rapidly. GRAIN PROCUREMENT AND DISPOSITION Grain sales to elevators Sales of all three grains to elevators were considerably heavier at harvest time in southern Illinois than in the state as a whole. With the exception of corn, the amount of grain stored on southern Illinois farms in 1952 and 1953 was negligible. 1 Mutti, R. J., Schumaier, C. P., and Stice, L. F. Business analysis of country grain elevators in Illinois, 1949-1950, page iii. Univ. 111. Col. Agr. Mimeo. AE2821. 1951. 12 BULLETIN No. 595 [October, To farmers, there are advantages as well as disadvantages to selling grain at harvest. The advantages are that farmers are relieved of the costs and risks of storage, the risks of insect damage and spoilage being greater in southern Illinois than elsewhere in the state, and the costs higher, since (with the exceptions of Areas 5 and 6) most farmers would first have to build bins and cribs. The chief disadvan- tage is that grain usually sells at lower prices during harvest than at other times because the harvest price is discounted for normal storage and carrying charges. In recent years, the harvest price has become weaker because of the difficulty encountered by grain firms in obtain- ing enough transportation and terminal-elevator storage space during the short harvest season. Grain sales by elevators Less than 15 percent of the grain sold to elevators in 1952 and 1953 was stored longer than was needed to obtain transportation. Elevators shipped grain almost as fast as they bought it, and their bins were usually cleared within 2 weeks after the end of harvest runs. The small percentage of grain stored for a longer period consisted of price-support wheat and wheat intended for milling, as well as soy- beans held for processors and farmers. Very few elevators made any attempt to keep storage space occupied with hedged inventories. Markets for grain The amount of grain going to different markets varies considerably from year to year, largely because of changes in regional supplies. Tables 4, 5, and 6 show the major markets for southern Illinois corn, wheat, and soybeans in 1952 and 1953, and the relative importance of those markets. Markets for corn. In general, corn sold by southern Illinois eleva- tors moved to (1) St. Louis for use there as well as for reshipment to the South and Southeast, and (2) the South and Southeast directly. More specifically, about 65 percent of the corn in Areas 5 and 6 was moved to St. Louis. From Area 5 an additional 20 percent was sent to Decatur, and in Area 6 an additional 20 percent was used by the elevators for feed manufacturing and retail sales (Table 4). Areas 7a and 7b had the most varied markets. In addition to truckers at the elevators, each of the following markets bought 10 to 20 percent of the corn marketed in these areas: Springfield, Decatur, St. Louis, Indianapolis, Louisville, and points on the eastern seaboard. 7955] MARKETING SOUTHERN ILLINOIS CORN, WHEAT, AND SOYBEANS 13 CO S bfl I J2 E o ." c 9 8 C u r. ro "JS" 5 rt rt -H -H CMCM O 22 ^J^S "* rt" ^^ -H -H -H -H ^H 25 O CM O 00 O CM H t^-OO O t^*O*O HO O 't CMIO CM r^W -H O m --H 5 CMCMCMCM OOt~ O T)-HrO 1--O O O 00 CM ^f CO O ; ; ; : : : : s ! ! 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