Economic considerations in marketing Oregon grain : factors affecting Columbia Basin producers

Abstract

Wheat is the primary field crop in Oregon. Selection of time of sale is one of the most important marketing problems facing grain producers. The objectives of the study deal with economic considerations involved in a wheat producer's marketing process including factors motivating the time of sale, price analysis, availability and use of market information, the role of country grain handlers, and the use of marketing alternatives to improve net income. The study area consisted of wheat-fallow farms in the Columbia Basin in north central Oregon. Included are specialized wheat units in Umatilla, Gilliam, Morrow, Sherman, and Wasco Counties. Data were obtained through a mail survey of a selected sample of farms and through personal interviews with country elevator managers. The most frequently used alternatives for marketing wheat are selling the grain all at one time (34 percent), selling at more than one time (23 percent), and placing all or part of the wheat under government loan (43 percent). The time of marketing wheat varied from year to year for 70 percent of the growers. Eighty-five percent of the growers who varied the time of sale did so to sell at a better price. Barley sales were much more concentrated in the late summer and early fall months than were wheat sales. Wheat is held longer than barley before selling because of greater fluctuations of wheat prices during the marketing year. The months were ranked from high to low according to an adjusted seasonal price index. Grower estimates of the high and low months of wheat and barley prices ranged throughout the adjusted seasonal price index. Growers have a greater awareness of the months of low prices than the months of high prices for both wheat and barley. In basing their selling decision growers place more importance on unofficial market information than on official reports. Grain handlers, newsletters, magazines, and past experience were the most important unofficial information sources. The weekly grain market report issued at Portland was the most important official source of market information. Even though farmers have ready access to general market and price information, they expressed a need for more specific information on the demand and supply outlook in foreign countries and government grain marketing operations. Country elevator managers stressed the point they do not offer advice on when to market. They only present the market information they have available, and all marketing decisions rest with the grower. The price growers receive equals coastal price minus transportation, wheat commission, and elevator charges. Characteristics of a producer's marketing environment are price uncertainty, scarcity of relevant market information, and the oligopsonistic market structure a producer faces in the sale of his grain. The following marketing plan was profitable from 1955-56 through 1964-65. If the domestic cash price minus the effective support rate for wheat is greater than or equal to $0.10 per bushel during August then August sale of the grain is recommended. If the difference is less than $0.10 per bushel, the sale is made in November or December. The net income received from using this alternative for marketing wheat is $0.035 per bushel more than a straight August sale and more than $0.015 per bushel greater than a straight November or December sale. Barley sales in October and November during the same time period returned about $1.25 per ton more than an August sale. All calculations include storage charges and the opportunity cost of not having sold the grain in August, freeing the producer's capital for other uses.