August 26, 2004
GRAIN DELIVERY COMPARISON MODEL: RELEASE
OF A NEW FAST TOOL
A new Farm Analysis Solution Tool (FAST)
has been released for use. This Microsoft Excel spreadsheet is called
the Grain Delivery Comparison Model and is useful for comparing
net revenues associated with delivering grain up to three different
locations. This tool has been developed by Brian Pulley (Illinois
Farm Business Farm Management) and myself and can be downloaded
from the FAST section of farmdoc (www.farmdoc.uiuc.edu).
Figure 1 shows the Grain Delivery Comparison
Model with a completed example. The "Grain for Delivery"
input section in the upper right hand corner of the tool contains
entries describing grain to be delivered. In the example, 1,000
bu. of grain having 24% moisture is to be delivered in the month
of October. The current cash price for this grain is $2.40.
The "Input for Alternative Delivery Points" input section
has input for two elevators. Entries for elevator 1 are shown in
the first two columns while the third column shows input for elevator
2. For elevator 1, the first column shows net returns for sales
at harvest while the second column shows net returns for a January
Elevators 1 and 2 have three differences in cost and shrink factors:
1. The elevators have different storage moisture levels. If grain
is stored, elevator 1 charges for drying grain to 15% while elevator
2 uses a 14% moisture level (see "Moisture/shrink factors"
in Figure 1).
2. The elevators charge different amounts for drying. Elevator 1
charges $.025 per point to dry grain between 14% and 21.5% moisture
levels and $.02 per point above 21.5%. Elevator 2 charges $.0275
per point for moisture levels between 14% and 18%, $.02 per point
between 18% and 23%, and $.015 per point for moisture levels above
23%. Entries for drying charges are made into the Grain Delivery
Comparison Model by completing the schedule shown in Appendix
3. The elevators charge different amounts for storage. Elevator
1 charges $.025 per month for each month in storage. Elevator 2
charges $.13 for placing grain in storage. If grain is stored after
January, elevator 2 then charges an additional $.0225 per month
for storing grain (see "Storage costs" in Figure 1).
Based on these input, the tool compares the three alternatives
in the "Report on Revenue from Delivery Alternatives"
section of the report (see Figure 1). "Dry bushels sold"
are calculated for each alternative. Elevator 1 has a higher number
of bushels sold (874 bu.) compared to elevator 2 (860 bu.) because
elevator 2 shrinks bu. to a lower moisture level (15% for elevator
1 compared to 14% for elevator 2).
The model projects transportation, drying, storage, and interest
costs. These costs are subtracted from "Revenue from sales"
to arrive at "Net revenue". Net revenue should be the
main comparison between
the alternatives. The alternative with the highest net revenue is
generally regarded as the most economical alternative. In the example,
the alternative of delivering grain to elevator 1 and selling at
harvest has the highest net revenue of $1825.10.
Inputs for elevators 1 and 2 are fairly indicative of differences
that can exist between elevators. As can be seen, these differences
can cause differences in net revenues. In the example, elevator
1 has net revenue of $1,769.16 for selling at $2.50 per bu. in January
while elevator 2 has net of $1,677.91, a difference of $91.25. While
this amount may not seem large for 1,000 bu., the difference in
net revenues becomes more substantial for larger quantities of grain.
For comparison purposes, the Grain Delivery
Comparison Model also reports "net revenue per wet bu.",
"net revenue per dry bu." and a break-even price when
grain is stored. The break-even price is calculated based on the
current cash price entered in the "Grain for Delivery"
input section. In the example, at least $2.56 per bu. must be received
from elevator 1 in January to have the same or higher revenue as
selling grain in October for $2.40 per bu.
The Grain Delivery Comparison Model has
been developed to aid farmers in evaluating the net revenues associated
with alternative grain delivery points. Net revenues can vary between
delivery points. Accounting for these differences and delivering
grain to the most economic point can aid in maintaining overall
Issued by: Gary Schnitkey, Department of Agricultural and Consumer
Appendix Figure 1. Drying Schedule from Grain Delivery Comparison Model.