(Press-News.org) URBANA, Ill. – When farmers harvest their grain, they can choose to sell it right away or store it to obtain better prices later in the season. A new study from the University of Illinois Urbana-Champaign explores how Illinois corn and soybean producers make those decisions and why the cost-benefit evaluation of storage may differ across farms.
Agricultural commodity prices fluctuate in response to changes in supply and demand, which depends on the stockpile of grain inventories around the country — but economists don’t really don't know how farmers decide to sell versus store their grain.
“Economic theory provides guidance that Extension economists have long shared with farmers, but we always say that these decisions depend on the specifics of the farm operation. We haven’t tested the theory against real-world farmer behavior before now. That’s what our paper provides,” said study co-author Joe Janzen, Illinois Extension specialist and assistant professor in the Department of Agricultural and Consumer Economics, part of the College of Agricultural, Consumer and Environmental Sciences (ACES) at U. of I. Janzen is also a frequent contributor to the Illinois farmdoc project.
“Our data show farmers how their peers make marketing decisions and provide useful benchmarking for profitability to help them in their own decision-making. There is great year-to-year variability, and just because a decision is right in general, doesn't mean it's right in specific circumstances, so farmers need to be adaptable,” Janzen said.
The researchers plan to develop calculators that farmers can use to understand the costs and benefits of their grain marketing decisions. These tools will also be helpful for business and marketing consultants, extension personnel, and others who serve as advisors for farmers.
For this study, the researchers had access to a large database of farm records from the Illinois Farm Business Farm Management Association (FBFM). Their analysis focused on corn and soybean producers in Illinois who may hold physical inventories of those commodities on their farm. They collected comprehensive financial statements from nearly 3,000 farms over 18 years.
Agricultural producers put their grain in storage hoping for prices to be higher later in the season. Grain prices usually increase after harvest, but that isn’t always the case. There is a risk to waiting, and the decision to sell or store needs to be weighed against the cost of storage.
“This includes the physical costs of storing and maintaining the grain in good condition, but the bigger cost is that the farm doesn't have the revenue from selling the commodity,” Janzen stated. “They can’t make new investments as quickly in things that might make their business more profitable — that foregone revenue is a hidden cost that doesn’t necessarily show up as a line item in farm records.”
Economic theory suggests farms that are less capital constrained are more likely to store their grain. In other words, the choice depends on how much they need cash at harvest to cover their expenses.
“Overall, our results indicate that storage costs influence the storage decision, but we find they matter more for some farms than others,” Janzen noted. “When the capital cost for storage increases, the share of production held in inventory decreases. But these findings cover a wide range of behaviors that vary for different farms and economic conditions.”
Some farms are market responsive and make significant adjustments to storage levels based on cost-benefit evaluations. Yet other farms ignore changes in cost and continue to store.
The main determinant for which group they belong to is their overall financial position, which is correlated with size and age. Farms that are bigger and have been in operation for a longer time have more assets and a more stable financial position, and they tend to have lower storage costs, while younger farms are typically in a more precarious financial position, Janzen explained.
The study findings also have broader implications for the role of agricultural commodity storage in the global supply chains.
“For example, last year the water levels on the Mississippi River dropped very low, which constrained shipping and affected agricultural exports. Farmers have to think about whether they are going to change their marketing behavior in response to big supply chain disruptions like that,” Janzen said. “Ultimately, we want to give farmers the tools to become more profitable and more resilient in the face of uncertain markets.”
The paper, “Commodity storage and the cost of capital: Evidence from Illinois grain farms,” is published in the American Journal of Agricultural Economics [doi.org/10.1111/ajae.12436]. Authors are Joe Janzen, Nicholas Paulson, and Juo-Han Tsay.
END
Study: How farmers decide to store or sell their grain
2023-12-07
ELSE PRESS RELEASES FROM THIS DATE:
Black patients less likely to get referral for home health care after hospital stay
2023-12-07
When discharging Black patients from the hospital, nurses are less likely to refer them to home health care than white patients, a new University of Michigan study found.
About 22% of Black patients are referred by discharge nurses to home health care compared to 27% of white patients.
The study found that despite a higher likelihood that Black patients were unmarried, lived alone and had more chronic conditions—all risk factors for hospital readmission—they were routinely rated equally ready for hospital discharge as white patients, and ...
Damon Runyon launches post-baccalaureate research internship
2023-12-07
The Damon Runyon Cancer Research Foundation is thrilled to announce the launch of the Damon Runyon Scholars Program for Advancing Research and Knowledge (SPARK), a one-year intensive cancer research internship program for post-baccalaureate students who come from backgrounds underrepresented in the sciences. The goal of the program is to provide students who have the potential to become leaders in cancer research with rigorous scientific training and a network of mentors and peers to support their next steps into graduate school and beyond.
Damon ...
The Morton Arboretum tree root scientist recognized as top-cited researcher
2023-12-07
LISLE, Ill. (Dec. 7, 2023)— The Morton Arboretum Tree Root Biologist Luke McCormack, Ph.D., has been recognized as one of the most cited and influential researchers worldwide by global information services provider Clarivate’s esteemed 2023 list of “Highly Cited Researchers.”
The list includes influential researchers at universities, research institutes and commercial organizations around the world who have demonstrated significant and broad influence in their field(s) of research. McCormack is the first Arboretum ...
Discrimination during pregnancy may alter circuits in infants’ brains
2023-12-07
Racial discrimination and bias are painful realities and increasingly recognized as detrimental to the health of adults and children.
These stressful experiences also appear to be transmitted from mother to child during pregnancy, altering the strength of infants’ brain circuits, according to a new study from researchers at Columbia, Yale, and Children’s Hospital of Los Angeles.
The study found similar brain changes in infants whose mothers experienced stress from adapting to a new culture during pregnancy.
“A leading hypothesis would be that the connectivity changes that we see could ...
Wayne State University announces creation of two research centers and institutes that aim to impact the health of Detroiters and beyond
2023-12-07
DETROIT – Wayne State University Interim Vice President for Research Timothy Stemmler, Ph.D., announced today the university’s Board of Governors approved the creation of two research initiatives that aim to improve the health and lives of the Detroit community and beyond.
Center for Emerging and Infectious Diseases
The Center for Emerging and Infectious Diseases (CEID) will contribute to the ongoing advancement of diagnostic testing, enabling rapid and accurate identification of infectious ...
New method is better able to map immune response and paves way for new treatments
2023-12-07
A new method, developed at Karolinska Institutet, KTH Royal Institute of Technology and SciLifeLab in Sweden, can identify unique immune cell receptors and their location in tissue, a study published in the journal Science reports. The researchers predict that the method will improve the ability to identify which immune cells contribute to disease processes and open up opportunities to develop novel therapies for numerous diseases.
Immune cells such as T and B cells are central to the body’s defence against both infections and tumours. Both types of immune cells express unique receptors that specifically recognise different parts of unwanted and foreign elements, such as bacteria, viruses ...
Researchers reveal uncharted liver-focused pathway in gene therapy immune responses
2023-12-07
INDIANAPOLIS— Indiana University School of Medicine researchers have uncovered vital insights regarding a liver trigger that blocks an undesired immune response from gene therapy, surprisingly resulting in the activation of specific immune cells, despite the liver's typical role in suppressing immune responses. The findings, published in Molecular Therapy, may pave the way for change in immunomodulation strategies for desired and long-lasting effects of gene therapy.
Gene therapy treatments involve replacing or introducing a healthy copy of ...
Virtualware and Kessler Foundation renew collaboration in groundbreaking spatial neglect research
2023-12-07
East Hanover, NJ – December 07, 2023 – Kessler Foundation, a leader in rehabilitation research, and Virtualware, an international leader in immersive and interactive technologies, expand their collaboration with a new agreement to further research and development aimed at advancing spatial neglect rehabilitation using virtual reality (VR) and tele-rehabilitation technology. This latest development stems from a strong, ongoing partnership initiated in 2018 between the VR innovator and the New Jersey-based disability-focused non-profit.
The intervention, ...
New HS curriculum teaches color chemistry and AI simultaneously
2023-12-07
North Carolina State University researchers have developed a weeklong high school curriculum that helps students quickly grasp concepts in both color chemistry and artificial intelligence – while sparking their curiosity about science and the world around them.
To test whether a short high school science module could effectively teach students something about both chemistry – a notoriously thorny subject – and artificial intelligence (AI), the researchers designed a relatively simple experiment involving pH levels, which reflect the acidity or alkalinity of a liquid solution.
When testing pH levels on a test strip, color conversion charts provide a handy ...
Bering secures FDA clearance for AI-based chest X-ray triage solution
2023-12-07
LONDON, DECEMBER 6, 2023 – Bering Limited, a London-based medical AI company, today announced it received U.S. Food and Drug Administration (FDA) 510(k) clearance for its AI-powered chest X-Ray triage solution, ‘BraveCX’. With the FDA clearance, the company is now able to commercially provide the AI solution to medical professionals and healthcare institutions in the U.S.
Bering’s BraveCX is a radiological computer-assisted triage and notification software that analyzes adult (≥18 years old) chest X-ray (CXR) images for the presence of ...