An Economic Analysis of Feed Grain and Soybean Marketing and Transportation Systems in Louisiana.

Abstract

The purpose of this study was to determine, via linear programming, an optimum number, size, and location of grain elevators, and feed mills, and modes of transportation for handling specific grains in each of the two regions (North and South) within Louisiana; to determine where inefficiencies exist by comparing the existing marketing system with the basic solution obtained from the linear programming model; and to determine the sensitivity of the optimal market system in each of the two regions to changes in various coefficients, constraints and parameters. The 1977 basic solution indicated that there exists a significant amount of excess elevator capacity in Louisiana in terms of the cost of assembling, handling and distributing grain within the state. It also indicated that larger elevators and feed mills were required to replace small elevators and feed mills in operation. A reduction would also be required in the number of small elevators and feed mills in certain areas. These results imply that the operating economies inherent in large scale elevators may lead to the abandonment of grain handling operations by many small elevators. The total grain movement estimated from the survey data is about 52.8 million bushels larger than that obtained from the basic solution. Thus, rerouting grain deliveries to conform to the routes suggested by the basic solution, could reduce total marketing cost of the current grain marketing system. There was a tendency to utilize truck facilities less and increase the utilization of water and rail facilities in the basic solution as compared to the existing system. A parametric programming procedure was used to determine the effects of the changes in costs and constraints upon the optimal system and to examine the stability of the basic solution. Responses to changes in production (20% increase), feed demand (20% farm and feed mill demand increase), rail rates (20% and 40% increase), and water rates (40% and 100% increase) were examined. When production was increased by 20 percent the volume of feed grains marketed to each firm from farms generally increased. Imports of feed grains from out of state sources generally decreased. When feed demand was increased by 20 percent the volume of feed grains imported increased and the volume of feed grains marketed from farms generally decreased. There were significant changes in grain flows when rail rates were increased. A greater effect was observed on the inter-state movements of corn and oats than