analysis of the economic feasibility of rice production, milling and marketing in puerto rico
TRANSCRIPT
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ANALYSIS OF THE ECONOMIC FEASIBILITY OF RICE PRODUCTION, MILLING AND MARKETING
IN PUERTO RICO
l , I
I
Robert E. Branson M. Dean Ethr i dge
and Richard A. Edwards
prepared for
The Economic Development Administration
and the
Department of Agriculture
of Puerto Rico
September )978
THE TEXAS AGRICULTURAL MARKET RESEARCH AND DEVELOPMENT CENTER
in cooperation with The Department of Agri cul tura 1 Economi cs
The Texas Agricultural Experiment Station and
The Texas Agricultural Extension Service Texas A&M University
THE TEXAS AGRICULTURAL MARKET RESEARCH AND DEVELOPMENT CENTER
An Education and Research Service of
The Texas Agricultural Experiment Station and
The Texas Agricultural Extension Service
The purpose of the Center is to be of service to agricultural producers, groups and organizations, and governmental agencies, as well as processing and marketing firms in the solution of present and emerging marketing problems. Primary emphasis is given to research and educational activities designed to improve and expand the markets for food and fiber products of present or prospective interest to Texas agriculture. Analyses are also directed toward an analysis of consumer food and fiber needs.
The Center is staffed by a basic group of professional agricultural and marketing economists from both the Experiment Station and Extension Service. In addition, support is provided by food technologists, statisticians and specialized consultants as determined by the requirements of individual projects.
Robert E. Branson Coordinator
i i
FOREWORD
This research project was under the general direction of Dr. Robert
E. Branson who also was responsible for the analyses of rice drying and
milling costs and the food marketing and distribution systems. Included
also was the aggregate analysis of the variabil ity in total system costs
for various levels of industry output and potential producer subsidy
costs if rice prices drop to loan levels over the next several years.
Dr. Dean Ethridge developed the rice production cost estimates and analyses.
Dr. Richard Edwards prepared the cash flow estimates for the dryer and
milling facilities. Linda Short and Bettye Kane, research technicians,
contributed significantly in the preparation of statistical analyses,
tables, graphs and the manuscript typing.
Appreciation is expressed to the following individuals without whose
help this report could not have been possible. In Puerto Rico Frank Besosa
and Ramon Gonzales of the Puerto Rican Department of Agriculture gave
valuable assistance in the procurement of economic data. Cooperation was
received from many other key individuals in government offices of Puerto
Rico such as the Planning Board, Department of Labor and Department of
Consumer Affairs. Dr. Jose Vicente Chandler of the Agricultural Research
Service, U.S.D.A., and head rice agronomist in Puerto Rico provided basic
production input data for rice crops produced by the Puerto Rican Depart
ment of Agriculture in cooperation with the Puerto Rican Agricultural
Experiment Station. Dr. George Pringle and Dr. Lill ian Zapata supplied
important preliminary consumer survey data from an ongoing consumer
expenditure survey.
Information regarding the food distribution system was aided by the
report of Dr. Parimal Choudhury on the potential impact in Puerto Rico of
the food stamp program.
Engineering consultants were: rice drying and storage, Jim Thomas
Construction, Houston, Texas; rice milling, Ned Bond Engineering Company,
Houston, Texas.
iii
TABLE OF CONTENTS
Page
RESEARCH SUMMARY AND RECOMMENDATIONS .. .. ... .. .. .. . .. xi i i
PART I. GEOGRAPHIC AND SOCIOECONOMIC BACKGROUND OF PUERTO RICO
Chapter 1. Introduct ion 3
Geographic Factors 3 Cultural Background 6 Socioeconomic Influences 6
Chapter 2. Food Consumption and Production 9
Food Consumption .... 9 Food Production versus Consumption 12
Chapter 3. Condition of the Sugarcane Economy 17
PART I I. FOOD SUPPLY SYSTEM
Chapter 4. Present Rice Supply System 25
Food Wholesaling ...... . 33 Food Retailing ....... . 38 Food Marketing Structure Conclusions 40 Food Manufacturing ......... . 40
PART I I I. RICE PRODUCTION AND PROCESSING COSTS IN PUERTO RICO VERSUS MAJOR U.S. PRODUCTION AREAS
Chapter 6. Production Costs Estimate for 1977 45
United States Budgets for 1977 45 Puerto Rico Budgets for 1977 48 Break-Even Prices ..... 49
Chapter 7. Estimated Production Costs for 1985 53
Comparison of U.S. and Puerto Rico Cost Estimates 53 Break-Even Prices for 1985 55 Some Further Considerations .. 57 What about a Service Company? . 58
v
TABLE OF CONTENTS {continued}
Page
Chapter 8. Rice Mi 11 ing ..... . 63
Chapter 9. Rice Drying and Storage 83
PART IV. ECONOMIC FEASIBILITY OF RICE PRODUCTION, PROCESSING AND MARKETING SYSTEM IN PUERTO RICO
Chapter 10. Overview of the Production, Drying, Storage and Milling Costs for Rice in Puerto Rico and the U.S. Mainland 93
Chapter 13. Cost Effects of Size Variation in the Rice Production,
APPENDIX E. RICE IMPORTS AND CALCULATION OF INTEREST ON WORKING
Chapter II. Cash Flow Analysis of Rice Processing Facilities 101
Chapter 12. Rice Marketing Outlook for Puerto Rico 109
Processing and Marketing System 115
Rice Mill i ng 115 Rice Dryer 124 Combined Costs 126 Impact on Potential for Subsidy Payments to Rice Growers 130 Effect of Initial Acreage and Mill Authorizations 131
APPENDIX A: COST OF PRODUCTION 133
APPENDIX B: MILL AND EQUIPMENT 151
APPENDIX C: DRYER AND EQUIPMENT. 163
APPENDIX D: RICE PRICES .... 169
CAP !TAL 181
vi
....., I I
-, I I
LIST OF TABLES
Table Page
Income Level of Households in Puerto Rico, 1969 . 7
2 Disposable Personal Income, Total Years, 1950-75, in Puerto Rico
and Per Capita, Selected 10
3 Family Income Levels in Puerto Rico, 1953, 1959 and 1969 10
4 Per Capita Consumption of Food in Puerto Rico by Major Food Groups, 1954-74 (retail weight equivalent) .... I I
5 Total Food,
Personal Expenditures and Puerto Rico, 1965-76
Personal Expenditures for ......•.... 12
6 Population of Puerto Rico and Percentage Change, 1950 to 1975 14
7 Origin and Disposition of Major Food Groups Retail Weight of Farm Equivalent, 1973
in Terms of ..... . 15
8 Rice Imports, 1976/77 .
Total and Per Capita, Puerto Rico, 1966/67. . . . . . . 16
9 Sugarcane Acreage, Production and 1960/61-1974/75 . . . . .
Prices, Puerto Rico, . ..•........ 18
10 Raw Cane Sugar, York, 1965-77 .
Wholesale Price, Caribbean Ports and New . . . . . . . . . ... 19
I I Sugarcane Production, Prices and Acreage, U.S., 1965-76 20
12 Retail Prices of Rice in the United States, August-July Year, 1967-76 . . . . . . • . . . . . ..... 25
13 Season Average Price for Rice Received States, 1960-76 . . . . • . .
by Farmers, Selected . . . . . . . . . . 27
14 Milled Rice Prices, California, Texas and Arkansas, Months, 1969-70 Marketing Year
Selected 28
15 List of Rice Importers, Puerto Rico, March 1977 . 32
16 Number of Wholesale Grocery Firms and Value of Sales by Sales Size of Business, Puerto Rico, 1972 . . ..... 35
vii
LIST OF TABLES (continued)
Table Page
17 Number of Wholesale Farm-Product Raw Materials Firms and Value of Sales by Sales Size of Business, Puerto Rico, 1972 36
18 Number of Wholesale Grocery Firms and Value of Sales by Legal Form of Organization, Puerto Rico, 1972 ...•.... 37
19 Number of Wholesale Grocery Firms and Value of Sales by SMSA Area, Puerto Rico, 1972 . . . .... 37
20 Number of Retail Grocery Stores and Size of Business, Puerto Rico, 1972
Value of Sales by Sales ••........ 38
21 Number of Retail Grocery Stores and Value of Sales by Legal Form of Organization, Puerto Rico, 1972 ...... . 39
22 Number of Retail Grocery Stores and Value of Sales by SMSA Areas, Puerto Rico, 1972 39
23 General Manufacturing Statistics for Grain Mill Products, Puerto Rico, 1967 and 1972 .............. . 41
24 Rice Brand Market Shares in Puerto Rican Market, 1976-77 Market i ng Year . . . .. .......•....... 42
25 Value of Products Shipped by Processing Plants Rico for Milled Rice and By-products, 1967 and
in Puerto 1972 . 42
26 Estimated Costs per Cuerda for Rice Production in the Sacramento Valley in California and the Upper Gulf Coast Area in Texas, 1977 . . . . . . . . . . . . . • . . . . . 47
27 Estimated Costs per Cuerda for Rice Production in Puerto Rico,1977 . . . . . . .... 50
28 Approximate Break-Even Prices for Rice, by Areas, 1977 52
29 Projected Costs for Rice Production, by Areas. 1985 .. 54
30 Percentage Cost by Areas
Increases Projected between 1977 and . . . . .
1985. 54
31 Projected Approximate Break-Even Prices for Rice. Areas, 1985 ............. .
by 56
vii i
LIST OF TABLES (continued)
Table Page
32 Approximate Break-Even Prices for Rice, by Areas, Alternative Production Costs from Consideration, 1977 vs. 1985 ................. .
Excluding
56
33 Cost Summary Rice Farm in
for Major Machinery and Equipment Puerto Rico, 1977 . . . . . .
on a 200-Cuerda . ... 60
34 Mill Operation Hours Necessary for Proposed Rice Production i n P u e r toR ico· . . . . . . . . . . . . . . . . . 65
35 Work Force Requirements and Labor Cost States Rice Mill, 240 cwt/hr Capacity,
Estimates for United 1978 ..... 66
36 Work Force Requirements and Cost Estimates for Puerto Rico Rice Mill, 1978. 240 cwt/hr Capacity ........... . 68
37 Work Force Rice Mill,
Requirements and Cost Estimates for Puerto Rico 240 cwt/hr Capacity, 1978, Engineering Survey 70
38 Estimated Variable Costs, Puerto Rico Rice Mill. 73
39 Construction and Equipment Cost Indexes, U.S., Periods. . . . . . . . . . . . . . . . . ..
Indicated . ... 74
40 Total Construction Cost Estimate for Building and Equipment for Rice Mill with 240 cwt/hr Capacity, U.S. Mainland and Puerto Rico . . . . . . . 75
41 Annual Average Fixed Cost Estimate for 240 cwt/hr, Rice Mill, U.S. Mainland and Puerto Rico ............ . 78
42 Total Annual Operating Cost Estimate 240 cwt/hr Rice Mill, U.S. Mainland and Puerto Rico. . . . . . . ..... 79
43 Rice Milling Cost Comparison, Puerto Rico and U.S. Mainland 80
44 Estimated Labor and Management Costs for Rice Drying-Storage System in Puerto Rico to Supply 40 and 80 Hour Operations per Week of a 240 cwt/hr Rice Mill, 1978 ...•. 84
45 On-farm Rice Drying-Storage System, Estimates, 75 Percent Utilization.
Total Operating Cost . .... 86
46 Estimated Cost of Constructing Rice Drying-Storage System, Puerto Rico, 1978 . . . . • . . .......... . 89
ix
LIST OF TABLES (continued)
Table Page
47 Summary of Production and Processing Costs for Rice, Puerto Rico and U.S. Mainland, 1977-78 . . . . . . .. .... 94
48 Summary of Estimated Cost for Rice, Mainland, 1985
Puerto Rico and U.S. . . . . 97
49 Cal ifornia Rice Price in San Juan Based on Estimated U.S. Loan Level and Calculation of Equivalent Puerto Rican Grower Price Assuming 240 cwt./hr. Millon 80 Hour Week . . • .. 98
50 Cash Flow Analysis First Year of Operation, Rice Dryer and Milling Facility for Processing Puerto Rican Rice ..... 104
51 Cash Flow Analysis for Operation of Rice Dryer and Milling Facility for Processing Puerto Rican Rice, Years 2 through 6 106
5la Estimated Price Payable to Rice Growers per Hundredweight of Rough Rice under Indicated U.S. Rice Price Assumption, 1979-83 . . . . . . • . . . . . . . . . . . . • . . . . .. 107
52 Average Rice Purchases by Income Categories, Puerto Rico Consumer Survey, 1977 . . . . . . • . . • . . • • . 114
53 Rice Mill Construction Cost Estimate for Three Sizes of Mills, Puerto Rico, 1978 . . . . . . . . . . • . . . . 116
54 Estimated Annual Average Fixed Costs for Rice Mills, Puerto Rico, 1978 . . . ..
Indicated Size ..... 118
55 Management and Labor Force Requirements for Indicated Size Rice Mills in Puerto Rico and Estimated Total Annual Expense According to Number of Hours of Operation, 1978 . . . 119
56 Estimated Annual Average Variable Costs for Rice Mills, Puerto Rico, 1978 . .
Indicated Size . . . . 122
57 Total Estimated Annual Operating Cost for Indicated Size and Hours of Operation of a Puerto Rico Rice Mill and Cost per cwt. of Rough Rice, 1978 . . . . . . . . . . . . . 125
58 Rice Drying-Storage System, Construction Costs, Rico, 1978 . . . . . . . . . . .
Puerto 127
~9 PardI leI Systcln Rice Dryer-Storage System Operating Cost Estimate, Puerto Rico, 1978 . . . . . . . . . 128
60 Rice Dryer-Storage and Milling Cost at Indicated Size Plants and Hours of Operation and Potential Subsidy Cost. . 129
x
1
LIST OF FIGURES
Figure Page
Map of Puerto Rico . . . . . . . . . . 4
2 Map of Puerto Rico and the United States 5
3 Rice Shipped to Puerto Rico by Source, 1967-76 29
4 Rice Shipped to Puerto Rico by Source, 1973-76 31
5 Food Distribution Channels in Puerto Rico . . 34
6 Total Rice Imports and Projections in Puerto Rico, 1966-76 110
7 Per Capita Rice Imports and Projections in Puerto Rico, 1966-7 6 . . . . . . ., .... ..... 111
8 Per Capita Rice Purchases by Income Categories, Puerto Rico, 1977..... ......... . ... 113
9 Dryer-Storage and Mill ing Cost for Puerto Rican Rice, 1978 123
xi
LIST OF APPENDIX TABLES
Table Page
A-I Estimated Costs per Acre of Rice in the Sacramento Valley of California, 1977 . • . . . . . . . ..... 135
D-I Average Prices F.O.B. Mills, Second Heads Rice, 1971/72
A-2 Estimated Costs per Acre of Rice in the Upper Gulf Coast Area of Texas, 1977 . . . . . . . . 137
A-3 Estimated Costs per Cuerda for Rice in Puerto Rico, Two Crops per Year, 1977 139
A-4 Estimated and Projected Price Indexes for Selected Agricultural Inputs, 1967-77 . . .. ..... . . . . 141
A-5 Regression Results Used for Projection of Price Indexes for Selected Agricultural Inputs . • . . . . . . . 143
A-6 Projected Costs per Acre of Rice in the Sacramento Valley of California, 1985 . . . . • . . . . . . . . . . 145
A-7 Projected Costs per Acre of Rice in the Upper Gulf Coast Area of Texas, 1985 . . . . . . . . 147
A-8 Projected Costs per Cuerda for Rice in Puerto Rico, Two Crops per Year, 1985 . . . . . . . 149
1977178 . . . . . . . . . . . . . . . . . . .. 171
D-2 Average Prices F.O.B. Mills, Brewers Rice, 1971/72-1977178 173
D-3 Average Prices F.O.B. Mills, Bran Rice, 1971/72-1977178 . 175
D-4 Average Prices F.O.B. Mills, Head Rice, 1971/72, 1976/77, and 1977178 . . . . . . . . . . . . . . . 177
D-5 Season Average Prices, F.O.B. Mills, Head Rice, 1970/71-1976/77 178
D-6 Average Prices Received for Rice by Producers and Mills, Cal ifornia and Texas, 1966-75 . . . . . . .. .... 179
E-l Rice Imports to Puerto Rico from the South and California, 1966-67 to 1976-77 . . . . . . . . . . . . . . . .. 183
E-2 Calculation of Interest on Working Capital for Puerto Rico Rice Mi 11 (80 hr. wk., 240 cwtlhr mi 11) . . . . . . . 184
xii
RESEARCH SUMMARY AND RECOMMENDATIONS
* The objective of this research report is to present an assessment of
the economic feasibility of a domestic production, drying-storage, milling
and marketing system for rice in Puerto Rico.
* Establishment of the economic feasibility of a rice production-processing
marketing system in Puerto Rico rests upon finding affirmative conclusions to
the following five questions.
1. Is rice production in Puerto Rico agronomically and economically
practical?
2. Can a rice processing system in Puerto Rico operate at a reasonable
cost level in comparison with U.S. mainland plants?
3. Is product demand fully adequate so that the domestic production
will not exceed a reasonably obtainable market share position in
Puerto Rico?
4. Can the total production-processing-marketing system successfully
meet outside competition?
5. Is there a practical method of governmentally administering and
monitoring a program that in effect will be a monopoly processing
and marketing business for domestically produced rice?
* Experimental commercial rice crops have been successfully grown for at
least three successive production periods in Puerto Rico. A subtropical
climate permits production of two successive rice crops per year on the
same land. A comparable system reportedly operates successfully in British
Honduras. I Yields of 4,500 to 6,000 pounds per acre are feasible according
to local and U.S. mainland agronomists. The cost of production per hundred
weight is estimated at $6.64/cwt. for 1978 and $8.87/cwt. for 1985. That
compares with $8.06 and $11.35, respectively, for rice production in Cali
fornia. Therefore, economical production appears to be feasible for a
medium grain type of rice.
INow known as Belize.
xiii
* Analyses were made regarding operating costs for a rice mill with a
240 cwt./hour capacity. A commercial drying and storage system is
recommended by consulting engineers that represent an adaptation from the
on-farm drying and storage system used in the U.S. mainland. These com
bined drying-storage-milling facilities have the capability at 1978 prices
of operating at a cost of $2.83 per hundredweight rough rice basis if about
1,497,600 cwt. of rice are produced from 15,750 acres of rice. This compares
with estimated average costs of $2.97 on the mainland. Assumed is a 240
cwt./hour mill in Puerto Rico operating 120 hours per week.
* However, if production is only about 998,355 cwt. from 10 to II thousand
acres, double cropped, the rice dryer-storage-milling facil ities cost will
be around $3.33 per cwt. of rough rice. The mill in this case would operate
on an 80 hour week basis.
* It is recommended that the dryer, storage and mill be located at the
same site since both the dryer and mill will operate on a year around basis.
Rice production should be staggered through the year with one-twelfth of
the annual volume required planted each month. Harvesting, therefore, will
also be monthly. A semi-monthly basis could be tried experimentally.
* The total production-drying-storage-milling cost also will vary with
the volume of rice producted. Using a 240 cwt./hour mill, on a 1977-78
cost basis, rice will cost $19.47 per hundredweight of milled rice
if about 499,225 hundredweight are grown on 5,255 acres double cropped.
The cost will drop to $17.19 per hundredweight if 998,355 hundredweight
production is grown on about 10,509 acres. These costs compare with an
average of $20.72 per hundredweight in the United States. These cost
estimates are based on a depreciation rate of 25 years for dryer metal
buildings and 35 years for mill concrete buildings and a loan rate of 10
percent in Puerto Rico.
Payment of the proposed $9.00 per hundredweight for rough rice to g'"owers
would increase the milled rice final total cost to $23.54 and $21.26
xiv
l per hundredweight respectively. Thus, the possibility arises of a subsidy
payment to growers during the initial years of operation. If present U.S.
market prices for milled rice, about $23.00 per cwt. in August 1978, continue
a subsidy would not be required.
* If rice prices hold at or above the 1978 target price in the U.S.
mainland the Puerto Rican rice production-processing-marketing system can
operate profitably and return at least $9.00 per hundredweight to growers
for rice delivered to the dryer. If U.S. mainland rice prices fall to the
1978 loan level and Puerto Rico grows 10 to 11 thousand acres of rice,
Puerto Rican growers may require subsidy payments of $1.14 per hundredweight
and $0.59 per hundredweight, respectively, during the years of 1979 and
1980. No subsidy would appear necessary for 1981. Assumed is a 7 percent
increase in the rice price loan rate each year to match the possible
inflation in the U.S. From 1982 on, the rice industry in Puerto Rico would
compete favorably against the U.S. estimated loan level prices for U.S. rice.
If rice production were increased to 1,497,600 cwt. from 15,750 acres, the
possible subsidy payments to growers would be only $0.64 in 1979 and $0.06
in 1980. The larger production simply results in a lower milling cost,
because 120 hours per week operation of the 240 cwt./hour mill can be used.
* Given the results of the above analysis and the assumptions relevant to
it, including staying within the stipulated costs for the rice drying, storage
and processing facilities, the recommendation is that the government of Puerto
Rico proceed with the establ ishment of the rice industry. However, the follow
ing two conditions should be maintained.
1) The rice dryer-storage-milling facility should be privately operated
by a firm that is guided by the needs and interests of Puerto Rico, or
regulated in the interests of Puerto Rico's needs.
2) Rice production should be by independent individual rice growers
who provide among themselves all of the production and harvesting inputs
and serve one another on a custom charge basis where needed as occurs on
the U.S. mainland. A separate firm could provide the aerial seeding and
spraying of crops as also is customary in mainland rice areas.
xv
Based partly, at least, upon the initial findings of this study,* indications are that commercial production of rice in Puerto Rico has
been given legislative approval. Initial reports are that plans are for
a 240 cwt./hour (rough rice basis) rice mill. Beginning acreage has been
set at 8,000 acres with 3,000 of these on the South Coastal plain.
* A review of the cost estimates reveals that the above combination,
8,000 acres and a 240 cwt./hour rice mill is not a compatible combination.
At a yield of 95 cwt. per acre (double cropped basis) the mill would have
to operate f~r about 60 hours per week which is untenable. The proper
size mill for the planned acreage is a 200 cwt./hour mill which would
operate on an 80 hour week, two shifts, for about 48 weeks per year.
Therefore, a 200 cwt./hour mill is recommended, but designed for easy
expansion to a 240 cwt./hour size.
* It is not feasible to construct a rice drying facility on the South
Coast for 3,000 acres of rice. Instead, one of two alternatives should be
followed. The first option is to truck rice direct to the dryer to be con
structed at the mill site on the North Coast. Hauling distance will not
likely exceed 50 miles and rice moves that distance frequently in the U.S.
mainland. The second option is to build a loading station on the South
Coast. Bobtail trucks could unload there so rice could be reloaded onto
trailer trucks. Cost of such a facility is estimated at about $20,000.
* Because of the smaller size drying facility and the smaller mill, 200
cwt./hour for 8,000 acres of rice, costs of rice processing will be larger
than previously indicated. Drying costs will average $0.68 and milling costs
$3.32 for a total of $4.00 per cwt. of rough rice. These are estimates for
1979.
xvi
~', The possible subsidy to growers if U.S. mainland rice is at the
estimated loan level is $1.81 per cwt. of rough rice in 1979, $1.31 for
1980, $0.77 for 1981 and $0.20 for 1982. Obviously, it is crucial that
rice acreage be expanded to an 11,000 acre basis producing around 998,355
hundredweight of rough rice as rapidly as possible. If the latter is done,
the subsidy will be sharply reduced to $1.14 in 1979 and $0.59 in 1980
and will likely be zero thereafter.
,,: An analysis of the cash flow operations for the mill-dryer facility
was made. This indicates that, with 998,355 hundredweight of rough rice
and a 240 cwt./hour of rough rice mill operating on an 80 hour week, the
necessary debt service can be met, and a normal operating profit achieved
by paying growers $7.79 and $8.43 per cwt. of rough rice in 1979 and 1980
respectively. That would mean a government subsidy to growers of $1.21 and
$0.57 per cwt. of rough rice in 1979 and 1980. None is indicated as
required after that crop year, based on this study's assumptions of costs
and market conditions.
xv i i
PART I. GEOGRAPHIC AND SOCIOECONOMIC BACKGROUND OF PUERTO RICO
I ,
Chapter 1. Introduction
The factors generating the need to evaluate the potential for rice
production, mill ing and marketing in Puerto Rico are better understood
if placed in perspective against the area1s geographic, cultural and
socioeconomic characteristics. Therefore, a review of these is in order
as useful background information.
Geogpaphic Pac tops
Puerto Rico is one of the important West Indies Islands. It is one of
a group that forms a longitudinal series of islands that extends from the
Leeward Islands on the eastern side of the Caribbean Sea westward to the
Gulf of Mexico. The latitudinal position of Puerto Rico is 18° to 18°30 1
north. Its longitudinal position is 65° to 75° west. Thus, it is about
1,500 miles south-southeast of New York and 900 miles east-southeast of
Miami. Of volcanic origin, Puerto Rico is for the most part hilly to
mountainous, is about 100 miles in length, east to west, and 35 miles
in width, north to south, Figures I and 2.
Positioned on the outer edge of the Atlantic Gulf Stream that flows
from the Gulf toward Gredt Britain and returns, the constant trade winds
prevail ing in Puerto Rico are from the northeast. These impact on the
mountain slopes of the northeastern part of the island where rainfall is
in the range of 180 to 200 inches per year On Mount Yungue, the tallest
peak. Most of the rainfall occurs on the northeastern side of Puerto Rico,
and diminishes as we move either westward or southward. In a portion of the
southwestern part, rainfall is only 10 to 20 inches per year. Obviously, the
topography results In large suppl ies of water being available from the moun
tain range that is in essence the geographic backbone, as it were, of the
island. The coastal areas around the island are a plain that extends into
the foothills of the central mountain range.
3
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Figure 2.
""""'MMOND&CO ,N.V.
IF MILES .~- ~:;=:.:::~
. KILOMETRES
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,Jles ...............;* mdarie$ ....... ----
...__ ......_--'.......-
6
Cl imatically, Puerto Rico is sUbtropical with an average daily
temperature over the year that ranges from 71 to 85 degrees according to the
U.S. National Oceanic and Atmospheric Administration records. Temperature
variations during the day are also relatively small. In terms of the U.S.
mainland, the climate is somewhat comparable to that of the southern tip
of Florida. Rainfall is almost exclusively in the form of tropical showers.
CuZtupal Backgpound
Insofar as history relates, Puerto Rico was initially inhabited by
Indians. During the exploration of the Western Hemisphere that led to
the Europeans' discovery of North America, the Spanish came to Puerto
Rico. Their cultural influence has remained ever since. The masses of
the population were left poor economically following an era of early
economic exploitation of the islands. As a consequence, the diet of the
Puerto Ricans was historically set in a combination of low cost foods
essential to their survival. That diet was based primarily upon dried
codfish, dried beans and rice.
Since those days, Puerto Rico has acquired a very cosmopolitan popula
tion but the Spanish culture and the diets of the early times have still
left their impact. Rice is still a major component of food consumption,
though the codfish and beans have become less prevalent as consumer
incomes have risen.
Socioeconomic Influences
As noted, rice consumption historically was stimulated by its low cost
and by the low level of incomes of the majority of the population. Rice
has the characteristics of being an economical, well nourishing, and appetite
satisfying food. After all, it is one of the staple foods of much of the
world. The diets which are comprised of little rice and which are familiar
to the U.S. mainlanders are worldwide somewhat more the exception than the
rule. So, rice became a preferred food in Puerto Rico. It is looked upon
I 'I
r
7
as a basic food item much the same as potatoes are on the mainland. Yet
the genesis of the usage of rice in Puerto Rico has not entirely vanished.
According to the 1970 Census of Population, 69 percent of the households
in Puerto Rico had annual incomes of less than $5,000. A total of 49
percent were reported as having incomes of less than $3,000 per year,
Table I. Therefore, the need for low cost diets still persists.
What of the future? As will be examined later, there is little to
suggest any major shift in food preference insofar as rice is concerned.
Though some data on food purchases suggest that the higher income house
holds may use less rice, the differential is certainly small. In fact, a
doubling of incomes would apparently have only a scant effect upon the posi
tion of the food in the general composition of the typical eating habits.
At the upper income levels, per capita purchases still hold at near 100
pounds per person per year.
Table 1. Income Level of Households in Puerto Rico, 1969
Percent of a II CumulativeIncome level households tota I
percent
under $500 12.8 12.8
500 1,000 8.6 21.4
1,000 2,000 13.8 35.2
2,000 3,000 14. I 49.3
3,000 4,000 11.4 60.7
4,000 5,000 8.3 69.0
5,000 7,000 I I • If 80.4
7,000 10,000 9.3 89.7
10,000 15,000 6.3 96.0r 100.015,000 and over 4.0
r Source: U.S. Census of Population, Puerto Rico, 1970.
Chapter 2. Food Consumption and Production
Food Consurnption
Some trends over the past two decades have occurred in food usage in
Puerto Rico. Reflected are in part the effects of increasing household
incomes. Per capita disposable income increased from $438 to $2,009 from
1955 to 1975. On a constant value dollar basis, the amounts were $437 to
$1,042, or a gain of 138 percent in purchasing power, Table 2. Families
with incomes over $5,000 per year represented 31 percent of the total
households in 1969 compared with only 4 percent in 1953. Some allowance
must be made, however, for approximately a doubling in the consumer price
index meanwhile. From whatever perspective it may be viewed, there none
theless has been a substantial increase in consumer real incomes, Table 3.
Over the 1955-74 time period, the following shifts have been observed
in Puerto Rican food usage. Total food consumption per person poundage-
wise increased by an average of about 8 percent, Table 4. The internal
make up of the diet, however, reflected some important changes in usage
of specific food groups. Heat consumption per capita, for example, more
than doubled, being up 123 percent. Use of eggs and milk advanced 82 and
62 percent respectively. Green vegetables gained by 61 percent. The
decl ining food categories were legumes, down 35 percent and starchy
vegetables down 33 percent. Overall the cereal foods were down 19 percent.
However, both corn and rice prices were exceptionally high in 1974. Decreased
usage reflected both high prices and less availability of supplies. Rice
consumption long-term has been affected only slowly downward on a per capita
basis. Imports have been up substantially in recent years.
If we examine food expenditures as a percentage of personal income,
a decline took place from 1965 when food was 25.6 percent of income to
1970 when the figure was 21.7 percent, Table 5. This would be expected
with rising levels of consumer income. With the introduction of the Food
Stamp program in 1974, food expenditures gained in relation to incomes.
For 1976, total food expenditures moved back to 23.9 percent of personal
income.
9
10
Table 2. Disposable Personal Income, Total and Per Capita, Selected Years, 1950-75, in Puerto Rico
Disposable eersonal income Per capita
Year Population Total Actual Deflated a/
thous. mi 11. $ dollars
1950 2,210 638 289 338
1955 2,231 977 438 437
1960 2,349 1,334 569 514
1965 2,583 2,134 831 697
1970 2,717 3,608 1,328 939
1975 3,172 6,454 2,009 1,042
~1954 = 100.
Source: Puerto Rico Planning Board, Bureau of Economic Planning.
Table 3. Fami ly Income Levels in Puerto Rico, 1953, 1959 and 1969
Income level 1953 1959 1969
do 11 a rs thous. % thous. % thous. %
Under 1,000 163 39 190 43 121 22
1,000 - 2,000 163 39 105 24 78 14
2,000 - 3,000 25 6 58 13 80 14
3,000 - 4,000 25 6 31 7 64 11
4,000 - 5,000 25 6 20 4 47 8
5,000 - 7,500 11 3 22 5 76 13
7,500 -10,000 7
10 2 42 8
over 10,000 9 2 58 10
Total 419 100 445 100 566 100
Source: Puerto Rico Planning Board, Bureau of Economic Planning.
i
-,
I I
r
r I
II
Table 4. Per Capita Consumption of Food in Puerto Rico by Major Food Groups, 1951f-74 (retail weight equivalent)
Food Group 1954-5 1959-60 1964-65 1969-70 1973-74 change
pounds percent
Meats Beef and veal 15.76 20.39 32.72 38. 13 35.39 124.56 Pork 29. 15 34. 12 36.68 41.08 40.33 38.35 Poultry aOther meat
8.60 1.08
14.84 1. 45
25.76 1. 38
38.06 2.30
41.56 2.57
383.26 137.96
Entrails, etc. 1. 31 2. 16 3.48 4.83 5. 13 291.60 Total 55.90 72.96 100.02 124.45 124.98 123.58
Mil k Fluid mi Ik 159.97 232.30 273. 15 277.52 264.72 65.48 Milk products 28.96 38.28 43.91 39.86 42.77 47.69 Total 188.93 270.58 317.06 317.38 307.49 62.75
Eggs 10.94 12.47 17.42 20.08 19.99 82.72
Cereals Wheat 40.67 46.23 65.09 68.39 56. 10 37.94 Corn 14.28 12. 17 13.31 13.92 9.83 -31.16 Rice 136.62 146.44 113.80 116.56 86.37 -36.78 Other 1. 76 1. 41 3.58 3. II 3.59 103.98 Total 193.33 206.25 195.78 201.98 155.89 -19·37
Vegetables Starchy Green
276.66 31.90
23 1L 09 40.66
199.76 46.44
192.09 50.98
183.50 51.63
-33.67 61.85
Total 308.56 274.75 246.20 243.07 235.13 -23.80
Legumes 35.37 33.09 30.67 25.08 22.99 -35.00
Fresh fruits 73.49 83.97 78.41 65.81 59.69 -11:3.79
Coconuts & nuts 3.76 6.53 4. 15 5.70 5.83 55.05 Coffee,
& tea chocolate 10.27 I 1.25 11.65 14.71 14.51 41.29
Sugar (refined basis) 86.82 90.86 91.48 93.76 96.01 10.59
Total 967.37 1,062.69 I ,092.84 1,112.02 1,042.51 7.77
alncludes goat, sheep and rabbit.
Source: Consumo de Aliments en Puerto Rico, Department de Agricultura, 1977.
12
Table 5. Total Personal Expenditures and Personal Expenditures for Food, Puerto Rico, 1965-76
Total Personal Food expendiPersonal personal expenditures tures--%Year income expenditures for food of income
1965
1970
1971
1972
1973
1974
1975
1976
2,222.6
3,795.8
4,363.2
4,871. 7
5,451.8
6,007.3
6,857.2
7,682.0
mi 11 ion dollars
2,251
3,686
4,180
4,622
5,090
5,539
6,258
7,125
569
825
949
1,080
I , I 70
1,344
1,560
I ,833
percent
25.6
21.7
21.8
22.2
21.4
22.4
22.7
23.9
Source: Economic Reeort to the Governor~ 1975-76, Bureau of Economic Planning, Puerto Rico Planning Board.
Food Production versus Consumption
Reference has already been made to the per capita consumption of food
according to the major food groups. A key question is the source of these
foods. Because of the topography of Puerto Rico, previously noted, it has
no extensive areas of reasonably level land suitable for large scale
commercial agricultural production. There is no inland plain such as the
type which lies between the Appalachian and Rocky Mountains on the U.S.
mainland. And, the coastal plain is relatively narrow and small in relation
to the total land mass of the island--amounting to perhaps no more than
about 10 to 15 percent. According to the U.S. Bureau of the Census, Puerto
Rico's total land area is 3,435 square miles. That is equivalent to nearly
2.2 million acres. In 1930, when the sugar economy was growing, reportedly
I
I
13
sugarcane occupied about 238,000 acres. And, the coastal plains were in
large part devoted to cane production. The other 519,000 acres in agri
cultural production lay in the hills and mountains, where the slope on
tilled fields often ranged between 30 and 1,0 degrees. Terrain kept these
to small fields hardly adaptable to any form of mechanization.
In order to support its large population, substantial imports of food
into Puerto Rico were then and are now required. Its population of around
2.2 million in the early 1950's now is estimated to have grown to over 3.1
million, Table 6. Even as late as 1973, on a retail weight basis, 21.7
million hundredweight of foods were imported out of a total consumption
of 39.6 million hundredweight, Table 7. A minor amount of outshipments of
imports to a few nearby islands occurs, but for parctical purposes this can
be ignored. Clearly at least half of the domestic food usage relies on
imported suppl ies.
Examination of food consumption by major food groups in comparison to
indigenous production gets to the heart of a key situation relative to the
present study. Two categories of foods completely lack any internal produc
tion--cereal is one and fats and oils the other. Cereal consumption in
1973 was estimated at 7.2 mill ion hundredweight and imports at 7.6 million
hundredweight, Table 7. The difference was inventory changes and a small
amount of re-exports. Fats and oils imports were 1.5 million hundredweight.
Import statistics show about 3.2 mill ion hundredweight of rice for calendar
1973, at least that was the average of the 1972-73 and 1974-74 June 30
fiscal years, Table 8. In other words, rice accounted for about 40 percent
of the cereal imports. The balance was food products from wheat, corn and
oats.
Of the cereals, only rice as of now appears to be a potential agricul
tural crop for Puerto Rico. Climatic conditions are not suited for wheat,
which is a product of the temperate climates. Corn grown locally, if any,
is essentially for fresh consumption as ear corn. Clearly, under these
conditions, the potential for rice production, mil ling and marketing is
one alternative that should be assessed if Puerto Rico is to lessen its
dependence upon imported foods. There are other significant circumstances
related to the economic conditions prevalent in the sugarcane industry.
These also have a bearing upon the situation, as we shall now see.
14
Table 6. Population of Puerto Rico and Percentage Change, 1950 to 1975
Year Popul at ion Pe rcen t cha nge
1950
1960
1965
1970
1974iY
J975iY
number
2,210,703
2,349,544
2,583,000
2,717,033
2,991,000
3,172 ,000
6.3
9.9
5.2
10. 1
6. I
iYEstimated from 1970.
Source: Puerto Rico Planning Board, Statistical Yearbook, 1974, May 1976.
l 15
Table 7. Origin and Disposition of Major Food Groups in Terms of Retail Weight of Farm Equivalent, 1973
Food groups Production Inshipments Outshipments Consumption
Cereals
Starchy vegetables
Legumes & green vegetables
Fruits
Meats
Fish & seafood
Eggs
Dairy products
Fats&oils
Sugar
Coffee, chocolate, tea, others
Soups & spices
Total
4,717
628
2,532
I ,038
42
323
7,783
2,752
224
13
20,052
thous. c~"t.
7,587 407
1,387 37
2,860 281
1,722 833
3,935 333
405 8
302 8
1 , 158 42
1,483 48
346 124
261 14
319 35
21,765 2, 170
7,180
6,067
3,207
3,421
4,640
438
617
8,899
1,435
2,973
472
297
39,646
Source: Commonwealth of Puerto Rico, Department of Agriculture. Data cited from The Food Distribution System and Food Stamp Program in Puerto Rico, Primal Choudhury, project director.
16
Table 8. Rice Imports, Total and Per Cap i ta, Pue rto Rico, 1966/67-1976/77
al Rice Per capitaYear- Populationimports imports
thous. cwt. thous. pounds
1966-67 3,314 2,612 126.88 1967-68 3,464 2,634 131.51 1968-69 3,268 2,665 122.63
1969-70 2,970 2,706 109.76 1970-71 3,308 2,717 121 .80 1971-72 3,315 2,746 120.72
1972-73 3,268 2,823 115.76 1973-74 3,077 2,910 105.74 1974-75 3,409 2,991 113.98
1975-76 3,740 3,075 121 .63 1976-77 3,911 3,172 123.30
al - June 30 fiscal year.
Source: Import data furnished by Frank Besosa 11/7/77 collected by DACO. Population data from Economic Report to the Governor, 1975-76, Puerto Rico Planning Board, Bureau of Economic Planning. Consumption data calculated.
Chapter 3. Condition of the Sugarcane Economy
The dominant agricultural crop in the coastal plains and for Puerto
Rico has traditionally been sugarcane. As noted earl ier about 237
thousand acres of cane was cited for 1930 as in production by David Ross
in his book concerning the economic development of Puerto Rico, The Long
Uphil I Path. Sugar statistics from the U.S. Department of Agriculture
indicate 328 thousand acres as harvested in the 1960-61 crop year which
represents at or near the peak amount. Since that time, harvested
acreage has declined rather consistently. By 1973-74, the total was
down to 122 thousand acres, a drop of about 200 thousand acres, Table 9.
For various reasons sugarcane production in Puerto Rico has become
in recent years uneconomical. The large and closely held private owner
ship of sugar production and milling prevailed until 1950. It was broken
up during the 1950 l s through a government program under which it assumed
ownership and management of the whole industry. In recent years substantial
financial losses per acre are being sustained from the government operation
of the sugar production and milling industry. A combination of increasing
operating costs, stemming in part from rising labor rates, combined with
price vicissitudes during recent years in the world sugar market have
contributed to this impasse.
Sugar prices at Caribbean ports in general clearly have lacked the
stability of those in the U.S. mainland. Leaving aside the high prices
of 1974 and into 1975, the annual average price per pound at Caribbean
ports ranged from 1.86 to 9.61 cents, or a 5.2 high to low price ratio
over the time span of 1963-73. Caribbean prices meanwhile equalled or
closely tracked the world sugar prices. The price support program in the
U.S. mainland held New York spot prices to the much narrower range of 6.75
cents to 10.29 cents. The high to low price ratio of 1.5 was clearly less
difficult to confront by the statesiue industry. Table 10. U.S. sugarcane
acreage harvested likewise has been more stable, Table 11.
Abolition of the long prevalent sugar program in the United States in
very recent years has plunged the mainland sugar production into an economic
17
18
Table 9. Sugarcane Acreage, Production and Prices, Puerto Rico, 1960-61/1974-75
Grower Returns/Ton of Sugar Cane
Sugar Act Processor Payments Area Cane Payments
Year Harvested Production Sugar Molasses for Sugar
1000 acres 1000 tons -----··----do11 ars/ton-----------
1960-61 328. 1 10,754 7.55 .43 1.39
61-62 308.6 9,663 7.86 .46 1. 41
62-63 303.0 10, 123 9.43 .80 1. 29
63-64 303. 1 9,802 8 .. 10 .61 1.32
64-65 287.6 8,807 7.. 97 .33 1.34
65-66 272.8 9,465 7.48 .43 1.24
66-67 263.3 8,160 8.45 .63 1. 33
67-68 237. 1 6,590 8.48 .57 1.36
68-69 180.1 5,897 7.24 .42 1. 15
69-70 188.8 5,891 7.18 .59 1.08
70-71 153.4 4,582 6.77 .55 .99
71-72 152.4 4,382 6.94 .59 .92
72-73 132. 1 3,621 8.26 1.53 .97
73-].4 121.6 3,585 28.90 1.68 .95
74-75
75-76
Source: Sugar Statistics and Related Data, Volume I I, U.S. Department of Agriculture, ASCS, Sugar Division, Stat. Bulletin 244, May 1975.
19
Table 10. Raw Cane Sugara , Wholesale Price, Caribbean Ports and New York, 1965-77
-, World sugar U.S. sugar ~/or 1 d pri ceCari bbe"ln
Year spot price (New NevJ Yorkb . cports prIce York spot) basis
cents/pound
-, !
1965 1966 1967
2. 12 1.86 1.99
2. 12 1. 86 1.99
6.75 6.99 7.28
3.07 2.82 2.95
1968 1969 1970
1.98 3.37 3.75
1.98 3.37 3.75
7.52 7.75 8.07
2.96 4.37 4.88
1971 1972 1973
4.55 7.43 9.61
4.52 7.43 9.61
8.52 9.09
10.29
5.65 8.54
10.99
1974 1975 1976
29.99 20.49 11 .58
29.99 20.49 11 .58
29.50 22.47 13.31
31.62 21.92 13.36
1977 d 8.60 8.60 11 . 15 11.25
a 96° centrifugal.
b F.O.B. and stowed.
c F.O.B. and stowed in one of more than 20 Caribbean, South American, Oceanic, African and Asian countries.
d Average January-July.
Source: U.S. Department of Agriculture, Agricultural Statistics, 1976; and U.S. Department of Agriculture, Sugar and Sweetner Report, Agricultural Marketing Service, selected issues.
20
Table II. Sugarcane Production, Prices and Acreage, U.S. 1965-76
Year Acres aHarvested
Cane Product i on
Pri ces Received by Farmers
Sugar Act Payments Total
1000 acres 1000 tons -----------dol1ars/ton----------
1965 1966 1967
617.0 625.2 627.6
23663 24515 26615
7.90 8.49 9.38
1. 12 1. 11 1. 16
9.02 9.60
10.54
1968 1969 1970
605.8 535.6 583.9
24825 22695 23996
9.29 9.94
10.50
1. 16 1. 18 1. 17
10.45 11 • 12 11. 67
1971 1972 1973
648. 1 701.8 741.0
24172 28332 25827
11. 10 11.70 20.90
1. 15 1.04 1.07
12.25 12.74 21.97
1974 1975 1976
734. 1 774.0 756.9
24812 28523 28767
48.50 19.60 13.80
1. 14 49.64
1977b 756.5 27229 9.54 3.96 13.50
a for sugar and seed
b Indicated or estimated
Source: U.S. Department of Agriculture, Agricultural Statistics, Agricultural Prices, and Crop Production, selected issues.
21
abyss. New legislation is laying the base of renewed support but the
support level is not generally viewed as a profitable one. Information
obtained suggests that the target price of about 13.5 cents per pound to
U.S. sugar mills is barely sufficient to meet the U.S. average cost of
production. Market prices for the 1977 crop have averaged within the 9
to 10 cent range, triggering the need for a subsidy payment of about 4 cents per pound. With the sugar industry in this condition, impetus in
Puerto Rico to shift further away from sugar production is clearly
understandable.
Logical alternative utilizations of sugar acreage should be considered
in Puerto Rico. Among those being evaluated is commercial rice production.
PART 1I. FOOD SUPPLY SYSTEM
Chapter 4. Present Rice Supply System
Rice entering Puerto Rico is coming exclusively from mainland United
States supply sources. Rice prices historically have varied according to
the length of the rice grain. Three lengths are recognized in the trade-
short, medium and long grain. Normally short grain rice is the lowest
in price with medium grain at or near the short grain price and long grain
highest. Retail prices reported by the U.S. Department of Agriculture for
the mainland states reflect this situation. For the ten year period 1967-76
the average was 27.4 cents per pound for short grain and 32.1 cents for
long grain, Table 12. The price spread for a given year has varied from
3 to 6 cents per pound over that time.
Table 12. Retail Prices of Rice in the United States, August-July Year, 1967-76
. atAverage prlce-Year Long grain Short grain
cents per pound
1967 22 19
1968 22 19
1969 23 19
1970 24 20
1971 24 20
1972 25 21
1973 46 39
1974 49 42
1975 45 39
1976 41 36
Average 32. 1 27.4
~Simple average of reported monthly figures for leading cities in the United States.
Source: U.S. Department of Agriculture, Rice Situation, Economic Research Service, October 1977.
25
26
Further evaluation of price differences is available by comparing
prices received by farmers in California, Texas and Arkansas. California
produces short grain rice, Texas and Arkansas medium and long grain. The
1960-69 decade experience was the following on prices to growers: California
$4.87 per hundredweight, Texas and Arkansas $5.02 per hundredweight. Whereas
California is devoted to short grain production, Texas and Arkansas in the
above period had both medium and long grain in production. Grower prices
thereby reflect an average of the two types, Table 13. Market News reports
of milled rice prices in Texas and Arkansas show the comparability of prices,
Table 14, for selected time periods in the 1969-70 marketing year.
Presentation of the foregoing insight into rice pricing is useful to
an understanding of the established preference in Puerto Rico for short
grain rice. Initially that preference was tied to the simple economic fact
that short grain rice was the lowest price to the consumer. This is still
true inasmuch as prices noted at a San Juan supermarket food store on
November 10, 1977, were 24.3 cents per pound in three pound packages for
a popular brand of short grain rice compared to 30.3 cents per pound for
long grain.
Use of short grain rice has meant that the major portion of the supply
has come from California. Between 70 and 80 percent of the rice imports
per year in Puerto Rico were from that source over the time span of the
1966-67 through 1976-77 fiscal years. That left between 20 and 30 percent
coming from the Texas, Arkansas and Louisiana sources, where medium and long
grain rice is grown.
Trends in rice imports from California versus the Texas-Arkansas-
Louisiana area have been analyzed for the 1966-76 period. These are pre
sented graphically in Figure 3. Dashed lines for the 1977-78 to 1984-85
years reflect the trends established in the preceeding ten years of ship
ments experience. Trend equations are of the simple linear form Y = A + BX
where Y represents the rice imports per year, A is the graph left margin
intercept point and B the average annual rate of change over time and X is
the year. Resulting equations in terms of thousand hundredweight of rice
are:
27
Table 13. Season Average Price for Rice Received by Farmers, Selected States, 1960-76
Year Cal ifornia Texas Arkansas United States
dollars/cwt. a
1960 4.43 4.85 4.41 4.55 1961 4.78 5.31 5.28 5. 14 1962 5. II 5.01 5. 10 5.03 1963 5.07 5.09 4.92 5.01 1964 4.92 4.94 4.87 4.90
1965 4.88 5.04 4.98 4.93 1966 4.75 5. I 3 5.09 4.95 1967 4.84 4.94 5. 12 4.97 1968 5. 15 4.97 5.07 5.00 1969 4.80 4.88 5.32 4.95
1970 5.02 5.25 5.41 5. 17 1971 5.24 5.35 5.62 5.34 1972 6.83 6.44 7.20 6.73 1973 II . 10 14.80 15.30 13.80 1974 I I . 70 10.90 II .40 I I .20
1975 1976b
7.65 8.81 8.54 8.34 6.63
1960-69 average 4.87 5.02 5.02 4.94
1970-75 average 7.92 8.59 8.91 8. 17
a Includes allowance for unredeemed loans and purchases by the government valued at the average loan and purchase rate, by states.
b Reporting of state data ceased.
Source: U.S. Department of Agriculture, Agricultural Statistics, 1962-74, and U.S. Department of Agriculture, Rice Statistics, CED Working Paper, Warren Grant, December 1977.
28
Table 14. Mil led Rice Prices, Cal ifornia, Texas and Arkansas, Selected Months, 1969-70 Marketing Year
Months Cal iforniaa Texas b Arkansas
August
October
December
February
Apri 1
June
Season average
10.60
10.60
10.60
10.60
10.60
10.60
10.60
dollars/cwt.
9.75
9.75
10.00
10.00
10.00
10.00
9.90
9.90
9.90
9·90
10.10
10.10
10.10
10.00
a Cal ifornia docks basis.
b Houston f.o.b. mill.
Source: u.S. Department of Agriculture, Agricultural Statistics, 1962-74, and U.S. Department of Agriculture, Rice Statistics, CED Working Paper, Warren Grant, December 1977.
------- - - ---
------ ---
----------------------------
F I G.U RE 3
Rice Shipped to Puerto Rico by Source 1967-76
MILLION CWT
MARKET SHARE
CALIFORNIA MARKET SHARE (0/0) 804
3 60 tc5
Y = 2,442 cwt. + 20.50X r = .5063
2
SOUTH
40
- -- -'201
Y = 670 cwt. + 22. lOX r = .4733
o r o 66-1 68-9 10-1 12-3 74-5 76-7 78-9 80-) 82-3 84-5
YEAR
Source: Appendix Table D-l, page 183.
010
30
California rice imports: Y = 2,442 cwt. + 20.50X
Tex-Ar-La rice imports: Y 670 cwt. + 22. lOX
Several conclusions result from this analysis. In the first place,
rice import volume from both areas is increasing, from California by 20.5
thousand hundredweight per year and by 22. I thousand hundredweight from
Texas-Arkansas-Louisiana.
Impacts of the Food Stamp program on rice purchases in 1974, 1975 and
1976 seem evident. The higher rate of imports in these years pulls th~
trend line upward somewhat. Leaving these latter years out, the trend, or X
value, for California is 2.79 thousand hundredweight per year and for Texas
Arkansas-Louisiana is -16.96 thousand hundredweight per year.
Risk is involved in making projections from only four years of data
nonetheless it is o~ value to see if the Food Stamp program is impacting
differently upon the two import sources. Our B values that reveal the
annual rate of change show 130 thousand hundredweight for California and
153 thousand hundredweight for Texas-Arkansas-Louisiana. Graphically pre
sented, the rates appear more similar than they actually are, Figure 4.
Some credence is given, in both the long term and recent trends, to
the feeling in Puerto Rico that use of long grain rice is increasing some
what. Opinions of observers in Puerto Rico were that for some reason the
long grain rice was growing in popularity in the western portion of the
island. Inasmuch as the main center of population is toward the eastern
side, the impact of this preference change in the West is dampened by the
effects of population location.
Within the overall rice demand in Puerto Rico described above, rather
fixed physical supply channels have grown. Rice importers in Puerto Rico
as of March 1977 are listed in Table 15. Indicated also is the United
States mill represented, their retail brand name in Puerto Rico and the
type of rice marketed.
Food distribution in Puerto Rico is closely linked to importers who
serve as exclusive franchised agents for the products they represent.
As may be recalled, we have already established that about half of the total
----1 -, -- 1
FIGURE 4
Rice Shipped to Puerto Rico by Source 1973 - 76
MIlliON CWT.
4
- -...- -- -- -3r
...- _- A
Y = 2,308 cwt. + 130X - -...r = .8842
/CALI~RNIA• w
2l--...- -...-
...- ...____ ...- A
___ - Y = 518 cwt. + 152.7X _ r = .930 ...
1 ..~ SOUTH
o 73-4 75-6 77-8 79-80 81-2 83-.4
'rEAR
Source: Appendix Table D-l, page 183.
Table 15. List of Rice Importers, Puerto Rico, March 1977
Type ofName of firm Shipping mill Brand name grain>~
1. Ram~n Escriba, Inc.
2. M. Cuebas, Inc.
3. J. Gus Lallande Inc.
4. Riviana International Riviana International
5. Goble & Jimenez, Inc. Goble & Jimenez, Inc.
6. J. Gonzales Torres, Sucrs
7. J. Perez Berciano
8. Ventura Rodriguez & Sons 9. Davila Hermanos, Inc.
10. Mars de P.R.
11. Mendez & Co. 12. Plaza Provision
Farmerls Camp. of P.R. Inc. C. E. Grosjean Rice Mill ing of P. R. Rice Grower Association of Cal ifornia, Inc. Riviana Rice Mil Is Riviana Rice Mills The Dore Rice Mills The Dore Rice Mills Rice City Milling Co., Inc. Liberty Rice Mills Liberty Rice Mills American Rice Growers Coop. Riviana Int. Inc. Blue Ribbon Rice Mills Uncle Bens Foods
Riviana International Pacific International
Valencia
Escudo Rojo
Sella Rojo
El Mago Rico Chevere, Dare Dore, Escudo Dorado Edls Brands El Jaba
Cazador Carolina Cinta Azul El Mago, Estrella Pamplona Majadma Oro Blanco
Short
Short
Short
Medium Medium Medium Large Medium Medium
Medium W
Large N
La rge Medium
Large Short
*Short grain rice is from California sources; medium and long grain from Texas, Louisiana or Arkansas.
Source: Information furnished by Frank Besosa, Department of Agriculture, Puerto Rico.
33
food tonnage for the island comes through import sources. The food supply
channel assumes the form depicted in Figure 5. The major exception
to the outlined system is that of the Grand Union food chain. This chain,
mainland based, ships most products direct to its own stores from mainland
warehouses. Yet rice is distributed locally in accordance with the above
system. Other food chains, such as Pueblo Stores, Tuyo and Uni-Coop,
normally buy direct from one or more of the importing agents listed in
Table 15.
For rice, the external supply sources are the United States rice
mills as noted in Table 15. Each of the importing agents is responsible
for providing a sales force to call upon food wholesalers and retailers
to sell rice from the mill which he represents. Those retail stores called
upon by importing agents' salesmen are more likely the larger ones. \-Jholesalers
in the coastal and inland cities serve the smaller retail stores. In.the instance
of the food chain supermarkets, the importing agents sales representative visits
the individual stores, takes orders and arranges for store door delivery
of shipments direct from the importing agent1s warehouse. A parallel situa
tion for food chain stores on the mainland is the so-called "store drop"
delivery of bread and dairy products by processors of those products, al
though the food chain's central warehouse receives the majority of the
products and in turn makes deliveries two or three times per week to their
respective stores.
Food Wholesaling
The food wholesaling industry in Puerto Rico is rather highly concen
trated in the hands of about 100 firms who generally are also importing
agents. As noted in Table 16, one-fifth of the firms had 68 percent of
the sales according to the 1972 Census of Business. Each of these had
sales exceeding $2,000,000 or more per year. By comparison the wholesale
firms of domestic supply foods are somewhat more dispersed. Yet, even in
34
Figure 5. Food Distribution Channels in Puerto Rico
External Supply Sources
Puerto Rican Importing Agents or Brokers
[ Island-wide Wholesalers
Regional Wholesalers
Retai lers
35
this case it is likely that the top four firms have close to 50 percent of
the sales, Table 17. These include dairy products and some others that
are likely to be highly concentrated anyway due to the economies of scale
which cost-wise favor the large size businesses.
Corporate forms of business dominate food wholesaling and account
for 81 percent of the sales volume in 1972, Table 18. Most of the whole
salers of grocery products are concentrated in San Juan, the main port.
Mayaguez and Ponce are also port cities, whereas Caguas is an inland city,
Table 19.
Table 16. Number of Wholesale Grocery Firms and Value of Sales by Sales Size of Business, Puerto Rico, 1972
Sales Size of %of Value of % of Business Establishments Total Sales Total
number percent 000 $ percent
Less than $25,000 10 2 129 0.01
$25,000 - $49,000 13 3 527 0.07
$50,000 - $99,000 24 5 I ,823 0.20
$100,000 - $249,000 77 15 12,930 2.00
$250,000- $499,000 74 15 28, 176 4.00
$500,000 - $999,000 100 20 72,830 9.00
$1,000,000 - $1,499,000 59 12 71 ,695 9.00
$1,500,000 - $1,999,000 37 7 65,410 8.00
$2,000,000 or more 106 21 526,888 68.00
Total groceries and related products 500 100 780,408 100·a
a Does not equal 100 percent due to rounding.
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Subject Statistics, Bureau of the Census, March 1975.
36
Table 17. Number of Wholesale Farm-Product Raw Materials Firms and Value of Sales by Sales Size of Business, Puerto Rico, 1972
%of Value of %ofSales Size of Business Establishments Total Sales Total
Less than $25,000
$25,000 - $49,000
$50,000 - $99,000
$100,000 - $249,000
$250,000 - $499,000
$500,000 - $999,000
$1,000,000 - $1,499,000
$1,500,000 - $1,999,000
$2,000,000 or more
Total farm-product raw materials
number
3
7
5 4
8
2
32
percent
3
9
22
16
13
25
6
3
3
100
000 $
a
a
483
717
1,351
5,857
a
a
15,788
percent
3
5
9
37
a Withheld to avoid disclosing figures for individual companies.
b Does not equal 100 percent due to nondisclosure of some companies.
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Subject Statistics, Bureau of the Census, March 1975.
37
Table 18. Number of Wholesale Grocery Firms and Value of Sales by Legal Form of Organization, Puerto Rico, 1972
Legal form of organ izat ion Establ ishments %of
Total Value of
Sales %of Total
Individual propr ietorsh i ps
Partnerships
Corporations
Other
Total grocer i es & related products
number
190
17
282
I 1
500
percent
38.0
3.0
57.0
2.0
100.0
000 $
114,874
17,640
634,828
13 ,066
780,408
percent
15.0
2.0
81.0
2.0
100.0
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Subject Statistics, Bureau of the Census, March 1975.
Table 19. Number of Wholesale Grocery Firms and Value of Sales by SMSA Area, Puerto Rico, 1972
%of Value of %ofSMSA area Establishments Total Sales Total
number percent 000 $ percent
Caguas 25 5 34,813 5
Mayaguez 50 10 63,806 8
Ponce 60 12 85,888 1 1
San Juan 229 46 498,469 64
Subtotal 364 a
73 682,976 88 a
Total groceries & related products 500 780,408
a Percentages do not equal 100 due to some firms not reporting.
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Area Statistics, Bureau of the Census, March 1975.
38
Food Retailing
Puerto Rico has moved away from its major dependence on small retail
food stores, which typified is food retail ing, of two decades ago. Now
several supermarket food chains are present. Sales of the chains or large
retailing companies now represent over half of the retail food business,
Table 20, though they account for only 2 percent of the retail food stores.
Business organization for the small stores is mostly individual proprietor
ships as would be expected. Chains are using the corporate structure,
Table 21.
Because of the size of the San Juan metropolitan area, it dominates
the island in terms of number of food retail outlets. However, incomplete
detailed reporting by the Census leaves firm figures unavailable, Table 22.
Table 20. Number of Retail Grocery Stores and Value of Sales by Sales Size of Business, Puerto Rico, 1972
Sales Size of %of Value of %ofEstablishmentsBusiness Total Sales Total
Less than $5,000
$5,000 - $9,000
$10,000 - $24,000
$25,000 - $49,000
$50,000 - $99,000
$100,000 - $249,000
$250,000 - $499,000
$500,000 - $999,000
$1,000,000 or more
Total grocery stores
number
2,402
1 ,431
1,725
659
532
308
145
97
124
7,423
percent
33
19
23
9
7 4
2
1
2
100
000 $
5,282
9,575
26,283
23,041
37,711
51,672
50,204
70,268
335,097
609,133
percent
0.9
2.0
4.0
4.0
6.0
8.0
8.0
12.0
55.0
100a
aDoes not equal 100 percent due to rounding.
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Subject Statistics, Bureau of the Census, March 1975.
-,
39
Table 21. Number of Retail Grocery Stores and Value of Sales by legal Form of Organization, Puerto Rico, 1972
Legal Form of Organization Establ ishments %of
Total Value of Sales
%of Total
number percent 000 $ percent
Individual proprietorships
Partnerships
Corporat ions
Other
Total grocery stores
6,992
105
217
109
7,423
95
3
100
215,424
12,882
308,905
71 ,922
609,133
35
2
51
12
100
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Subject Statistics, Bureau of the Census, March 1975.
Table 22. Number of Retail Grocery Stores and Value of Sales by SMSA Areas, Puerto Rico, 1972
%of Value of %ofSMSA Area Establishments Total Sales Total
number percent 000 $ percent
Caguas 41+0 6 34,367 6
Mayaguez 371 5 26,332 4
Ponce 677 9 50,869 8
San Juan 1,647 22 291,921 48
Subtotal 3,135 42a 403,489 66a
Total grocery stores 7,423 609,133
a Total does not equal 100 percent due to some stores not being reported.
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Area Statistics, Bureau of the Census, March 1975.
40
Food Marketing Structure Conclusions
The significance of the structure of the food distribution system in
Puerto Rico to rice marketing is quite clear. This is especially true for
the development of marketing for domestically produced rice. Since rice
production will not begin on a large scale, only about 8,000 acres initially,
a strategy can be pursued of opening markets at the outset mostly in San
Juan and through the food chains. As production expands, the distribution
system and supporting marketing programs can be expanded as needed.
Food Manufacturing
Only a few plants are in the grain milling business be it for food
or feed in Puerto Rico. The plant size required to achieve economical
production costs makes a small number of plants unavoidable. Whereas the
1967 Census of Manufacturing reported four plants engaged in rice milling,
only three were noted in 1972, Table 23. These are really finishing plants
for rice. Brown rice milled in and received from the U.S. mainland is
put through the final mill ing stages in Puerto Rico. This includes bran
removal, pol ishing of the grains, separation of head rice from broken
kernels, brewers rice, etc. and packaging of the final consumer rice.
Finishing plants were established in Puerto Rico because of economic
advantages of performing these aspects of processing there. However,
only the Cal ifornia rice suppliers have used this system extensively
thus far. Most, if not all, of the rice from the Texas, Louisiana, Ark
ansas sources is shipped in pre-milled and pre-packaged in consumer size
units. Nonetheless, the quantity of rice processed in Puerto Rico is
substantial since California rice has the dominate market share position,
Table 24. The value of Puerto Rico rice finishing plant shipments was
around 45 million dollars in 1972, Table 25.
Rice finishing mills in Puerto Rico are unable to handle rough or paddy
rice grown in Puerto Rico because the equipment for the processing of paddy
rice to brown rice is not available. Nor are facilities present to dry
and store rough rice as it comes from the rice growers' harvests.
-] ·-1 - 1 - 1
Table 23. General Manufacturing Statistics for Grain Mill Products, Puerto Rico, 1967 and 1972
Value AddedGrain Mill %of %of % of Value of % ofEstablishments Employees by ManufacIndustry Total Total Total Shipments Totaltu ring
1967 number
Flour & other grain mi 11 products 1
Rice mi 11 i ng 4
Blended & prepared flour
Wet corn mi 11 ing
Prepared feeds, nec 5
Total grain mi 11 products 12
972
Flour & other grain mill products
Rice mill i ng 3
Blended & prepared flour
Wet corn mill ing
Prepared feeds, nec 7 Total grain mi 11
products 1 1
percent
8
33
8
8
43
100
27
9
64
100
number
a
159
a
a
457
633
a
a
564
709
percent
25
72
b97
80
80b
000 $
a
3,570
a
a
8,804
12,905
a
a
18,860
23,567
percent
28
68
b96
80
b80
000 $
a
34,625
a
a
35,582
71,826
a
a
59,546
91 ,787
percent
48
50
b98
~
65
65.!?!
a Withheld to avoid disclosing figures reported by individual companies.
b Does not equal 100 percent due to nondisclosure of some companies. Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Manufacturers
Statistics, Bureau of the Census, March 1975.
42
Table 24. Rice Brand Market Shares in Puerto Rican Market, 1976-77 Ma rket i ng Yea r
Brand Market share
Cal ifornia
Brand A Brand B Brand C Other Ca 1i forn i a
Subtotal
Southern mi 11 s
Brand K Brand L Brand M Other Southern
Subtotal
Total
percent
47 15
3 6
7T
13 9 3 4
29
100
Source: Confidential market data.
Table 25. Value of Products Shipped by Processing Plants in Puerto Rico for Milled Rice and By-products, 1967 and 1972
Year Value of Shipments
thous. $
1967 45,207
1972 45,093
Source: U.S. Department of Commerce, 1972 Economic Census of Outlying Areas, Puerto Rico, Manufacturers Statistics, Bureau of the Census, March 1975.
.. ~----------
1
PART I I I. RICE PRODUCTION AND PROCESSING COSTS IN PUERTO RICO VERSUS MAJOR U.S. PRODUCTION AREAS
Chapter 6. Production Costs Estimate for 1977
A basic requirement for the economic viability of a domestic rice industry
in Puerto Rico is that average production costs be competitive with those
on the United States mainland. Thus, if a representative Ilbreak-even" price
for rice producers in the United States is less than that for Puerto Rico
producers, then competitive forces are expected to eventually force prices
below profitable levels in Puerto Rico - unless the government continually
subsidizes domestic producer prices.
In order to compare rice production costs in Puerto Rico and the United
States, representative enterprise budgets were constructed for Puerto Rico
and two major rice producing areas in the United States: The Sacramento
Valley in Cal ifornia and the Upper Gulf Coast region in Texas. Budgets were
first estimated for the 1977 season, then all major input costs were pro
jected 8 years into the future and used to obtain projected 1985 budgets
for each area. Since 8 years is enough time for the Puerto Rico rice
industry to achieve substantial maturity, comparative 1985 budgets can
give some indication of competitive potential after the industry has
"grown Upll.
united States Budgets fop 1977
The 1977 rice production budgets for California and Texas were deter
mined in consultation with personnel of the Economic Research Service, U. S.
Department of Agriculture. I While the Market Research Center budgets are
not identical to the Economic Research Service budgets, either in presen
tation or in cost levels, all major assumptions are compatible and results
are not significantly different.
Detailed budgets are shown in Appendix A. The 1977 budget for the
Sacramento Valley in California is shown in Appendix Table A-I. The
corresponding 1977 budget for the Upper Gulf Coast region in Texas is
shown in Appendix Table A-2. Variable production costs are summarized
under two major categories: preharvest costs and harvest costs. The
45
46
fixed costs include separate values for tractors, all other machinery and
equipment, and a land charge. No allowance is made for a reasonable return
to management In the budgets in Appendix A. Any return in excess of total
costs should be considered as a return to management, overhead, and risk
bearing.
Average 1977 yields in Texas were about 4,450 pounds of rice per acre,
while those in California were about 5,400 pounds per acre. These yield
figures were assumed when deriving the budgets in Tables A-I and A-2.
Additionally a producer price of $9.00/cwt. of rice was used for both areas.
Price/cwt. times hundredweights of rice produced per acre gives gross producer
revenue per acre. Thus, gross revenue in Cal ifornia is 9.00 x 54.0 $486/
acre and for Texas it is 9.00 x 44.5 = $400.50/acre. These revenue figures
affect budgeted costs for the land charge, while the per acre yield figures
affect harvest costs.
The budgets in Appendix A are arranged with four data columns. The
first column gives the unit of each input used in pricing, the second column
gives the cost per unit of the input, the third column gives the number of
input units appl ied to each acre, and the fourth column gives the cost per
acre of each input.
The Cal ifornla and Texas budgets are based on one rice crop per year, since
the growing seasons are not long enough to allow more. In the Upper Gulf
Coast region of Texas it is common to promote a second growth for the rice
stubble and harvest this, but the second harvest accounted for only about
200 pounds of the total 4,450 pounds of rice per acre in 1977.
Results of the Cal ifornia and Texas budgets for 1977 may be summarized
as in Table 26. Total cost per acre of rice produced are $400.23 in California
and $338.49 in Texas. Thus, with estimated yields and prices in 1977, the
result is a net return to management, overhead, and risk-bearing of $85.77/acre
in Cal ifornia ($486.00 - $400.23 ; $85.77) and $62.01/acre in Texas ($400.50
$338.49 = $62.01).
1
47
Table 26. Estimated Costs per Cuerda for Rice Production in the Sacramento Valley in California and the Upper Gulf Coast Area in Texas, Excluding Returns to Management, 1977
Dollars per Acre
Cal ifornia Texas
VARIABLE COSTS
Preharvest 190.29 197.54
Harvest 62.34 53.58
FIXED COSTS
Tractors 13.17 10.27
Machinery & equipment 37.23 24.35
Land Charge 97.20 52.75
TOTAL COSTS 400.23 338.49
48
PUerto Riao Budgets for 19??
Since Puerto Rico currently has no commercial rice producing sector,
formulating a representative budget necessarily involves some uncertainty.
However, much information is available due to efforts of personnel in the
Agricultural Experiment Station of the University of Puerto Rico. 2 Levels
of input usage and costs obtained for experimental rice production on 130
cuerdas 3 of land in 1976 provide a good foundation for generating a budget
that approximates the situation for commercial rice production in Puerto
Rico. Reasonable levels of input usage can be verified and prices of
fixed and variable inputs can be adequately estimated.
There can be 1ittle doubt that rice production is technically feasible
in Puerto Rico. Personnel in the Texas Agricultural Experiment Station
have for many years used Puerto Rico to grow experimental rice plots during
the winter months. Furthermore, the soil and water conditions on at least
40,000 cuerdas of land have been carefully assessed and determined to be
adequate for rice production. 4 The land used by the Puerto Rico Agricultural
Experiment Station for growing rice is representative of the kind of land
available for rice production on the island.
Average yields of about 5,000 pounds of rice per cuerda were obtained
by the Puerto Rico Agricultural Experiment Station. However, average yields
by Agricultural Experiment Stations in the United States are typically some
what larger than those obtained by the commerical producing sector. Therefore,
it is assumed that average commercial yields would be 4,750 pounds of rice
per cuerda in Puerto Rico. Appendix Table A-3 contains a 1977 budget for
production of rice in Puerto Rico, presented in the same format as the budgets
for Cal ifornia and Texas. The major difference is that the Puerto Rico budget
is for two crops of rice rather than one. Since Puerto Rico's climate will
allow year-round production of rice, harvesting two crops a year is quite
feasible. In order to estimate cost per cuerda for one cro~ the numbers in
the last column of Table A-3 must be halved.
49
Results in Table A-3 may be summarized as in Table 27. Total cost per
cuerda of rice produced in Puerto Rico is $580.88, while total cost per
cuerda per crop is $290.44. The latter cost figure is the one that compares
with the total cost figures for Cal ifornia and Texas in Table 26. Converting
the total cost per acre in Table 26 to total cost per cuerda results in
$388.70 per cuerda in California (400.23 x 0.9712 = 388.70) and $328.74
per cuerda in Texas (338.49 x 0.9712 = 328.74). Thus, cost per acre in
Puerto Rico is $98.26 per cuerda less than in Cal ifornia and $38.30 per
cuerda less than in Texas.
The primary reason for a lower cost in Puerto Rico is because the
production cost can be spread over two crops instead of one. This spreading
of costs is apparent for preharvest costs and fixed costs. The spreading
of the fixed costs of tractors, machinery and equipment is especially impressive
when it is real ized that Puerto Rico rice producers were assumed to bear the
current, full-retail price for all these capital items, while Cal ifornia
and Texas do not endure full current prices due to the fact that much of
the capital equipment was purchased in previous years at lower prices.
Additional benefit comes to Puerto Rico producers from the lower annual
land charge, even before it is spread over the two crops. The $45.00/cuerda
for land is based on the stated intent of the government to assess rice
producers this amount of rent for using the land.
With yields averaging 4,750 pounds per cuerda and a price of $9.00/cwt.,
the Puerto Rico budget implies a net return to management, overhead and
risk-bearing of $274.12/cuerda. (Thus, two crops at 4,750 pounds per
cuerda is 9,500 pounds per cuerda per year. Gross revenue per cuerda is
95.0 x 9.00 = $855.00. Net return is 855.00 - 580.88 = $274.12.)
Break-Even Prices
Of primary interest is the break-even price for rice produced in Puerto
Rico compared with major competitive areas. A break-even price is one that
just covers cost per unit of production, and it gives a good indication of
the "staying power" of an industry.
50
Table 27. Estimated Costs per Cuerda for Rice Production, Excluding Returns to Management, in Puerto Rico, 1977
Dollars per Cuerda
Two Crops One Crop
VAR IABLE COSTS
Preharvest 347. 17 173.58
Harvest 127.91 63.96
FIXED COSTS
Tractors 22.37 1 1 . 19
Machinery & equipment 38.43 19.21
Land Charge 45.00 22.50
TOTAL COSTS 580.88 290.44
51
Strictly speaking, a "complete!' break-even price is one that covers
all costs of production, including management, overhead and risk-bearing.
These costs were omitted from the budgets because only a subjective evalu
ation of them is possible. Costs of overhead and risk-bearing are not of
great concern; however, a return to management is a necessity for long
term success of an industry. Therefore, for the sake of a more complete
illustration, the following annual cost of management will be used:
Cost per Year Cost per Crop
Puerto Rico $50lcuerda $25/cuerda
California $35/acre $35/acre
Texas $35/acre $35/acre
Thus, the annual cost of management in Puerto Rico is set $15.00 per land
unit higher because of the necessary year-round production management. On
a cost per crop basis, it is $10.00 per land unit less than in the other
two areas.
Including the above management costs and deriving break-even prices
for each area reveals that the break-even price in Puerto Rico, $6.64/cwt. of
rice, is $1.42/cwt. less than that for California and $1.75/cwt. less than
that for Texas (Table 2a). The implication is that, on a full-cost basis,
Puerto Rico producers could make a profit at lower prices than would be
profitable in California and Texas.
While the long-run viability of an industry requires that all costs be
covered, it is not necessary for all cost to be covered each and every
year in order for an industry to survive the bad years (then recoup losses
in good years). Thus, in bad years an industry may "borrow" against some
of the fixed costs. The industry becomes unable to produce, however, when
ever variable costs of production cannot be covered by existing prices. Using
only variable costs as a basis, the resulting "rock bottom" prices for each
area are: $5.00/cwt. for Puerto Rico, $4.68/cwt. in California, and $5.64/cwt.
in Texas. So Cal ifornia has the lower "rock bottomll price, followed by
Puerto Rico and then Texas. But it is obvious that prices near $5.00Icwt. for
any significant length of time would be ruinous to all rice producing areas.
--..--..--
52
Table 28. Approximate Break-Even Prices for Rice, Including Returns to Management, by Areas, 1977
Total Costsa Break-Even Prices b
Puerto Rico $630.88/cuerda $6.64/cwt.
Ca 1i forn i a $435.23/acre $8.06/cwt.
Texas $373.49/acre $8.39/cwt.
a Equal to total costs in Tables 26 and 27 plus allowances for management costs.
b Equal to total costs in column' divided by estimated production in each area: Estimated production is 95.0 cwt. for Puerto Rico, 54.0 cwt. for California, and 44.5 cwt. for Texas.
Footnotes for Chapter 6
1 Special thanks are due Warren R. Grant, Economist in the Grains and Feeds Program Area, Commodity Economics Division, Economic Research Service, stationed at Texas A&M University.
2 See Cultivo Intensivo y Perspectivas del Arroz en Puerto Rico, by Jose Vicente-Chandler, Fernando Abrufta, Jose Lazano, Servando Silva, Angel Rodr(guez, and Carmen L. Ramirez, Puerto Rico Agr. Exp. Sta. Bul. 250, March 1977.
3 A cuerda is equal to 0.9712 of an acre.
4 Vicente-Chandler, et. al., £E.. cit., pp. 61-66.
Chapter 7. Estimated Production Costs for 1985
CompaY'ison of U.8. and T'ucr>to Rico Cost E'st1:mates
In order to project rice production costs to 1985 it is assumed that
no significant technological change occurs; i.e., the levels and mix of
inputs remain the same as in 1977. In order to get 1985 'budgets, pro
jections must be made for input prices and the effect of these price
increases on average production costs determined.
Annual price indexes were obtained for 14 major input categories during
1967-1976, then trend regression was used to project these indexes to 1985
(Appendix Table A-4). A shift variable was used after 1973 to capture the
precipitous increase in price levels beginning in 1974 (Table A-5).
Obviously this simple procedure cannot be depended upon for pin-point
forecasting of input prices; however, the emphasis here is on relative impacts
of anticipated price increases rather than upon exact estimation of pro
duction costs in 1985. (Thus, missing the mark for a production area is not
critical as long as the differences among areas are not greatly distorted.)
Detailed projected budgets for 1985 are given in Tables A-6, A-7, and
A-8 for Cal ifornia, Texas and Puerto Rico, respectively. The same yields
and rice prices that were used for the 1977 budgets are used here; i.e.,
5,400 pounds per acre in California, 4,450 pounds per acre in Texas, 9,500
pounds per cuerda in Puerto Rico (4,750 pounds from each crop), with rice
price set at $9.00/cwt. in all areas.
A summary of the 1985 budgets is given in Table 29 compared to 1977
total costs are projected to increase 39% in California to $556.68/acre,
41% in Texas to $476.77/acre, and 31% in Puerto Rico to $381.40/cuerda per
crop. The primary reason for smaller increases in Puerto Rico is the much
smaller increases in fixed costs for tractors, machinery and equipment
(Table 30). This is due to an allowance made for the aging of such capital
items, and was already given to the other areas in 1977. It was withheld
53
Table 29· Projected Costs for Rice Production, Excluding Returns to Management, by Areas, 1985
California Texas Puerto Rico
$/acre $/acre $/cuerda $/cuerda
VARIABLE COSTS
Preharvest 273.88 281 .57 464. 16 232.08
Harvest 81.29 69.23 160.57 80.29
FIXED COSTS
Tractors 22.79 18.72 29.77 14.88
Machinery & equipment 81.52 55.33 63.30 31.65
Land Charges 97.20 51 .92 45.00 22.50
TOTAL COSTS 556.68 476.77 762.80 381 .40
Table 30. Percentage Cost Increases Projected Between 1977 and 1985, by Areas
California Texas Puerto Rico
VARIABLE COSTS
Preharvest + 44% + 43% + 34%
Harvest + 30% + 29% + 26%
FIXED COSTS
Tractors + 73% + 82% + 33%
Machinery & Equipment +119% +127% + 65%
Land Charge o 2% o
TOTAL COSTS + 39% + 41% + 31%
55
from Puerto Rico in 1977 due to the fact that rice is an "infant industry"
that must become capitalized at current replacement prices.
With the assumed yields and prices, returns to management, overhead,
and r i s k - bea r i n g in 1985 are given as follows:
Puerto Rico: $855.00 - $762.80 = +$92.20/cuerda
California: $486.00 - $556.68 = -$70.6H/acre
Texas: $400.50 - $476.77 = -$76.271acre
So it is projected that $9.00/cwt. for rice in 1985 would result in losses
to California and Texas producers, but Puerto Rico producers would still
have positive net returns.
Bpeak-Even Prices fop 1985
To estimate reasonable returns to management in 1985, the 1977 values
were inflated by 60%. This resulted in projected management costs of $80.001
cuerda in Puerto Rico and S56.00/acre in California and Texas. Including these
management costs and deriving 1985 break-even prices for each area indicates
that the break-even prices in Puerto Rico, $8.87/cwt. of rice, is $2.48 less
than that for California and $3.10 less than that for Texas (Table 31). These
results reflect the expectation that the cost advantage for Puerto Rico in 19H5
will be greater than it was in 1977.
Comparative break-even prices in 1977 and 1985 are summarized in Table 32.
The "total" break-even prices for each area include all production costs except
return to overhead and risk-bearing. Three alternative break-even prices are
given for each area: excluding management costs from consideration, excluding
both management and land costs from consideration, and excluding all fixed costs
from consideration. The last of these prices are the aforementioned "rock-bottom"
prices which would just cover projected variable production costs. These prices
are projected for 1985 to be equal in Puerto Rico and California (at $6.58/cwt.),
with the price for Texas being $1.30 higher (Table 32). Texas looks bad in
comparison partly because of the assumed per-acre rice yield of 4,450 pounds.
This 1977 figure was somewhat below historical averages for Texas, and the yield
may well be higher in 1985. For example, an additional per-acre yield of 200
pounds would lower Texas I break-even price by 34clcwt. to $7.54/cwt.
56
Table 31. Projected Approximate Break-Even Prices for Rice, Including Returns to Management, by Areas, 1985
aTotal Costs Break-Even Prices b
Puerto Rico $842.80/cuerda $ 8.87/cwt.
Cal ifornia $612.68/acre $11 . 35/cwt.
Texas $532.77/acre $11 .97/cwt.
a Equal to total costs in Table 29 plus allowances for management
costs.
b Equal to total costs in column 1 divided by assumed production
in each area. Assumed production is 95.0 cwt. for Puerto Rico, 54.0 cwt. for California, and 44.5 cwt. for Texas.
Table Approximate Break-Even Prices for Rice, by Areas, Excluding Alternative ProJucti0n Costs from Consideration, 1977 vs. 1985
Area 1977 19tf5
dollars/cwt.
Puerto Rico Total 6.64 8.87 Excluding management 6. II 8.03 Excluding management & land 5.64 7.56 Excluding all fixed costs 5.00 6.58
Ca Ii forn i a Total 8.06 11.35 Excluding management 7.41 10.31 Excluding management & land 5.61 8.51 Excluding all fixed costs 4.68 6.58
Texas Total 8.39 11.97 Excluding management 7.61 10.71 Excluding management & land 6.42 9.55 Excluding all fixed costs 5.64 7.88
57
Some FUrtheP Considerations
On a comparative cost-of-production basis, it appears that Puerto Rico
can effectively compete in rice. It must be remembered however, that a new
price support program has recently been passed which covers currently
existing rice allotment acreage in the United States. Under this program,
if the actual market price falls below the government target price for rice,
the government makes up the difference to those farmers that have allotment
acreage. Therefore, if market price falls below target price (which was
$8.25/cwt. in 1977) many United States producers do not have to accept the
market price. It might be necessary to afford Puerto Rico producers a
similar kind of buffer against ruinous low prices.
Since rice from the United States mainland must incur shipping costs
to Puerto Rico, an additional pricing advantage is afforded domestically
produced rice. California rice producer cooperatives have devised the most
efficient method of getting their rice to Puerto Rico. Although no authoritative
figures are available on shipping costs for California rice, "educated quesses ll
peg them a 1-2¢/pound of milled rice, which converts to about $2.00-$3.50/cwt.
of paddy rice. In other parts of the United States, shipping costs run about
3-5¢/pound of finished rice, or about $5.00-$8.50/cwt. of paddy rice.
If Puerto Rico desires to commit itself to developing a modern, mechanized
rice producing sector, there are at least two resources which will require
special attention in the early stages of development: (a) production manag
ment and (b) expertise and facilities for maintenance and repair of machinery.
Poor management at the farm level can make potential cost advantages
demonstrated for Puerto Rico disappear. Since Puerto Rico has not previously
had a rice industry, few people on the island have much knowledge about
producing it. But Puerto Rico does have many capable people with demonstrated
managerial aptitude who can learn how to efficiently operate a rice pro
duction enterprise. Finding such people and providing them with the instruction
and profit incentive necessary to develop economically efficient farms is
critical to the long-run success of the producing sector. Employment of a
58
few people (probably from the U. S. mainland), thoroughly knowledgeable in
rice production and handl ing practices, to be consultants to Puerto Rico
rice farmers would be a good investment during the first few years of
production. It would be insurance against unnecessarily reduced yields
and qual ity, as well as an investment toward developing a domestic expertise
in rice production.
Almost all the machinery necessary for commercial rice production will
have to be bought from the United States mainland (or imported from somewhere).
Existing farm machinery and implement dealers on the island currently do
not have the staffs and the facil ities to adequately furnish parts and ser
vices. Needed parts and supplies must be available on a timely basis
if costly production delays are to be avoided. Also, people who can provide
difficult repair and maintenance functions must be available, along with
the expensive tools needed for such work. If commercial businesses cannot
be persuaded to agree to provide these services during the early years of
rice production, then some subsidization by the government may be necessary.
What About a Servioe Company?
Serious consideration has been given to providing a government-financed
or government-backed "service company" that would provide almost all needed
machinery along with maintenance and repairs, and perhaps even hire and train
the machinery operators. The Market Research Center has not been officially
asked to assess this course of action, but the issue should benefit from
additional discussion.
The major objections to such a service company are based mainly on economic
philosophy and institutional considerations. In its most extreme form, the
service company would leave I ittle room for the individual farmer to manage
his operation. Indeed, there would be I ittle need for the farmer to have
an intimate knowledge of each production activity. Absentee management
would be encouraged, and the Incentive to develop into thoroughly capable
farmers would be diminished. Most capable entrepreneurs will desire to own
59
as much of their production tools as feasible and to have the flexibil ity
to use them whenever they determine the time is right. They will typically
desire to make investments and take prudent risks in the hope of rewards;
both in terms of additional net revenue and the pride of achievement. Are
these not the kind of managers Puerto Rico needs on its rice farms when
1985 arrives? (This assumes, of course, that control over the limited land
resource in Puerto Rico is diversified enough to insure a competitive structure
within the producing sector.)
Another major institutional consideration is that a central ized, all
inclusive service company would provide an easy focal point for labor
unions to apply pressure for unwar~nted wage or employment demands for workers
engaged in rice production. If the producing sector were instead main
tained as one with fairly small firm units, it should be politically and
tactically easier to protect it from damaging manipulations by organized
labor.
All budgets generated in this report assumed individual firm ownership
of most capital resources. The only custom work hired by producers is
assumed to be seed and chemical appl ications by airplane and haul ing of
t~e harvested rice. In Texas, about 400 acres of riceland is considered
sufficient to justify ownership of most capital items. Since Puerto Rico
farms will grow two crops per year instead of one, about 200 acres of rice
land should be adequate for such ownership.
Admittedly the pur~hase expense for tractors, machinery and eqUipment
is large, being almost $100,000 in 1977 for a 200 cuerda rice farm (Table 33).
But most of this machinery has to be purchased regardless of who owns it,
a service company or individual producers. The primary economic justification
for centralizing ownership would be to take advantage of economies of size.
Note that about 47% of the total machinery cost is accounted for by the
combine and grain cart for harvesting the rice (Table 33). Since the combine
is the most expensive and one of the most under-util ized items of machinery,
it is perhaps the best candidate for either joint ownership or ownership by a
service company. One possible - and more 1 imited - approach for a service
Table 3-3. Cost Summary for Major Machinery and Equipment on a 200-Cuerda Rice Farm in Puerto Rico, 1977a
Fixed (Ownership) Operating Cost Total Cost Purchase Price Cost per Cuerda per Cuerda per Cuerda
$ % $ $ $ %
Tractor (lOa h.p.) 24,200 24.8 3.67 5.32 8.99 19.7 Off-Set 0 i sk 5,981 6. 1 .61 .30 .91 2.0 Spring T Harrow 1,329 1.4 .10 .07 .17 .4 Field Cultivator 4,082 4.2 . 15 .09 .24 .5 Levee Plow 1,866 1.9 .23 .07 .30 .7 Doser Blade 1,547 1.6 . 19 .29 .48 1.0
Comb i ne (1 6 f t. ) 41,319 42.4 7.76 9.45 17.21 37.7 0'\
Grain Cart 4,488 4.6 .74 .29 1.03 2.3 0
Pickup Truck 6,266 6.4 1.20 2.22 3.42 7.5 Shop Equipment 6,449 6.6 1.43 2.43 3.86 8.5 Levee Box 24 b 1.05 7.92 8.97 19.7
TOTAL 97,551 100.0 17.13 28.45 5.58 100.0
a Derived from budget generated for Puerto Rico in 1977.
b Less than 0.5 of one percent.
61
company would be to provide most all of the harvesting and haul ing equipment
to the farmers, while leaving all other capitalization in the hands of individual
firms. This would not only reduce capital investment by almost half, but
would also allow centralized management of handl ing and drying the rice to
help assure good milling results.
The service company approach is also one alternative way of solving the
aforementioned problem of adequate expertise and facil ities for maintaining
and repairing machinery, in the event that private enterprise could not
be persuaded to immediately undertake this. For a service company to do
this, however, does not require that it own all the machinery and equipment
it services. ~
This service company approach is also one way of providing an adequate
capability for custom applications by airplane, since this service will
certainly be needed. However, the development of private flying services to
compete for this work should be an eventual result - unless it is discouraged
by the government or other power structures.
.-I I
r I
Chapter 8. Rice Milling
Development of estimated costs for the construction and operation of a
new rice mill in Puerto Rico will be considered first and then the matter of
rice drying and storage facilities. It is desirable to consider the rice mill
first because selection of the mill size that offers the minimum cost is of
crucial importance. Drying and storage needs can be adapted thereto to obtain
optimum efficiencies of scale. Formulation of cost estimates for a rice mill
is a very involved and detailed procedure. In the process basic assumptions
are required in some instances. These will be clearly stated wherever used.
Rather than relying upon any single system of analysis, the approach has been
to use U.S. mainland costs and update these to 1978. These are then compared
with cost estimates provided by engineering consultants who have worked on the
Puerto Rican project and have visited there to assist in cost formulations.
As noted in the preceding sections of this report, Puerto Rico begins with
a potential advantage in rice production costs. The estimated cost per hundred
weight of rough rice, 1977 cost basis, is $6.64 compared with $8.06 in California
and $8.39 in Texas, Table 28. Budgets for Louisiana and Arkansas were not devel
oped separately since their costs are somewhat comparable with those for Texas.
Of primary concern in developing rice mill ing costs is the type of rice to
be processed--long, medium or short grain. For example, the processing cost per
hundredweight for a small rice mill (240 cwt/hr rough rice capacity) operating
80 hours per week was estimated in 1973 to be $1.20/hundredweight for long grain
rice and $1.04 for medium grain rice. These figures are cited from the report
Economic Models for Rice Hills in the South, Southern Cooperative Series Bulletin
187 by Shelby Holder, Jr., William Morrison and Harold Traylow. In the experi
mental commercial rice production program for Puerto Rico the Brazos variety has
been the principal one grown thus far--a medium grain rice.
Rice milling costs are also greatly affected by the number of hours of
plant operation per week. Usually an 80 hour week provides a cost reduc
tion per hundredweight of rough rice of about one-third as compared to
a 40 hour week. That carries immediate and important implications for
63
64
rice acreage in Puerto Rico. In order for the proposed mill,with a 240
cwt/hr capacity, to operate on a 40 hour week about 5,255 acres of rice
must be dual cropped with rice production each year. The original govern
ment proposal of 4,000 acres would result in a costly 30 hour per week
mill average operating time, Table 34. Some of the difference in required
acreage may be attributed to the level of rice yields assumed per acre.
In this analysis an average of 4,750 pounds per acre is used as a conserva
tive figure rather than previous expectations of 5,000 pounds. Achievement
of an 80 hour week mill schedule necessitates double cropping of about
10,500 acres. Consequently, recommendation number one is to move to that
volume of acreage as soon as is reasonably feasible. If the mill is unable
to operate at full 240 cwt/hr, the effect of 90 percent efficiency, for
example, is noted in Table 34. Indicated reductions in acreage and produc
tion would be required. Design of the mill has allowed for a safety factor
above 240 cwt/hr. Therefore, achievement of the 240 rate is entirely
feasible with desired equipment maintenance.
The next step in estimating operating costs is to consider the
differences in work force requirements for a 40 versus 80 hour operation.
These are presented in Table 35 using labor costs in the mainland in 1973
and updating them to 1978. In the prel iminary report the 1973 wage rates
were adjusted for 1978 by using the change in the index of wage rates for
the United States between 1973 and 1978. The most recent study of rice
mill operating costs ir. the U.S. was in 1973, therefore, that year is
used as a base. In this final report, current U.S. wage rates as reported
for the rice milling positions are used. Therefore, current actual wage
rates give a better cost reading, Table 35.
An alternate approach was to use selected wage rates obtained in rice
finishing mills in Puerto Rico and apply these to the man-hour work schedule,
Table 36. Differences in the labor and management costs were comparatively
small, $695,960 for the U.S. and $813,440 for Puerto Rico, Tables 35 and 36.
A third estimate came from the consulting engineers and amounted to
a total labor and management cost of $636,760, Table 37.
65
Table 34. Mi II Operation Hours Necessary for Proposed Rice Production in Puerto Rico
Acres Produc t ion Mill caeac i ty Mil lingPhase Yielda Ab C hoursB A B A B
A or B
number cwt. thous. cwt. cwt/hr hrs/wk
4,000 3,600 95 380.0 342.0 240 216 30 5,255 4,730 95 499.2 449.3 240 216 40
8,000 7,200 95 760.0 684.0 240 216 612 10,509 9,451 95 998.4 897.8 240 216 80
3 12,000 10,800 95 I , 140.0 1,026.0 240 216 91
4 16,000 14,400 95 1,520.0 I ,368.0 240 216 121
aA reasonably conservative estimate of rice yields in Puerto Rico is 4,750 pounds per acre per harvest. Double cropping is practical in Puerto Rico because of its subtropical climate and ability to grow rice year around. Thus, two crops per year result in 9,500 pounds or 95 cwt. per acre per year.
bBased on full mill capacity rating.
cBased on operating at 90 percent of mill capacity. However, the mill itself as designed has some capacity above the 240 cwt/hr level.
Source: Estimated from proposed mill capacity and rice production yields.
66
Table 35. Work Force Requirements and Labor Cost Estimates for United States Rice Mill, 240 cwt./hr. Capacity, 1978
I tern Annual 40 hr.
manhours 80 hr.
Salary or wage rate U.S. P.R.
Annual 40 hr.
cost 80 hr.
1973 1979 est.i!i
no. hrs. dollars do 11 a rs
Rough rice Warehouseman 2,080 2,080 7,500 18,000 18,000 18,000 Asst. warehouseman 2.90 12,000 Sample man 2,080 2,080 2.20 3.50 7,280 7,280 Bin setter 2,080 4.160 2.30 4.50 9.360 18.720 San i tat ion 2,080 2,080 2.00 3.50 7,280 7,280 Buyer 2,080 2,080 9,000 24,000 24,000 24,000 Asst. buyer 6,500 15,000 Subtotal 10,400 12,480 65,920 75,280
Hi II i ng Superintendent 2,080 2,080 20,000 25,000 25,000 25,000 Head mi Iler 2,080 4,160 10,000 18,000 18,000 18,000 Huller operator 2,080 4,160 2.30 5.00 10,400 20,800 Paddy operator 2,080 4,160 2.30 5.00 10,400 20,800 Floorman 6,264 12,480 2.10 4.00 25,056 49,920 Bi n setter 2,080 4,160 2.30 4.50 9,360 18,720 San i tat ion 4, 160 6,240 2.00 3.50 142560 21,840 Subtotal 20,800 37,440 132,776 175,080
Clean rice Shipping clerk 2,080 2,080 18,000 18,000 18,000 Asst. ship. clerk 2.30 15,000 Qual ity control 2,080 4,160 2.30 4.50 9,360 18,720 Blender 2,080 2,080 2.90 4.50 9,360 9,360 Sackman 2,080 2,080 2.40 4.00 8,320 8,320 Sewer 2,080 2,080 2.40 4.00 8,320 8,320 Sealer 2,080 2,080 2.40 4.00 8,320 8,320 Forklift operator 2,080 2,080 2.25 4.25 8,840 8,840 Loaders 4,160 4, 160 2. 10 4.00 16,640 16,640 Monitor 2,080 2,080 2.30 4.00 8,320 8,320 Car cleaner 2,080 2,080 2.00 3.50 7,280 7,280 San i tat ion 2 2080 2 2080 2.00 3.50 7,280 7,280 Subtotal 24,960 27,040 110,040 119,400
Packaging Manager 2,080 2,080 7,200 20,000 20,000 20,000 Clerk 2,080 2,080 2.30 4.50 9,360 9,360 Operators 2,080 4,160 2.25 4.50 9,360 18,720 Packers 4,160 6,240 2.25 3.50 14,560 21,840 Scalers 2,080 2,080 2.40 4.00 8,320 8,320 Supplyman 2,080 2,080 2.10 4.00 8,320 8,320 Take-off 2,080 2,080 2.10 4.00 8,320 8,320 Forklift operator 2,080 2,080 2.25 4.25 8 2840 8 2840 Subtotal 18,720 22,880 87,080 103,720
67
Table 35. continued
Salary or wage rateAnnual manhours Annual costItem u.s. P.R.40 hr. So hr. 40 hr. 80 hr.1973 1979 est.a
no. hrs. do 11 a rs do 1 1 a rs By-products
Sewer Scalers Sackers Loaders Gri nder, oper. Quality control Sanitation Subtotal
2,080 2,080 2,080 2,080 2,080
2 2080 12,480
2,080 2,080 2,080 2,080 2,080
2 2080 12,480
2.40 2.40 2.40 2.10 2.30 2.30 2.00
4.00 4.00 4.00 4.00. 4.00 4.00 3.50
8,320 8,320 8,320 8,320 8,320
7,280 49,880
8,320 8,320 8,320 8,320 8,320
72 280 48,880
Maintenance Millwright Asst. millwright Helper millwright Electrician Sanitation Subtotal
2,080
2,080 2,080 2 z080 8,320
2,080
2,080 2,080 2,080 8,320
10,500 2.90 2.40 3.00 2.00
20,000 6.00 5.00 7.00 3.50
20,000
10,400 14,560
72280 52,240
20,000
10,400 14,560 7,280
52,240
Administration Plant manager 2,080 Asst. manager Bookkeeper 2,080 Asst. bookkeeper Secretary 2,080 Accountant Clean rice salesman By-product salesman Programmer Key punch operator Watchman 2,080 Subtotal 8,320
2,080 2,080 2,080
2,080
4,160 12,480
50,000 15,000 6,000 5,000 5,000
10,000 30,000
6,000
74,000 22,200 8,880 7.400 7.400
14,800 44,400
8,880
74,000
8,800
7,400
8,880 99,160
74,000 22,200
8,880
T,400
8,880 121,360
Grand total 104,000 133,120 596,096 695,960
a Based on average rate of increase in salaries in manufacturing in Puerto Rico, 1973-76, of 9.6 percent adjusted to 5 year rate which equals 1.48 ratio increase.
Source: Based on data reported in Economic Models for Rice Mills in the South, Holder, Morrison and Traylor, Arkansas and Louisiana Experiment Stations, Southern Cooperative Series Bulletin 187, June 1974.
68
Table 36. Work Force Requirements and Cost Estimates for Puerto Rico Rice Mill, 1978, 240 cwt/hr Capacity
Item Annual manhoursa Salary orb Annual cost 40 hr. 80 hr. wage rate 40 hr. 80 hr.
Rough rice Warehouseman Asst. warehouseman Sample man Bin setter Sanitation Buyer Asst. buyer Subtotal
Mill i ng Superintendent Head mi ller Huller mach. oper. Paddy mach. oper. Floorman Bin setter Sanitation Subtotal
Clean rice Shipping clerk Asst. ship. clerk Quality control Bl ender Sackman Sewer Scaler Forklift operator Loaders Moni tor Car cleaner Sanitation Subtotal
Packaging Manager Clerk Operators Packers Scalers Supplyman Take-off Forkl ift operator Subtotal
no.
2,080
2,080 2,080 2,080 2,080
10,400
2,080 2,080 2,080 2,080 6,240 2,080 4,160
20,800
2,080
2,080 2,080 2,080 2,080 2,080 2,080 4,160 2,080 2,080 2,080
24,960
2,080 2,080 2,080 4,160 2,080 2,080 2,080 2,080
18, ]20
hrs.
2,080
2,080 4,160 2,080 2,080
12,480
2,080 4,160 4, 160 4, 160
12,480 4,160 6,240
37,440
2,080
4,160 2,080 2,080 2,080 2,080 2,080 4,160 2,080 2,080 2,080
27,040
2,080 2,080 4,160 6,240 2,080 2,080 2,080 2,080
22,880
doll a rs
12,000
3.79 3.79 3.79
35,000 20,000
3.79 3.79 3.79 3.79 3.69
12,000
3.79 3.79 3.81 3.79 3.79 3.84 3.69 3.69 3.69 3.69
12,000 3.79 3.79 3.79 3.79 3.79 3.79 3.84
dollars
12,000 12,000
7,883 7,883 7,883 15,766 7,883 7,883
15,000 15,000
50,649 58,532
35,000 35,000 20,000 40,000 7,883 15,766 7,883 15,766
23,650 47,300 7,883 15,766
15,300 23,026 11 7,599 192,624
12,000 12,000
7,883 15,766 7,883 7.883 7,925 7,925 7,883 7,883 7,883 7,883 7,987 7,987
15,300 15,300 7,675 7,675 7,675 7,675 7.675 7,675
97,76§- 105, 652
12,000 12,000 7,883 7,883 7,883 15,766
15,766 23.650 7,883 7,883 7,883 7,883 7,883 7,883 7,987 7,987
75,168 90,935
continued
69
Tab I e 36. Continued
Annual manhours Salary or Annual costItem 40 hr. 80 hr. wage rate 40 hr. 80 hr.
no. hrs. dollars dollars
By-products Sewers Sealers Sackers Loaders Gri nder operator Qua I i ty cont ro I Sanitation Subtotal
2,080 2,080 2,080 2,080 2,080
2,080 12,480
2,080 2,080 2,080 2,080 2,080
22080 12,480
3.79 3.79 3.81 3.69 3.79 3.79 3.69
7,883 7,883 7,925 7,675 7,883
7,675 46,924
7,883 7,883 7,925 7,675 7,883
7,675 46,924
Maintenance Millwright Asst. millwright Helper millwright Electrician Sanitation Subtotal
2,080
2,080 2,080 22°80 8,320
2,080
2,080 2,080 2,080 8,320
12,000 3.79 3.79 3.79 3.69
12,000
7,883 7,883 7,675
35,441
12,000
7,883 7,883 7,675
35,441
Administrative Plant manager Asst. manager Bookkeeper Asst. bookkeeper Secretary Accountant
2,080
2,080
2,080
2,080 2,080 2,080
2,080
75,000
7,000
7,000
75,000 20,000 7,000
7,000
Clean rice salesman By-product salesman Prog rammer Key punch operator Watchman 22°80 Subtotal 8,320
4z16o 12,480
62°°0 95,000
12 2°00 121 ,000
Total Fringe benefits C
104,000 133,120 518,550 122 2,65
651,108 162 2332
Grand total 641 ,115 813,440
aBased on work force data reported in Economic Models for Rice Hills in the South, Holder, Morrison and Traylor, Soufhern'Cooperative Series Bulletin 187, June 1974.
bSalary and wage rates are from survey data in Puerto Rico on labor costs. Calculations of differences in wage rates between the U.S. mainland and Puerto Rico in the nondurable industries parable to the procedure used.
indicated that results were generally com
cCalculatcd at 30 percent and mill supervisor.
on all salaries and wages except plant manager
70
Table 37. Work Force Requirements and Cost Estimates for Puerto Rico Rice Mill, 240 cwt/hr Capacity, 1978, Engineering Survey
Salary or 48 hr. weekItem wage rate I shift
Rough ri ce Manager Pit man & sampler Sampler & drier control Bin setter & transfer Load-out Clean-up Night operator Night helper Estimated cost:
48 hr. wk. $61,800
Mill i ng Superintendent Head mi 11er Hu II er Floormen Sanitation & misc. Estimated cost:
40 hr. wk. $63,000 80 hr. wk. 101 ,000
120 hr. wk. 139,000
Clean rice Shipping clerk Asst. clerk Quality control Blender Loader ReI ief & misc. Truck clean Forklift operator Sanitation & cleaning Estimated cost:
40 hr. wk. $92,080 80 hr. wk. 101 ,440
'120 hr. wk. 106,640
dollars
15,000
25,000 12,000
2.50 3.00 3.00
12,000 3.50 3.50 3.50 3.00 3.00 3.00 3.50 3.00
number of persons
1 1 1 1 1 I 1 I
"8 Total
40 hr ./wk. 80 hr./wk. 120 hr. Iwk.
number of persons
I 1 1 1 2 3 I 2 3 2 4 6 I 2 3
(; IT 16 Total
1 1 1 1 1 1 1 2 3 I 1 1 2 2 2 1 1 1 2 2 2 2 2 2 2 2 2
13 T1f 15 Tota I
continued
71
Tabl~ 37. continued
Sa I ary orItem 40 hr .!wk. 80 hr./wk. 120 hr .!wk. wage rate
dollars number of persons
Package plant Manager 16,000 I I I Clerk 3.50 I 2 3 Operator 3.50 I 2 3 Sanitation & cleaning 3.00 I 2 3 Miscellaneous 3.00 2 4 6 Packaging & sealing 3.00 2 6 10 Supplyman 3·00 I 2 3 Estimated cost: 9" 19 29 Total
40 hr. wk. $68,000 80 hr. wk. 132,480
120 hr. wk. 196,960
By-products Sewers 3.00 I 2 3 Loaders & relief 3·00 2 3 4 Sanitation 3.00 I I I Estimated cost: Ii b 8" Total
40 hr. wk. $24,960 80 hr. wk. 37,440
120 hr. wk. 49,920
Mainetnance Welder foreman 12,000 1 I I Welder 4.50 I 1 I Electrician 10,000 I I 1 Labor 3.00 2 2 2 Estimated cost: 5 5 5 Total
40 hr. wk. $43,840 80 hr. wk. 43,840
120 hr. wk. 43,840
Admi n i s trat ion r Plant manager 65,000 1 1 1
Assistant manager 18,000 I I I Bookkeeper 9,000 1 I 1
.,.... Secretary 8,500 2 2 2 Assistant bookkeeper 8,500 2 2 2 Sales manager 35,000 I I I Jan i tor 3.00 1 I 1 Messenger 3.50 1 1 I Watchman 3.00 1 2 3
r- Estimated cost: IT IT 13 Total 40 hr. wk. $152,520 80 hr. wk. 158,760
120 hr. wk. 165,000 Grand total 80 hr/wk = $636,760
72
The second major category of mill operating costs pertains to the
variable costs exclusive of labor. An itemization is given based on the
study of U.S. mainland rice mills in the South, Table 38. Costs for 40 and
80 hour per week operations are shown for 1973. Updating to 1978 is by an
across the board increase of 43 percent suggested by recent adjustments of
the 1973 model by workers on that study. An 80 hour week results in a
cost estimate of $878,932 for these variable costs in Puerto Rico.
Finally, there is the question of the investment in plant and equipment
for the mill. Continuing inflation in building construction costs as well
as those for machinery are a matter of common knowledge. Fluctuating
international exchange rates are also a problem. One of the ways to track
the plant and machinery cost changes is by means of the cost indexes published
for the United States by the U.S. Department of Commerce. Pertinent ones
are cost indexes for commercial and factory buildings in major cities and
to machinery and equipment prices. Changes from 1970 to 1977 are noted
in Table 39. These are considered to be the most reliable available indica
tors to use.
Building and eq~ipment costs are itemized by milling operation phases
in Table 40. Cost as of the 1973 study are given first with an update to
a 1978 estimate based upon the cost indexes cited above. Provided as well
are the cost estimates by the consulting engineering staff working on the
Puerto Rico rice mill plans. Initially, mill costs were 1isted at 3.8
million dOllars as of August 1977. In January 1978 these were increased
to an estimate of 4.5 million dollars and as of mid-March stand at 4,471,000
dollars.
That compares with an estimate of 3,644,000 dollars for a comparable
size (240 cwt/hr) mill in the Arkansas, Louisiana, Texas area. The dif
ference in the costs lies entirely in building costs plus a minor dif
ference in the contingency cost figures. Mills in the U.S. mainland can
and do use metal buildings in some cases rather than all concrete. That
generally reduces costs. Furthermore, it may be that building cost esti
mates in Puerto Rico are somewhat higher than will eventually prove necessary.
Once a building site has been selected and soil core samples are taken, some
of the present uncertainties that estimates must cover may be removed.
73
Table 38. Estimated Variable Costs, Puerto Rico Rice Mill, 240 cwt./hr. Capacity of Rough Rice
U.S. 1973 U.S. 1978(est)a Puerto Rico 197&bItem 40 hr. 80 hr. 40 hr. 80 hr. 40 hr. 80 hr.
Dollars - - Dollars - Dollars
Variable Cost, Others
Uti I ities Interest on
18,700 29,500 26,741 42,185 29,415 46,404
working capital
18,400 33,800 26,312 48,334 1 13,382 226,765
Taxes on inv. Ins. on rice
stocks
2,000
1,200
3,900
2,400
2,860
I ,716
5,577
3,432
3,146
1 ,888
6,135
3,775 Repairs & main
tenc1nce 16, 100 32,300 23,023 46,189 25,325 50,808
Fumigants 3,400 6,900 4,862 9,867 5,348 10,854 Outside storage 22,200 44,400 31 ,746 63,492 34,921 69.841 Refuse disposal Mill supp lies Bags and con
tainers
4, 100 12,300
93,500
8,200 24,600
187,000
5,863 17,589
133,705
II ,726 35,178
267,410
6,449 19,348
147,076
12,899 38,696
294,151
Broker fees 10,000 20,000 14,300 28,600 15,730 3t ,460 Other 16,400 32,800 23,452 46,904 25,797 51 ,594 Mis 'el laneous 11,300 22,600 16, 159 32,318 17,775 35,550
Total 229,600 448,400 328,328 641,212 445,600 878,932
r
a Based on estimated 1.43 ratio increase in variable costs from 1973 to 1978.
b Puerto Rico costs estimated at 10% above stateside to allow for average overall higher costs in Puerto Rico due to import freight costs.
Source: Derived from cost data in Economic Models for Rice Mills in the South, by Holder, Morrison and Traylor, Southern Cooperative Series Bulletin 187, Arkansas Agric. Exper. Station.
r
74
Table 39. Construction and Equipment Cost Indexes, U.S., Indicated Periods
Commercial and Machinery and Year Factory Buildings Equipment
Index Index 1967=100 1967c::l00
1970 123.1 111.4 1971 133.9 115.5 1972 144.8 117.9
1973 154.4 121.7 1974 171.1 139.4 1975 188.8 161.4
1976 204.9 171 .0 1977 223.3 (July) 183.9 (Sept.)
1978 (est.) 250 200
Source: Survey of Current Business, U. S. Dept. of Commerce
75
Table 40. Total Construction Cost Estimate for Building and Equipment for Rice Mill with 240 cwt. Per Hour Capacity, U.S. Mainland and Puerto Rico
Item U.S. Mainland Puerto Rico 1973'~ 1978 1978
Thous. $ Thous. $
Bu i I dings
Rough rice storage 132 214 309 Mj II 129 209 325 MilJed rice stor.ge
and shipping 198 321 465 Packaging 42 68 107 By-products and maintenance 37 60 68 Warehouse 28 45 240 General Offices and others 75 121 ~ Total 641 1038a 1572c
Equipment
Rough rice 92 96 95 Mill 627 1120 1173 Milled rice storage
and shipping p... ;kaging By-productsMillwright shop and other
208 96 41 42
398 290 114 60
398 290 114 60
Eng ineed ng cost _354 354
Sub Total 1106 2432b 2484b
Contingencies 174d 415e
Total 1106 2606 2899
Grand Total 1747 3644 4471f
* Based on cost data reported in Economic Models for Rice 11il1s in in South, Arkansas Agric. Exper. Sta., So. Coop Ser. Bull. 187. June 1974.
a, Estimate for bui lding costs for 1978 based upon change in index of commercial and factory building costs in the U.S., 154.4 in 1973 and 250 estimate for 1978
b. Machinery cost installed based upon March 1978 price information including freight in from Japan and/or Mexico.
76
Table 40. continued.
c Estimated building cost in Puerto Rico for concrete structures as typically used there.
d Estimated at 5% of the amount of building and machinery cost.
e Engineers estimate for Puerto Rico.
f Materials imported for mill construction are based on a cost reflecting a foreign rate of 240 Japanese yen per dollar and 22.5 Mexican pesos per dollar.
77
Given the mill construction costs, it is possible to add in other annual
fixed costs component of the mill operating expense, Table 41. In addition
to depreciation costs, there are those for interest on investment, insurance
and similar fixed expenses. Fixed costs for the U.S. mainland estimate are
about 497 thousand dollars for 1978; in Puerto Rico it was originally 473
thousand but later engineering estimates increased it to nearly 635 thousand
do II a rs.
Interest on investment was increased to 10 percent instead of 8 percent
stateside. Higher building and machinery costs carry with them proportional
increases in insurance and tax expenses. If the plant is given a tax holiday
for the first few years of operation, annual fixed costs in Puerto Rico and
for a new plant on the mainland would be closely comparable. It appears in
order, nonetheless, to carefully review all costs to insure that they have
not been over stated. It must be constantly recognized that the proposed
mill will face direct competition from the mainland mills and must hold its
costs to the most efficient level possible.
A summary of the rice mill operating costs is derived from the fore
going components: fixed costs, labor costs, variable costs and a separate
allowance for advertising. The latter is separated from other variable
costs for reasons we shall mention later. Operating cost summaries are
stated or a 40 and an 80 hour per week operating basis for the 240 cwt./hour
mill.
The cost is estimated at $4. II per hundredweight for a 40 hour week
operation. Assumed is a mill operating at normal efficiency, Table 42.
This requires 5,255 acres of double cropped rice to supply it. Moving to
80 hours per week drops costs appreciably to $2.73 per hundredweight or
more than a dollar savings per hundredweight. Comparable stateside estimates
for Southern mills, if the same size mill, is $2.18 per hundredweight. Again
normal operating efficiency is used in the estimates for all cases.
A summary of the differentials in mill costs per hundredweight of
rough rice is provided in Table 43.
In summary, it is clear that the Puerto Rican rice mill is going to
operate at an economic cost disadvantage when compared to stateside mills.
This condition follows from several considerations. First, the 240 cwt./hour
78
Table 41. Annual Average Fixed Cost Estimate for 240 Cwt/hr., Rice Mill, U.S. Mainland and Puerto Rico
U.S. Mainland Puerto RicoItem 1973 1978 1978
Depreci at ion
Equipment Buildingsb
Interest on investment
Insurance
Taxes
Licenses
Leases and rentals
Other
Total Fixed Cost
Rat io
-- Dollars -
18,314 29,657 110,600 250,600
69,880c 145,760c
7,900 15,818
19, 100 38,200
900 I ,500
2, I 00 4,200
600 I ,200
229,394 496,935
1.00 2.17
Dollars
44,914 289,900
d223,550
20,224
48,896
I ,500 I --'
5,000
1 ,320
635,304 -1
2.77
a At average of 35 year rate between 25 for metal and 40 for concrete structu,'es.
b At average 10 year depreciation. i
c Based on interest cost of 8% and average over total period which -'
is equal to 4% of initial cost in 1973.
d Interest cost of 10% or loan life average of 5% of initial loan.
-l
.J
-'
79
Table 42. Total Annual Operating Cost Estimate 240 cwt./hr. Rice Mill, U.S. Mainland and Puerto Rico
40 Hour Week 80 Hour Week Item U.S. Mainland Puerto Rico U.S. Mainland Puerto Rico
1973 1978 1978 1973 1978 1978
-- Do II a rs -- Do II ars
Fixed Costs 229,394 496,935 635,304 229,394 496,935 635,304
Variable Costs Adm. and
labor 380,270 596,096 641 , II 5 440,782 695,960 813,440
Other var. costs 229,600 328,328a 445,600 448,400 641 ,212a 878,932
Advertising 125,000b 125,00Ob 125,000 125,000b 125,000b 125 z000
Grand Total 964,264 1546,359 1847,019 1243,576 1959,107 2452,676
Cost/cwt. rough r i cec (excluding 2. 15 3.44 4.11 1.38 2. 18 2.73 profit)
d 1.93 3. 10 3.70 1. 25 1.96 2.46
a Other variable costs were increased an averaae of 43% based upon estimate of authors of report on Economic Models of Rice t1ills in the South.
b Projected advertising cost in Puerto Rico included to make U.S. costs comparable for purposes in arriving at total costs.
c Calculated at plant operation of 90% efficiency or 449,280 cwt. on 40 hr./week basis; 898,560 cwt. on 80 hr./week basis.
d· Calculated at plant operation of 100% efficiency of 240 cwt./hr.
capacity or 499,225 cwt. on 40 hr./week basis and 998,450 cwt. on 80 hr'!week basis.
Source: Data from preceding tables 35, 36, 38 and 41.
80
Table 43. Rice Milling Cost Comparison, Puerto Rico and U.S. Mainland, 1978
240 cwt/hr mi II All size mills combined
Item mill ing hours/week 40 80
net cost
U.S. mainland
net cost
vs. 80 hr/wk including
profit
U.S. Mainland
dollars for cwt. of rough rice
1978 estimate 3. 10 1.96 1.59 1.7Sc
Puerto Rico
1978 Eng. Est. a
Net cost
Incl. profi t b 3.70
3.86
Puerto Rico--Milled Cost
2.46
2.62
Different i a I:
Net cost 2. I I 0.87 0.87 ......J
Eng. Est. Incl. profit 2. II 0.87 0.87
......J
a . Cost estimate based on engineering consultant report of machinery
and construction costs for Puerto Rico and labor and management cost ....... estimates by Texas Agricultural Market Research Center and based on survey of rice mills by ERS, USDA as cited in previous tables.
bSstimate profit of $0.16 per cwt. of rough rice based on U.S. mill average experience as indicated by ERS. USDA survey.
CEstimate for 1978 based upon cost of $1.53 in 1976-77 and use of --' inflation rate of 7% per year from 1976-77 through 1978-79.
--t
-"
81
mill is a small size mill which inherently has higher operating costs than
a medium size (480 cwt!hr) or a large mill (810 cwt!hr). Secondly, the
rule is to run a rice mill around the clock if possible for costs decline
substantially as operating hours expand from 40 to 80 to 120 hours, or in
other words, 1,2 and 3 labor shifts per day.
Because of the built in economics of rice mill ing technology that seem
inescapable, it again is urgently recommended that the Puerto Rico mill
operate 80 hours per week as soon as feasible which requires about 10,509
acres of double cropped rice, Table 34.
Cognizance must be given, too, for the fact that most U.S. rice mills
were constructed several years ago and are not facing the present day high
construction costs. Present estimates are that the average mill ing cost
per hundredweight for California rice is $1.75, Table 43. That is sub
stantially below the prospective $2.47 net cost and $2.63 including profit
faced in Puerto Rico. As we shall see, though, there are some economies
in rice drying and storage that tend to countervail the above milling cost
disadvantage.
Chapter 9. Rice Drying and Storage
Economic studies have been made of rice drying and storage costs in
the U.S., both in terms of rice dryer and elevator facil ities and those
of the on-farm type. The system proposed for Puerto Rico is in many respects
comp~rable to the on-farm system. Metal bins will be used for rice drying,
so that batch drying of rice at controlled depths will be employed instead
of continuous feed drying as used at commercial grain elevators on the
mainland. Thus, comparisons with the on-farm system appear to be the most
appropriate though it must be clearly understood that the system is to be
placed at the mill location, at least for the service of the first proposed
5,255 acres. Rapid movement to about 10,509 acres has already been pointed
out as needed. 1 If the additional acreage is to be located in other parts
of the island, the drying-storage facilities could be constructed nearby or
at the mill. Consequently, multiple locations should be evaluated as new
acreage plans are made. Haul ing distances from other production areas are
not likely to exceed 35 miles.
Two sets of variable cost estimates were developed for the dryer
storage facil ity. One is for as much as 6,000 acres of production but
basically to serve a 40 hour week operation of the rice mill. The second
is for as much as 12,000 acres but geared essentially to an 80 hour week
for the mill operation. In terms of hundredweight of rice to be processed,
the amounts are about 500,000 and 1,000,000 hundredweight respectively. The
suggested facilities can handle a peak load of 7.500 hundredweight and
15,000 hundredweight respectively per day, Table 44.
Labor and management costs for the two levels of operation for the dryer
are summarized in Table 44. Including a $20,000 salary for the manager,
which may be more than necessary, costs are $104,500 and $189,000, respectively,
for the two levels of operation.
The lower level of operation should not exceed six months after which
the higher level will be advisable. Efficiency of the dryer as well as the
mill will be enhanced by the higher quantity of put through.
I See Table 34.
83
84
Table 44. Estimated Labor and Management Costs for Rice Drying-Storage System in Puerto Rico to Supply 40 and 80 Hour Operations per Week of a 240 cwt/hr Rice Mill, 1975a
Dry i n9 Ca~ac i t~ I tern Pay 499,225 cwt/yr 99-.450 cwf.!y'r
rate Annual hrs. Cost Annua 1 hrs. Cost
dollars number do II a rs number do II ars
Direct labor
Manager $20,000 $20,000 $20,000
(per hour)
Pit man Bin setter Rice sampler Load out Clean-up Night operator Night laborer
3.25 3.25 3.25 3.00 3.00 3.25 3.00
3,120 2,080 2,080 2,080 2.080 3, 120 6,240
10, 140 6,760 6,760 6,240 6,240
10, 140 18,720
6,240 4, 160 4,160 4,160 4,160 6,240
12,480
20,280 13.520 13,520 12,480 12.480 20,280 37,440
Total direct labor 85,000 150,000
Fringe benefitsb 19,500 39.000
Grand total 104.500 189.000
aBasic data from Jim Thomas, rice drying consulting and construction firm. Houston, Texas.
bCalculated at 30 percent on all salaries and wages except plant manager.
......J
...J
85
Other variable costs for operation of the rice dryer are itemized in
Table 45. It would be dangerous to ratio the dryer output too closely to
the daily needs of the mill. Little likelihood exists that that production
and harvesting could be matched week for week. Consequently, it is preferable
to consider that production will be started monthly and harvesting of a
month's production possible within only about one week's time. Given the
production of 998,450 hundredweight per year from about 10,509 acres, and
division of this to a monthly planting and harvest schedule, we have about
83,204 hundredweight to be dried and stored per month. Operation at a
peak of 15,000 hundredweight capacity per day would mean a total annual
rated capacity of near 300,000 hundredweight. Since this is probably
somewhat excessive, an annual rate of about 270,000 hundredweight capacity
has been used in projecting nonlabor variable costs.
Because of the similarities to the on-farm drying system, variable costs,
except labor, were estimated from data in the report, Costs of On-Farm
Rice Drying-Storage Facilities in Mississippi, 1975, publ ished by the
Mississippi Agricultural and Forestry Experiment Station in cooperation
with CEO, ARS, USDA. Tables pertaining to costs at 75 percent of capacity
operations were taken as the basis for cost projections. The largest size
reported was 150,000 bushels of capacity or 67,500 hundredweight. There
fore, it was necessary to use a correlation extrapolation to the 270,000
bushel size. The extrapolated trend was based on data covering 15,000
bushel to 150,000 bushel on-farm dryer-storage facilities.
Drying and storage of the 499,225 hundredweight production per year
from the initial level of rice acreage means four times the volume of
121,950 hundredweight used in calculating the U.S. on-farm cost. A9ain
to provide adequate cushion, the U.S. costs were multiplied by a factor
of six except for labor which as previously noted was computed separately.
Likewise costs for the second stage expansion of production were figured
at 12 times the U.S. cost. U.S. costs are based on drying all of the
rice in a matter of two or three weeks and holding it in on-farm storage
for five months. It has been indicated that the substantial part of the
86
Tab1 e 45. On-farm Rice Drying-Storage System, Total Operating Cost Estimates, 75 Percent Utilization
Puerto Rico Cost 1978f
Item 1975c 1975° 1978e 150,000 bu. 271 ,000 bu. 271 ,000 bu. 499,225 998,450 67,500 cwt. 121,950 cwt. 121 ,950 cwt. cwt/yr. cwt/yr.
- - Do 1 1 a r s - - - - Do 1 1 a r s -
Fixed Costs
Bldg. depreciationa 4, 117 4,117 4,117 14,166
9 24,290
9
Equipment depreciation b 3,138 3,138 3,138 38,709g 55,5569
Insurance-bldg. and equip. 1 ,200 1,200 I ,200 6,453 10,131
Interest on investment 6,033 6,033 6,033 44,977 67,792
Taxes .-b835 2,835 2,835 15,245 23,935
Total Fixed Cost 17,323 17,323 17,323 119,550 181 ,704
Variable Costs
Direct labor 1 ,633 2,841 3,580 104,500 189,000 Electricity 1,772 3,048 3,840 23,0/10 46,080 Drier fuel 2,295 3,947 4,973 29,838 59,676 Bldg. repai r 412 709 893 5,358 10,706 Equip. repair 903 I ,553 1,957 II ,742 23,484 Insurance on
rice 1 , 181 2,031 2,559 15,354 30,708 Fumigation 129 222 280 I ,680 3,360 Interest on oper
ating capital 276 475 598 3,588 7,176
Total Variable Cost 8,601 14,826 18,680 195,100 370,190
Grand Total 25,924 32,149 36,003 314,650 551 ,894
Cost per cwt/rough rice (not including profit) .38 .26 .30 .63 .55
.......l
87
Table 45. Continued.
a Twenty-five year rate.
b Fifteen year rate.
c Data from Costs of On-farm Rice Drying-Storage Facil ities in Mississippi, 1975, by Shelby Holder, ~~, Mississippi Agr. and Forestry Expt. Sta. bulletin 837.
d Variable costs increased by 1.72 ratio to accommodate larger facility (labor by 1.74 ratio).
e Variable costs increased by 26%.
f Based on data from Jim Thomas Construction Co., Houston, Texas. Interest cost of 10%or loan I ife average of 5.0% of initial loan. Insurance costs based on $8.00 per $1,000 valuation. Taxes based on 30% of original value (new) and a millage rate of 63 ($63 per $1,000 valuation).
g Includes 15% of total freight and engineering cost to building costs; 85% to equipment costs.
88
cost occurs in the drying and storage for the first month. Consequently,
use of the multiples of six and twelve are appropriate for a maximum cost
estimate. Thus, some cushion for higher costs of imported materials in
Puerto Rico is provided as well in the 1978 annual variable cost estimates
presented in Table 45 for Puerto Rico.
Following is an explanation of the annualized fixed costs which are
included in the top portion of Table 45. Construction costs for the rice drying-storage facility are detailed
in Table 46. The 5,255 acre basis corresponds to the 40 hour week mill
operation. Use of the 10,509 acre basis obviously represents the 80 hour
week mill operation. As noted these costs were provided by the engineering
consultants in Houston, Texas. Freight costs to Puerto Rico and engineering
fees are included in the grand total costs of 823,600 dollars for the first
phase to handle up to 5,255 acres of rice production and 1,291,996 dollars
for the 10,509 acre crop. In both cases, double cropping each year is
assumed. In other words, this is equivalent stateside to 10,510 and 21,018
acres of production.
The net effect of the drying-storage costs is one of 63 cents per
hundredweight to serve the 40 hour work mill schedule and 55 cents for
the 80 hour week. This does not include any allowance for profit. Accord
ing to reI iable sources, the profit rate stateside is about 15 to 16 cents
per hundredweight. That brings the total drying-storage cost to 79 and 71
cents per hundredweight, respectively. According to reliable sources, the
charge for rice drying at commercial elevators in the South is 30 cents per
bushel. Storage time averages about five months for which there is a five
cent charge per month. Total charges that result average approximately 55 cents per bushel, or $1.22 per hundredweight. Consequently, the rice dryer
storage cost estimate for Puerto Rico is about half that for the mainland
when the second stage of 10,000 to 11,000 acres of production is achieved,
Table 45. Whether one or two dryer-storage locations are ultimately used is not
likely to affect cost to any great extent because the major economies of
scale are achieved when the 100,000 hundredweight size is reached.
89
Table 46. Estimated Cost of Constructing Rice Drying-Storage System, Puerto Rico, 1978
5,255 Acre Basis 10,509 Acre BasisItem Labor Material Total Labor Material Total
Dollars- - Dollars
Building Costsa
Concrete t1etal building Wilting tanks Drying tanks Misc. structural
steel
8,475 11,710 23,964
II ,925
12,414 32,052 79,374
.~~
141,590 20,889 43,762
103,338
44,569
8,475 21 ,07844,322
15,543
14,292 64,780
166,273
50,785
221 ,690 22 ;767 85,858
210,595
~328
Total building cost 56,074 156,484 354,148 89,418 296,130 607,238
Equipment Costs Drying tanks Dry i ng fans Stirring devices Bucket elevators Screw conveyors Misc. machinery
and equipment Electrical system
1 ,698 240
2,130 22,433 20,340
20,150 31,395
11,171 22,619 22,248 50,181 45,499
100,634 36,354
12,869 22,859 24,378 ]2,614 65,839
120,784 67,749
3,336 480
3,930 27,283 38,697
20,350 45,285
20,810 43,899 41 ,508 55,719 89.573
109,637 55,051
24,146 44,379 45,438 83,002
128,270
129,987 LOO,336
Total equipment cost 98,386 288,706 387,092 139,361 416,197 555,558
Total building and equipment 154,460 445,190 741,240b 228,779 b712,327 I, 162,796
Other Costs Engineering cost Freight cost:
Inland to port Ocean to Puerto
Rico
42,533
10,902
28.925
66,498
17,250
45,452
Total other costs 82,360 129,200
Grand Total 823,600 1 ,291 ,996
a Does not include site preparation or land cost. b Materials imported for mill construction are based on a cost reflecting
a foreign rate of 240 Japanese yen per dollar and 22.5 Mexican pesos per dollar.
PART IV. ECONOMIC FEASIBILITY OF RICE PRODUCTION, PROCESSING AND MARKETING SYSTEM IN PUERTO RICO
Chapter 10. Overview of the Production, Drying, Storage and Mill ing Costs for Rice in Puerto Rico
and the U.S. Mainland
Now that the costs have been developed, in a very detailed, although
synthesized manner in part, for production, drying and storage and milling
of rice, the total cost situation can be evaluated. On a rough rice basis,
the combined production, drying, storage and milling cost in Puerto Rico
for 5,255 acres of double cropped rice, which thereby al lows a 40 hour
week mill operation totals about $11.29 per hundredweight. Doubling
acreage to 10,509 in order that an 80 hour mill ing week is possible brings
our cost down to around $9.97 rer hundredweight, Table 47. The estimated
U.S. mainland cost (actually using Cal ifornia production) is near $11.03
per hundredweight. A $1.06 per hundredweight advantage thus appears to
favor Puerto Rico. This does not include allowance for transportation
costs for U.S. mainland rice to Puerto Rico.
Conversion of the cost data from a rough rice to a milled rice basis
provides a more meaningful comparison. This is provided in the lower
section of Table 47. A 58 percent yield of milled rice is used to convert
to the finished or milled rice basis. That is about the average milling
yield experience for the U.S. and seems reasonable for Puerto Rico.
At the initial production from around 5,250 acres, the milled rice
price for Puerto Rican domestic rice is estimated at $19.47 per hundred
weight, or about $1.25 per hundredweight less than imported U.S. rice.
Movement to the 10,000 to 11,000 acreage level to permit an 80 hour week
for the mil I reduces the cost to $ 17.19 per hundredweight, which would be
$3.53 per hundredweight under the stateside imported rice. This is a most
encouraging indication for the outlook for a Puerto Rican rice production
and processing system. It should be cautioned, however, that U.S. costs
are calculated on a current replacement cost basis. A viable accounting
system would require this. But, the fact remains that U.S. mills can use
older and lower cost facility expenses as a basis to maintain competitive
pressure on the Puerto Rican rice production and marketing system.
93
---
94
Table 47. Summary of Production and Processing Costs for Rice, Puerto Rico and U.S. Mainland, 1977-78
Item Puerto Rico Puerto Rico U.S. Mainland (CA)
Mill operation 240 hr/wk
No. of acres
Rough rice basis
Production cost Drying & storage d Mill i ng d
Total
Milled rice basis
Production cost Drying & storage d Mill i ng d Transportation
Total
40 hr/wk
5,255
6.64 9.00a
0.79 0.79 3.86 3.86
II .29 13.65
(58% head rice yield)
11.45 15.52a
1.36 1. 36 6.66 6.66
19.47 23·54
80 hr/wk
10,509
dollars/cwt.
6.64 O. 71
9.00a
0.71 8.06b1.22
2.62 2.62 ~ 9.97 12. 33 11.03
11 .45 15.52a
13.90 1.22 1. 22 2. 10 4.52 4.52 3.02
1.70c
17. 19 21 .26 20.72
aGuaranteed price to grower in Puerto Rico is $9.00 per cwt. for rough rice.
bprevailing commercial rate at dryer-storage elevators in the South.
cTransportation rate, conservative estimate, to bring U.S. mainland rice to Puerto Rico of 1.5 cents per pound of brown rice and 1.7 equivalent for milled rice including second heads, brewers rice, etc.
dlncludes average profit rate in U.S. mainland.
95
Furthermore. whereas the present plan in Puerto Rico is to guarantee
$9.00 per hundredweight to growers for rough rice, this is a few cents
above the U.S. target price. And, the loan price is near or below $7.00
per hundredweight. U.S. growers will receive subsidy payments if average
prices received by them are below the target level. The farmer who complies
with requirements to be el igible for the target price subsidy thus has
himself covered. But the lower U.S. market price for rice may have to be
faced at times by Puerto Rico. Examination of the situation if Puerto Rican
growers are paid $9.00 per hundredweight and U.S. rice moves at the 1976
preliminary announcement of the loan level of $6.31 per hundredweight has
been considered. The result is as follows:
Rough rice $6.31 per cwt.
Drying and storage 1. 22
Mil ling 1. 75
Total $9.28
Mill ed rice basis at 58% yield $16.00
Transportation to Puerto Rico~ 1. 70
Total $17.70 per cwt.
Milled rIce cost c. i .f. Puerto Rico of $17.70 per hundredweight
would be almost 90 cents more than the cost in Puerto Rico if growers were
paid the estimated cost of production, including return to management of $50
per acre, or a total of $6.64 per hundredweight. However, since the government
has guaranteed $9.00 per hundredweight, the cost of Puerto Rican milled rice
will likely be $21.26 per hundredweight at the mill or about $0.54 per hundred
weight higher than rice which could be imported. These are net prices at the
port and at the Puerto Rican mill that we are comparing.
As of mid-March the landed price of short grain rice in Puerto Rico was
$25.33 per hundredweight. That is substantially. $4.00 per hundredweight,
over the estimated cost of Puerto Rican milled rice. Thus, a profit position
for Puerto Rican rice would prevail as of early 1978 price conditions.
~Milled rice equivalent of 1.5 cwt. rate on brown rice.
96
Higher costs of rice in future years will result from inflationary cost
trends. If these average about 7 percent per year, we can estimate the 1985
potential situation. It is assumed that the cost of rice in Puerto Rico
is what we have forecast for 1985 or $8.87 per hundredweight which includes
a management return to growers of $80 per acre. Rice drying and milling costs
are figured to increase 7 percent per year from 1978 to 1985. Under these
circumstances the cost of Puerto Rican milled rice is estimated at $24.52
per hundredweight and U.S. mainland rice (California) imported to Puerto Rico
comes to $30.54 per hundredweight, Table 48. Therefore, the outlook over time
is for the Puerto Rican competitive position to improve if the inflation
rate can be kept at no more than that in the U.S. mainland. Even the payment
of the guaranteed $9.00 per hundredweight will result in a milled price of
$24.75 or $5.79 under the imported price based on our forecast of production
costs for California.
There are important cash flow problems at the outset with the proposed
dryer and mill facility. These are considered in the next section of this
report. The fact that the outlook for the proposed rice production-processing
system is reasonably good thus far does not take into account the situation
the system encounters in the short run. In meeting payments on a 20 year loan
for the buildings, rather than 35 year depreciation, and a 7 year loan on
machinery, rather than 10 year depreciation, added cash flow needs are faced.
Critical attention must be paid to these because the industry's survival is
keyed to success over the first five or so years.
As will be noted in the cash flow analysis for the first year, it is one
in which losses are typical for a new operation. A cumulative deficit of about
460,000 dollars will be experienced that year by the dryer-processor facility.
And, very importantly, this assumes payment of 9.00 dollars per hundredweight
for rough rice and the sale of milled fancy rice at 23 dollars per hundredweight
at the mill, plus other income noted in Table 50. Prices could be less favorable
than that, but the early 1978 price c. i.f. San Juan is $25.33 per hundredweight
for California rice.
Movement to years 1980-83 offer the critical comparisons. Prediction of --J
future rice prices is hazardous, to say the least, because the United States
--'
97
Table 48. Summary of Estimated Cost for Rice, Puerto Rico and U.S. Mainland, 1985
a
Item Puerto Rico U.S. Mainland (CA)
Mill operat ion (rough rice basis) 80 hr/week 120 hr/week
No. of acres 10,500
dollars/cwt.
d dRough rice basis 8.87 b 9.00c 11.35bDrying and storage I. 1\ 1.14 I .96b bMil ling 4.21 4.21 2.81
Subtotal 14.22 14.35 16. 12
Mill operation (mi lIed rice basis)
Rough rice basis 15.29 15.52 19.57 Drying and storage 1.97 1. 97 3.38 Mill i ng 7.26 7.26 4.84
Subtotal 24.52 24.75 27.79
Transportat ion to Puerto Rico 2.75
Total 24.52 24.75 30.54
aAssumes inflation average rate of 7 percent per year in Puerto Rico and U.S. mainland for seven years between 1978 and 1985.
blncluding profit.
cPrice guarantee to Puerto Rican rice growers.
dForecast cost of production including return to management, Table 31.
ri
98
Table 49. California rice price in San Juan based on estimated U.S. loan level and calculation of equivalent Puerto Rican grower price assuming 240 cwt./hr. mill on 80 hour week and 10,509 acres of rice
Item 1979 1980 1981 1982 1983
do I I ars/cwt.
Ca I iforn i a Rice
Est. U.S. loan price {rough rice)a
Typical U.S. processing cost {rough rice)C
Total--Items J & 2 Items 1 & 2 converted to
milled rice basis
6.85
3. 18
10.03
17.29
7.33
3.40
10.73
18.50
7.84
3.64
II .48
19.79
8.39
3.89
12.28
21 . 17
8.98
4.16
13.14
22.65
Transportation to P.R. 2.00 2. 14 2.29 2.45 2.62
C. I .F. U. S.
San Juan for rice 19.29 20.64 22.08 23.62 25.27
Puerto Rican Rice
Mill door price for P.R. mill
Adjusted for processing yield from rough rice
Processing & drying margins & profit
Rough rice price to growers
19.29
II . 19
3.33 d
7.86
20.64
11 .97
3.56 8.41
22.08
12.81
3.81 9.00
23.62
13.70
4.08 9.62
25.27
14.66
4.36 10.30
Potential subsidy payment to Puerto Rican producers
U.S. target priceb aU . S . I oa n rate
0.00 1. 14
0.00 0.59
0.00 0.00
0.00 0.00
0.00 0.00
apresent loan rate of $6.85 increased by 7 percent each year.
bTarget price is $9.13 increased by 7 percent per year.
cU. S. mainland cost as shown in Table 47 increased by inflation rate of 7 percent per year.
dAssumes processing cost for 1977-78 will carry forward to 1979 since mill construction would be started in 1978 and the same costs continue into 1979 and are inflated by 7 percent thereafter.
99
produces so small a part of the world supply. Yet production shortages. or
vice versa. overseas impact heavily on U.S. prices because we are nonetheless
a major rice exporting country. It appeared advisable to pursue the question
from a different approach. We have started from the $9.0U price which Puerto
Rico desires to guarantee its producers. converted this to a milled rice
yield basis, or $15.52 per hundredweight. Added is the dryer-storage milling
processing break-even margin (as calculated from the cash flow analysis instead
of using depreciation schedules) plus an allowance for profit equivalent to
the mainland estimated average from recent U.S. studies. This provides the
final f.o.b. mill price for Puerto Rican rice that is economically sound. That
price increases somewhat each year as the variable costs of drying-storage and
milling are advanced by a 7 percent annual inflation factor.
Given the series of necessary prices at the Puerto Rican mill. we now
assume the same price for California imported rice in the section designated
IIcalculation of mainland equivalent rice prices." From these we calculate
backwards to the equivalent rough rice price to California growers. These
are shown on the third line from the bottom of page I of Table 49 and range
from 10.30dollars per hundredweight down to 7.86 dollars.
The next step is to examine the above rough rice prices for California
in comparison to estimated U.S. target and loan prices for rice. The actual
target and loan prices as known April 10, 1978. are increased yearly by a 7
percent inflation factor, which mayor may not hold. Yet, some assumption is
necessary and this seems to be a reasonable one.
Finally, at the bottom of Table 49 we calculate. using all foregoing
assumptions. the potential subsidy payment, if any. that the Puerto Rican
government would need to make to rice growers in order for the dryer-storage
and mill operations to be safeguarded from operating at below average profit
levels. The net result is a government payment to growers of 1.14 dollars
per hundredweight if the production-marketing system were operating in 1979.
It decreases yearly to 198J when the industry is able to compete successfully
even against the assumed loan rate for U.S. rice of 7.84 dollars. Since this
is a rather pessimistic approach to the rice price outlook inthe mainland,
it indicates that with this or better prices the rice industry in Puerto Rico
appears to be potentially successful.
100
It is suggested that the rice dryer-storage-mill facil ity be viewed in the
same manner as a public utility. Being the only rice mill in Puerto Rico
it will have monopoly powers that necessitate placing its operations under
governmental regulation. The above analysis assumes that the facility will
be in essence guaranteed a profit through price regulation of the F.O.B. mill
price and the price to be paid to growers. Since rice prices are already
controlled in Puerto Rico, this is merely an extension of the present system.
Chapter II. Cash Flow Analysis of Rice Processing Facilities
The cash flow projections are shown in two tables. The first is a
monthly breakdown of estimated income and expenses during the first 12 months.
The second table estimates the second through the sixth year on an annual
basis.
The income sectiun oT the monthly analysis consists of an estimation of
the amount of saleable products and projected prices received for these
products. The amount and kind of saleable products are based on the following
items.
I) Production will average 90 percent of the rated capacity,
240 hundredweight per hour, over the year.
2) A 40 hour schedule will be in effect the first six months of
operation with all subsequent operations being on an 80 hour
schedule.
3} Production for tht::! first month will be 50 percent of the
expected average and 75 percent the second and seventh months.
4} Outputs from rough rice will be: fancy 52.5%; hulls 19.1%;
bran 9.3%; second heads 8.6%; broken 5.6%; brewers 3.1%; and
waste 1.8%.
5} Prices received for these products were selected on the basis of
prices over a period covering late 1977 and early 1978. These prices
are in most cases lower than prices which prevailed during 1977.
The projected cash expenciitures were estimated using current manpower
requirements for a drying and milling operation; prevail ing Puerto Rican wage
rates and fringe benefits; estimates of contruction and equipment costs; and
variable operational costs obtained from industry representatives.
Most of the expenditures are expected to be on a monthly basis, exceptions
to this generalization are taxes, insurance, licenses, etc. which are paid
annually. Packaging suppl ies and mil I supplies were programmed to be purchased
quarterly. Additional purchases of these items were made on an irregular
schedule to obtain the necessary supplies to go to an 80 hour operation.
101
102
Interest expense on necessary working capital was estimated at $60,000 the
first year. This estimate is based on the accumulative cash flow deficit
which ranges from about $520,000 to about $1,100,000.
Building and equipment notes are to be in the amount of 90 percent of the
actual cost. Repayment is 20 years on the building and 7 years on the equip
ment. Both notes carry a 10 percent interest rate.
The annual ized cash expenditures for years two through six reflect the
items outlined above and each item except the building and equipment note is
compounded 7 percent per year to reflect expected increases.
No prices for the mill outputs were made for this period. Instead a
breakeven margin per hundredweight of rough rice processed was calculated.
This figure indicates the amount the mill must obtain over and above the price
paid to the farmers to cover their cash expenditures.
A profit margin which reflects current U.S. margins for a drying and
million operation is also shown. This margin is also increased 7 percent
per year.
As a conservative estimate, it will be noted that the first assumption
in this cash flow analysis was operation of the processing facility at 90
percent of capacity. In actuality the mill is fully capable of an output of
the full 240 cwt./hour. That is, the equipment design permits that volume at
a normal operating rate rather than it being the peak capacity rating. In
view of this the income to the mill could be about 10 percent higher than that
shown in Tables 50 and 51.
Calculation has been made of the price the mill-dryer facility could pay
Puerto Rican growers for their rice. Results are presented in Table 51a.
Section A of that table shows the forecast price of California rice, CIF
San Juan equivalent. The Puerto Rican mill would have to meet that price to
be competitive at the wholesale price level. Deductions are made, on a cash
flow budget basis of actually meeting all loan payments (20 years on the
buildings and 7 years on the equipment) for the mill and dryer, plus operating
costs, and plus normal profits. The net remaining is the price available to
pay rice growers. Should the forecast rice prices prevail, prices to growers
103
would exceed $9.00 per cwt. of rough rice. Therefore, no government subsidy
would be required over the 1979-82 analysis period.
The possibility, however, always exists that rice prices in the U.S.
could be driven down to loan levels. In that event lower elF San Juan
prices would prevail for California rice. Under the assumption that open
market rice prices were also at the loan level, the San Juan milled rice
equivalent prices are noted at the top of Part B of Table 51a. Again, the
deductions of operating expenses and normal profits for the mill-dryer
facility are deducted plus cost of meeting a 20 year loan on the buildings and
a 7 year loan on machinery. Prices the mill could pay Puerto Rican growers
for their rough rice are noted for each year, 1979-82. The possible government
subsidy to growers would be about $1.21 in 1979 and $0.57 in 1980. Thereafter
subsidies would not likely be necessary since grower prices would be expected
to exceed $9.00 per cwt. As will be noted later. the potential subsidy
calculated on the cash flow basis is not appreciably different from that
shown using the tax depreciation rates for buildings and equipment.
-i
.......
104
Table 50. Cash Flow Analysis First Year of Operation, Rice Dryer and Milling Facil ity for Processing Puerto Rican Rice.
Month 2 3 1f 5 6 Opera 40 hour week
Item ting 50% 75% 100% 100% 100% 100% Level
Do 11 a rs -
Income:
Fancy @ $23/cwt. 226,100 339,100 452,100 452,100 452, I 00 1f52,100 Broken @ $7/cwt. 7,310 10,960 14,620 14,620 14,620 14,620 2nd Heads @$8.50/cwt. 13,660 20,550 27,320 27,320 27,320 27,320 Brewers @ $7/cwt. 4,030 6,050 8,060 8,060 8,060 8,060 Bran @ $50/ton 4,320 6,570 8,640 8,640 8,640 8,640 By-products @ $15/ton 2,700 4,050 5,400 5,400 5,400 5,lfOO
Total Income 258,120 387,280 516,460 516,460 516,460 516,460
Expense:
Wages & Salaries 61 ,500 61,500 61 ,500 61 ,500 61 ,500 71 ,700 Utilities 6,250 6,250 6,250 6,250 6,250 6,250 Repairs & Maintenance 3,550 3,550 3,550 3,550 3,550 3,550 Note - Equipment 54,600 54,600 54,600 54 ,600 54 ,600 5.4,600
- Bu i 1 ding 20,100 20, 100 . 20,100 20, 100 20,100 20,100 Mi 11 Suppl ies 4,800 4,800 4,800 Packaging Supplies 36,700 36,700 36,700 Outside Storage 2,900 2,900 2,900 2,900 2,900 2,900 Insurance - B & E 15,000
- I nven. 17,500 Taxes - B & E
- I nven. Advertising 10,400 10,400 10,400 10,400 10,400 10,400 Other Expense 5,050 5,050 5,050 5,050 5,050 5,050 License & Bonds 2,500 Other Fixed 7,500
Interest on Working Capital
Rough Ri ce a 380,390 380,390 380,390 380,390 380,390 570,590 Total Expense 625,590 541,590 541 ,590 583,090 541,590 773,290
Net Cash Flow (367,470) (154,310) (25,130) (66,630) (25,130) (256,830) Cumulative (521,780) (546,910) (613,540) (638,670) (895,500)
continued
105
Tab Ie 50. Cont j nued.
Month 7 8 9 10 II 12 Item Opera 80 hour week
ting 75% 100% 100% 100% 100% 100% level
- - Do 11 a rs -
Income:
Fancy @ $23/cwt. 678,100 904,200 904,200 904,200 904,200 904,200 Broken @ $7/.cwt. 21,920 29,240 29,240 29,240 29,240 29,240 2nd Heads @ $8.50/cwt. 41 ,100 54,640 54,640 54,640 54,640 54,640 Brewers @ $7/cwt. 12,100 16,120 16, 120 16, 120 16,120 16, 120 Bran @ $50/ton 13,000 17,300 17,300 17,300 17,300 17,300 By-products @ $15/ton 8,100 10,800 10,800 10,800 10,800 10,800
Total Income 774,320 1032,300 1032,300 1032,300 1032,300 1032,300
Expense:
Wages & Salaries 81 ,900 81 ,900 81 ,900 81 ,900 81 ,900 81 ,900 Ut i 1it i es 12,500 12,500 12,500 12,500 12,500 12,500 Repaires & Maintenance 7, I 00 7,100 7, I 00 7,100 7, 100 7,100 Note - Equipment 54,600 54,600 54 ,600 54 ,600 54 ,600 54,6 GO
- Bu i I ding 20, I 00 20, 100 20,100 20,100 20, 100 20,100 Mill Suppl ies 4,800 9,600 Packaging Supplies 36,700 73,400 Outside Storage 5,800 5,800 5,800 5,800 5,800 5,800 Insurance - B & E 15,000
- Inven. 17,500 Taxes - B & E 72 ,000
- I nven. 6,000 Advertising 10,400 10,400 10,400 10,400 10,400 10,400 Other Expense 10,125 10, 125 10, 125 10, 125 10,125 10, I 25 license & Bonds Other Fixed
Interest on Working Capital 60,000
Rough Rice a 760,780 760,780 760,780 760,780 760,780 760,780
Total Expense 1,034,155 960,155 960,155 1043,155 960,155 1038,155
Net Cash Flow (259,835) 72,145 72,145 (10,855) 72,145 (5,855) Cumulative (1155,335) (1083,190) (1011,045) (1021,900) (949,755) (955,610)
aAssumes $9.00 per hundredweight for rough rice; 898,560 hundredweight processed.
J106
Table 51. Cash Flow Analysis for Operation of Rice Dryer and Mill ing Facility for Processing Puerto Rican Rice, Years 2 through 6
2nd year 3rd year 4th yea r 5th year 6th yearItem 1979 1980 1981 1982 1983 .J
Cash expenditures
Building note 241,250 Equipment note 655,000 Salaries & labor 1,051,600 Utilities 160,500 Packaging supplies 314,200 Repairs & maintenance 91 ,200 Advertising 133,750 Mi 11 suppl ies 41,100 Outside storage 74,500 Insurance 69,500 Taxes 63,500 Other expenses 140,700 Interest on working 25,000capital
Total 3,081,800
Gross margin per cwt. of rough rice processed to meet est. cash expenditures (898,560 cwt. processed) 3.43
Gross profit per year on cwt. of rough rice processed .34
Net profit before taxes 305,500
241,250 655,000
1 , 125,200 171 ,700 336,200 97,600
143, 100 44,000 79,700 74,400 89,400
150,600
3,208,150
3.57
.37
332,500
do 11 a rs
241,250 655,000
1,203,950 183,700 359,700 104,400 153, 100 47,100 85,300 79,600 95,700
161 ,100
3,369,900
3.75
.39
350,400
241,250 655,000
1 ,288,250 196,600 384,900 111 ,700 163,800 50,400 9 J ,200 85,200
102,400 172,400
3,543,100
3.94
.42
377,400
i I
....J
241 ,250 655,000 --'
1,378,400 210,400 411 ,900 119,600 175,300 53,900 97,600 91 ,100
109,500 ......!
184,500
3,728,450
4.15
.45
404,400
107
Table 51a. Estimated Price Payable to Rice Growers per Hundredweight of Rough Rice under Indicated U.S. Rice Price Assumption, 1979-83
2nd year 3rd year 4th year 5th year 6th yearItem 1979 1980 1981 1982 1983
dollars/cwt.
Part A. Assumption of present indications of possible California rice prices (rough rice equivalent).
CIF San Juan price of Calif. fancy ricea 24.61 26.33 28. 18 30. 15 32.26
Income to Puerto Rico rice mill-dryer at above prices 14.75 15.78 16.89 18.07 19.34
Operating expenses of Puerto Rico rice mill-dryer 3.43 3.57 3.75 3.94 4. 15
Profit 0.34 0.37 0.39 0.42 0.45
Available to pay growers 10.90 11.84 12.75 13.71 14.74
Potent i a I subs i dy payment to Puerto Rican producers 0 o o o o
Part B. Assumption of California rice prices being at U.S. loan level for Cal ifornia type rice (rough rice equivalent) .
CIF San Juan price of Calif. fancy ricea 19.29 20.64 22.08 23.62 25. 27
Income to Puerto Rico rice mill-dryer at above prices 11.56 12.37 13.23 14. 16 15. 15
Operating expenses of Puerto Rico rice m i 11dryer 3.43 3.57 3.75 3.94 4. 15
Profit 0.34 0.37 0.39 0.42 0.45
Avai lable to pay growers 7.79 8.43 9.08 9.80 10.55
Potential subsidy payment to Puerto Rican producers I. 21 0.57 0 0 0
aWhich Peurto Rico would match.
I i
Chapter 12. Rice Marketing Outlook for Puerto Rico
Production of 10,500 acres of rice yields the aforementioned 997,500
hundredweight of rough rice. At a head rice mill ing yield of 58 percent,
that is 578,550 hundredweight of milled rice. Imports presently are
totaling somewhere between3.8and 4.0million. The local production would
be equivalent to only about 15 percent of the market consumption. Judging
from the reported consumer acceptance of the D'Aqui rice samples achievement
of the 15 percent market share should be reasonably feasible.
The dominant brand commands a 47 percent market share and the second
most popular one a 15 percent market share, Table 24. Expenditures by
the second brand on television advertising in 1976 was said to be near
$150,000. The advertising budget for the D'Aqui was set in the milling
cost budget at $125,000 per year. With some local loyalty to a home
produced rice, the aforementioned advertising allocation should be
sufficient. It would be preferable to have had an in-store market test
for further assessment of marketing prospects but supplies were not
available. Nonetheless, all previous supplies to stores moved extremely
quickly. And, household responses were all good in the home placements of
consumer samples by the Agricultural Experiment Station in work directed by
Lill ian Zapata of their staff.
A question in some quarters is what the future holds for rice demand
in Puerto Rico. As noted in Figure 6, rice imports based on the 1966-76
trend is upward. Food Stamp Plan effects increased, it is believed, rice
use in 1975 and 1976. The expanded Food Stamp program was introduced the
latter part of 1974. Without this impetus, and using the 1966-73 experience,
rice imports were trending down somewhat. Forecast was about 2.9 million
hundredweight for 1985 versus a 3.9 million in 1985 using the full .period
including the Stamp Plan recent effect.
Undoubtedly, the more likely occurrence will lie in between the two
above extremes. Rice usage will probably hold at or near 3.4 to 3.5
mil I ion hundredweight by 1985, Figure 7.
-------
---- - - -- -- ----
FIGURE 6
Total Rice Imports & Projections in Puerto Rico 1966-76
MILLION CWT.
4.2
4.0
3.8
3.6
3.4
3.2
1966-76 TREND _ - --o-
1966-73 TREND
66-7 68-9 70-1 72-3 74-5 76-7 78-9 80-1 82-3
YEAR
84-5
----------
---- --- -- --- ---
FIGURE 7
Per Capita Rice Imports & Projections in Puerto Rico 1966-76
POUNDS
140
130
120
110
100
90
80
70
1966-76 TREND
- __1966 -73 TREND
66-1 68-9 10-1 12-3 14-5 16-1 18-9 80-1 82-3 84-5
YEAR
112
Viewed on a per capita basis, rice imports per year show a decline on
either the full 1966-76 or the shorter 1966-73 pre-Stamp Plan period,
Figure 7. On the longer trend base, the decline is modest, being only
about 5 pounds per capita per six or seven years. The rate is almost
20 pounds over 7 years using the pre-Food Stamp time base. That is about
3 pounds per capita per year versus 1.0 to 1.5 with the Food Stamp base.
Unfortunately, the Food Stamp experience of only about 2 to 3 years is not
long enough to give a very stable base for estimating.
The source of the tendency for rice use to decline lies in the effect
of rising income levels in Puerto Rico. A survey still underway in Puerto
Rico of consumer food purchases reveals a sharp decl ine in rice purchases
as income rises, Figure 8. The decl ine is from near 200 pounds per capita
per year to the level of about 120 pounds per capita. That is a 40 percent
drop. Here, a lot of caution in interpretation is called for. Note in the
first place that in Figure 7 per capita imports have totaled only 110 to
130 pounds per capita. The simple average of the food purchase study data
is 160 pounds, Table 52. Therefore, obviously, the food purchase reports
are overstating rice purchases. It is not known whether overstatement
is more among heavy (low income) users or among the smaller (high income)
users. Survey experience suggests that the low income households are
overstating purchases because of recording or recall biases that are typical
of food purchase surveys. Studies in the U.S. have shown results that varied
considerably according to methodology used. There is good reason for similar
problems to exist in this case. Such problems are technical ones and do
not reflect on the consumer researchers capabilities themselves.
A summary judgment is that rice purchases in Puerto Rico will remain
at sufficient levels into the 1980 l s so as not to jeopardize the development
of rice production,drying, milling and marketing. There could be a danger
of over optimism and over expansion in terms of long range demand. The
situation should be reassessed after another two or three years experience
with the Food Stamp program1s impact.
.-J
--i
j
I J
~
--l
---'
-'
1 1
FIGURE 8
Per Capita Rice Purchases by Income Categories, Puerto Rico, 1977
POUNDS
250
...... .......
200
w
~,
....... , , , .......150
100
50
<: 1 1-2 2-3 3-4 4-5' 5-6 6-7 7-8 8-9 9-10 10-15 15 +
THOUSAND DOLLARS
114
The percentage decline in rice purchases per capita by income, according
to the Zapata study, is about 25 percent. If this percentage decline is
applied to the observed rate of imports, it would overstate the potential
reduction since all households are not moving to a $15,000 and over income.
A more reasonable interpretation would be on the order of perhaps an over
all IS percent decline in the long run. That would reduce the 3.8 million
hundredweight level to 3.2 million hundredweight. Puerto Rican production
of as much as 600,000 hundredweight would represent a 19 percent market
share which should be reasonably obtainable. Again, this is from 10,500
acres of rice, double cropped, and permits an 80 hour/week operation of
the proposed mill with a 240 hundredweight per hour capacity of rough
rice.
Table 52. Average Rice Purchases by Income Categories, Puerto Rico Consumer Survey, 1977
Distribution Distributionof families, Average riceIncome categories of survey1975, in purchasehouseholdsPuerto Rico
percent
Less than $1,000 $ I ,000 - $ 2 , 000 $2,000 - $3,000 $3,000 - $4,000 $4,000 - $5,000
7. 1 9.4
13.7 11.4 11.2
1.9 8.9
13 .8 10.0 13.8
$5,000 - $6,000 $6,000 - $7,000 $7,000 - $8,000 $8,000 - $9,000 $9,000 -$10,000
8.6 8.6 6.3 3.9 3.9
9.6 9.9 6.9 4.3 2.7
$10,000 -$15,000 $15,000 or more
10.9 5.0
11.9 6.3
Total 100.0 100.0
Total number in survey Simple average (annual rate) Weighted average a/ (annual rate)
788
Ibs/capita
68.9 67.9 65.2 63.8 52. I
47.5 43.5 46.7 44.3 40.7
42. I 31.1
613.8
153.6 160.5
aWeighted by percent of households in Puerto Rico with respect to income group.
Source: Consumer expenditure survey under the direction of Lillian Zapata, Puerto Rico Agricultural Experiment Station.
.J
Chapter 13. Cost Effects of Size Variation in the Rice Production, Processing and Marketing System
Following completion and reporting of the analysis in the foregoing
chapters, the Department of Agriculture of Puerto Rico requested information
as to cost effects of changes in the size of the Puerto Rican rice industry.
Such information was desired for legislative discussions pertaining to
enabling legislation. In response thereto the rice dryer-storage and the
milling costs were examined over a range of plant sizes and total hours
of operation. The size of the rice mill represented the key consideration
with dryer-storage facil ities adjusted to meet mill operation needs. Govern
ment ownership of the potential rice land provides flexibility from the
production standpoint.
Rice Milling
Data were formulated for three sizes of rice mills: those with normal
operating capacities of 200, 240, and 400 cwt./hr. Hours of operation were
varied from 40 to 168 per week, using internal stages of 80 hours (two
labor shifts) and 120 hours (three labor shifts). Attainment of 168 hours
per week involves four shifts operating over a seven day week instead of a
five day week for the other schedules.
Construction costs for the three mill sizes ranged from about 4.0
million dollars for the 200 cwt./hr. mill to nearly 4.5 million for the 240
cwt./hr. size and 5.6 million for a 400 cwt./hr. mill, Table 53. Estimated
costs reflect both early 1978 construction and equipment prices and inter
national exchange rates. The United States is not a major manufacturer
of rice milling equipment. Rice machinery to a considerable extent would
be obtained from Japanese sources because they are one of, jf not, the leading
rice equipment manufacturers. Thus the yen to dollar exchange rate is
important in cost calculations.
Economies of size (scale of operation) are immediately evident from
the construction cost data. For example the cost of buildings for a 400 cwt./hr.
as compared to a 200 cwt./hr. mill are only 41 percent larger. Equipment
115
- ..-.~..- ..---..-.
116
Table 53. Rice mill construction cost estimate for three sizes of mills, Puerto Rico, 1978
200 cwt/hr 240 cwt/hr 400 cwt/hrItem mi 11 mi II a mill
thous. dollars
Buildings Rough rice 231 309 450 Mil I 325 325 325 Milled rice storage &
shipping 371 465 665
Packaging 91 107 120 By-products & maintenance 68 68 80 Warehouse 240 240 260 General offices & others 58 58 58
Total 1,384 1,572 1,958
Equ i pment Rough rice 95 95 104 Mil I 1,063 I , 173 1,550 Milled rice storage &
shipping 398 398 510
Packaging 289 290 391 By-products 114 114 114 Millwright shop & others 60 60 60 Engineering cost 256 --.124 418
Total 2,275 2,484 3,147
Contingencies 346 415 491
Total 2,621 2,899 3,638
Grand total 4,005 4,471 5,596
Source: Based on consultive information from Ned Bond, Bond Engineering Inc., Houston, Texas.
aCosts as appear also in Table 40.
117
costs increase by only 38 percent. Such economies are directly reflected
in the annual average fixed costs which show corresponding changes, Table
54. Annual fixed cost for the 200 cwt./hr. mill total 571 thousand dollars
whereas 793 thousand covers the 400 cwt./hr. mill. That represents a
total fixed cost increase of about 39 percent for a 100 percent increase
in mill capacity.
Management and labor force requirements also must be considered by
plant size and hours of mill operation. Work crew requirements are noted
in Table 55. Economies of scale are evident here also since a doubling of
milling hours is not dependent on full doubling of the plant's labor input.
Increases at some positions are necessary, primarily in the bin setting
phase of the rough rice department, most phases of the milling department,
a few in clean rice department, and among several positions in the packaging
department. Management and labor costs at the 240 cwt./hr. mill range from
641 thousand dollars for a 40 hour week to 1.2 million dollars for a 168
hour week. In other words, a 300 percent increase in milling output is
achieved at only about a 100 percent increase in management and labor
expenditures.
Changes in the mill size also call for less than porportional changes
in the management and labor components. No increase is required in moving
from a 200 to a 240 cwt./hr. size plant. However, a 400 cwt./hr. plant does
involve additional labor and management personnel. Assuming an 80 hour
week for each size mill, the labor-management costs move from 813 thousand
dollars for the 240 cwt./hr. plant to 981 thousand, or 21 percent higher,
for the 400 cwt./hr. mill. If a 120 hour operation is used as a basis
of comparison labor-management costs increase from 1,004 thousand dollars
to 1,267 thousand or a gain of only 26 percent to obtain 66 percent more
mill output.
Changes in the cost per hundredweight for milling rice both as
operating hours per week are lengthened and as plant size changes are
presented graphically in Figure 9. From the graph presentation of the
data one can visually determine the best combination of mill size and
operating hours for a specified acreage and production of rice. Within
the foreseeable range of likely rice production in Puerto Rico over the
118
Table 54. Estimated annual average fixed costs for indicated size rice mills, Puerto Rico, 1978
200 cwt/hr 240 cwt/hr 400 cwt/hrItem mill mill mill
do II a rs
Dep rec i a t i on Buildings (35 yr. ba sis) 39,51.3 44,914 55,943 Equipment (10 yr. basis) 262,100 289,900 363,800
Interest on investment 199,798 223,550 279,438
Insurance 18,075 20,224 25,280
Taxes 43,701 48,896 61 , 120
Licenses 1,500 1,500 1,500
Leases and rentals 5,000 5,000 5,000
Other 1,320 1 ,320 I zl20
Total fixed costs 571 ,037 635,304 793,401
Source: Engineering estimates provided by Bond Engineering for building and equipment; other cost estimates'based on data from Economic Models for Rice Mills in the South, Louisiana and Arkansas Experiment Stations, Southern Cooperative Bulletin 187, June 1974, and subsequent revisions through 1976-77.
.1 1 1 1 J
Table 55. Management and labor force requirements for indicated size rice mills in Puerto Rico and estimated total annual expense according to number of hours of operation, 1978
200 & 240 cwt/hr mill 400 cwt/hr mi IIAnnual salaryItem hours/week hours/weekor hourly 40 So 120 168 80 120wage rage
do II a rs dollars/year do II ars/year
Rough ri ce Warehouseman 12,000 12,000 12,000 12,000 12,000 12,000 12,000 Asst. warehouseman 8,000 ---a 8,000 8,000 Sample man 3.79 7,883 7,883 7,883 8,277 7,883 7,883 Bin setter 3.79 7,883 15,766 23,650 33, 109 15,766 23,650 Sanitation 3.79 7,883 7,883 7,883 8,277 7,883 7,883 Buyer 15,000 15,000 15,000 15,000 15,000 15,000 15,000 Asst. buyer Subtotal 50,649 58,532 66,416 84,663 58,532 74,416 \.0
Mill i ng Superintendent 35,000 35,000 35,000 35,000 35,000 35,000 35,000 Head mi II er 20,000 20,000 40,000 60,000 80,000 40,000 60,000 Huller machine operator 3.79 7,883 15.766 23,650 33, 109 15,766 23,650 Paddy machine operator 3.79 7,883 15,766 23,650 33, 109 15,766 23,650 Floorman 3.79 23.650 47,300 70,949 99,328 47,299 70,949 Bin setter 3.79 7,883 15,766 23,650 33, I09 15,766 23,650 Sanitation 3.69 15,300 23,026 23,026 24, I 77 23,026 23%026 Subtotal 117,599 192,624 259,925 337,832 192,623 259.925
Clean rice Shipping clerk 12,000 12,000 12,000 12,000 12,000 12,000 12,000 Asst. shipping clerk 8,000 8,000 8,000 8,000 8,000 Qual ity control 3.79 7.883 15,766 23,650 33,109 15.766 23,650 Blender 3.79 7,883 7,883 7,883 8,277 7,8H3 7,883 Sackman 3.81 7,925 7,925 7,925 8,321 7,925 7,925 Sewer 3.79 7,883 7,883 7,883 8,277 7,883 7.883 Scaler 3.79 7.883 7,883 7,883 8,277 7,883 7,883 Forklift operator 3.84 7,987 7,987 7,987 8,387 7,987 15,974
continued
Table 55. continued
200 & 240 cwt/hr mill 400 cwt/hr mi 11Annual salaryItem hours/week hours7week or hourly 40 80 120 168 80 120wage rage
do 1I a rs do 11 a rs/yea r dollars/year
Clean rice (continued) Loaders 3.69 15.300 15.300 15,350 16, I 18 15,350 23,026 Monitor 3.69 7,675 7,675 7,675 8,059 7,675 7,675 Car cleaner 3.69 7,675 7,675 7,675 16, I 18 15,350 15,350 Sanitation 3.69 7,675 7,675 7,675 8,059 7,675 15,350 Subtotal 97,769 105,652 121,586 143,002 121,377 152,599
Packag i ng Manager 12,000 12,000 12,000 12,000 12,000 12,000 12,000 Clerk 3.79 7,883 7,883 7,883 8,277 7,883 7,883 Operators 3.79 7,883 15,766 23,650 33, I09 23,650 47,299
NPackers 3.79 15,766 23,650 31 ,533 49,664 39,416 63,066 0
Scalers 3.79 7,883 7,883 15,766 24,832 15,766 31,533 Supplyman 3.79 7,883 7,883 7,883 8,277 7,883 7,883 Take-off 3.79 7.883 7,883 15,766 16,555 23,650 31.533 Forklift operator 3.84 7,987 7,987 15,974 16,773 15.974 23,962 Subtotal 75,168 90,935 130,455 169,487 146,222 225,159
By-products Se~."e rs 3.79 7,883 7,883 7,883 8,277 7,883 7,883 Sealers 3.79 7,883 7,883 7,883 8,277 7,883 7,883 Sackers 3.81 7,925 7,925 7,925 8.321 7,925 7.925 Loaders 3.69 7,675 7.675 7.675 8,059 7,675 15,350 Grinder operator 3.79 7,883 7,883 7,883 8,277 7,883 7,883 Qual ity control 3.79 7,883 7,883 Sanitation 3.69 7,675 7.675 7,675 8,059 7,675 7!675 Subtotal 46,924 46,924 46,924 49,270 54,807 62,482
continued
I
--l , 1-1 , 1 J
Table 55. continued
Itern Annual salary or hourly 40
200 & 240 cwt/hr mill hours/week 80 120 168
400 cwt/hr mi 11 hours/week 80 120
wage rage
do 11 a rs dollars/year dollars/year
Maintenance Millwright Asst. millwright Helper mi 11wright Electrician San i tat ion Subtotal
12,000 3.79 3.79 3.79 3.69
12,000
7,883 7,883 7,675
35,441
12,000
7,883 7,883 7,675
35,441
12,000
7,883 7,883 7,675
35,441
12,000 8,277 8,277 8,277 8,059
44,890
12,000 7,883
7,883 7,675
35,441
12,000 7,883 7,883 7,883 7,675
43,324
Administrative Plant manager As s t. manage r Bookkeeper Asst. bookkeeper Sec reta ry Accountant Clean rice salesman By-product salesman Programmer Key punch operator Watchman Subtotal
75,000 20,000
7,000 5,500 7,000
10,000 40,000
6,000
75,000
7,000
7,000
6,000 95,000
75,000 20,000
7,000
7,000
12,000 121 ,000
75,000 20,000 7,000
7,000 10,000
18,000 137,000
75,000 20,000
7,000 5,500 7,000
10,000
24,000 148,600
75,000 20,000
7,000
7,000 10,000 40,000
12,000 171 ,000
75,000 20,000
7,000 5,500 7,000
10,000 40,000
18,000 182,500
N
Total
Fringe benefits b 518,550
122,565
651,108
162,332
797,747
206,324
977,744
260,323
780,002 1,000,405
201,001 267,122
Grand total 641 , II 5 813,440 1,004,071 1,238,067 981,003 1,267,526
~ indicates position not necessary. Calculated at 30 percent on all salaries and wages except plant manager and mill supervisor.
Source: Based on work force data reported in Economic Models for Rice Mills in the South, Holder, Morrison and Traylor, Southern Cooperative Series Bulletin 187, June 1974. Salary and wage rates are from survey data in Puerto Rico on labor costs. Calculations of differences in wage rates between the U.S. mainland and Puerto Rico in the nondurable industries indicated that results were generally comparable to the procedure used.
Table 56. Estimated annual average variable costs for indicated size rice mills, Puerto Rico, 1978
200 & 240 cwt/hr mill 400 cwt/hr mi 11 Item hours/week hl"ll U°<;./wppk
40 ~'~ 120 168 80' 120
dollars dollars Variable costs, others
Utilities Interest on working capital a
Taxes on inventories Insurance on rice stocks Repairs & maintenance Fumigants Outside storage Refuse disposal Mill supplies Bags & containers Broker fees or office salesmen Other Miscellaneous
Total
29,415 113,382
3,146 1,888
25,325 5,348
34,921 6,449
19,348 147,076
15,730 25,797 17,775
b445,600
83,684 476,206
12,899 5,506
106,964 22,808
147,076 27,213 81,796
595,852 65,437
109,009 74,875
1 ,809,325
46,404 226,765
6, 135 3,775
50,808 10,854 69,841 12,899 38,696
294, 151 31 ,460 51 ,594 35,550
b878,932
63,235 340,148
9,281 5,506
76,290 16,202
104,762 19,348 58,201
436,193 46,875 77,549 53,325
I ,306,915
77,864 340,148
12,427 7,393
89,032 21 ,707
139,682 25,797 77,706
563,606 62,291
103,503 71 ,100
1,592,256
106,335 476,206
18,561 1I , 168
133,390 32,571
209,524 38,853
116,402 828,499 N
N
93,751 155,255 106,649
2,327,164
aCalculated based on Puerto Rico conditions and 9% interest ra on working capital, see Appendix Table b . (Based on capital for 80 hour operating week or proportional increase or decrease.)
Compare with Table 38. Source: Derived from cost data in Economic Models for Rice Mills in the South, by Holder, Morrison
and Traylor, Southern Cooperative Series Bulletin 187, Arkansas Agricultural Experiment Station (Appendix Table 9, long grain rice, small model mill). 1973 data increased by ratio of 1.43 to derive 1978 U.S. variable costs; Puerto Rico costs estimated at 10% above stateside to allow for average overall higher costs in Puerto Rico due to import freight costs.
123
Figure 9. Dryer-storage and Mill ing Cost for Puerto Rican Rice, 1978
$/cwt. rough rice 4.00
3.50 Estimated mill ing cost
3.00
200 cwt/hr mi 11
2.50
240 cwt/hr 400 cwt/hr mi 11
120 /--.......-:::::::..~.-- ....... -~ 2.00
120 hr/wk -----
I. 50
1.00
Estimated dryer-storage cost
No. of acres
Thous. cwt. rough rice
124
next five to eight years the 240 cwt./hr. mill has the lowest total
operating cost. To be certain one needs to carefully examine the rice
volume in relation to the work schedule of the mill. Mill work schedules
like those in other processing plants are discontinuous cost functions.
A work week of 60 hours, for example, is impractical since it represents
one and a half work shifts. Use of 40, 80, 120 or 168 hour work weeks
are the practical options. Some overtime is possible but to deliberately
plan a 60 hour work week is not an acceptable alternative.
Combined milling costs for the respective sizes and operating hours
are shown in Table 57. First consider only the effect of hours of operation.
Excluding profits the cost for hundredweight of rough rice in a 240 cwt./hr.
mill ranges from $3.70 for a 40 hour work week down to $1.91 for one of
168 hours. Clearly the desirable strategy with a mill is to operate it as
many hours per week as possible assuming the rice required is available.
Next let us consider the effect of size of the mill. For an 80 hour week the
total milling cost in dollars/cwt. of rough rice are $2.87, $2.46 and $2.10
respectively for a 200, 240 and 400 cwt./hr. mill. In order to allow an
average profit which is comparable to stateside experience, about sixteen
cents per hundredweight rough rice basis, should be added.
Achievement of the above economies of scale is highly dependent upon
building a mill appropriate to the size of the crop to be processed. In
Puerto Rico, it is imperative that a mill be so designed that it can be
flexibly increased in capacity. This means that the initial building must
be built large enough to allow for such expansion. To do so places a higher
than otherwise initial cost on the mill relative to its beginning capacity
but such costs are recouped in subsequent savings. It is impossible to
capture these economies of scale if a so-called unitized mill is built.
Such a mill cannot be expanded; it can only be duplicated to increase milling
capacity thereby most all of the efficiencies of size are totally lost.
Rice Dryer·
Another major cost in rice processing is the initial step of rice
drying and storage. Design of a dryer facility should include enough
-, - - -1 1 - 1 1
Table 57. Total estimated annual operating cost for indicated size and hours of operation of a Puerto Rico rice mill and cost per cwt. of rough rice, 1978
200 cwt/hr mill 240 cwt/hr mi 11 400 cwt/hr mi II Item hours/week
80 120 1+0 hours/week
80 120 168 hours/week
80 120
Fixed costs
Variable costs Administration &
labor Other variable
costs
Avertising
Grand total
Mill rough rice output Acreage equivalent
Cost/cwt. rough rice 100% capacitya excluding profit including profit
dollars
571,037 571,037 635,304
dollars
635,304 635,304 635,304
do 11 a rs
793,401 793,401
813,4401,004,071 641,115 813,4401,004,071 1,238,067 981,0031.267,526
878,932 1,306,915 445,600 878,932 1,306,915 1,809,325 1,592,256 2,327,164
125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000
2.388,409 3,007,023 1,847,019 2,452,676 3,071,290 3,807,696 3,491,660 4,513,091 N \J1
cwt.
832,000 1,248,000 8,757 13,137
dollars
499,200 5,255
cwt. cwt. b998,400 1,497,600 1,995,840 1,664,000 2,496,000
10,509 15,764 21,009 17,516 26,274
dollars do 11 ars
2.87 3.03
2.41 2·57
3.70 3.86
2.46 2.62
2.05 2.21
I. 91 2.07
2.10 2.26
1. 81 1.97
aN 1 • • b fl' d'orma operating capacity. Assumes 2.5 weeks out per "year or p ant maintenance an repairs.
Source: Data from preceding tables 54, 55 and 56; advertising cost estimate from consultive agency in Puerto Rico.
126
capacity to care for peak rice harvesting days. For that reason the drying
unit acreages set at increments of about 5,255 acres can take stages of
6,000 acres rather than the 5,255 used for the mill. Other elements of the
dryer design also provide for extra capacity to handle a four week harvest, if
necessary, within about a two week's time frame if circumstances so require.
Construction costs for the dryer-storage unit are estimated to total
about 0.8, 1.3, 1.7 and 2.0 million dollars respectively to handle pro
duction from as much as 6, 12, 18 and 24 thousand acres, Table 58. Moving
from either 5,255 to 15,750 or from 6,000 to 18,000 acres is a tripling of
rice volume but dryer construction costs are only doubled. Economies of size
again are clearly evident. Depreciation and other fixed costs rise from 115
to 178, 228, and 272 thousand dollars respectively, Table 59.
Variable costs, labor, suppl ies, insurance, maintenance and similar
expenses, increase from 195 thousand dollars for the 5,255 to 6,000 acre
production capacity to 576 thousand for a 21,000 to 24,000 acre level.
That represents a tripling of variable cost to obtain a quadrupling of
dryer capacity.
Total operating costs for drying rice from 5,255 acres are forecast
at close to $311,000 per year. A size capable of serving three times as much
or 15,750 acres of production would operate at a yearly budget of approxi
mately $690,000, or only about double the cost, Table 59.
On a per bushel rough rice basis drying costs decline from 62 cents
to 42 cents per hundredweight, as the plant expands to handle 21 thousand
acres instead of 5 to 6 thousand. Profits, rough rice basis, for drying amount>
to about an additional 16 cents per hundredweight. The costs by plant size
are shown graphically in Figure 9.
Combined Costs
When one considers the combined dryer and mill costs savings from
larger scale operations the desirability of expanding the rice industry
to at least 15,750 acres of production becomes even more compel I ing.
Summary cost figures are noted in Table 60. timates for a 400 cwt./hr.
mill are not shown since that size mill does not appear to be suited to
the acreage prospects in Puerto Rico.
127
Table 58. Rice drying~storage system, construction costs, Puerto Rico, 1978
Number of acres, double croppedItem 5,255 8,000 a 10,509 15,750 21 ,000
dollars
Bu i 1 ding Cos t
Concrete 129,230 161,609 212,533 278,428 340,114 Metal buildings 22,098 24,220 22,098 22,098 29,818 Wilting tanks 46,322 60,890 87,928 121,607 148,550 Drying tanks 109,361 145.494 214,720 311,265 380,227 Misc. structural 47,137 62,751 69,959 85.507 101,628steel
Total building cost 354,148 454,964 607,238 818,905 1,000,337
Equipment Cost
Drying tanks 12,968 22,220 24, 167 33,575 39,213 Drying fans 22,838 40,829 44,389 63,107 73,705 Stirring devices 24,387 41.795 45.44LI 63, 176 73,785 Bucket elevators ]2,618 76,370 83,000 87,706 102,435 Screw conveyors 65,845 118,013 128,278 181 ,305 211,751 Misc. machinery 120,695 116,945 129,945 130,396 152,452
& equi pment Electrical system 67,741 92,285 100,335 125,941 156,929 Total equipment 387,092 508,457 555,558 685,206 800,270cost
Tota 1 bu i 1 ding & 741,240 963,421 1,162.796 1 , 504, 111 1,800,607equipm,nt cost
bOther costs 82,360 105,976 129,200 167,123 200,067
South Coast loading 20,000system
Grand total 823,600 1,089,397 1,291,996 1,671,234 2,000,674
a Based on reduction in equipment as indicated by Jim Thomas Company as to number of wilt tanks and drying tanks required for the indicated volume of production.
b Includes freight cost for delivery of equipment and materials to Puerto Rico and engineering fees.
Source: Based on data furnished by Jim Thomas Construction Company, Houston, Texas.
128
Table 59. Parallel systema rice dryer-storage system operating cost estimate, Puerto Rico, 1978
AcresItem 5,255 8,000 10,509 15,750 21 ,000
Cwt. rough rice 499,200
Fixed costs b Building depr. 14, 166 Equipment depr. c
38,709 Insurance-- d
bldg. & equip. 6,453 In~erest on d
Investment 41 , 180 Taxesd 15,245
Total fixed costs 115,753
Variable costs
Direct labor 104,500 Electricity 23,040 Dryer fuel 29,838 Building repair 5,358 Equipment repair 11,742 Insurance on rice 15,354 Fumigation 1,680 Interest on operat
ing capital 3,588
Total v,riable costs 195,100
Grand total 310,853
Cost per cwt. rough ri ce 0.62 including profit 0.78
760,000
18,199 52,846
8,518
54,358 19,971
153,892
121 ,400 30,643 39,685 7,126
15,617 20,421
2,234
4,772
241,898
395,790
0.52 0.68
998,400
do 11 a rs
24,290 55,556
10,131
64,653 23,935
178,565
189,000 46,080 59,676 10,706 23,484 30,708
3,360
7,176
370,190
548,755
0.55 0.71
1,497,600
32,756 68,521
13, 100
83,595 30,947
228,919
189,000 69, 120 89,514 16,074 35,226 46,062
5,040
10,764
460,800
689,719
0.46 0.62
1,995,000
40,013 80,027
15,681
100,067 36,893
272,681
214,OOoe 92, 160
119,352 21 ,432 46,968 61,Lt16 6, ]20
14,352
576,400
84'9,081
0.42 0.58
a'nvolves two lines for dumping and all subsequent stages for scalping, wilting, drying and storage.
bTwenty-five year rate. cTen year rate.
d'ncrease by ratio of increase in investment. Interest cost of 10% or loan I ife average of 5.0% of initial loan. Insurance costs based on $8.00 per $1,000 valuation. Taxes based on 30% of original value (new) and a millage rate of 63 ($63 per $1,000 valuation).
eEstimate $25,000 added labor needed.
Source: Based on data from Jim Thomas Construction Co., Houston, Texas.
129
Table 60. Rice Dryer-Storage and Milling Cost at Indicated Size Plants and Hours of Operation and Potential Subsidy Cost
RiceItem 1980 1981 1982 1983Productiona 1979
thous. cwt. dollars/cwt. rough rice
A. Dryer-Storage & Milling Costs (including profit)
200 cwt/hr mi II
80 hr. wk. 831.2 3.67 3.93 4.20 4.50 4.81
120 hr. wk.
240 cwt/hr mi II
40 hr. wk.
1,247.9
499.2
3.24
4.64
3.47
4.96
3.71
5.31
3.97
5.68
4.25
6.08
80 hr. wk. 998.4 3.33 3.56 3.81 4.08 4.36
120 hr. wk.
168 hr. wk.
1,497.6
1,995.0
2.83
2.65
3.03
2.84
3.24
3.03
3.47
3.25
3.71
3.47
B. Potential Subsidy to Producer to Achieve $9.00/cwt. if U.S. Rice Is at loan level
200 cwt/hr mill
80 hr. wk. 831.2 1. 48 0.96 0.39 0.00 0.00
120 hr. wk. 1,247.9 1.05 0.50 0.00 0.00 0.00
240 cwt/hr mi II
'.0 hr. wk. 499.0 2.45 1.99 1. 50 0.98 0.42
80 hr. wk. 998.4 1. 14 0.59 0.00 0.00 0.00
120 hr. wk.
168 hr. wk.
1,497.6
1,995.0
0.64
0.46
0.06
0.00
0.00
0.00
0.00
0.00
0.00
0.00
200 cwt/hr mill (47.5 wks/yr)
80 hr. wk. 760.0
Dryer-storage-mllling cost 4.00 4.28 4.58 4.90 5.24
Potential subsidy I. 81 1. 31 0.77 0.20 0.00
aRice production assuming 95 cwt. annually per acre on a double cropping system would equal the following: 499,200 cwt. = 5,255 acres; 760,000 cwt. = 8,000 acres; 831,200 cwt. = 8,750 acres; 998,400 cwt. = 10,509; 1,247,900 cwt. 13,136 acres; 1,497,600 cwt. = 15,750 acres; 1,995,000 cwt. = 21,000.
Source: Computed from data on tables 49, 57 and 59. Assumes 7 percent annual inflation rate.
130
Clearly the most costly arrangement is to have a 240 cwt./hr. mill
which operates only 40 hours per week and a drier geared to only 5,250
acres of rice. Combined costs would attain $4.64 per hundredweight
according to our estimates for 1979. Second least attractive is 8.750
acres served by a 200 cwt./hr. mill operating on an 80 hour week plus
its assocaited dryer and storage plant. Costs in this event would total
about a dollar less or about $3.71 per hundredweight of rough rice.
Most of the potential processing cost savings associated with scale
of operations are achieved at the 15,750 acre production level when it
is coupled with a 240 cwt./h~ mill operation on a three shift 120 hour
work week with related dryer service. The cost per hundredweight
decl ines almost another dollar to $2.83. Table 60. These savings, as
noted below, can be of considerable significance.
Impact on Potential for Subsidy Payments to Rice Growers
Part of the program arrangements for the initiation of rice production
in Puerto Rico was the decision to guarantee $9.00 per cwt. to rice growers.
This does not present a problem unless rice prices fall below target levels
in the United States and descend as low as the loan value. The preliminary
1978 crop announcement by the U.S. Department of Agriculture was for a loan
level of ~v.31 per hUilr'redweight. Later it was raised slightly.
Given the foregoing price guarantee the question arises as to how
much subsidy payments to producers might be. Section B, Table 60, presents
the results of an examination of this question. First let us review the
procedure used. The loan rate was applied to California rice and then
converted to a milled rice basis. Transportation charges to Puerto Rico,
brown rice basis, were calculated to arrive at a Puerto Rico c.i.f. price
equivalent price is $19.29 for milled rice.
Since Puerto Rican rice must at least be competitive price-wise, the
$19.29 price is used as a mill door price for the domestic rice. From
this is deducted the estimated drying-storage and milling costs by size of
plant and hours of operating. The results are converted to a rough rice
131
basis. The latter becomes the price the mill can pay for rice delivered
to the dryer at the mi II. Increases in rice processing costs result in
correspondingly lower prices to rice growers. Therefore it is important
that as optimum a size as possible of processing facilities be selected
sjnce processing costs would thereby be lowered and prices payable to
growers could be higher.
The difference between what the mill could afford to pay for rough
rice and the $9.00 quaranteed price was estimated for each mill size and
operating hours combination associated with the rice acreage it would serve.
The findings are presented in part B of Table 60. Production of 5,255
acres of rice would require subsidies to rice growers for at least five
years, assuming U.S. Iilainland rice was at the postulated loan levels.
With 8,750 acres a subsidy potential exists for three years. Quite
clearly 13 to 16 thousand acres is a more efficient level from the rice
processing cost standpoint. With 10 thousand acres and a 240 cwt./hr. mill
a subsidy would be possible for only two years, $1.14 per cwt. the first
year and $0.59 the second. It is hardly practical to achieve 16 to 21
thousand acres at the outset even though it will reduce the subsidy
potential to essentially only one year. But movement to the 13 to 16
thousand acre level should be made as soon as practical and the dryer
and milling facilities should be designed with this in mind from the outset.
Effect of Initial Acreage and Mill Authorizations
A total of 8,000 acres and a 240 cwt./hr. mill week were authorized
by the Legislature for the beginning of the rice industry. These two decisions,
unfortunately, a,re not consistent with the econom'ics of the rice drying and
processing costs. Production of 760,000 cwt. of rice would occur at
expected average yields of 4,750 pounds per acre. Double cropping would
be practiced. That quantity would be short of the 998,450 cwt. throughput
of a 240 cwt./hr. mill operating on a two work shift (80 hour week) basis.
It would be equal to 60 hours per week, or a shift and a half, which
as noted earlier in this analysis is completely impractical.
Two alternatives appear to be available. Either increase the acreage
132
to 8,750 which may not be feasible in the short run, or build a 200
cwt./hr. mill. The latter could operate on an 80 hour week basis for
about 47.5 weeks out of the year. Either alternative can be costly at
the outset. The knowhow and the necessary production preparation and
inputs may not be available for 10,509 acres of production the initial
year. On the other hand building the smaller mill (200 cwt./hr.) to
match the 8,000 acres raises the potential subsidy to growers to $1.81
per cwt. the first year instead of the $1.14 with 10,509 acres and a 240
cwt./hr. mi lIon an 80 hour week. Furthermore unless acreage and mi II
size were jointly increased the possibility of a subsidy would exist for
four years instead of two. If rice prices in the U.S. were at loan levels
for all four years which is unlikely, the total subsidy at 8,000 acres
and the small mill could reach 3.1 million dollars. The economics of the
industry, as previously mentioned, call for 10,509 acres of rice production
as soon as feasible and expansion of the annual mill operating capacity to
240 cwt./hr. and its operation on an 80 hour week basis. With the latter
scale of operations the potential subsidy is 1.7 million dollars, a
possible saving of 1.4 million dollars. That is more than sufficient to
pay the added difference between the 4,005 and 4,471 thousand dollars,
respectively, between the cost of the 200 and 240 cwt./hr. rough rice
capacity mill. But operating costs would be higher so it is not an easy
solution. If the legislature would raise the acreage limit to 8,750 acres
initially and the 240 cwt./hr. rough rice capacity mill were built, the
potential subsidy would drop to 2.5 million dollars over a three year period,
or a saving of about $600,000 over the present arrangement.
-j
APPENDIX A
. COST OF PRODUCTION
135
Table A-I. Estimated Costs per Acre of Rice in the Sacramento Valley of California, 1977a
Cost/ Cost/Q •Unit Unit uantltyb Acre
VARIABLE COSTS
PREHARVEST: -I Seed
Ferti 1izer c Insecticided Herb i c idee Custom Air Appl ications:
Seed Fertilizer Insecticide Herbicide
Survey Levees Move Crawler Tractors Tractors Machinery Irrigation Machinery Labor:
Tractor & Machinery Irrigation Other Labor
Interest on Operating Capital
TOTAL Preharvest
HARVEST: Hauling f
gDryi ng Move Harvest Equipment Machinery Labor
Cwt. Cwt. Acre Acre
Cwt. Cwt. Acre Acre Acre Acre Acre Acre Acre
Hour Hour Hour Dol.
Cwt. Cwt. Acre Acre Hour
12.25 19.41 1. 51 6.29
2.50 1.25 1.46 2.50 1.40 0.45
14.81 8.82
25.00
6.00 4.50 4.50 0.09
0.15 0.45 0.65
14.18 6.00
1.61 1.93 1.40 1.87
1.61 9.16 1.40 1.87 0.33 1.00 1.00 1.00 1.00
4.01 1.00 2.86
67.27
58.94 58.94
1.00 1.00 1.92
19.72 37.47 2.10
11 .76
4.02 11 .45 2.05 4.68 0.46 0.45
14.81 8.82
25.00
24.06 4.50
12.87 6.05
190.29
8.99 26.97 1
0.65 14.18 11 .54
TOTAL Harvest 62.34
TOTAL VARIABLE COSTS 252.63
FIXED COSTS Tractors Acre 13. 17 1.00 13.17 Machinery & Equipment Acre 37.23 1.00 37.23 Land Cha rge h Acre 97.20 1.00 97.20
TOTAL FIXED COSTS 147.60
TOTAL COSTS 400.23
136
a Assumes a yield of 54.0 cwt./acre and a price of $9.00/cwt., so the gross revenue is $486.00/acre.
b Where the unit is an acre, the quantity is the portion of an acre covered with the given input(s).
c Includes nitrogen, phosphate, and zinc (35%).
d Includes Carbofuradine (40%) and Parathion.
e Includes Ordram and MCPA (87%).
f Custom rate, based on green weight of rice.
g Based on green weight of rice.
h Computed as 20% of gross revenue.
137
Table A-2. Estimated Costs per Acre of Rice in the Upper Gulf Coast Area of Texas, 1977a
Cost/ Cost/Unit Unit Quant i tyb Acre
VARIABLE COSTS
PREHARVEST: Seed Fertilizer c Insecticide d
Herb i c i de e Custom Air Applications:
Seed Fert iIi zer Insect ici de Herb ici de
Tractors Machinery Irrigation Machinery Labor:
t-
I Tractor & Machinery Irrigation
Interest on Operating Capital
Cwt. Cwt. Lbs. Acre
Cwt. Cwt. Acre Acre Acre Acre Acre
Hour Hour Dol.
15.00 18.44 0.37
10.35
2.35 2.00 1.90 2.35 7.72 8.95
26.50
5.50 5.50 0.09
1.20 2.12
17.50 1.50
1.20 5.07 1. 50 1.50 1.00 1.00 1.00
4.76 4.31
67.79
18.00 39. 10 6.41
15.53
2.82 10. 14 2.85 3.52 7.72 8.95
26.50
26.18 23.72 6.10
TOTAL Preharvest
HARVEST: f Hau I i n~ Drying Sales Commission Tractors Machinery Labor
Cwt. Cwt. Cwt. Acre Acre Hour
0.20 0.48 0.07 2.22 6.55 5.50
49. 40 49. 40 44.50
1.00 1.00 1.47
197.54
9.88 23.71 3. II 2.22 6.55 8.10
TOTAL Harvest 53.58
TOTAL VARIABLE COSTS 251. 12
FIXED COSTS Tractors Acre lO·n 1.00 10.27 Machinery & Equipment Acre 24.35 1.00 24.35 Land Charge g Acre 52.75 1.00 52.75
TOTAL FIXED COSTS 87·31
TOTAL COSTS 338.49
138
a Assumes a yield of 44.5 cwt./acre and a price of $9.00/cwt., so the gross revenue is $400.50/acre. Two harvests are obtained, due to a second growth from stubble. Yields are 42.5 cwt./acre from first harvest and 2.0 cwt./acre from second harvest.
b Where the unit is an acre, the quantity is the portion of an acre covered with the given input(s).
c Includes nitrogen, phosphate, and potash.
d .Includes Furadan and Parathion.
e Includes Propanil and Ordram.
f Based on green weight of rice.
g Computed as 14% of gross revenue less a corresponding share of drying costs on first harvest, second harvest computed on 25% of acreage.
139
Table A-3. Estimated Costsjer Cuerda for Rice in Puerto Rico. Two Crops per Year. 1977
Cost/ Cost/bUnit Unit Quantity Cuerda
VARIABLE COSTS
PREHARVEST: Seed Fertilizer c
Cwt. Cwt.
15.00 6. 15
2.40 12.00
36.00 73.80
Urea dInsecticide Herb ici de e
Cwt. Gal. Gal.
16.00 22.00 9.75
1.60 1.00 5.00
25.60 22.00 48.75
Custom Air Applications: Seed Cwt. 2.95 2.40 7.08 Ferti 1izer Cwt. 2.40 1.60 3.84 Insecticide Cuerda 2.25 3.00 6.75 Herbicide Cuerda 2.65 3.00 7.95
Tractors Cuerda 13.30 1.00 13.30 Machinery Cuerda 10.70 1.00 10.70 I rr igat i6n Machinery Cuerda 35.10 1.00 35.10 Labor:
Tractor & Machinery Hour 3. 10 4.80 14.87 Irrigation Hour 2.53 10.53 26.64
Interest on Operating Capital Dol. O. 12 123·33 14.80
TOTAL Preharvest 347.17
HARVEST: Haulin~f Drying Tractors Mach i nf ry Labor
Cwt. Cwt.
Cuerda Cuerda
Hour
0.25 0.60 6.12
19.48 3.10
111 .00 111 .00
1.00 1.00 2.57
27.75 66.60 6.12
19.48 7.97
TOTAL Harvest 127.91
TOTAL VARIABLE COSTS 475.08
FIXED COSTS Tractors Machinery & Equipment Land Cha rge g
Cuerda Cuerda Cuerda
22.37 38.43 45.00
1.00 1.00 1.00
22.37 38.43 45.00
TOTAL FIXED COSTS 105.80
TOTAL COSTS 580.88
140
a Assumes a yield of 95.0 cwt./cuerda (or 47.5 cwt./cuerda/crop) and a price of $9.00/cwt., so the gross revenue is $855.00/cuerda.
b Where the unit is a cuerda, the quantity is the portion of a cuerda covered with the given input(s).
c Assumes a complete 10-5-15 fertilizer.
d Includes Oiazinon and Malathion.
e Includes Propanil and 2-40.
f Based on green weight of rice.
g Assumed to be a flat rate of $45.00/cuerda. >
141
Table A-4. Estimated and Pro~ected Price Indexes for Selected Agricultural Inputs, 1967-1977
Agricultural Agricultural Year Wages Ureab Fertilizerc Chemicals Seed Gas d Diesel
- - - - Index - - - - - - - 1967 1.00 1.00 1.00 1.00 1.00 1.00 1.00
1968 1.08 0.91 0.94 1. 01 1.04 1.0 I 1.04
1969 I. 19 0.84 0.87 1.00 1.06 1.05 1.07
1970 1.28 0.84 0.88 0.98 1. 12 1.07 1.08
1971 1. 34 0.92 0.91 1.00 1.24 1.09 I. 12
1.42 0.83 0.94 1.03 1.35 1. 10 1.131972
1973 1. 55 0.94 1.02 1.05 1.67 1.20 I. 35
1974 I. 78 2. 10 1.67 I. 19 2. 15 1.62 2.17
r 1975 1.92 2.26 2. 17 1.60 2.45 1.77 2.33 I
1976 2.10 1.69 1.85 1. 74 2.41 1.89 2.46
1977 2.09 2.00 1. 91 1.56 2.52 1.81 2.40
1978 2. 19 1.97 1. 92 1.59 2.62 1.84 2.45
1979 2.28 1.95 1.93 1.61 2.72 1.88 2.50
1980 2.37 1.93 1.94 1.64 2.82 1.92 2.56
1981 2.47 I. 91 1.95 1.66 2.93 1.95 2.61
1.96 1.69 3.03 1.99 2.661982 2.56 1.89
1983 2.65 1.86 1.97 1. 77 3.13 2.02 2.71
1984 2.75 1.84 1.98 1. 74 3.23 2.06 2.76
1985 2 84 1.82 1.99 1. 76 3.33 2.10 2.82
a Values for 1977-85 are projections. See Table ·A-5 for projection equations.
b 45 - 46% nitrogen.
c Weighted average for all types of fertilizer.
d Regular, bulk delivery.
142
Table A-4 (continued).
Disk Autos Farm Wagons Moldboard Harrows f and and Other
Year Plowse Tandems Trucks Tractor Tra i Iers Machinery Tractorsg Combines h
Index _c - - - - - - - - - - 1967 1.00 1.00 1.00
1968 1.07 . 1.06 1.04
1969 1.00 1.00 1.12 I. 13 I. 10 1.00 1.00
1970 1.06 1.03 1.20 I. 23 1.16 1.04 1.07
1971 I. 13 I. 13 1. 31 1. 31 1.22 1.09 1.16
1972 1.24 I. 17 1. 37 1.37 1.30 I. 14 1.27
1973 1.37 1.24 1.45 1.55 1.39 1.27 1.46
1974 I. 74 1.48 1.61 1.94 1.59 1.58 1.83
1975 2.23 1.84 1. 91 2.25 1.97 1.86 2.33
1976 2.50 2.06 2.12 2.48 2.25 I. 94 2.67
1977 2.44 1.99 2.03 2.43 2.08 I. 93 2.58
1978 2.58 2.09 2.12 2.53 2.16 2.02 2.74
1979 2.72 2.19 2.21 2.62 2.24 2.10 2.90
1980 2.86 2.29 2.30 2.72 2.32 2.18 3.07
1981 3.00 2.39 2.38 2.82 2.40 2.27 3.23
1982 3. 14 2.49 2.47 2.92 2.49 2.35 3.39
1983 3.28 2.59 2.56 3.02 2.57 2.43 3.56
1984 3.42 2.69 2.65 3.12 2.65 2.52 3.72
1985 3.56 2.79 2.74 3.22 2.73 2.60 3.88
e Five bottoms.
f Ten feet wide.
g 90-99 PTO or belt horsepower.
h Self propelled, large capacity.
SOURCE: U. S. Department of Agriculture, ~ricultural Prices, SRS, Selected annual summaries.
143
Table A-5. Regression Results Used for Projection of Price Indexes for aSelected Agricultural Inputs
Estimated Coefficients for:
Input Yearb Shift Variablec Constant Term R2
Ag. Wages
Urea
Fert iIi zer
Ag. Chemicals
Seed
Gas
Diesel
,-
Moldboard Plow
Disk Harrows and Tandems
Autos and Trucks
Farm Wagons and Tractor Trailers
Other Machinery
Tractors
Combines
0.093 (12.72)
-0.022 (-0.76)
0.0093 (0.36)
0.025 (0.93)
O. 10 (5.43)
0.036 (3.40)
0.052 (3.91)
O. 14 (2.81)
O. 10 (2.57)
0.088 (5. 14)
0.099 (5.50)
0.082 (3.25)
0.083 (3.61)
0.16 (3.09)
0.20 (4.37)
1.23 (6.67)
0.91 (5.54)
0.38 (2.26)
0.61 . (5. 19)
0.50 (7.53)
0.95 (11.28)
0.44 (1.R5) .
0.28 (1.52)
0.22 (2.05)
0.49 (4.31)
0.35 (2.22)
0.35 (3.22)
0.43 (J .72)
-5.27
2.46
0.28
-0.72
-5.95
-I .47
-2.55
-8.78
-5.99
-4.97
-5.74
-4.59
-4.81
-10.40
99. I
93.6
93.0
78.6
97.6
97.7
98.8
93.4
91.6
94.9
97.2
91.4
96.8
93.8
144
a Ordinary least squares regression estimation was used to estimate coefficients. Numbers in parentheses below estimated coefficients are the computed Student's t-values. R2 denotes the multiple coefficient of determination for each regression equation. Time period used covers 1967 through 1976.
b 1967 = 67, 1968 = 68, ... , 1976 = 76.
c Equal to zero in 1967-1973 and equal to one after 1973.
145
Table A-6. Projected Costs per Acre of Rice in the Sacramento Valley of Cal ifornia, 1985a
Unit Cost/ Unit Q • buantlty
Cost/ Acre
VARIABLE COSTS
PREHARVEST Seed Cwt. 22.00 1. 61 35.42 Fertilizer c
dInsecticide Cwt. Acre
21.64 1.80
1.93 1.40
41.76 2.52
Herb i c i de e Acre 7.57 1. 87 14. IS Custom Air Applications:
Seed Cwt. 3. J3 1. 61 5.04 Ferti 1izer Cwt. 1. 56 9. 16 14.29 Insecticide Acre 1.80 1.40 2.52 Herb i ci de Acre 3. 13 1.87 5.85
Survey Levees Acre 1. 75 0.33 0.58 Move Crawler Tractors Acre 0.56 1.00 0.56 Tractors Acre 17.45 1.00 17.45 Mach i ne ry Acre 9. 18 1.00 9. 18 Irrigation Machinery Acre 44.00 1.00 44.00 Labor:
Tractor & Machinery Hour 10.50 3.09 32.48 Irrigation Hour 7.90 1.00 7.90 Other Labor Hour 7.90 2.86 22.59
Interest on Operating Capital Do 1 . 0.09 88.43 7.96 r
TOTAL Preharvest 273.88
r HARVEST:
fHau 1 i ng Cwt. O. 19 59.94 11.27 r Dry i ng g Cwt. 0.56 59.94 33.57
Move Harvest Equipment Acre 0.81 1. 00 0.81 Machinery Acre 15.45 1.00 15.45 Labor Hour 10.50 1.92 20.20
TOTAL Harvest 81· 29
TOTAL VARIABLE COSTS 355. 17
FIXED COSTS Tractors Acre 22.79 1.00 22.79 Machinery & Equipment Land Charge h
Acre Acre
81.52 97.20
1.00 1.00
81.52 97.20
TOTAL FIXED COSTS 201 .51
TOTAL COSTS 556.68
146
a Assumes a yield nf 54.0 cwt./acre and a price of $9.00/cwt., so the gross revenue is $486.00/acre.
b Where the unit is an acre, the quantity is the portion of an acre covered with the given input(s).
c Includes nitrogen, phosphate, and zinc (35%).
d Includes Carbofuradine (40%) and Parathion.
e Includes Ordram and MCPA (87%).
f Custom rate, based on green weight of rice.
9 Based on green weight of rice.
h Computed as 20Z of gross revenue.
I
147
Table A-7. Projected Costs per Acre of Rice in the Upper Gulf Coast Area of Texas, 1985a
Unit Cost/ Unit Quantityb
Cost/ Acre
VARIABLE COSTS
PREHARVEST: Seed Cwt. 27.00 1.20 32.40 Fertilizerc
dInsecticide Cwt. Lbs.
19.44 0.44
2.12 17.50
41.22 7.69
Herbicidee Acre 12.42 1.50 18.63 Custom Air Applications:
Seed Cwt. 2.94 1.20 3.53 Fertilizer Cwt. 2.50 5.07 12.67 Insecticide Acre 2.38 1.50 3.57 Herbicide Acre 2.94 1. 50 4.41
Tractors Acre 9.60 1.00 9.60 Machinery Acre 9.85 1.00 9.85 Irrigation Machinery Acre 42.27 1.00 42.27 Labor:
Tractor & Machinery Hour 9.60 4.76 45.69 Irrigation Hour 9.60 4.31 41 .40
Interest on Operating Capital Dol. 0.09 95.97 8.64
TOTAL Preharvest 281.57
HARVEST: Haul in~ f Cwt. 0.25 49.40 12.32 Drying Cwt. 0.60 49.40 29.56 Sales Commission Cwt. 0.07 44.50 3. 11 Tractors Acre 2.75 1.00 2·75 Machinery Acre 7.24 1.00 7.24 Labor Hour 9.60 1.47 14.13
TOTAL Harvest 69.23 r
TOTAL VARIABLE COSTS 350.80
FIXED COSTS Tractors Acre 18.72 1.00 18.72 Machinery & EquipmentLand Chargeg
Acre Acre
55.33 51.92
1.00 1.00
55.33 51 .92
r TOTAL FIXED COSTS 125·97
,
TOTAL COSTS 476.77
,
148
a Assumes a yield of 44.5 cwt./acre and a price of $9.00/cwt., so the gross revenue is $400.50/acre. Two harvests are obtained due to a second growth for stubble. Yields are 42.5 cwt./acre from first harvest and 2.0 cwt./acre from second harvest.
b Where the unit is an acre, the quantity is the portion of an acre covered with the given input(s).
c Includes nitrogen, phosphate, and potash.
d Includes Furadan and Parathion.
e Includes Propanil and Ordram.
f Based on green weight of rice.
g Computed as 14% of gross revenue less a corresponding share of drying costs on first harvest, second harvest computed on 25% of acreage.
149
Table A-8. Projected Costs per Cuerda for Rice in Puerto Rico, Two Crops per Year, 1985 a
Cost! Cost! Unit Unit Quant i tyb Cuerda
VARIABLE COSTS
PREHARVEST: Seed cFerti I izer
Cwt. Cwt.
27.00 6.58
2.40 12.00
64.80 78.96
Urea Insecticide d
Cwt. Gal.
16.00 26.40
1.60 1.00
25.60 26 .J~O
Herbicide e Ga l. II .70 5.00 58.50 Custom Air Appl ications:
Seed Cwt. 3.69 2.40 8.86 Fertil izer Cwt. 3.00 1.60 4.80 Insecticide Cuerda 2.81 3.00 8.43 Herbicide Cuerda 3.31 3.00 9.93
Tractors Cuerda 16.61 1.00 16.61 Machinery Cuerda 12.54 1.00 12.54 Irrigation Machinery Cuerda 56.16 1.00 56.16 Labor:
Tractor & Machinery Hour 5.50 4.80 26.39 Irrigation Hour 4.50 10.53 47.38
Interest on Operating Capital Dol. 0.12 156.67 18.80
TOTAL Preharvest 464.16
HARVEST: Haulina f
Drying f
Tractors Machinery Labor
Cwt. Cwt.
Cuerda Cuerda
Hour
0.31 0.75 7.64
21.14 5.50
III .00 II I. 00
1.00 1.00 2.57
34.41 83.25 7.64
21 .14 14.13
TOTAL Harvest 160·57
TOTAL VARIABLE COSTS 624.73
r-
FIXED COSTS Tractors Machinery & Equipment Land Chargeg
Cuerda Cuerda Cuerda
29.87 63.30 45.00
1.00 1.00 1.00
29.77 63.30 45.00
r-TOTAL FIXED COSTS 138.07
I ~
j TOTAL COSTS 762.80
r-j
--'
150
a Assumes a yield of 95.0 cwt.!cuerda (or 47.5 cwt.!cuerda!crop) and a price of $9.00!cwt., so the gross revenue is $855.00!cuerda.
b Where the unit is a cuerda, the quantity is the portion of a cuerda covered with the given input(s).
c Assumes a complete 10-5-15 fertil izer.
d Includes Diazinon and Malathion.
e Includes Propanil and 2-4D.
f Based on green weight of rice.
g Assumed to be a flat rate of $45.00!cuerda.
APPENDIX B
MILL AND EQUIPMENT
153
WHITE RICE MILL 12 TONS/HR. INPUT (MEDIUM GRAIN)
(A.) BUILDINGS
I. Storage Fac iIi ty
A. From Drying to Storage & Into Mill
1. I-Truss for Conveyor 4'-6 1'
vii de x 80' Long
2. 7-21 'x57' Hopper Bottom Storage Tanks, Erected
3. Foundation for Bins
4. Elevator Pit w/Steel Cover
5. Truss from Storage to Mill 41-6 1
' Wide x 100 1 Long
6. 4-Structural Bents for Conveyor Supports
7. 3-181x44' Hopper Bottom Mill Bins, Erected
II. Mill
1. Level Building 70'x80'x50' High, 3 - 18'x44'-4" Bins
I I I. Milled Rice Storage & Shipping
A. 70 I x70'x50' High Clear Span Building w/Foundation (Bin Housing)
B. 70'x20'x50' High 4-Story Head House w/Foundation
C. 70'x25'x20' Hiqh w/Foundation lShipping)
D. 18'x70'x20' w/Foundation (Shipping, trucks)
E. 16-14'x42 1 High Hoppered Tanks, .Erected
154
IV. By·Products & Maintenance
20'x70'20' High, Divided into 3 Spaces
40'x70' By Products
- 30'x40' Shop
- 30'x30' Parts Storage
V. Package Plant
A. 25'x55'x50 ' High w/Foundation & Tank Supports
B. 14 - Steel Tanks, H' dia. x 24' Wall
VI. Warehouse (Dock Height)
100'xI50'x20' High. Dock Height Floor
VI I. General Office
35' x 50'
(B.) MACHINERY LIST
I. Paddy Storage
- Richardson Model JJ, 10 Bu., Automatic Scale
Upper Scale Hopper
- Lower Scale Hopper
1 - 11" X 6" Bucket Elevator, 50' C.c. w/Motor and Drive, 7.5 HP
I - 14" x H4' Screw Conveyor, w/Motor & Drive 10 HP
II" X 6" Bucket Elevator, 68 1 c.c. w/Motor and Drive, 7.5 HP
1411 x 160' Screw Conveyor, w/Motor & Drive, 15 HP
- 9" X 160' Screw Conveyor, w/Motor & Drive, 7.5 HP
511- 7" X X 50' Bucket Elevator, w/Motor & Drive. 5 HP
911 X 100' Screw Conveyors, w./Motor & Drive, 5 HP
2 - Head Platforms w/Enc10sed Ladders, 11 x 6
155
- Head Platform w/Enclosed Ladder. 7 x 5
I - Wide Catwalk. w/Bents for Ground Support41
II. Mill
- Eriez 811 Hump t1agnet or Equiv.
- Richardson Mod. JJ, 6 Bu. Cap. Automatic Scale or Equiv.
- S. Howes #15. 3 Screen, 2 Air Supercleaner w/10HP. 1800 RPM TEFC Motor & Drive or Equiv.
2 - Remo Mod. 2520 Dis Graders w/3HP. 900 RPM. TEFC Motor & Drive
1 - Remo Mod. RED 1218 IIRotol ipsell Sifter. w/lHP. 1800 RPM. TEFC Motor & Drive
3 - Remo Mod. 2527 Disc Graders w/3HP 900 RPM. TEFC Motors & Dri ves
6 - Satake Mod. WS-201 Width Separator w/1HP. 1200 RPM. TEFC Motors & Drive
1 - Remo Mod. 2534 Disc Grader 2/3HP, 900 RPM. TEFC Motor & Drive
- Eriez 811 Hump Magnet or Equiv.
4 - Satake HRIOLP Rubber Roll Shellers w/IOHP. 1800RPM. TEFC Motors & Drives
3 - Satake Mod. PS-120C Paddy Separators w/5HP, 1200 RPM, TEFC Motors & Drives
I - Remo 48" Closed Circuit "Duo" Aspirator w/2HP, 1800 RPM, TEFC Motors & Drives
2 - Satake WS-201 Thickness Graders, w/1HP, 1200 RPM. TEFC Motors & Drives
1 - Savaae/r,aunt Talc Feeder Size 330 Type 2B, w/l/2HP, 20-60 RPM Gearmotor
10 - Satake Mod. BA-15 Pearlers w/20HP 1800 RPM. TEFC Motors & Drives
1 - Remo 4tjll Open Circuit Aspirator, w/2HP, 1800 RPM. TEFC Motor & Drive
156
Remo Mod. RED 1523 "Roto1ipse" Sifter w/2HP, 1800 RPM, TEFC Motor & Drive
1 - Remo Mod. RED 121t$ "Roto1ipse" Sifter w/1HP, 1800 RPM, TEFC Motor & Drive
1 - Savage/Gaunt Talc Feeder Size 330 Style 2B, w1/?HP, 20-60 RPM Gearmotor
2 - Remo Mod. EH-1500 Rice Trumbo1s w/7 1/2HP, 230 RPM, Gearmotors
3 - Remo Mod. 2534 Disc Graders w/3HP, 900 RPM, TEFC Motors & Drives
1 - Remo Mod. UTD-725 Cvlinder Grader, Split Feed, w/5HP 1200 RPM, TEFC Motor & Drive
I - Remo Mod. UTS-725 Cylinder Grader, w/3HP, 1200 RPM, TEFC Motor & Drive
2 - Satake Mod. WS-201 Thickness Graders, w/IHP, 1200 RPM, TEFC Motor & Drive
2 - Satake Mod. BA-IS Pearlers, w/20HP, 1800 RPM, TEFC Motors & Drives
- Richardson Mod. JJ6BU Automatic Scale or Equiv.
- Remo 36" Enclosed ItDuoll Aspirator w/IHP, IHOO RP~", TEFC Motor & Drive
4 - Richardson Mod. FF Automatic Scale or Equiv.
Remo Mod. RED-1523 IIRotolipse li Sifter with 2HP, 1800 RPM, TEFC Motor & Drive
4 - Fabric Filters, 7000 CFM Capacity Complete w/Fan, Motor & Blowdown System
I I I. Transfer Equipment
10 - 7"x5" Steel Bucket Elevators, 421 cc, w/5 HP, 1800 RPM, TEFC Motors, S.M. Reducers & Drives.
21 - 51'x4" Steel Bucket Elevators, 42' cc, w/5HP, 1800 RPM, TEFC Motor & Drive
I - 9"x5" Steel Bucket Elevators, 42' cc, w/5HP, 1800 RPM, TEFC Motor & Drive
157
9"xl0' Std. Screw Conv. t 1 disch .• w/1HP, HinO RPM, TEFC Motor, Reducer & Drive
9"x10' Std. Screw Conv., 1 Disch., w/1HP, 1800 RPM, TEFC Motor, Reducer & Drive
6"xl00' Std. Screw Conv., 1 Disch., w/3HP, 1800 RPM, TEFC Motor, Reducer & Drive
9"x35 , Std. Screw Conv., 8 Disch., w/3HP, 1800 RPM, TEFC Motor & Drive
9"x35' Std. Screw Conv., 1 Disch., w/3HP, lBOO RPM, TEFC Motor & Drive
611x30 ' Std. Screw Conv., 1 Disch., w/1HP, 1800 RPM, TEFC Motor & Drive
9"x20 1 Std. Screw Conv., 4 Disch., w/2HP, lBOO RPM, TEFC Motor & Drive
91'x20' Std. Screw Conv., 1 Disch., w/2HP, 1800 RPM, TEFC Motor & Drive
6"x50 ' Std. Screw Conv., 1 Disch., w/2HP, 1800 RPM, lEFC Motor & Drive
91'x40' Std. Screw Donv., 4 Disch., w/3HP, 1800 RPM, TEFC Motor & Drive
911 x50' Std. Screw Conv., 1 Disch., w/5HP, 1800 RPM, TEFC Motor & Drive
12"xlOO' Std. Screw Conv., 1 Disch., w/l0 HP, 1800 RP~1, TEFC Motor & Drive
9"x40 I Std. Sc rew Conv., 3 Disch., w/3HP, 1800 RPM, TEFC Motor & Drive
611x40' Std. Screw Conv., 1 Disch., w/1HP, 1800 RPM, TEFC Motor & Drive
6"x40' Std. Screw Conv., 1 Disch., w/1HP, 1800 RPM, TEFC Motor & Drive
9"x40' Std. Screw Conv., 1 Disch., w/3HP, 1800 RPM, TEFC Motor & Drive
9"x30' Std. Sc rew Conv., 10 Disch., w/2HP, H:lOO RPM, TEFC Motor & Drive
158
Belt Conv., IV', 32' cc. Complete w/lrays, Motor & Drive
9"x30' Std. Sc rew Conv. 3 Disch., w/2HP, 1800 RPM, lEFC Motor & Drive
9"x30' Std. Screw Conv., I Disch., w/2HP, 1800 RPM, lEFC Motor & Drive
6"x20' Std. Screw Conv., 1 Disch., w/lHP, 1800 RPM, lEFC Motor & Drive
61'x60' Std. Screw Conv., I Disch., w/2HP, 1800 RPM, lEFC Motor & Drive
6"x20 1 Std. Screw Conv., 1 Disch., w/2HP, 1800 RPM, lEFC Motor & Drive
Fabrication for Air Ducts & Sheet Metal
IV. Machinery for Milled Rice Storage & Shipping
- FF Duplex Shipping Scale
- Bemis VOSlat Conveyor
- Double Pedestal Sewing Stand w/2 Model 80800E Sewing Heads
- Clean Rice Scalperator
4 - Size 6 Volumetric Feeders
- Belt Feeder
- 9" x 95 1 Screw Conv., w/5 HP Motor & Drive
- 9" x 75' Screw Conv., w/5 HP Motor & Drive
2 - 9" X 60' Screw Conv., w/5 HP Motor & Drive
- 9" x 40' Screw Conv., w/3HP Motor & Drive
4 - 9" X 55' Screw Conv., w/3 HP Motor & Drive
4 - 6" X 50' Screw Conv., w/2 HP Motor & Drive
4 - 24" x60 1 Belt Conveyors w/Motor & Drive
6 - I JI' X 6" Bucket Elevators w/7.5 HP Motor & Drive 521 Overall Ht.
159
I - 9'1 X 5" Bucket Elevator w/5HP Motor & Drive, 50' Overa II Ht.
4 - 5" X 4" Bucket Elevator w/3HP Motor & Drive, 50' Overall Ht.
- 121' X 60' Screw Conveyor w/7.5 Motor & Drive
- Traveling Belt Loader for Loading 100# Bags on Trucks (Optional)
- 241' X SO' Roll er Belt Conveyor w/Motor & Dr i ve
- 12" X 60' Screw Conveyors wl7.5 Motor & Drive
V. Machinery for By-Products
3 6" x 50' Screw Conv., w/l HP Motor & Drive
- 9" X 120 1 Screw Conv., w/7.5 HP Motor & Drive
- 12" X 100' Screw Conv., w/7.5 HP Motor & Drive
11.5 x 44 Champion Hammer Mill w/12S HP Motor
- 9" X 5" Bucket Elevator, 38' X.x. w/2HP Motor & Drive
- 1111 X 6" Bucket Elevator, 30' c.c. w/Motor & Drive
- 18 1 X 34'-4" High Hull Storage Bin w/Structural Supports, Found.
Pneumatic Bran Conveyor
- S. Howes C-550 Auger Type Bran Packer w/Motor & Drive
Structural Supports for Hammer Mill
9" x 20' Screw Conveyor wll HP Motor & Dri ve
- 500# Platform Scale
- 9" X 50 1 Screw Conveyor w/2HP Motor & Drive
VI. Machinery for Packaging Plant
2 - 12" X 80' Screw Conv., w/7.5 HP Motors & Drives
2 - Haysen Poly Packaging Machines (3# & 5#)
160
3 - Kraft Foldjn~-Sewing Lines, w/Adjustable Tables, Volumetric Fillers, etc.
......5 ~ Cneck Scales
4 - 2411 X 7' Belt Conveyors
- 2411 X 70' Roller Belt Conveyor w/Motor & Drive -.J
5 - Fabricated Metal Packing Tables
2 - Model v40B Caterpillar Fork Lifts, 4,000# Cap. at 2411
I - Plant Air Compressor Quincy Hodel QSI-235A wI Air Dryer
VII. Shop Equipment
Lath, Band Saw, Bench Grinders, Drill Presses, Metal Breaks, & Misc. Tools.
INCREMENTAL ADDITIONS FOR EXPANSION TO 10,500 ACRE PRODUCTION
I. Add 7 Paddy Storage Tanks
7 - Tanks
Foundation for Tanks
- 14"xI60' Screw Conv., w/15HP Motor & Drive
- 9"x160' Screw Conv., w/7.5HP Motor & Drive
2. Add to Mill Equipment
- Remo 2520 Disc Grader w/3HP Motor & Drive
2 - Remo 2527 Disc Graders w/3HP Motors & Controls
3 - Satake Model WS-201 Width Separator w/Motor & Drive
- Remo 2534 Disc Grader w/Motor & Drive
2 - Satake HRIO-LP Shellers w/Motors & Drives
- Satake Model PS-120C Paddy Separators, w/Motor & Drive
161
- Satake WS-201 Thickness Grader w/Motor & Drive
2 - Remo 48" Closed Circuit Duo Aspirators w/Motors & Drives
6 - Satake Model BA-IS Pearlers w/20HP Motors & Drives
2 - Remo EH-ISOO Rice Trumbols w/7.S HP Motors & Drives
2 - Remo 2534 Disc Graders w/Motors & Drives
1 - Remo Model UTD-725 Cylinder Grader w/Motor & Drive
- Remo Model UTS-725 Cylinder Grader w/Motor & Drive
- Satake t1od. \JS-201 Thickness Grader w/Motor & .Jrive
3. Addition to Milled Rice Storage & Shipping
Buildings 70'x70'x50' High Clear Span Building w/Foundation
16 - 14'x42 ' Hoppered Tanks
Mach i nery
4 - 9"x64 , Screw Conveyors
4 - 6!1x64 , Conveyors
4 - 24"x64 I Be I t Conveyors
4. Addition to Package Plant
- Haysen Poly Packaging Machine
2 - Kraft Folding Sewing Lines
2 - Check Scales
2 - Packing Tables
Electrical Wiring & Controls
APPENDIX C
DRYER AND EQUIPMENT
165
RICE DRYING FACILITIES PUERTO RICO
1. CONCRETE:
- Scale pit 137 cubic yards
2 - Truck dumper 60 cubic yards
3 - Receiving building 98 cubic yards
4 - Wilt tank area 138 cubic yards
5 - Scalper building 17 cubic yards
6 - Drier tank area 494 cubic yards
7 - Load out building 17 cubic yards
8 - Office building. If dri er is adjacent to mill one offi ce should suffic~ and should be supplied by the mi 11.
I I. METAL BUILDING:
- Receiving building 40 ' x60 ' x16 1
2 - Scalper building 25 1 x35 1
3 - Load-out scale building
II I. WILTING TANKS:
5 - 24 1 x24 1 Wilting tanks complete with perforated hopper bottoms, racks & pinion gates, roof vents, interior & exterior ladders and fan to bin transitions
IV. DRYING TANKS: r
14 - 27 1 diameter x 241 eave height special rice dryinq tanks complete with foundation ring, interior ladder, rice drying floor, floor supports and (4) roof vents
14 - Special fan to bin transitions
14 - Center sumps
14 - 10" Discharge augers
19 - Bin caps
166
V. SPECIAL RICE DRYING FANS:
19 - 26" Galvanized tube axial fans for drying bins and wilting tanks
14 - Special supplemental LPG heaters for drying bins
VI. SPECIAL RICE STIRRING DEVICES:
14 - Stirways for 27 1 drying bins with (2) down augers each and special drives
3 - Bin sweep augers with 2 - HP TEFC motors
VI t. BUCKET ELEVATORS:
E-I 90 1 King 12"x611 elevator complete with 20 HP drive. necessary spouting and accessories
E-2 60 1 Queen 101x6" elevator complete with 15 HP drive, necessary spouting and accessories
E-3 75 1 Queen 10"x6" elevator complete with 15 HP drive, necessary spouting and accessories
E-4 70 1 King 12"x6" elevator complete with 20 HP drive, necessary spouting and accessories
E-5 75 1 King 12"x6" elevator complete with 20 HP drive, necessary spouting and accessories
E-6 75 1 King 12"x6" elevator complete with 20 HP drive, necessary spouting and accessories
V I II . SCREW CONVEYORS:
SC-I 1611 x1321 Screw conveyor complete with 25HP drive
SC-2 14"x150 1 Screw conveyor complete with 20HP drive
SC-3 14"x18 1 Screw conveyor complete with 5 HP drive
sc-4 14"x84 1 Screw conveyor complete with 15 HP drive
SC-5A 14"x138 1 Screw conveyor complete with 25 HP drive
SC-5B 14"x138 1 Screw conveyor complete with 25 HP drive
sc-6 14"x126 1 Screw conveyor complete with 20 HP drive
SC-7A 14"x144 1 Screw conveyor complete with 25 HP drive
SC-7B 14"x144 1 Screw conveyor complete with 25 HP drive
SC-8 I4"X36 I Screw conveyor complete with 7 1/2 HP drive
167
IX. MISCELLANEOUS MACHINERY AND EQUIPMENT:
2 - 24··x76·· Scalperators complete with 5 HP drive, surge hopper, splitter value, discharge hoppers, bindicater and (2) cyclones (Complete scalping system)
I - 70 HPC 600 60/15 ton 70· xlO· non scale combination hydraulic truck dumper complete with (2) 50 HP electric motors
I - 60 ton 70·xI0· truck scale with model 31000 dial and CP-2 printer
I - Complete set of dumppit material with grate, cross ~upports
and control gate
- Reclaim conveyor discharge hopper
- Automatic loadout scale for weightinq in transit to mill
- Scale top hopper
- Scale bottom hopper
10 flP air compressor
X. ELECTRICAL SYSTEM:
Motor control center I-A complete
t1otor control center 2-A complete
Hotor control center 3-A complete
Panel 3-Al complete
Panel 3-81 complete
Panel 3-Cl complete
Single phase transformers (1) 15 KVA - (2) 5 KVA
I-A panel complete
1-8 panel complete
l-C panel complete
MPB main CB
Electrical accessories
Conduit, wire, boxes etc.
168
XI. MISCELLANEOUS STRUCTURAL STEEL:
- SC-IA Misc. conveyor supports for wilting tanks
2 - 300 lineal feet catwalk for drier tanks
3 - SC-5 & 6 Misc. conveyor supports for drying tank
4 - SC-4A cyclone supports
5 - Imbedded steel anchors (Does not include Re-Bar)
6 - Elevator base channels
INCREMENTAL ADDITIONS FOR EXPANSION TO 10,500 ACRE PRODUCTION
4 Wilting Tanks
12 Drying Tanks
Associated conveyors, etc. and related equipment.
APPENDIX 0
RICE PRICES
r
•
r
171
Tab Ie D-I. Average Pricesa F.O.B. Mills, Second Heads Rice, 1971172 1977178
Year & Month Cal ifornia Texas Louisiana Arkansas Avg.
Dollars per cwt.
1971172
August September
7.25 7.25
5.88 5.88
6. 13 6.13
6. 13 6.13
6.35 6.35
October 7.25 5.88 6.13 6.13 6.35 November 7.25 5.88 6.13 6.13 6.35 December 7.25 5.88 6.13 6. 13 6.35 January 7.25 5.90 5.90 6. 15 6.30 February 7.25 5.90 5.90 6.15 6.30 March 7.25 5.90 5.90 6.15 6.30 Apri 1 7.25 5.90 5.90 6. 15 6.30 May 7.25 5.90 5.90 6. 15 6.30 June 7.25 5.90 5.90 6. 15 6.30 July 7.25 5.90 5.90 6. 15 6.30
Average 7.25 5.89 5.99 6.14 6.32
1976/77
August September
11.25 11.25
9.00 7.00
6.75 6.75
9.00 7.00
9.00 8.00
October 8.80 7.00 7.00 7.00 7.45 November 8.80 7.00 6.75 7.00 7.39 December 8.80 7.00 6.75 6.50 7.26 January February March
8.80 8.80 8.80
6.50 6.00 6.00
6.75 6.25 6.25
6.00 6.00 6.00
7.01 6.76 6.76
Apri I May June
8.80 8.80 8.80
7.50 8.50 8.50
6.50 6.75 7.25
6.50 8.50 8.25
7.35 8.14 8.20
July 8.80 8.50 7.25 8.25 8.20
Average 9.21 7.38 6.75 7.18 7.63
continued
172
Table D-I. Continued.
Year & Month Cal ifornia Texas Louisiana Arkansas Avg.
Dollars per cwt.
1977/78
August 8.88 8.25 6.75 8.00 7.97 September 8.88 5.50 7.00 8.00 7.35 October 8.50 8.00 7.00 8.00 7.88 November 8.50 10.00 7.75 10.00 9.06 December 3.50 10.00 8.50 10.00 9.25 January 8.50 10.00 8.50 10.00 9.25 February 9.00 10.00 8.50 10.00 9.38 March 10.00 10.00 9.50 10.00 9.88
Average 8.85 8.97 7.94 9.25 8.75
a Mid-month price.
Source: U.S.D.A., Rice Market News, AMS, Grain Division, August 9, 1977 and other selected issues.
173
Table 0-2. Average Pricesa F.O.B. Mills, Brewers Rice, 1971/72
1977178
Year & Month Cal ifornia Texas Louisiana Arkansas Avg.
1971172
August September October November December January February March Apr i 1 May June July
Average
1976177
August September October November December January February March Apr i 1 May June July
Average
5.30 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.48
8.00 8.00 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.75 6.96
Dollars per
4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35
5.75 5.75 5.75 5.75 5.75 5.75 5.75 5.75 5.75 5.75 5.75 5.75 5.00 5.00 5.00 5.00 5.25 5.00 5.50 5.00 5.50 5.00 5.50 5.00 5.52 5.38
cwt.
4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35
5.75 5.75 5.75 5.75 5.75 5.60 5.00 5.00 5.60 6.00 6.00 5.50 5.62
4.59 4.64 4.64 4.64 4.64 4.64 4.64 4.64 4.64 4.64 4.64 4.64 4.63
6.31 6.31 6.00 6.00 6.00 5.96 5.44 5.44 5.65 5.81 5.81 5.69 5.87
continued
174
Table D-2. Continued.
Year & Month California Texas Louisiana Arkansas Avg.
Dollars per cwt.
1977/78
August September October November December January February March
6.75 6.75 5.75 5.75 5.75 7.00 8.00
10.00
5.00 5.00 5.50 5.50 5.50 6.50 7.75 8.00
5.00 5.00 5.00 5.00 6.50 6.75 7.75 9.25
5.50 5.50 5.50 5.50 6.50 6.50 8.00
10.00
5.56 5.56 5.44 :;.44 6.06 6.69 7.88 9.31
Average 6.97 6.09 6.28 6.63 6.49
a Mid-month prices.
Source: U.S.D.A., Rice Market News, AMS, Grain Division, August 9, 1977 and other selected issues.
175
Table D-3. Average Pricesa F.O.B. Mills, Bran Rice, 1971/72 - 1977/78
Year & Month Ca 1i forn i a Texas Louisiana Arkansas Avg.
Dollars per ton
1971/72
August 50.00 32.80 37.00 35.50 38.83 September 50.00 27.25 29.75 29.00 34.00 October 46.00 23.00 26.25 25.85 30.28 November 47.50 35.00 30.80 33.40 36.68 December 48.00 38.35 39.00 42.00 41.84 January 50.25 36.60 38.60 38.25 40.93 February 51.75 31 .75 38.00 33.10 38.65 March 51.60 33.10 37.20 34.80 39.18 Apr i 1 50.00 29.10 34.00 31.50 36.15 May 48.00 26.00 34.00 26.30 33.58 June 48.00 33.60 34.00 34.25 37.46 July 48.00 37.00 34.00 40.10 39.78
Average 49.09 31 .96 34.38 33.67 37.28
1976/77
August September October
86.00 86.00 86.00
65.00 77 .40 74.50
68.50 71.00 68.00
73.50 81.90 76.00
73.25 79.08 76.13
November 86.00 79.10 73.10 80.60 79.70 December 86.00 76.15 73.35 78.50 78.50 January February March
85.00 88.40 91.30
75.40 76.75 65.40
71 .90 74.40 64.50
75.00 82.75 65.75
76.83 80.58 71.74
Apri 1 May June
91.50 88.20 77 .50
57.00 55.00 51 .40
54.00 50.40 45.60
61 .90 56.80 50.90
66. 10 62.60 56.35
July 67.50 51 .75 44.50 51.40 53.79
Average 84.95 67.07 63.27 69.58 71.22
continued
r I
176
Table D-3. Continued.
Year & Month California Texas Louisiana Arkansas Avg.
Dollars per ton
1977178
August September October November December January February March
43.50 33.50 34.00 53.50 62.50 57.50 53.50 53.50
49.50 47.50 45.00 58.50 69.00 68.00 69.00 66.00
36.50 45.00 32.00 63.00 67.50 65.50 62.50 60.50
62.50 50.00 50.00 70.00 70.00 70.00 70.00 70.00
48.00 1.4.00 40.25 61.25 67.25 65.25 63.75 62.50
Average 48.94 59.06 54.06 64.06 56.53
a t1i d-month pr ices.
Source: U.S.D.A., Rice Market News, AMS, Grain Division, August 2, 1977 and other selected issues.
177
Table 0-4. Average Pricesa F.O.B. Mills, Head Rice, 1971/72, 1976/77, and 1977178
Year & Month Ca 1i forn i a Puerto RIco
Short ' Short Medium Long Grain Grain Grain Grain
Dollars per cwt.
1971172
August November January Apr i 1 July
10.98 10.98 10.50 10.75 10.75
10.75 10.75 10.75 10.75 10.75
10.13 10.11 10.13 10. 13 10.13
1976177
August November January Apri 1 July
15. IS 14.75 14.75 14.75 16.25
20.50 18.33 18.33 18.33 20.00
20.50 18.33 18.33 19. 17 20.00
25.00 22.83 22.83 22.83 22.83
1977178
August November January March
16.25 18.25 22.00 22.00
20.00 22.00 25.33 25.33
20.00 22.00 25.33 25.33
22.83 25.83 27.83 27.83
a Mid-month prices.
Source: U.S.D.A., Rice Market News, AMS. Grain Division, selected issues.
178
Table D-5. Season Average Prices, F.O.B. Mills, Head Rice, 1970/711976/77
Season Ca 1i forn i a Texas Louisiana Arkansas
1970 10.75
1971 11 .05
1972 11 .80
1973 24.20
1974 25.40
1975 20.65
1976 15. 15
Average 17.00
10.05
10.20
14.45
31.75
22.05
18.35
14.95
17.40
Dollars per
8.70
8.90
12.70
26.40
20.05
15.85
13.30
15.13
cwt.
10.10
10.25
14.35
30.80
22.40
18.10
15.30
17.33
......i
--l
......i
~
Source: Grant, Warren R., Rice Statistics, U.S.D.A., ERS, Commodity Economics Division, December, 1977.
.J
.......
179
Table 0-6. Average Prices Received for Rice by Producers and Mills, Cal ifornia and Texas, 1966-75
Cal ifornia Texas Price Price cYear Price to Mill Rice Spread. Price to Mill Rice Spreadc
Growersa Ca 1ifI) Growersa Houstond Docks
1966 4.75
1967 4.84
1968 5. 15
1969 4.80
1970 5.02
1971 5.24
1972 6.83
1973 11 . 10
1974 11 .70
1975 7.65
1966-75 avg. 6.71
1966-72 avg. 5.23
Ool1ars/cwt.
10.15
10.40
10.60
10.60
10.75
11 .05
11 .80
24.20
25.40
20.65
14.56
10.76
5.40
5.56
5.45
5.80
5.73
5.81
4.97
13.10
13.70
13.00
7.85
5.53
5.10
4.94
4.90
4.88
5.25
5.35
6.44
14.80
10.90
8.81
7. 14
5.27
Dol1ars/cwt.
10.00
10.05
9.80
9.90
10.05
10.20
14.45
31 .75
22.05
18.35
14.66
10.64
4.90
5. 11
4.90
5.02
4.80
4.85
8.01
16.95
11 . 15
9.54
7.52
5.37
aRough rice price per cwt.
bMil1ed rice price at California docks.
cGrower to mill price.
dMilled rice price at Houston mills.
Source: Grant, Warren R., Rice Statistics, USDA, CEO, December 1977.
APPENDIX E
RICE IMPORTS AND CALCULATION OF INTEREST ON WORKING CAPITAL
183
Table E-l. Rice Imports to Puerto Rico from the South and California, 1966-67 to 1976-77
Year South Imeorts
Cal ifornia Total
cwt. percent
of total cwt. percent
of total cwt.
1966-67 799,925 21.(.11.( 2,513,727 75.86 3,313,652
1967-68 870,1.(21 25. 12 2,593,909 71.(.88 3,1.(61.(,330
1968-69 752,782 23.01 2,515,692 76.99 3,268,470
1969-70 606,820 20.44 2.363,180 79.56 2,970,000
1970-71 688,673 20.83 2,618,880 79. 17 3,307.553
1971-72 801 ,316 24. 16 2,514.082 75.81.( 3.315,398
1972-73 709,195 21. 70 2,559.099 78.30 3,268,294
1973-74 611,599 19.89 2.465.380 80. 11 3,076,979
1974-75 935,538 27.43 2,473,520 72.57 3,409,058
1975-76 930.658 24,87 2,809,820 75. 13 3.740,478
1976-77 1 • 122,296 28.71 2,788,268 71.29 3.910,564
Source: Information furnished by Senor Lebron. DACO. Puerto Rico, to Frank Besosa.
184
Table E-2. Calculation of Interest on Working Capital for Puerto Rico Rice Mill (80 hr.; wk., 240 cwt/hr mill)
A. 998,450 cwt. needed to finance rough rice inventory of 60 day forward supply
166,408 cwt. for 60 days X $9 per cwt.
7$-:'-1-,4'-:9:-:7=-,-;6-=7-=5 i nven tory of rough ri ce
x 9% interest rate on working capital----:::....;;.. $134,791 interest cost of carrying 60 day rough rice inventory
B. Amount required to finance milled rice inventory of 30 day supply
998,450 cwt. rough rice
x 58% yield
579,101 cwt. milled rice/year
f 12 months
48,258 cwt. 30 day reserve supply
x 19.29 mill door price based on CIF San Juan price of U.S. price at loan level of $6.85 in 1979 which is 1978 loan rate increased
____ by 7% inflation factor
$930,897 value of milled rice 30 day inventory
x 9% interest rate for working capital
$83,781 interest cost of carrying 30 day milled rice inventory
C. $930,897 value of 30 day output of milled rice
x 9% interest rate on working capital
$83,781 interest cost of carrying credit on sales of milled rice
185 Table E-2 continued
Summary
$134,791 interest cost of carrying 60 day inventory 83,781 interest cost of carryi ng 30 day mi lIed rice inventory 83 2 781 interest cost of carrying cred it on sales of mi 11 ed rice 00 days)
$302,353 total interest cost
x 75% borrowed (remainder from permanent working capital)
$226,765 interest cost for rough rice, milled rice and credit float
rI
