442 



Idaho Wheof Price, 1985-89 Average 

 Received by Formers and Net 



Jul Aug Sep Oct Nov Dec Jon Feb Ater Apr Moy Yun 



Received by Former 



Net of Holding Cost 



Rgurel. 



handling necessary to get the grain to terminal markets. However the costs of 

 storage, risk, and financing that the farmer ordinarily pays have not been 

 deducted. Farmer prices are generally lowest during the July to September 

 harvest glut, gradually rise through the marketing year, and plunge again at the 

 next harvest. The farmer or grain company is faced with a complex balancing 

 act. They trade off the need to pay near-term bills against the cost of continued 

 storage with the possibility of hitting a higher price. This is subject to the 

 constraint of trying to empty storage in preparation for the coming harvest. 

 The interest forgone by holding grain is between I<t and 2€ per bushel per 

 month. In addition, the marginal cost of storing the grain might be l<t or 2€ 

 per bushel per month (2« to 3<t for commercial elevators, less for on-farm 

 storage). Those who think prices will rise enough to cover these holding costs 

 will continue to store grain; those who don't will sell. When the cumulative 

 interest, storage and risk costs of holding grain in storage, say 3C per bushel per 

 month, are deducted from farmer prices, the net price is nearly level as shown 

 by the lower line in Figure 1. On average, there are no panicular time periods 

 when farmers can expect unusual net returns; one month appears about as good 

 as another. Therefore, the high farm prices which regularly occur in April and 

 May, do not imply disproportionately high net prices. Table D28 of the Henry 

 Report shows that shipments from lower Snake River ports actually slow during 

 that period, suggesting that shippers see no advantage in waiting until April or 

 May to sell. 



