The cost of handling and storing grain in Manitoba country grain elevators

Abstract

Branch line abandonment as proposed by the Royal Commission on Transportation in 1961 has concerned farmers, grain handling firms and others who are dependent upon the services provided by the railways. To the grain elevator companies rail line abandonment will mean a loss of revenue producing sites. In order for these firms to make rational decisions about the size and location of grain elevators, information on the cost of handling and storing grain is essential. This study was set up to analyze the cost structure of the Manitoba grain elevator industry for the crop years 1961/62, 1962/63 and 1963/64. The basis for the study is cost and grain handlings for the above three year period. The mathematical tool employed to discover functional relationships is regression analysis. The study was designed to discover the average cost for the entire industry for this period as well as to analyze what effect size, utilization and annex capacity have upon the cost structure. In order to study the effect of size it was necessary to stratify the grain elevators into five size groups. Costs were then studied for each group as well as for the industry as a whole. Major findings of the study are: 1. The estimated total average cost of handling and storing grain for the entire industry, during this period, was 9.54 cents per bushel per year with a standard error of 2.39 cents. 2. The most important single cost reducing factor in the grain elevator industry is the handling to capacity ratio. 3. For the industry as a whole the average per bushel cost of handling and storing grain decreases by one-half cent when the annex to capacity ratio increases by ten per cent. 4. For the industry as a whole the average per bushel cost of handling and storing grain decreases by approximately three-tenths of a cent when the utilization of the plant increases by ten per cent.