Marketing Research Report No. 961

Transcription

1 Marketing Research Report No. 961 U. S. DEPARTMENT OF AGRCULTURE Enomic Research Service

2 ABSTRACT Average operating sts per bale of 42 West Texas gins for the season were: out-of-pocket--$2.1, down $1.65 or 7.6 percent from the season; total--$24.7, down $2.82 or 1.5 percent; and total standardized-- $26.82, down $2.66 or 9 percent. The plants, grouped by rated hourly capacity, ginned 16 percent of the total West Texas tton crop. mpared with , ginning volumes were up and sts down from all gin size groups. The average ginning volume for all groups increased 22 percent for the season, while the average rate of gin plant capacity use was up 9 percentage points--from 39 to 48 percent. Keywords: tton, ginning, sts, capacity, utilization. PREFACE This is the fifth annual report of tton gin operating sts based on a sample of West Texas gins. Previous reports are: tton Gin Operating sts in West Texas, U.S. Dept. Agr., MRR-831, Nov tton Gin Operating sts in West Texas, and , U.S. Dept. Agr., MRR-844, Mar tton Gin Operating sts in West Texas , U.S. Dept. Agr., MRR-93, Sept tton Gin Operating sts in West Texas , U.S. Dept. Agr., MRR-934, Aug Objectives of the research are to (1) determine the current sts of ginning on the igh Plains of West Texas and observe trends over time, (2) analyze the effects of changes in ginning volumes on ginning sts, and (3) nsider the possibilities of reducing operating sts through more efficient ginning. Gin st information'and rerds are mailed in annually for use in preparing these reports. The authors express their appreciation to the gin owners, managers, and acuntants for their ntinued support and assistance in this work. Washington, D.C. 225 June 1972 ii

3 TTON GN OPERATNG STS N WEST TEXAS by Dale L. Shaw and Charles A. Wilmot Agricultural Enomists Marketing Enomics Division NTRODUCTON This report, although ndensed, retains the same basic format as that for the season (see preface). The rates used to calculate standardized depreciation and interest sts were changed to more accurately reflect actual interest and depreciation rates. They are discussed in the appendix under sting methods. The gin sample is stratified into four groups, based on rated hourly capacities of the gin stand mplexes. These are: group 1--8 bales or less; group 2--9 to 11 bales; group to 2 bales; and group bales or more. Size and ntent of the gin sample vary slightly from year to year, mainly because of periodic plant modifications which frequently alter capacity. This necessitates an annual review and reclassification of some plants into other size groups and the filling of voids thus created. During the season, the 42 plants in the sample ginned a total of 254,789 bales--16. percent of the total ginnings for the West Texas area. FNDNGS Volumes ginned.--average volumes ginned were up this season, resulting in higher rates of gin plant capacity utilization, 1/ and lower per bale operating sts. mpared with last season, volumes in ranged from 1 percent higher for group 1 plants to 53 percent higher for group 2 plants; for all groups mbined, average volume increased 22 percent (table 1). Larger ginning volumes resulted in higher rates of ginning capacity utilization in each size group. The gin capacity utilization rate for all groups mbined increased 9 percentage points over last year--to 48 percent--the highest level since the season when the all-group average was 65 percent. sts per bale at actual percentages of capacity utilization.--total sample gin sts 2/ per bale were down in from for all size groups 1/ Ratio of volume ginned to estimated total seasonal ginning capacity without seed-tton storage. Based on typical ginning season of 96 operating hours and a sustained seasonal ginning rate capability set at 85 percent of rated capacity. 2/ Taken from gin rerds and submitted to uniform allocation procedures as outlined in the appendix. 1

4 Table l.--rated hourly capacities, volumes ginned, and capacity utilization, by ranges and averages, sample gin plants, West Texas, and seasons Rated hourly : Annual volume : Rate of capacity Gin size group: capacity jj : ginned utilization 2/ by season : Range Average Range Average Range Average Bales Percent : Group 1...: ,135-5,193 3, Group 2...: ,123-4,188 2, Group 3...: ,595-11,613 5, Group 4...: ,464-13,991 9, mbined...: ,123-13,991 4, : Group 1...: ,727-5,659 3, Group 2...: ,957-5,23 3, Group 3...: ,1-13,4 6, Group 4...: ,78-15,444 1, mbined...: ,727-15,444 6, / Based on observations and manufacturers' ratings of gin stand mplexes. Variations in group average between seasons are due to sample gin plant modifications which altered rated capacity and size group classifications. 2/ Ratio of volume ginned to estimated total seasonal ginning capacity without seed tton storage. Based on typical ginning season of 96 operating hours and a sustained seasonal ginning rate capability set at 85 percent of rated capacity. (tables 2 and 3). For all groups mbined, the average was $24.7 per bale, a decrease of $2.82 from last season. 3/ Group 2, which howed the greatest increase in average rate of capacity utilization over last year, also showed the greatest reduction in average total st--from $29.27 to $23.29 per bale. Standardized sample gin st 4/ averages ranged from $26.19 for group 4 to $28.63 for group 1, with an average st of $26.82 per bale for all groups mbined. Last year, this st range was $27.82 for group 4 to $33.7 for group 2; the average for all groups mbined was $29.48 per bale. Out-of-pocket sts ranged from $18.2 per bale for group 4 to $22.7 for group 1. The average for all four groups mbined was $2.1 per bale. mpared 3/ See weighting procedure in appendix. 4/ See sting methods in appendix. 2

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7 with last season, average out-of-pocket sts in were lower in all size groups, ranging from $.7 less per bale for group 1 to.69 less for group 2; these two showed the smallest and largest increases in average rates of capacity utilization. The average drop in out-of-pocket sts from to was $1.65 per bale for all groups mbined. For all groups mbined, individual items making up out-of-pocket sts were all lower in than in , except for bagging and ties which remained the same for both years. Labor had the greatest drop in average st from the previous season, followed by management, repairs, and miscellaneous, in that order. Decreases in these four items amounted to $.54, $.39, $.25, and $.21 per bale. Regardless of sting method used, group 4 averaged the lowest st, even though plants in this group operated at the lowest average rate of capacity utilization. st per bale at 7-percent capacity utilization.--to allow st mparisons at the same relative ginning volume levels, group average sts were adjusted to a uniform rate of 7-percent capacity utilization (table 4). 5/ This adjustment lowered sts per bale substantially for all groups, pointing up the beneficial effect of increased volumes on unit operating sts regardless of plant size (tables 2, 3, and 4). The actual st advantages of group 4 over other groups (table 3) were further increased with the introduction of uniform rates of capacity utilization. This supports the theory that enomies of scale are available in large-size plants if ginning volumes are large enough to ensure relatively high rates of capacity utilization. mpared with , adjusted sts were higher in group 1, but lower in all other size categories except group 4 standardized total. For all groups mbined, at 7-percent capacity use, sts for management, insurance, taxes, standardized depreciation, and standardized interests 6/ increased in over ; sts for bagging and ties remained the same; and all other sts showed small decreases. 5/ See st Adjustmentments in appendix. 6/ Standardized interest st per bale was $.28 higher. owever, $.23 of the st increase was due to a change in the standardized interest rate from 7 to 8 percent. 5

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9 APPENDX: METODOLOGY Gins vary widely by type of organization, ownership structure, acunting procedures used, and in many other ways. n analyzing sts reported by sample gins, uniform allocation procedures were employed to mpensate for some of these differences. sts of hauling ttonseed and lint--such as truck drivers' wages, truck depreciation, insurance, road-use taxes, and associated truck-operating sts-- were excluded. st Allocations Management: Where applicable, includes salaries, bonuses, mmissions, expense allowance, house rent, and personal insurance policies for owners and managers; bookkeeping and other office salaries, home office (line mpanies); social security taxes, workmen's mpensation insurance, and any other insurance on management and office personnel. Depreciation: ncludes allowances for depreciation exactly as carried on gin rerds except under standardized and out-of-pocket sts. nterest: ncludes interest exactly as carried on gin rerds except under standardized and out-of-pocket sts. nsurance: ncludes st of all forms of insurance on gin buildings, equipment, housing furnished management and labor, tton products, and automotive equipment (except large trucks and trailers). Taxes: ncludes all taxes on real property only. Energy: ncludes st of all utilities--electricity, gas, and water--used in ginning and directly related operations. Labor: ncludes st of gin wages, social security, workmen's mpensation, and any other insurance of gin labor borne by the gin; plus any rental housing furnished labor (excludes gin repair labor; see "Repairs" below). Bagging and ties: ncludes actual st of bagging and ties purchased. Repairs: ncludes st of gin repair wages, social security, workmen's mpensation, and other insurance on gin repair labor borne by the gin; plus the the st of repair materials and supplies. Miscellaneous: ncludes st of mbined car and pickup, tractor, and other automotive outlays; telephone and telegraph; advertising and promotion; legal and audit; dues, memberships, and subscriptions; annual meetings and directors' fees and expense; nventions and travel expenses; donations and ntributions; tton losses from fire; sampling, mpressing, and related charges; gin and office supplies; and any other sts not included elsewhere. 7

10 sting Methods Sample gin sts: Gin sts which have been subjected to the above allocations are identified in this report as sample gin sts. Standardized sample gin sts: Sample gin sts from which the effects of variations in rates used in mputing depreciation and interest have been eliminated by adopting uniform rates. Depreciation was set at 7 percent of the initial purchase price of capital items carried on the depreciation schedule regardless of age or former method of depreciation. Standardized depreciation sts shown in this report for are approximately 3 percent lower than those shown in tton Gin Operating sts in West Texas (U.S. Dept. Agr. Mktg. Res. Rpt. No. 934), owing to a change in the standardized depreciation rate from 1 percent to 7 percent. This change was made to better reflect the useful life of ginning equipment and to be more mpatible with rates used in similar ginning st studies on other production areas. For , interest was charged at 8 percent on the estimated average gin site land values for the general area and 8 percent on one-half the st of buildings, machinery, and equipment. For , an interest rate of 7 percent was used in both cases. Out-of-pocket sts: Sample gin sts from which depreciation and interest have been excluded. st Adjustments Estimates of ginning sts at other than existing levels of capacity utilization were based on relationships obtained from a recent study of model gins: Looney, Zolon M., and Wilmot, Charles A., Enomic Models for tton Ginning, U.S. Dept. Agr., Agr. En. Rept. 214, Oct Weighting n mputing per bale st averages for all groups mbined, the simple weighted average for each group was further weighted by its representative proportion of the total rated hourly ginning capacity in West Texas. This was done to reflect more accurately the st of ginning an "average" bale of tton in West Texas. F;]

11 UNTED STATES DEPARTMENT OF AGRCULTURE WASNGTON, D. C. 225 OFFCAL BUSNESS PENALTY FOR PRVATE USE, $3 POSTAGE AND FEES PAD U.S. DEPARTMENT OF AGRCULTURE