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ANALYSIS OF THE ECONOMIC FEASIBILITY OF
RICE PRODUCTION, MILLING AND MARKETING
IN PUERTO RICO
Robert E. Branson and
M. Dean Ethridge
prepared for
The Economic Development Administration
and the
Department of Agriculture
of Puerto Rico
January 1978
THE TEXAS AGRICULTURAL MARKET
RESEARCH AND DEVELOPMENT CENTER
in cooperation with The Department of Agricultural
Econco,nics
The Texas Agricultural Experiment s,tation and
The Texas Agricultural Extension 'Service Texas A&M
University
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Table of Contents
Page
Introduction .....
Geographic Factors I
Cultural Background 2
Socioeconomic Influences 2
Food Consumption ..... 3
Food Production versus Consumption. 8
Condition of the Sugarcane Economy. 14
The Present Rice Supply System 18
28Food Wholesal ing
Food Retailing.
Food Marketing Structure Conclusions 33
Rice Production Costs in Puerto Rico versus Major
Food Manufacturing ... 33
U.S. Production Areas. 41
Rice Milling ... 60
Rice Drying and Storage 75
Overview of the Production, Drying-Storage and Milling
Costs for Rice in Puerto ~ico and the U.S. Mainland 82
Rice Marketing Outlook for Puerto Rico 84
Append i x . . . 90
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ANALYSIS OF THE ECONOMIC FEASIBILITY
OF RICE PRODUCTION, MILLING AND MARKETING
IN PU ERTO R I CO
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 area's geographic, cultural
and
socioeconomic characteristics. Therefore, a review of these is
in order
as useful background information.
Geographia Paators
Puerto Rico is one of the importal)t 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
1830'
north. Its longitudinal position is 65 0 to 75 0 \"est. 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 1 and 2, Appendix.
Positioned on the outer edge of the Atlantic Gulf Stream that
flows
from the Gulf toward Great 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 supplies 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.
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2
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.
CuZturaZ Background
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 InfZuences
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
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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 1. 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
doubl ing 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.
Food Consumption
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 1955-70 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 17 percent, Table 4. The
internal consist
of the diet, however, reflected some important changes in usage
of specific
food groups. Meat consumption per capita, for example, more than
doubled,
being up 118 percent. Use of eggs and milk advanced 79 and 67
percent
respectively. Green vegetables gained by 44 percent. The only
losing food
categories were legumes, down 31 percent and starchy vegetables,
also down
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Table 1 Income Level of Households in Puerto Rico, 1969
Percent of all CumulativeIncome level households total
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. 1 49.3
3,000 4,000 11.4 60.7
4,000 5,000 8.3 69.0
5,000 7,000 11.4 80.4
7,000 10,000 9.3 89.7
10,000 15,000 6.3 96.0
15,000 and over 4.0 100.0
Source: U.S. Census of Population, Puerto Rico, 1970.
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Table 2. Disposable Personal Income, Total and Per Capita,
Selected Years, 1950-75. in Puerto Rico
Disposable eersona1 income Per capitaYear Population Total
Actual Deflated a/
thous. mill. $ 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 = )00.
Source: Puerto Rico Planning Board, Bureau of Economic
Planning.
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Table 3. Fami Iy Income Levels in Puerto Rico, 1953, 1959 and
1969
Income level 1953 1959 1969
do II a rs thous. % thous. % thous. %
Under 1,000 163 39 190 43 121 22
I ,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 I I
4,000 - 5,000 25 6 20 4 47 8
5,000 - 7,500 I I 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 Economi c
Planning.
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Table 4. Per Capita Consumption 'tf Major Food Groups in Puerto
Rico
1955-70Food Group 1955 1960 1965 1970 change
pounds percent
Meats Beef & veal 15.8 20.5 32.8 38.1 141 Pork 29.2 34.3
36.6 41.0 40 Poultry 8.6 14.9 26.9 37.5 336 Entrails 1.3 2.3 3.5
4.9 277 Other meats 1.8 1.5 1.4 2.3 28 Total 56.7 73.5 101 .2 123.8
ill
Fish Fresh & frozen 1.5 1.7 3.0 4.0 167 Processed 12.8 9.4
11.0 10.0 -22 Total 14.3 TT:T 14.0 14.0 -=2
Mi lk Fluid mi 1 k 180.6 262.7 302.6 304.7 69 Mil k products
Total
8.4 189.0
9.6 272.3
14.0 316.6
11.8 316.5
40 67
Eggs 11.7 12.9 18.3 21.0 79
Fats & 0 i 1 s 33.3 36.8 37.7 42.4 27
Cereals Rice Other Total 211. 8 228.7 229.4 236. 1 1 1
Vegetables Starchy 276.7 235.6 199.5 191. 7 -31 Green 60.6 74.0
84.6 87.0 44 Total 337.3 309.6 284.1 278.7 -17
Legumes 36.3 33.3 30.6 250 -31
Fruits Fresh 77 .3 91.1 86.0 71.6 - 7 Processed 22.3 24.6 44.2
27.9 25 Dr i ed & frozen 0.8 0.7 1.0 1.7 113 Total 100.4 116.4
131.2 101.2 0.1
Coffee, chocolate, tea & other 10.3 11.3 11.6 14.7 42
Total 1 ,001 . 1 1,105.9 1,174.7 1,173.7 17
Source: Puerto Rico Planning Board, Bureau of Economic
Planning.
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31 percent. Overall the cereal foods were up 11 percent. 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.
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 1ies 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 mill ion acres. In 1930, when the sugar economy was growing,
reportedly
sugarcane occupied about 238,000 acrea. 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 40 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 3.0
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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
million dollars
2,251
3,686
4,180
4,622
5,090
5,539
6,258
7,125
569
825
949
1,080
I , 170
I ,344
1,560
I ,833
percent
25.6
21.7
21.8
22.2
21.4
22.4
22.7
23.9
Source: Economic Re~ort to the Governor, 1975-76, Bureau of
Economic Planning, Puerto Rico Planning Board.
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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 mill ion hundredweight, Table 7. A minor amount of
outshipments of
imports to a few nearby islands occurs but for practical
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--cereals is one and fats and oils the other. Cereal
consumption in
1973 was estimated at 7.2 million 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 million hundredweight of rice
for calendar
1973, at least that was the average of-~he 1972-73 and 1973-74
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, mill ing 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.
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Table 6. Population of Puerto Rico and Percentage Change, 1950
to 1975
Year Population Percent change
1950
1960
1965
1970
1974~
1975~
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. I
6. 1
~Estimated from 1970.
Source: Puerto Rico Planning Board, Statistical Yearbook, 1974,
May 1976.
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Table 7. Origin and Disposition of Major Food Groups in Terms of
Reta i I Height of Farm Equivalent, 1973
Food groups Production Inshipments Outshipments Consumption
thous. C\'/t.
Cereals 7,587 407 7,180 Starchy vegetables 4,717 1,387 37 6,067
Legumes & green 628 2,860 281 3,207vegetables
Fru i ts 2,532 1,722 833 3,421
Meats I ,038 3,935 333 4,640
Fish & seafood 42 405 8 438
Eggs 323 302 8 617 Dairy products 7,783 I , I 58 42 8,899 Fats
& oil s I ,48-3 48 I ,435
Sugar 2,752 346 124 2,973 . Coffee, chocolate, 224 261 14
472tea, others
Soups & spices 13 319 35 297
Total 20,052 21,764 2,168 39,648
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.
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Table 8. Rice Imports, Total and Per Capita, Puerto Rico,
1966/67-1976/77
al Rice Per cap itaYear- Populationimports imports
thous. cwt. thous. pounds
1966-67 3,314 2,612 126.88 1967-68 },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.
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Condition of the Sugarcane Economy
The dominant agricultural crop in the coastal plains and for
Puerto
Rico has traditionally been sugarcane. As noted earlier 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
Uphill 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 decl ined 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. A large and closely held ownership
in sugar
production and mill ing was broken up through a government
program initiated
during the 1950 1 s. Government sources report that substantial
financial
losses per acre are being sustained by the government in its
role as oWner
operator 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 to one high to low
price ratio
over the time span of 1963-73. Caribbean prices meanwhile
equalled or
closely tracked the world suga~ prices. The price support
program for
the U.S. mainland production held those sugar prices to the much
narrower
range of 6.12 cents to 9.66 cents. The 1.6 high to low price
ratio was
clearly less difficult to confront by the stateside industry,
Table 10.
Acres of sugarcane harvested likewise has been more stable,
Table II.
Abolition of the long prevalent sugar program in the United
States in
very recent years has plunged the mainland sugar production into
an economic
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Table 9. Sugar Cane Acreage, Production and Prices, Puerto Rico,
1960-61/ 1974-75
Grower Returns/Ton
Area Cane
of Sugar Cane
Processor Payments Sugar Act Payments
Year Harvested Production Sugar Molasses for Sugar
1000 acres 1000 tons ----------dollars/ton-----------
1960-61 328. 1 10,754 7.55 .43 1.39
61-62 308.6 9,&63 7.86 .46 1. 41
62-63 303.0 10, 123 9.43 .80 1.29
63-64 303. I 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. I 6,590 8.48 .57 1.36
68-69 180. I 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. I 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.
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Table 10. Raw Cane a/Sugar-, Wholesale Price, Caribbean Ports
and New York,
J965-77
\.Jor1d sugar U.S. sugar ~!or 1 d pri ceCar i bbe'3nYear spot /
price (New Nevi York . b/ . cports- prlce- York spot) basis
1965 2.12 1966 1.86 1967 1.99
1968 1. 98 1969 3.37 1970 3.75
1971 4.55 1972 7.43 1973 9.61
1974 29.99 1975 20.49 1976 11 .58
1977# 8.60
cents/pound
2.12 1.86 1.99
1. 98 3.37 3.75
4.52 7.43 9.61
29.99 20.49 11 .58
8.60
6.75 6.99 7.28
3.07 2.82 2.95
7.52 7.75 8.07
2.96 4.37 4.88
8.52 9.09
10.29
5.65 8.54
10.99
29.50 22.47 13.31
31.62 21.92 13.36
11 . 15 11 .25
a/96 Q 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.
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Table II. Sugar Cane Production, Prices and Acreage, U.S.
1965-76
Pr ices Acres a/ Cane Received Sugar Act
Year Harvested- Production by Farmers Payments Total
1000 acres 1000 tons -----------dollars/ton----------
1965 6 I 7.0 23663 7.90 J. 12 9.02 1966 625.2 24515 8.49 J. 11
9.60 1967 627.6 26615 9.38 1. 16 10.54
1968 605.8 24825 9.29 J. 16 10.45 1969 535.6 22695 9.94 J. 18 I
1 . 12 1970 583.9 23996 10.50 1. 17 11.67
1971 648. 1 24172 II . 10 I. 15 12.25 1972 701.8 28332 11 .70
1.04 . 12.74 1973 741.0 25827 --20.90 1.07 21.97
1974 734. I 24812 48.50 1. 14 49.64 1975 774.0 28523 19.60 1976
756.9 28767 13.80
1977'E! 756.5 27229 9.54 3.96 13.50
a/- for sugar and seed
b/lndicated or estimated
Source: U.S. Department of Agriculture, Agricultural Statistics,
Agricultural Prices, and Crop Production, selected issues.
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abyss. New legislation is laying the base of renewed support but
the support
level is not a generally 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 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 those conditions, impetus in Puerto Rico to
shift further out
of sugar production is clearly understandable.
Logically alternative utilizations of the acreage devoted to
sugar
should be considered in Puerto Rico. Among those being evaluated
is commer
cial rice production.
The Present Rice SuppZy System
Rice entering Puerto Rico is coming exclusively from mainland
United
States supply sources. Historically rice prices 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.
Further evaluation of price differences is available by
comparing
prices received by farmers in Cal ifornia, Texas and Arkansas.
Cal ifornia
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
Cal ifornia is devoted to short grain production, Texas and
Arkansas in the
above period had both medium and short 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 are shown in Table
14 for selected
time periods during the 1969-70 marketing year.
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Table 12. Retail Prices of Rice in the United States,
August-July Year, 1967-76
. a/Average prlce-Year Long grain Short grain
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
Average
cents per pound
22 19
22 19
23 19
24 20
24 20
25 21
46 39
49 42
45 39
41 36
32. 1 27.4
a/Simple average of reported monthly figures for leading cities
in the United States.
Source: U.S. Department of Agriculture, Economic Research
Service, October 1977.
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Table 13. Season Average Price for Rice Received by Farmers,
Selected States, 1960-76
Year Ca 1i forn i a Texas Arkansas United States
aldo 11 a rslcwt.
1960 4.43 4.85 4.41 4.55 1961 4.78 5.31 5.28 5. 14 1962 5. 11
5.01 5.10 5.03 1963 507 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. 13 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 11. 10 14.80 15.30 13.80 1974 11 .70 10.90
11.40 11 .20
1975 7.65 8.81 8.54 8.34 1976P! 6.63
1960-69 average 4.87 5.02 5.02 4.94
1970-75 average 7.92 8.59 8.91 8.43
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, A9ricultural Statistics,
1962-74, and U.S. Department of Agriculture, Rice Statistics, CED
Working Paper, Warren Grant, December 1977.
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Table 14. Milled Rice Prices, Cal ifornia, Texas and Arkansas,
Selected Months, 1969-70 Marketing Year
. al bl a ornla-Months C 1I f Texas- Arkansas
August
October
December
Februa ry
Apri 1
June
Season average
10.60
10.60
10.60
10.60
10.60
10.60
10.60
dol1ars/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/C 1 f . d k b - a I ornla oc s aSIS.
!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.
\
-
22
Presentation of the foregoing insight into rice pricing is
useful to
an understanding of the establ ished preference in Puerto Rico
for short grain
rice. Initially that preference was tied to the simple economics
of short
grain rice being the lowest price to the consumer. This still
holds 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 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 1966-67 period. These
are pre
sented graphically in Figure 1. Dashed lines for the 1977-78 to
1984-85
years reflect the trends establ ished in the above shipments
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:
Cal ifornia rice imports: Y = 2,427 cwt. + 20.23X Tex-Ar-La rice
imports: Y = 637 cwt + 24.99X Several conclusions result from this
analysis. In the first place,
rice import volume from both areas is increasing, from
California by 20.2
thousand hundredweight per year and by 24.9 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 the
trend 1ine upward somewhat. Leaving these latter years out, the
trend for
Cal ifornia is 2.79 thousand hundredweight per year and for
Texas-Arkansas
Louisiana is -16.96 thousand hundredweight per year.
-
---------------
-------------
FIGURE 1
Rice Shipped to. Puerto Rico by Source 1967-76
MILLION 0/0CWT.
CALIFORNIA 0'0 OF SHARE4 80
3 60 ~
2 40
SOUTH
__ - - - - - - - -- - - - -1201
o
~I______~___~______~___~______~___~---~------~---~~___~___~______~___~~___~___~~___~___~______~___~
o 66-7 68-9 70-) 72-3 74-5 76-7 78-9 80-) 82-3 84-5
YEAR
-
24
Risk is involved in projecting from only four years but
nonetheless
it is of 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 141 thousand hundredweight for Cal ifornia and 168
thousand
hundredweight for Texas-Arkansas-Louisiana. Graphically
presented, the
rates appear more similar than they actually are, Figure 2.
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 this overall allocation, as it were, of rice demand in
Puerto
Rico, rather fixed physical supply channels have grown. Rice
importers as
of March 1977 are listed in Table 15. Indicated also is the mill
represented
from the United States, the retail brand name and type of rice
marketed.
Food distribution in Puerto Rico is closely linked to
franchised
importers who serve as exclusive agents for the products they
represent.
As may be recalled, we have already established that about half
of the total
food tonnage for the island comes through import sources. The
food supply
channel assumes the following general form, Figure 3. The major
exceptions
to the outlined system is that of the Grand Union food chain.
This chain,
mainland based, ships direct to its own stores. Yet rice is
distributed
locally in accordance with the above system. Other food chains,
such as
Pueblo Stores, Tuyo and Uni-Coop, also normally buy direct from
the import
ing agent listed in Table 15.
In the case of rice, the external supply sources basically are
the
rice mills in the United States, as shown in Table 15. Each of
the import
ing agents has the responsibility of providing a sales force to
call upon
food wholesalers and retailers to promote the sales of rice from
the mill
-
------------------------
-----------------------
--
,..
FIGURE 2
Rice Shipped to Puerto Rico by Source 1973 - 76
MilliON CWT.
4
31- ---V1
/CALI~ORNIA N
2~ -- --
1 ~ ~
SOUTH
o 73-4 75-6 77-8 79-80 81-2 83-4
YEAR
-
" .
Table 15. List of Rice .Importers, Puerto Rico, March 1977
Type ofName of fi rm Mill Brand name grain
~ ;
1. Ramon 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.
I O. Mars de P.R.
11. Mendez & Co. 12. Plaza Provision
Farmer's Compo of P.R. Inc. C. E. Grosjean Rice Milling of P.R.
Rice Grower Association of Ca 1 i fo rn i a, Inc . Riviana Rice
Mills Riviana Rice Mills The Dore Rice Mills The Dore Rice Mills
Rice C'i ty Mill i ng 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
Sello Rojo
EI Mago Rico Chevere, Dore Dore, Escudo Dorado Ed I S Brands EI
Jaba
Cazador Carol ina Cinta Azul El Mago, Estrella Pamplona Majadma
Oro Bl anco
Short
Short
Short
Medium Medium Medium Large Medium Medium
Medium N Large 0'
Large Medium
Large Short
Source: Information furnished by Frank Besosa, Department of
Agriculture, Puerto Rico.
-
27
Figure 3. Food Distribution Channels in Puerto Rico
External Supply Sources
Puerto Rican Importers and Brokers
Island-wide Wholesalers
Regional Wholesalers
Reta i 1 ers
-
28
which they represent. Retail stores called upon would more
likely be the
larger ones. Wholesalers serve the smaller retail stores. In the
instance
of the food chain supermarkets, the importing agents sales staff
visits
the individual stores, takes orders and requests store door
delivery of
shipments direct from the importing agent's warehouse. A
parallel situa
tion in food chain stores on the mainland is the so-called
"store dropll
delivery of bread and dairy products by processors of those
products,
although central food chain warehouses receive and make the
majority of
product del iveries to their respective stores.
Food Wholesaling
The wholesale food industry in Puerto Rico is rather highly
concentrated
in the hands of about 100 firms who ge~erally are also importing
agents.
As noted in Table 15, one-fifth of the firms had 68 percent of
the sales
according to the 1972 Census of Business. Each of these had
sales exceed
ing $2,000,000 or more per year. By comparison the wholesale
firms of
domestic supply foods is somewhat more dispersed. Yet, it is
1ikely that
the top four firms have close to 50 percent of the sales, Table
16. These
include dairy products and some others that are likely to be
highly con
centrated anyway due to the economics of the business.
Corporate forms of business dominate in wholesaling and
accounted
for 81 percent of the sales volume in 1972, Table 17. Most of
the whole
salers of grocery products are concentrated in San Juan, the
main port.
Mayaguez and Ponce are also port cities, but Caguas is an inland
city,
Table 18.
Food Retailing
Puerto Rico has moved away from the major dependence on small
retail
food stores of two decades ago. Now several supermarket food
chains are
present. Sales of the chains or large retailing companies now
represent
-
29
Table 15. 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 1 ,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/- 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.
-
30
Table 16. 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 Estab1 ishments Total
Sales Total
number percent 000 $ percent
Less than $25,000 3 a/
$25,000 - $49,000 3 9 a/
$50,000 - $99,000 7 22 483 3 $100,000 - $249,000 5 16 717 5
$250,000 - $499,000 4 13 1 ,351 9
$500,000 - $999,000 8 25 5,857 37
$1,000,000 - $1,499,000 2 6 a/
$1,500,000 - $1,999,000 3 a/
$2,000,000 or more a/
Total farm-product materi a 1 s
raw 32 100 15,788 54E.!
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.
-
31
Table 17. Number of Wholesale Grocery Firms and Value of Sales
by Legal Form of Organization, Puerto Rico, 1972
Legal form of %of Value of %ofEstabl ishments organ izat ion
Total Sales Total
number percent 000 $ percent
Individual proprietorships 190 38.0 114,874 15.0
Partnerships 17 3.0 17,640 2.0
Corporations 282 57.0 634,828 81.0
Other I 1 2.0 13,066 2.0
Total groceries & related products 500 100.0 780,408
100.0
Source: U.S. Department of Commerce, 1972 Economic Census of
Outlying Areas, Puerto Rico, Subject Statistics, Bureau of the
Census, March 1975.
-
32
Table 18. 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 I I
San Juan
Subtotal
229
364
46
73~ 498,469
682.976
64
88al
Total groceries & related products 500 780.408
al- 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.
-
33
over half of the retail food business, Table 19, though they
account for
only two percent of the retail food stores. Business
organization is
mostly individual proprietorships as expected for the small
stores. Chains
are using the corporate structure, Table 20.
Because of the size of the San Juan metropolitan area, it
dominates
the island in terms of number of food retail outlets. However,
incomplete
reporting leaves firm figures unavailable, Table 21.
Food Marketing Structure ConcZusions
The significance of the structure of the food distribution
system in
Puerto Rico to rice marketing is guite clear. This is especially
true for
the development of marketing for domestically produced rice.
Since pro
duction will not begin on a large scale, a strategy can be
pursued of
opening markets mostly in San Juan at the outset and through the
food chains.
As production expands, the system of distribution and supporting
marketing
programs can be expanded as needed.
Food Manufacturing
Only a few plants exist in Puerto Rico in the business of grain
milling
for food or feed. The nature of the plant size required for
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 22. These are really
finishing plants
for rice. Rough or brown rice is received from the U.S. mainland
and is
put through the final mill ing stages of bran removal, polishing
of the grains,
separation of head rice from broken kernels, brewers rice, etc.
and the
final consumer rice is packaged. Plants were established because
of eco
nomic advantages of performing these aspects of processing in
Puerto Rico.
However, only the Cal ifornia rice suppl iers have used this
system extensively
so far. Most, if not all, of the rice from the Texas, Louisiana,
Arkansas
-
34
Table 19. 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 Sa
Ies Tota I
number percent 000 $ percent
Less than $5,000 2,402 33 5,282 0.9
$5,000 - $9,000 I ,431 19 9,575 2.0
$10,000 - $24,000 1,725 23 26,283 4.0
$25,000 - $49,000 659 9 23,041 4.0
$50,000 - $99,000 532 7 37,711 6.0
$100,000 - $249,000 308 4 51,672 8.0
$250,000 - $499,000 145 2 50,204 8.0
$500,000 - $999,000 97 70,268 12.0
$1,000,000 or more 124 2 335,097 55.0
Total grocery stores 7,423 100 609,133 10~
~oes 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.
-
35
Table 20. Number of Retail Grocery Stores and Value of Sales by
Legal Form of Organization, Puerto Rico, 1972
Legal Form of %of Value of %ofEstablishmentsOrgan i za t i on
Total Sales Total
number percent 000 $ pe rcent
Individual proprietorships 6,992 95 215,424 35
Partnerships 105 I 12,882 2
Corporations 217 3 308,905 51
Other 109 71 ,922 12
Total grocery stores 7,423 100 609,133 100
Source: U.S. Department of Commerce, 1972 Economic Census of
Outlying Areas, Puerto Rico, Subject Statistics, Bureau of the
Census, March 1975.
-
36
Table 21. Number of Retail Grocery Stores and Value of Sales by
SMSA Areas, Puerto Rico, 1972
%of Value of %ofSMSA Area Establishments Tota 1 Sal es Total
number percent 000 $ percent
Caguas 440 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 42~ 403,489 66~ Total grocery stores 7,423 609,
133
a/- Total reported.
does not equal 100 percent due to some stores not being
Source: lying Areas, 1975.
U.S. Department of Commerce, Puerto Rico, Area Statistics,
1972 Economic Census of OutBureau of the Census, March
-
---------------------------------------------------------
I' i'
Table 22. General Manufacturing Statistics for Grain Mill
Products, Puerto Rico, 1967 and 1972
Grain Mi 11 %ofEstablishments EmployeesIndustry Total
1967 number percent number
Flour & other grain 8 almi 11 products Rice milling 4 33
159
Blended & 1 8 alprepared flour Wet corn mill ing 1 8 al
Prepared feeds, nec 5 43 457
Total grain mi 11 12 100 633products
-----------------------~------------------------------
1972
Flour & other grain mill products
Rice mi 11 ing 3 27 al
Blended & 9 alprepa red flour
Wet corn milling
Prepared feeds, nec 7 64 564
Total grain mill 1 1 100 709products
Value Added%of %of Value of % ofby ManufacTotal Total Shipments
Totalturing
percent 000 $ percent 000 $ percent
al al
25 3,570 28 34,625 48
al al
al al
8,804 68 35.t282 50
bl97 12,905 96E! 71 ,826 98E!
....,
........
al al
al al
80 18,860 80 59,546 65-
8o.!Y 23,567 80E! 91 ,787 65E!
~Withheld to avoid disclosing figures reported by individual
companies. Ei 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.
-
38
sources is shipped in pre-mi11ed and pre-packaged. Nonethe1ess,
the quantity
of rice processed in Puerto Rico is substantial since Cal
ifornia rice dom
inates the market share position, Table 23. Value of plant
shipments was
around 45 mill ion do11ars in 1972, Table 24.
Finishing mi11s for rice in Puerto Rico are unab1e to handle
rough
or paddy rice grown in Puerto Rico because all of the equipment
for the
earl ier processing stages is not available. Nor are facil ities
present
to dry and store rough rice as it comes from the rice growers'
harvests.
-
39
Table 23. Rice Brand Market Shares in Puerto Rican Market,
1976-77 Year
Brand Market share
Ca 1i forn i a
Brand A Brand B Brand C Other California Subtotal
Southern mi 11 s
Brand K Brand L Brand M Other Southern Subtotal
Total
percent
47 15 3 6
7T
13 9 3 2
29
100
Source: Confidential market data.
-
40
Table 24. 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 .
.'
-
Rice Production Costs in Puerto Rico vs.
Major U. S. Production Areas
A basic requirement for the economic viability of a domestic
rice industry
in Puerto Rico is that average productfon costs be competitive
with those
on the United States mainland. Thus, if a representative
"break-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
lIg rown up".
united States Budgets for 1977
The 1977 rice production budgets for Cal ifornia 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 Cal ifornia 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
41
-
42
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; therefore, any
return in access
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 cwt. of rice produced per acre gives gross
producer revenue
per acre. Thus. gross revenue in California 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 ifornia and Texas budgets are based on one rice crop per
year,
as 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 25. Total cost per acre of rice produced are $400.23
in Cal ifornia
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 California ($486.00 - $400.23 = $85.77) and $62.01/acre in
Texas ($400.50
$338.49 = $62.01).
-
43
Table 25. Estimated Costs pe~ Cuerda for Rice Production in the
Sacramento Valley In California and the Upper Gulf Coast Area in
Texas, 1977
Dollars per Acre
California 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
-
44
Puerto Rico Budget for 1977
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 Ricos
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 crop the
numbers in
the last column of Table A-3 must be halved.
-
45
Results in Table A-3 may be summarized as in Table 26. 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
25. Converting
the total cost per acre in Table 25 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 Pue~to Rico is $98.26 per cuerda less than in
California 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
California
and Texas do not endure ful I 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 impl ies 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 competiting 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.
-
46
Table 26. Estimated Costs per Cuerda for Rice Production in
Puerto Rico, 1977
Dollars per Cuerda
Two Crops One Crop
VARIABLE COSTS
Preharvest 347. 17 173.58
Harvest 127.91 63.96
FIXED COSTS
Tractors 22.37 11 . 19
Machinery & equipment 38.43 19.21
Land Charge 45.00 22.50
TOTAL COSTS 580.88 290.44
-
47
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 $50/cuerda $25/cuerda
Cal ifornia $35/acre $35/acre
Texas $35/acre $35/acre
Thus, the annual cost of management in P~erto 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 revelas that the break-even price in Puerto Rico,
$6.64/cwt. of
rice, is $1 .42/cwt. less than that for Cal ifornia and
$1.75/cwt. less than
that for Texas (Table 27). The impl ication 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 viably 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
even 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 bottom" price,
followed by
Puerto Rico and then Texas. But it is obvious that prices near
$5.00/cwt.
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48
Table 27. Approximate Break-Exen Prices for Rice, by Areas,
1977
Total Costsa Break-Even Prices b
Puerto Rico $630.88/cuerda $6.64/cwt.
Cal ifornia $435.23/acre $8.06/cwt.
Texas $373.49/acre $8. 39/cwt.
a Equal to total costs in Tables 25 and 26 plus allowances for
management costs.
b Equal to total costs in column I divided by estimated
production in each area: Estimated production is 95.0 cwt. for
Puerto Rico, 54.0 cwt. for California, and 44.S cwt. for Texas.
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49
for any significant length of time would be ruinous to all rice
producing
areas.
Projected Budgets for 1985
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 remains 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 Cal ifornia, 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 28 compared to
1977
total costs are projected to increase 39% in California to
$S56.68/acre,
41% in Texas to $476.76/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 29). 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
-
50
Table 28. Projected Costs for Rice Production, 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
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51
Table 29. Percentage Cost Increases Projected Between 1977 and
1985, by Areas '
Ca I iforn i a 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 a 2%
a
TOTAL COSTS + 39% + 41% + 31%
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52
from Puerto Rico in 1977 due to the fact that rice is an II
infant industryIl
that must become capital ized at current replacement prices.
Wi th the assumed yields and prices, returns to management,
overhead,
and r i s k - bea ring in 1985 are given as fo I lows :
Puerto Rico: $855.00 - $762.80 = +$92.20/cuerda
Cal ifornia: $486.00 - $556.68 = -$70.68/acre
Texas: $400.50 - $476.77 = -$76.27/acre
So it is projected that $9.00/cwt. for rice in 1985 would result
in losses
to Cal ifornia and Texas producers, but Puerto Rico producers
would still
have positive net returns.
Break-Even prices for 1985
To estimate reasonable returns to management in 1985 the 1977
value
were inflated by 60% giving $80.00/cuerda in Puerto Rico and
$56.00/acre
in Cal ifornia 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
Cal ifornia
and $3.10 less than that for Texas (Table 30). So the cost
advantage for
Puerto Rico in 1985 is expected to be greater than it was in
1977 (Table 31).
The prices that would just cover projected variable costs are
the
following: $6.58/cwt. in Puerto Rico, $6.58/cwt. in Cal ifornia,
and $7.88/cwt.
in Texas. These Hrock bottomll prices are now equal for Puerto
Rico and
Cal ifornia, with the price for Texas being at $1.30/cwt.
higher. Texas
looks bad in comparison, partly because of the assumed per acre
rice yield
of 4,450 pounds in the production area. This 1977 figure was
somewhat below
historical averages for Texas; therefore, the yield may well be
higher in
1985. For example, an additional per acre yield of 200 pounds
would lower
Texas's break-even price by 34c/cwt. to $7.54/cwt. of rice.
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53
Table 30. Projected Appro~imate Break-Even Prices for Rice, by
Areas, 1985
aTotal Costs Break-Even Prices b
Puerto Rico $842.80/cuerda $ 8.87/cwt.
Ca 1 i forn i a $612.68/acre $11.35/cwt.
Texas $532.77/acre $1 I .97/cwt.
a Equal to total costs in Table 28 plus allowances for
management costs.
b Equal to total costs in column J 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.
-
------------------------------------------------------------------------
54
Table 31. Production Costs per Hundredweight (Break-Even
Prices), Puerto Rico versus M~inJand, 1977 and 1985
Area J 977 1985
dollars/cwt.
Puerto Rico Total 6.64 8.87 Excluding management Excluding
management & land Excluding a I I fixed costs
6. II 5.64 5.00
8.03 7.56 6.58
Cal ifornia Total 8.06 II .35 Excluding management 7.41 10.31
Excluding management & land 5.61 8.51 Excluding a II fixed
costs 4.68 6.58
Texas Total 8.39 II .97 Excluding management 7.61 10.71
Excluding management & land 6.42 9.55 Excluding a II fixed
costs 5.64 7.88
U. S. minimum allowed loan price for rice $6.31/cwt. during 1978
through 1981 .
Return to land is based on average yield in 1977 and assumed
rough rice price of $9.00/cwt. for Cal ifornia and Texas. In Puerto
Rico land charge set at $45 per acre.
Source: Based on estimated production input costs applied to
USDA cost of production budgets for Cal ifornia and Texas and
estimated input costs in Puerto Rico appl ied to production budgets
from Jose Vicente-Chandler.
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55
Some Further 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 passes 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. Cal ifornia rice producer-'cooperatives have
devised the most
efficient method of getting their rice to Puerto Rico. Although
no firm
figures are available on shipping costs for California rice,
"educated quesses"
peg them a 1-2c/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
3-5c/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,
mechandized
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 facil ities 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
-
56
few people (probably from the U. S. mainland), throughly
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 facilities to adequately furnish
parts and ser
vices. For example, parts and suppl ies must be available on a
timely basis
if costly production delays are to be avoided. Also, pleple 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 Service Company?
Serious consideration has been given to providing a
government-financed
or government-backed Iiservice companyll 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 throughly
capable
farmers would be diminished. Most capable entrepreneurs will
desire to own
-
57
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
1imited land
resource in Puerto Rico is diversified enough to insure a
competitive structure
within the producing sector.)
Another major institutional consideration is that a centralized,
all
inclusive service company would provide an easy focal point for
labor
unions to apply pressure for unwarrented 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
the 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 purchase expense for tractors, machinery and
equipment
is large, being almost $100,000 in 1977 for a 200 cuerda rice
farm (Table 32).
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 central izing 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 32).
Since the combine
is the most expensive and one of the most under-utilized 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
-
,'.1 I If J
Table 32. 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 Cue rda
$ % $ $ $ %
Tractor (IOO h.p.) 24,200 24.8 3.67 5.32 8.99 19.7
Off-Set Disk 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
\J1Comb i ne (16 f t. ) 41,319 42.4 7.76 9.45 17.21 37.7 co
Grain Cart 4,488 4.6 .74 .29 1.03 2.3
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.
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59
company would be to provide most all of the harvesting and haul
ing equipment
to the farmers, while leaving all other capitalization inthe
hands of individual
firms. This would not only reduce capital investment by almost
half, but
would also allow centralized management of handling and drying
the rice to
help assure good mil ling 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 appl ications by airplane, since this
service will
certainly be needed. However, the development of private flying
services to
compete for this work should be an eventu"al result - unless it
is discouraged
by the government or other power structures.
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60
Rice MitZing
Development of estimated costs for rice milling will be
considered
first and then the matter of rice drying and storage.
Formulation of cost
estimates is a very involved and detailed procedure. In the
process some
basic assumptions are required at times and these will be
clearly stated.
Rather than relying upon any single system of analysis. the
approach has
been to use U.S. mainland costs and update these to 1978 and
compare these
with engineering cost estimates provided by engineering
principals who
have worked on the Puerto Rican project and visited there to
assist in
cost formulations.
As noted from the previous section of this report on rice
production
costs. Puerto Rico begins with a potential advantage. Its
production
cost per hundredweight of rough rice on a 1977 cost basis is
estimated , .
at $6.64 compared with $8.06 in California and $8.39 in Texas.
Budgets
for Louisiana and Arkansas were not developed separately since
their costs
would be somewhat in line with those for Texas anyway.
Of primary concern when considering a mill is what type of rice
it will
be processing--1ong. medium or short grain. For example. the
cost per
hundredweight for a small mill (240 cwt/hr rough rice) operating
on an 80
hour week was estimated to be $l.20/hundredweight for long grain
rice and
$1.04 for medium grain. These figures are from the report
Economic Models
for Rice Mills in the South. Southern Cooperative Series
Bulletin 187
by Shelby Holder. Jr., William Morrison and Harold Traylor. And,
the costs
are for 1973. In the program for Puerto Rico the Brazos variety
of rice
is to be the principal one grown which is a medium grain
rice.
Rice mill ing costs are affected by the number of hours of
operation.
Usually an 80 hour week results in a cost reduction per
hundredweight of
rough rice of about one-third. That carries immediate
implications for
rice acreage. In order for the proposed mill of 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 proposed 4,000 acres would
provide a
costly 30 hour per week average operation time, Table 33.
Achievement of
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61
Table 33.
Phase
Mill Operation in Puerto Rico
Acres
Hours Necessary for Proposed Rice Production
Yield Production Mill Mill i ng capacity hours
no. cwt. cwt. cwt/hr hrs/wk
4,000 5,255
95 95
380,000 499,200
240 240
30 40
2 8,000 10,509
95 95
760,000 998,400
240 240
61 80
3 12,000 95 1,140,000 240 91
4 16,000 95 1,520,000 240 121
Source: Estimated from proposed mill capacity and rice
production yields.
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62
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.
The next step is to consider the differences in work force
require
ments for a 40 versus 80 hour operation. These are shown in
Table 34 on
the basis of using labor costs in the mainland and updating
them. Reference
to these estimates is in terms of a designation as Economic
Survey I,
as so noted on the table.
An alternate approach was to use selected wage rates obtained
in
Puerto Rico and apply these to the man-hour working schedule,
Table 35.
Differences in the labor and management costs were comparatively
small,
$568,292 by Survey Model and $626,491 by Survey Model I I.
A third estimate came from consulting engineers and amounted to
a
total labor and management cost of $636,760, Table 36~
A second major category of mill operating costs pertains to the
var
iable costs exclusive of labor. An itemization is given based on
the
study of U.S. mainland rice mills in the South. 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, which was suggested by recent
forward
casting of the 1973 model by workers on that study. An 80 hour
week
cost estimate totals $641,212.
Finally, there is the question of the investment in plant
and
equipment for the mill. Inflation in building construction costs
and
those for machinery are a matter of common knowledge. One of the
ways to
track these changes is by means of the cost indexes published
for the
United States. Pertinent ones refer to costs of commercial and
factory
buildings in major cities and to machinery and equipment prices.
Changes
from 1970 to 1977 are indicated in Table 37. These are
considered to be
the most reliable indications to use.
Building and equipment costs are itemized by milling operation
phases
in Table 38. Cost as of the 1973 study are given first with an
update to
a 1978 estimate based upon the cost indexes cited above. Given
as well
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63
Table 34. Work Force Requirements and Cost Estimates for Puerto
Rico Rice Mi 11, 1978. Economics Survey I.
Item Annual 40 hr. manhours
80 hr. Salary or wage rate
U. S. - South Annual
40 hr. cost
80 hr. 1973 1978 est.~
no. hrs. dollars do 11 a rs
Rough rice Warehouseman 2,080 2,080 7,500 11,100 11,100 11,100
Asst. warehouseman 2.90 4.29 Sample man 2,080 2,080 2.20 3.26 6,781
6,781 Bin setter 2,080 4, 160 2.30 3.40 7,072 14,144 Sanitation
2,080 2,080 2.00 2.96 6,157 6,157 Buyer 2,080 2,080 9,000 13,320
13,320 13,320 Asst. buyer 6,500 9,620 Subtotal 10,400 12,480 44,430
51,502
Mi 11 i ng Superintendent 2,080 2,080 20,000 29,600 29,600
29,600 Head miller 2,080 4,160 ~JO,OOO 14,800 14,800 14,800 Huller
operator 2,080 4,160 2.30 3.40 7,072 14,144 Paddy operator 2,080
4,160 2.30 3.40 7,072 14,144 Floorman 6,264 12,480 2.10 3.11 19,406
38,813 Bin setter 2,080 4,160 2.30 3.40 7,072 14,144 Sanitation
4,160 6,240 2.00 2.96 12,314 18,470 Subtotal 20,800 37,440 97,336
144,115
Clean rice Shipping clerk 2,080 2,080 Asst. ship. clerk 2.30
3.40 Qua 1 i ty cont ro 1 2,080 4,160 2.30 3.40 7,072 14,144
Blender 2,080 2,080 2.90 4.29 8,923 8,923 Sackman 2,080 2,080 2.40
3.55 7,384 7,384 Sewer 2,080 2,080 2.40 3.55 7,384 7,384 Sealer
2,080 2,080 2.40 3.55 7,384 7,384 Forkl ift operator 2,080 2,080
2.25 3.33 6,926 6,926 Loaders 4,160 4,160 2.10 3.11 12,938 12,938
Hon i tor 2,080 2,080 2.30 3.40 7,072 14,144 Car cleaner 2,080
2,080 2.00 2.96 6,157 6,157 Sanitation 2,080 2,080 2.00 2.96 6,157
6,157 Subtotal 24,960 27,040 77,397 91,541
Packaging Hanager 2,080 2,080 7,200 10,656 10,656 10,656 Clerk
2,080 2,080 2.30 3.40 7,072 7,072 Operators 2,080 4,160 2.25 3.33
6,926 13,853 Packe rs 4,160 6,240 2.25 3.33 13,853 20,779 Scalers
2,080 2,080 2.40 3. 55~ 7,384 7,384 Supplyman 2,080 2,080 2.10 3.11
6,469 6,469 Take-off 2,080 2,080 2.10 3.11 6,469 6,469 Forkl ift
operator 2,080 2,080 2.25 3.33 6,926 6,926 Subtotal 18,720 22,880
65,755 79,608
continued ""
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64
Table 34. continued
Salary or wage rate Annual costAnnual manhoursItem U.S. - South
. 40 h 80 h 40 hr. 80 hr. 1973 1978 est.!! r. r.
no. hrs. do 11 a rs do II ars By-products
Sewer 2,080 2,080 2.40 3.55 7,384 7,384 Scalers 2,080 2,080 2.40
3.55 7,384 7,384 Sackers 2,080 2,080 2.40 3.55 7,384 7,384 Loaders
2,080 2,080 2. 10 3. I 1 6,469 6,469 Grinder, opere 2,080 2,080
2.30 3.40 7,072 7,072 Quality control 2.30 3.40 Sanitation 2,080
2,080 2.00 2.96 6,157 6,157 Subtotal 12,480 12,480 41,850 41 ,
850
Maintenance Millwright 2,080 2,080 10,$00 15,540 15,540 15,540
Asst. millwright 2.90 4.29
. Helper millwright 2,080 2,080 2.40 3.55 7,384 7,384
Electrician 2,080 2,080 3.00 4.44 9,235 9,235 Sanitation 2,080
2,080 2.00 2.96 6,157 6, 157 Subtotal 8,320 8,320 38,316 38,316
Administration Plant manager 2,080 2,080 50,000 74,000 74,000
74,000 Asst. manager 2,080 15,000 22,200 22,200 Bookkeeper 2,080
2,080 6,000 8,880 8,880 8,880 Asst. bookkeeper 5,000 7,400
Secretary 2,080 2,080 5,000 7,400 7,400 7,400 Accountant 10,000
14,800 Clean rice salesman (30,000) (44,400) By-product salesman
Programmer Key punch operator Watchman 2,080 4, 160 6,000 8,880
8,880 8,880 Subtotal 8,320 12,480 99, 160 121 ,360
Grand total 104,000 133,120 464,244 568,292
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.
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65
Table 35. Work Force Requirements and Cost Estimates for Puerto
Rico Rice Mill, 1978. Economics Survey II.
Annual manhours Sal a ry or Annual costItem 40 hr. 80 hr. wage
rate 40 hr. 80 hr.
no. hrs. dollars do 11 a rsRough rice 14a rehouseman 2,080 2,080
10,000 10,000 10,000 Asst. warehouseman Samp 1 e man 2,080 2,080
3.79 7,883 7,883 Bin setter 2,080 4,160 3.79 7,883 15,766
Sanitation 2,080 2,080 3.79 7,883 7,883 Buyer 2,080 2,080 15,000
15,000 Asst. buyer Subtotal 10,400 12,480 48,649 56,532
Mi 11 ing Supe r i ntendent 2,080 2,080 35,000 35,000 35,000
Head mi ller 2,080 4, 160 20,000 20,000 20,000 Huller mach. oper.
2,080 4,160 3.79 7,883 15,766 Paddy mach. oper. 2,080 4,160_- 3.79
7,883 15,766 Floorman 6,240 12,480 3.79 23,650 47,300 Bin setter
2,080 4,160 3.79 7,883 15,766 Sanitation 4,160 6,240 3.69 15,300
23,026 Subtotal 20,800 37,440 117,599 1]2,624
Clean rice Shipping clerk 2,080 2,080 10,000 10,000 10,000 Asst.
ship. clerk Qual ity control 2,080 4,160 3.79 7,883 15,766 Bl ender
2,080 2,080 3.79 7,883 15,766 Sackman 2,080 2,080 3.81 7,925 7,925
Sewer 2,080 2,080 3.79 7,883 7,883 Sea 1 er 2,080 2,080 3.79 7,883
7,883 Forklift operator 2,080 2,080 3.84 7,987 7,987 Loaders 4,160
4,160 3.69 15,300 15,300 Mon i tor 2,080 2,080 3.69 7,675 7,675 Ca
reI eaner 2,080 2,080 3.69 7,675 7,675 Sanitation 2,080 2,080 3.69
7,675 7,675 Subtotal 24,960 27,040 95,769- 111,535
Packaging Manager 2,080 2,080 10,000 10,000 10,000 Clerk 2,080
2,080 3.79 7,883 7,883 Operators 2,080 4,160 379 ],883 15,766
Packers 4, 160 6,240 3.79 15,766 23,650 Scalers 2,080 2,080 3.79
7,883 7,883 Supplyman 2,080 2,080 3.79 7,883 7,883 Take-off 2,080
2,080 3.79 7,883 7,883 Forklift operator 2,080 2,080 3.84 7,987
7,987 Subtotal 18, ]20 22,880 73, 168 88,935
continued
http:4,160_-3.79
-
66
Table 35. Continued
Annual manhours Salary or Annual costItem 40 hr. 80 hr. wage
rate 40 hr. 80 hr.
no.
By-products Sewers 2,080 Sealers 2,080 Sackers 2,080 Loaders
2,080 Grinder operator 2,080 Quality control Sanitation 2,080
Subtotal 12,480
Maintenance Millwright 2,080 Asst. millwright Helper millwright
2,080 Electrician 2,080 Sanitation 2,080 Subtotal 8,320
Admi n i strat i ve 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
Grand total 104,000
hrs.
2,080 2,080 2,080 2,080 2,080
2,080 12,480
2,080
2,080 2,080 2,080 8,320
2,080 2,080 2,080
2,080
4,160 12,480
133,120
do 11 a rs
3.79 3.79 3.81 3.69 3.79 3.79 3.69
8,500 3.79 3.79 3.79 3.69
dollars
7,883 7,883 7,925 7,675 7,883
7,883 7,883 7,925 7,675 7,883
7,675 46,924
7,675 46,924
8,500 8,500
7,883 7,883 7,675
31 ,941
7,883 7,883 7,675
31 ,941
75,000
10,000
75,000 20,000 10,000
7,000 7,000
6,000 6,000 98,000 118,000
512,050 626,491
Source: Based on data reported in Economic Models for Rice Mills
in the South, Holder, Morrison and Traylor, Southern Cooperative
Series Bulletin 187, June 1974. Also survey data in Puerto Rico on
labor costs.