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 Title Page
 Present cattle situation
 Structure of Florida's feeding...
 Estimations of the impact from...
 Projections
 Summary
 Footnotes
 References














Group Title: Staff paper
Title: An economic analysis of the effect of increasing transportation costs on Florida's cattle feeding industry
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 Material Information
Title: An economic analysis of the effect of increasing transportation costs on Florida's cattle feeding industry
Series Title: Staff paper
Physical Description: 31 p. : ; 28 cm.
Language: English
Creator: Stegelin, Forrest E ( Forrest Eugene ), 1947-
Simpson, James R
Publisher: Food and Resource Economics Dept., Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville
Publication Date: 1980
 Subjects
Subject: Trucking -- Economic aspects -- Florida   ( lcsh )
Feed industry -- Transportation -- Economic aspects -- Florida   ( lcsh )
Flour industry -- Transportation -- Economic aspects -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Statement of Responsibility: F.E. Stegelin & J.R. Simpson.
Bibliography: Includes bibliographical references (p. 30-31).
General Note: "August 1980."
General Note: Some copies have Staff Paper 161r and corrections have been made to the tables in ink.
 Record Information
Bibliographic ID: UF00091352
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 22412548

Table of Contents
    Title Page
        Title Page
    Present cattle situation
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
    Structure of Florida's feeding industry compared with other areas of the United States
        Page 10
    Estimations of the impact from higher transportation costs
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
    Projections
        Page 24
        Page 25
        Page 26
        Page 27
    Summary
        Page 28
    Footnotes
        Page 29
    References
        Page 30
        Page 31
Full Text

















AN ECONOMIC ANALYSIS OF THE EFFECT OF INCREASING
TRANSPORTATION COSTS ON FLORIDA'S
CATTLE FEEDING INDUSTRY


by

F.E. Stegelin & J.R. Simpson


Staff Paper 161


August 1980


Staff Papers are circulated without formal review
by the Food and Resource Economics Department.
Content is the sole responsibility of the author.








Food and Resource Economic Department
Institute of Food and Agricultural Sciences
University of Florida
Gainssville, Florida 32611







AN ECONOMIC ANALYSIS OF THE EFFECT OF
INCREASING TRANSPORTATION COSTS ON FLORIDA'S CATTLE FEEDING INDUSTRY

F.E. Stegelin & J.R. Simpson

Rapid fuel price increases in 1979 and early 1980, along with con-
cern about further disproportionate rises, have led to speculation that
Florida, a major calf producing state and a net importer of finished
cattle and beef, will increasingly be competitive in finishing cattle to
slaughter weight. This hypothesis is strengthened by the recognition of
significant structural changes in the Florida cattle feeding industry
since the late 1960's as large-scale feedlots were developed and smaller
scale feeders declined in importance. In addition, there have been pro-
duction possibilities developments in Florida feedstuffs, such as the
use of bagassee silage and various other types of silage, high-moisture
corn, and improved corn yields. These feedstuff developments have renewed
the speculation of Florida increasing the number of cattle fed in Florida
feedlots. Considering these factors, this paper is an evaluation of the
potential effect increased transportation costs as a result of higher
fuel prices might have on Florida's competitive cattle feeding position.

PRESENT CATTLE SITUATION

Florida ranks sixteenth in the United States in total number of
cattle and calves. Beef cows and replacement heifers comprise approxi-
mately 60 percent of the state's cattle population. Beef cattle con-
tribute significantly to Florida's economy as evidenced by cash receipts
in 1979 of over $422 million from marketing 921,000 cattle and calves [5].
Total cattle population in Florida on January 1, 1979, numbered 2.2 mil-
lion head, of which 1.1 million were beef females that had calved (Table
1). Inventory numbers for 1967-1979 (Table 2) show the state's cattle
numbers have grown significantly despite fluctuations due to the cattle
cycle [12]. The estimated number of feeder cattle in Florida on July 1,
1979, was 818,000 head of which about 100,000 head were carried over
from the 1978 calf crop while the balance were born in 1979. (Table 3).
A summary of cattle outshipments, inshipments and net outshipments
(Table 4) shows inshipments of cattle are about one-third to one-half
the number of outshipped cattle. Even though one-half to two-thirds of










Table l.--Total cattle population in Florida, January 1, 1979, including
numbers of various classes


Class Number


--lHead--
Inventory
Females that have calved 1,338,000
Replacement heifers 225,000
Bulls 76,000
Steers 100,000
Calves under 500 lb 441,000
Total cattle population 2,180,000

Beef females
Cows that had calved 1,149,000
Replacement heifers 146,000
Beef breeding females 1,295,000

Dairy females
cows that had calved 189,000
Replacement heifers 38,000
Dairy breeding females 227,000











On hand January 1 Farm b/ Deaths
All cattle arktslau1 ahter cattle
and Calf Inship- aCattle and and
Year calves all cowsc/ crop ments Cattle Calves calves calves

---------------------------- ------1000 Head--- ----------------------------- -----

1971 2,060 1,220 1,025 115 361 657 6 46
1972 2,130 1,266 1,087 91 300 692 7 72
1973 2,237 1,336 1,180 100 289 626 9 103
1974 2,490 1,494 1,320 70 350 442 18 120
1975 2,950 1,670 1,250 69 6 52 562 15 120
1976 2,920 1,615 1,170 65 568 669 11 107
1977 2,800 1,579 1,135 65 662 852 11 125
1978 2,350 1,410 1,060 76 478 711 10 107
1979 2,180 1,338 1,060 76 298 623 3 92

Source: Florida Agricultural Statistics, Livestock, Sunmaries, 1971 and 1979

a/ Includes custom slaughter for use on farms where produced, but excludes inter-farm sales
within the state.

b/ Excludes custom slaughter for farmers at commercial establishments.
# ...- . .- -l _ .... .z._ .lt- t. .... .- ^. "t -









iaDie j.--tLstmatea number OT Teeaer cadtie in riuorua, duiv i, iI/


Livestock
category Number

---head---

Calves under 500 Ibs 718,000
Steers over 500 Ibs 72,000
Heifers over 500 Ibs 28,000
Total 818,000




Source: Florida Agricultural Statistics: Livestock Summary, 1979










Table 4.--Florida cattle outshipments, inshipments and net outshipments, 1969



In
as
Net pe
Year Outshipments Inshipments outshipments ou

--------------------------Head-------------------------

1969 407,240 173,458 233,782
70 469,545 166,143 303,402
71 604,215 199,322 404,893
72 655,467 224,384 431,083
73 591,728 239,299 352,429
74 411,947 214,414 197,533
75 510,248 215,752 294,496
76 573,095 236,897 336,198
77 612,815 221,948 390,867
78 672,671 243,256 429,415
tr-yf -%j Aj> n ~ -%rn f^ i^~








a 11 1 i u1 fu al e ae t: i aI lppu u uI riuriua allltuall auuuL Ca LIuaCr'Lt ui
a million are shipped back each year. Two-thirds of the inshipments are
for Florida slaughter while most of the outshipments are feeder cattle.
Florida calf outshipments and inshipments for 1969-1979 (as com-
pared to all cattle in Table 4) are given in Table 5. About one-half
million calves are shipped out of Florida each year with the number vary-
ing from 357,000 head in 1974 to 605,000 head in 1972. Calf inshipments
range from three to seven percent of outshipments. Calves account for
about 85-90 percent of all cattle shipped out of Florida, as depicted in
Tables 4 and 5. The number of outshipped stocker-feeder cattle of the
type going into Florida feedlots is, however, larger than the number of
calves reported in the time series data in Table 5 as there are a signifi-
cant number of cattle shipped from the Florida panhahdle. It was esti-
mated,for example, that outshipments of stocker-feeder cattle from all
Florida in 1978 numbered about 707,000 head, compared with inshipments
of 35,000 head (Table 6). In effect, the total net number of stocker-
.feeder cattle shipped out was about 672,000.
Approximately 75 percent of the calves shipped out of Florida in
1978 went to the cattle feeding areas in the southwestern and plains
states, which required trucking calves 1400 to 2200 miles. The southern
plains states of Texas, Oklahoma, New Mexico, Kansas, and Colorado re-
ceived 58 percent of the calves, while 17 percent of the Florida calves
were trucked to the California-Arizona feeding area C5]. Calf shipments
to the nearby states of Georgia, Alabama, and Mississippi also accounted
for 17 percent of the outshipments in 1978. Most of the latter were pro-
bably for backgrounding as a preparation for shipping to other feeding
areas.
Florida's number of cattle on feed, as of each January 1st, has
ranged from 55,000 head in 1974 to 81,000 head in 1976 (Table 7). There
were 5-10 thousand head more on feed in the late 1970's than the late
1960's. As of 1979, the 23 major cattle feeding states had about 12.7
million head on feed while the 39 states reporting cattle on feed had a
total of 13.3 million head on feed. Florida represented about one-half
of one percent of all cattle on feed with an inventory of 65,000 head.













Calf
Inshipments outshipments oL
as a as a percent as
Net percent of of all cattle
Year Outshipments Inshipments outshipments outshipments outshipnments a/ ci

-------------------Head-------------------- ------------------ Percent----------

1969 362,340 21,323 341,017 06 .89
70 435,897 17,437 418,460 04 93
71 557,087 16,783 540,304 03 92
72 605,140 20,377' 584,763 03 93
73 552,067 25,788 526,279 05 93
74 357,370 12,991 344,379 04 87
75 393,665 27,115 366,550 07 77
76 483,191 31,792 451,399 06 84
77 535.497 35.336 500.161 07 87











Table 6.--Number of stocker-feeder cattle and calves shipped out of Florida
to other states, and numbers shipped into Florida in 1978


Item


Number


Outshipments to other states
From south and east of Suwnnee
From north and west Florida
Total outshipments


Inshipments
To south
To north


from other states
and east of Suwannee
and west Florida


Total inshipments
Net shipped out-of-state


606,789
100,000
706,789


29,743
5,000
34,743
672,046


Source: Florida Agricultural Statistics, 1978, and estimates by
independent researchers.









Table 7.--Cattle and calves on feed, January 1, 1969-1979


Florida
as a
23 39 percent
Year Florida States States of 39 states

---------------1000 head-- ----------- --percent--

1969 60 11,965 12,534 0.48
70 61 12,644 13,190 0.46
71 57 12,209 12,770 0.45
72 57 13,330 13,876 0.41
73 58 13,861 14,432 0.40
74 55 13,067 13,642 0.40
75 60 6,619 10,167 0.59
76 81 12,327 12,943- 0.63
77 73 11,948 12,580 0.58
78 72 12,811 13,469 0.53
1979 65 12,631 13,275 0.49


Source: Livestock.and Meat Statistics, various issues.








STRUCTURE OF FLORIDA'S FEEDING INDUSTRY COMPARED WITH
OTHER AREAS OF THE UNITED STATES

The number of cattle feedlots in Florida is presented in Table 8,
and shows the decline in the number of Florida feedlots in the last 15
years. The results of a 1979 survey of Florilda feedlots show there likely
are five to ten feedlots with less than 1000 head one-time capacity, sev-
en or eight feedlots with 1000 to 4999 head capacity, three feedlots with
5000 to 9999 head capacity, and three feedlots with 10,000 head or more
capacity.
There were 125,000 to 130,000 head of cattle from Florida feedlots
marketed in 1979, as compared to the 150,000 head marketed each year in
the late 1960's (Table. 9), Although the number of feedlots in Florida
has substantially declined, the number of cattle fed in Florida has not
decreased as noticeably. The conclusion reached upon studying the market-
ings and structure of the United States and Florida feedlots is that the
Florida feedlots are relatively large by industry standards (Table 10) as
a result of a structural shift rather than growth in terms of cattle on
feed or feedlot marketing. Given this background, an analysis of the
impact from higher cattle and feed transportation costs on the Florida
cattle feeding industry is presented.
ESTIMATIONS OF THE IMPACT
FRDM WTnHFD TRANPPnRTATTnM CASTS








STRUCTURE OF FLORIDA'S FEEDING INDUSTRY COMPARED WITH
OTHER AREAS OF THE UNITED STATES

The number of cattle feedlots in Florida is presented in Table 8,
and shows the decline in the number of Florida feedlots in the last 15
years. The results of a 1979 survey of Florilda feedlots show there likely
are five to ten feedlots with less than 1000 head one-time capacity, sev-
en or eight feedlots with 1000 to 4999 head capacity, three feedlots with
5000 to 9999 head capacity, and three feedlots with 10,000 head or more
capacity.
There were 125,000 to 130,000 head of cattle from Florida feedlots
marketed in 1979, as compared to the 150,000 head marketed each year in
the late 1960's (Table. 9), Although the number of feedlots in Florida
has substantially declined, the number of cattle fed in Florida has not
decreased as noticeably. The conclusion reached upon studying the market-
ings and structure of the United States and Florida feedlots is that the
Florida feedlots are relatively large by industry standards (Table 10) as
a result of a structural shift rather than growth in terms of cattle on
feed or feedlot marketing. Given this background, an analysis of the
impact from higher cattle and feed transportation costs on the Florida
cattle feeding industry is presented.
ESTIMATIONS OF THE IMPACT
FRDM WTnHFD TRANPPnRTATTnM CASTS










8, Number of Florida feedlots


Less than 1,000 to
1000 head 4,999 head

--------------------------

461
465
415
355

Estimated 5-10 7-8


lurce: 1965-68 from Beef Cattle Com
University of Florida, 1975,
results D33.


U


head
-e


ly ZL I4- uJ



000 head or
5,000 to
9,999 he

Number of L







3


imittee Repol
The 1979


io re
10,0
I and

s -------







3


, A.G.U.,
ta are f


I


Sub- To
total lo



16 4
13 4
15 4
13 3

-14 18-



ev


head
re


tal
ts



77
78











1979 compared with Nebraska, Texas and 23 major cattle feeding
states, 1978



State 1,000 8,00
or Less than to and
region 1,000 head 7,999 over Total

------------------------Head------------- ----------

Florida 3,200 23,700 101,500 123,400
Nebraska 1,630,000 1,255,000 1,285,000 1,170,000
Texas 80,000 312,000 4,523,000 4,915,000
23 states 8,542,000 4,242,000 13,861,000 26,645,000

-----------------------Percent---------------

nr1 10o 70 inn









the 23 major cattle feeding states, 1978.

e Less 1000 8000 head
than to and
on 1000 head 7999 head more

--------------------------NUMBER-----------------------

*ida 5 8 5

aska 13,500 337 42

s 959 58 103

states 125,523 1,487 415

------------------------PERCENT-----------------------

ida 28 44 28

aska 97 3 0

s 86 5 9

states 98 I I


ce: Livestock and Meat Statistics, Supplement for 1978 and survey data C[









F higher fuel costs on the transport of cattle. The method is not
?signed to replace spatial equilibrium techniques developed for use
ith computers; rather it is intended to complement such .approaches.
iis method is analogous to the use of partial budgeting rather than
)mplete enterprise budgeting to solve investment questions.
The method of analysis is presented in this paper is based on the
assumption that the Florida cattle feeding industry will expand signifi-
intly only if it is more profitable to feed cattle in Florida than in
other areas. There is no crucial evidence showing significant differences
between Florida's relatively large feedlots (by industry standards) and
ie other major cattle feeding areas, thereby permitting Florida's feed-
)ts to take advantage of substantial economies of size [14]. There is
cesss packing plant capacity in Florida and a review of inquiries by
)n-Florida packers indicates more plants would be built if there existed
supply of Florida fed cattle. As stated earlier, production breakthroughs
i the development of new feedstuffs has also occurred. Consequently the
;sue to be addressed becomes the cost-value relationship of trucking
little.
Part of transportation theory states that the higher a commodity's
ilue relative to its weight, the greater the distance it can be shipped
id remain competitive with locally produced commodities. There is no
isincentive to move cattle long distances if cattle prices are high and
uel, as a value of the animal, is relatively small. If the percentage
mains small over time, fuel costs are not a significant factor in en-
ouraging shifts in feedlot location from the southwest to the southeast,
id fuel costs are overshadowed by factors such as a competitive packing









Table 11. Components of consumer expenditures for farm foods

1972 1976 1977 1978 19791
---.----------BiH ion' Dollars----------- --------

Retail Expenditures 118.8 178.8 186.4 207.7 231.0
Farm Value 39.1 57.6 57.5 67.2 75.0
Marketing bill: 79.7 121.2 128.9 140.5 156.0
Labor/ 37.4 54.0 59.8 66.0 72.0
Packaging materials 10.2 15.0 16.2 17.5 19.0
Transportation, rail,
and trucks/ 6.1 9.5 10.0 10.8 12.5
Corporate Profits
before taxes 4.0 7.9 8.5 9.5 11.0
Other- 22.0 34.8 34.4 36.7 41.5


-4reliminary. -Includes wages and salaries,/ Also includes imputed earnings of
proprietors, partners, and family workers. "Does not include local hauling charges.
tfincludes business taxes, depreciation, rent, advertising, interest, energy, and
numerous other costs.









of Florida feeder calves are given in Table 12. The analysis is
done by quarters beginning with the first quarter of 1977, a period of
relatively low fuel prices and low cattle prices. At that time, the
.average price of Florida calves was $31.17 per cwt., and transportation
rates for pot trailers hauling feeder calves from Florida to Texas were
about $0.90 per loaded mile. Assuming a 1000 mile haul from central
Florida to a central Texas feedlot, the transportation cost attributed
to one animal was about $9, i.e., about 7.6 percent of the value of the
animal in early 1977. Diesel fuel was valued at $0.40 per gallon and
the fuel used on the trip was 9.22 percent of the transportation, or
0.70 percent of the value of the animal. In effect, fuel cost was rela-
tively small in comparison to other production and marketing costs since
fuel was only seven-tenths of one percent of the value of a 380-pound
feeder calf. The relatively small dollar expenditure for fuel also ex-
plains why Florida cattlemen occasionally purchase cattle in Texas for
feeding in Florida when, at the same time, similar type cattle are pur-
chased in Florida for feeding in Texas.
The price of cattle increased slightly during 1977 as did fuel costs
with the result that fuel consumed as a percent of the value of the
animal increased only slightly from 0.70 percent to 0.75 percent. In
1978, cattle prices,increased dramatically, with the average calf price
in Florida reaching $68.40 per cwt. by the fourth quarter. Fuel cost
went from $0.45 to $0.55 per gallon, but the end result was fuel as a
percent of the value of the animal declined and stabilized at about 0.45
percent for the last nine months of the year. Cattle prices continued
to increase in 1979 such that, even with upwardly spiraling diesel fuel
prices, fuel as a percent of the 380-pound calf reached a low of 0.34
percent in the second quarter. Cattle prices stabilized the first half
of 1980 with the result that fuel still only represented 0.60 percent
of the value of the calf in the first quarter 1980 when diesel fuel prices
rose dramatically to average $1.00 per gallon. A decline in calf prices
during the second quarter and a continued climb in diesel fuel prices
increased' the fuel/animal value ratio to reach 0.87 percent, a percent-
age that is not significantly higher than the 1977 figures.

FED CATTLE ANALYSIS

Data on analysis of fuel used for 1000-mile backhaul from Texas to












-- Estimations of fuel as a percent of the value of Florida feeder calves, 1977-1980 with project

UNITS 1977 1978
I II III IV I II III I
:e FL Calves 1/ $/cwt 31.17 34.60 32.50 31.90 45.40 59.17 64.70 68
. Rate/Truck2 $/mi. .8974 .8974 .8974 1.9353 .9353 .9824 .9824 1.
. Cost/Head/Mile
id,380 lb. avg.) $/hd/mi. .008974 .008974 .008974 .00953 009353 .009824 00984 .C
. Cost (1000 mi) $/head 8.974 8.974 8,974 9.353 9.353 9.824 9.824 1C
id (380 Ib.) $/head 118.446 131.48 123.50 121.22 172.52 224.86 245.86 25
. as % value
1 7.58 6.38r 7.27 7.72 5.42 4.37 4.00 4.









Table 12. --(Cont.)


1933
I- II


I II


Spring, 15~3
HC HF LC LF HC LF


Avg. Price FL Calves 1
Transport. Rate/Truck
Transport. Cost/Head/Mile
(1000 head,380 lb. avg.)
Transport. Cost (1000 mi)
Value/Head (380 Ib.)
Transport. as % value
of animal
Fuel Usage (loaded)
(19T)2/
Diesel Fuel Cost/
Fuel Cost/Load/Trip.
Fuel Cost/Animal
Fuel as % of value of
Animal
Fuel as % Transport. Cost


S$cwt 91.83 107.30 96.80 85.73 91.90 76.90
$/mi. 1.0807 1.0807 1.2896 1.2896 1.3455 1.3455


$/hd/mi
$/head
$/head


.010807
10.807
348.954


% 3.10


gal/
T-mile
$/gal
$/load
$/head


.01110
.60
126.54
1.2654


% .36
% 11.71


.010807
10.807
407.74

2.65


.01110
.65
137.035
1.3709


.012896
12.896
367.84

3.51


.0110
.75
158.175
1.5818


.012896
12.896
325.774

3.96


.01110
.85
179.265
1.7927


.34 .43 .55
12.69 12.27 13.90


.013455
13.455
349.22

3.85


.01120
1.00
212.8
2.128


.013455
13.455
292.22

4.60


.01120
1.20
255.36
2.5536


.61 .87
15.82 18.98


150 135 150 135
-,-,- 250 ----------------


.---..025
-------. 25
570 513

4.39 4.87


------.0113
4.00 3.00
858.8 644.1
8,588 6 441


E70 513

4.39 4.87


---------------
3.00 4.00
544.1 359.8
6.441 3.533


15.1 1.26 1.31 1 67
34.35 25.76 25.76 14.35


I/ Florida Crop and Livestock Reporting Service.

2/ Composite average of rates quoted by three Florida livestock trucking firms, and


Operations of


For-Hire Livestock Trucking Firms 1'7]1.


3/ Transportation Fuel Requirements in the Food and Fiber Systerm r18]

4/ Department of Transportation and Cost of Operating Trucks for Livestock Transportation [19].
5/ High cattle-high fuel; low cattle-low fuel.


ITEI1


UNITS


LC HF/


~ __I~








Florida as percent of the value pf a 1050-pound fed animal are given in
Table 13. The fuel/animal ratio was 0.60 percent in the first quarter
of 1977, declined to 0.51 percent in the second quarter of 1978, and
gradually increased to 1.09 percent in the second quarter of 1980. Al-
though the percentage doubled from two years earlier, the fuel cost is
a relatively small value of the animal.
Investment and direct operating costs for Florida feedlots (ex-
cluding feed and marketing costs) vary between $30 per head fed in 5,000
to 10,000 head capacity feedlots operating at 90 percent of capacity in
1979, and $125 per head in 500 head capacity feedlots operating at 60
percent of capacity [14]. The total cost of transporting a Florida calf
to Texas and backhauling a fed animal to Florida amounts to $34.46
($13.46 plus $21.00). Given the range on the direct costs attributed
to the various sizes and scales of operation and the finite transportation
charges, the relative importance of economics of size and management
efficiencies in explaining why cattle can be hauled long distances can
be observed. Another transportation cost factor is in the feed cost
relationships.

FEED ANALYSIS

An estimate of the importance of transportation cost in the total
cost of using corn-based rations is provided in Table 14. Despite mod-
erate fluctuations, corn prices in the first quarter 1980 were still
about the $2.35 per bushel price for Illinois corn reported in the first
quarter~1977. Transportation charges from Illinois to Florida have in-
creased from $0.35 per bushel to $0.53 per bushel over these three years.
Georgia corn is about $0.40 per bushel higher in delivered price than
Illinois corn. The net result is that in early 1977 corn delivered to
Florida feedlots cost $2.70 per bushel while three years later the
delivered price was just $2.90 per bushel.
Corn, on a dry matter basis,accounts for about 65 percent of all
Floridafeedlot ingredients used [13]. Given that about eight pounds of
feed on a dry matter basis are required per pound of gain, about five
pounds of corn are used for every pound of gain. Assuming that 350
nnmiit nf nain will hP nut on the animal in confinement feeding (aPart







percent of the value of fed (slaughter weight) cattle, 1977-1980 with projections to 1985


1977 1978

Units I II III IV I II II I IV


Avg. Price Omaha Ch. Fed Cattle -!
Transport. Frt. Rate (Backhaul) 2
Transport. Cost/Head/Mile
(40 head, 42,000 lb., 1000 ml)
Transport. Cost/I Way (1000 mi)
Value/Head (1050 Ib.)
Transport. as % value of animal
3/
Fuel Usage (Loaded) 3

Diesel Fuel Cost /
Fuel Cost/Trip
Fuel Cost/Animal
Fuel as %value of animal
Fuel as %Transport. Cost
Total Fuel cost Calf West &
Fed Cattle East
% value of animal


$/cwt. 37.88 40.77 40.47 42.42 45.77 55.06 53.75 54.76
$/cwt 1.65 1.65 1.65 1.70 1.70 1.70 1.70 1.80


$/hd/ml
$/head
$/head


gal/
T-mi le
$/gal
$/load
S/head


.017325
17.325
397.74
4.36

.01089
.40
95.832
2.3958
.60
13.83


.017325
17.325
428.085
4.04

.01089
.42
100.6236
2.51559
.59
14.52


.017325
17.325
424.935
4.08

.01089
.43
103.0194
2.575485
.61
14.87


.01785
17.85
445.41
4.01

.01089
.44
105.4152
2.63538
.59
14.76


.01785
17.85
480.585
3.71

.01130
.45
111.87
2.79675
.58
15.67


.01785
17.85
578.13
3.09

.01130
.47
116.842
2.92105
.51
16.36


.01785
17.85
564.375
3.16

.01130
.50
124.3
3.1075
.55
17.41


.0189
18.90
574.98
3.29

.01130
.55
136.73
3.41825
.59
18.09


$/head 3.2234 3.3846 3.4652 3.5458 3.7630 3.9302 4.181 4.5992
% .81 .79 .82 .80 .78 .68 .74 .80


Table 13 --Estimations of fuel as a











1979 1980


Item Units I II III IV I

Price Omaha Ch. Fed Cattle / $/cwt 65.42 72.51 65.88 66.86 66.85 6,
sport. Frt. Rate (Backhaul) 2/ $/cwt 1.80 1.80 1.90 1.90 1.90 2
sport. Cost/Head/Mile
40 head, 42,000 Ib., 1000 mi) $/hd/mi .0189 .0189 .01995 .01995 .01995 .
sport. Cost/I Way (1000 ml) $/head 18.9 18.9 19.95 19.95 19.95 .2
e/Head (1050 Ib.) $/head 686.91 761.355 691.74 702.03 701.925 6
sport. as % of value of animal Z 2.75 2.48 2.88 2.84 2.84 3
Usage (Loaded) 3/ gal/
T-mile .01110 .01110 .01110 .01110 .01120
el Fuel Cost'4/ $/gal .60 .65 .75 .85 1.00 I
Cost/Trip $/load 146.52 158.73 183.15 207.57 246.4 2
Cost/Animal $/head 3.663 3.96825 4.57875 5.18925 6.16 7
as % value of animal % .53 .52 .66 .74 .88 I
as % Transport. Cost z 19.38 21.00 22.95 26.01 30.88 3
I Fuel Cost Calf West &
ed Cattle East $/head 4.9284 5.3392 6.1606 6.9820 8.288 8
alue of animal z .72 .70 .89 .99 1.18 I




1/ Livestock and Meat Situation, various issues.

2/ Composite average of rates quoted by three Florida livestock trucking firms, and Operations of I

3/ Transportation Fuel Requirements in the Food and Fiber System, AER 444, and subsequent releases

4/ Department of Transportation data files, and Cost of Operating Trucks for Livestock Transportat

5/ High cattle-high fuel; low cattle-low fuel.






Table 4.--Estimations of fuel as a percent of the value of imported corn to Florida feedlots, 1977-1980 with projections to 1985



1977 1978 1979
CORN UNITS I II Ill IV I II III IV I II III IV
FOB Price (Illinois) Y $/bu 2.34 .233 1.70 1.84 2.06 2.27 2.05 2.03 2.17 2.37 2.55 2.35


Transport. Cost from IL-'
Total Corn Cost from IL

FOB Price (Georgia) !/
Transport. Cost from GA1-'
Total Corn Cost from GA

Georgia Corn Transport.
as % of Corn Value

Georgia Corn as % of'
Animal Value

Corn Transport. as %
of Animal Value

Other States Corn
Transport. as % of
Corn Value

Other State Corn as %
of Animal Value

Corn Transport. as %
of Animal Value


$/bu
$/bu


$/bu
$/bu
$/bu


.35
2.69

2.60
.13
2.73


.05


16.09

.77


.13


15.85

2.06


.35
2.60

2.45
.13
2.58


.05

14.13

.71


.14


14.23

2.03


.38
2.08

2.00
.14
2.14


.07

11.80

.77


.18


11.47

2.10


.39
2.23


2.10
.14
2.24


.06

11.79

.74


.17


11.73

2.05


.40
2.46

2.20
.14
2.34


.06


11.41

.68


.16

12.00

1.95


.41
2.68


2.60
.15
2.75


.05


11.15

.61


.17

10.87

1.66


.42
2.47


2.25
.15
2.40


.06


9.97

.62


.17


10.26

1.74


.43
2.46


2.30
.15
2.45


.06


9.99

.61


.17


10.03

1.75


.47
2.64


2.35
.17
2.52


.07

8.60

.58


.18

9.01

1.60


.48
2.85

3.00
.17
3.17


.05


9.76

.52


.17

8.77

1.48


.50
3.05

2.80
.18
2.98


.06


10.10

.61


.16

10.33

1.69


.51
.286

2.80
.19
2.99


.06

9.98

.63


.18

9.55

1.70











Table 14.--(con't)


CORN UNITS

FOB Price-(Illinois)-! $/by 2.
Transport. Cost from IL1- $/bu .5
Total Corn Cost from IL $/bu 2.


FOB Price (Georgia) / $/bu
Transport. Cost from GA1/ $/bu .2
Total Corn cost from GA $/bu 2.


Georgia Corn Transport.
as % of Corn Value % .0

Georgia Corn as % of
Animal Value % 9.

Corn Transport. as %
of Animal Value % .7

Other States Corn
Transport. as % of
Corn Value % .1

Other State Corn as
% of Other Value % 9

Other Transport. as %
of Animal Value % 1

1/'Gold Kist, Live Oak, Florida

2/ High corn high fuel; low corn low corn


19

.62

.77


-prinq I -~T


Spring,
LC LC


3.00
.80
3.80


3.50
.50
4.00


1980
1 II


35 2.55
3 .55
88 3.10


70 2.90
2 .24
92 3.14


18 .08

75

'3


HC HF


4.00
1.00
5.00


4.30
.80
5.10

Low Cattle
.16

11.98

1.88


.20

1.75

2.35


.17

S 7.07


1.49


HC LF


4.00
.80
4.80


4.30
.50
4.80

High Cattle
.10

7.44


1.93


--


Lc HF 2/


3.00
1.00
4.00


3.50
.80
4.30









per animal fed. Assuming the importedd corn is from Georgia, the
transportation cost of the Georgia corn accounted for..77 percent of
the value of a 1050-pound fed animal. If, however, the imported corn was
Illinois corn, 2.06 percent of the value of the animal was attributed to
the transportation cost of the imported Illinois corn.
From the 1979 Florida feedlot study [13], it is determined that
approximately three-fifths of the imported corn is from Georgia and the
remaining two-fifths is from other states, primarily the Corn Belt. Thus
approximately 1.15 percent [7.4(3) + 1.77(2)/5] of the value of the fed
animal is attributed to the transportation cost of importing corn to
Florida feedlots. For some feedlots, the utilization rate of five pounds
of corn per pound of gain is low, so that the actual corn transportation
per animal value percentage would be higher.
The analysis of the 1977-80 data shows that transportation is a smaller
than expected amount of a feeder cattle or fed animal's value. In Table 15,
I .-_-^ i- 1 -L _C -- r -Z- -- 4- -. 4 j .kl.4 *fuknm 4-li 4m -\1 Or wnliia


In 1980, for example, the fed cattle transportation <
!der and fed animal) was $33.40 while the transportati(
corn Der head was $7.97 for a net transportation cost


iel price in


teases on this net cost.

PROJECTIONS

sta presented provide valuable insi!


oJec-Lons anu dcau L pri'ues snuu
industry being in the accelerate,
1











Table 4i5. Net dollar per head differential in transporting cattle Versus
transporting corn



First Quarter Costs
Item. .1 77 .. 978 I 979 1980
-----------------Dollars per head----------
Calves and 8.97 9.35 10.81 13.45
Fed Cattle 17.33 17.85 18.90 19.95
(Round Trip) 26.30 27.20 29.71: 33.40

Imported
Corn 5.15 5.46 6.80 7.97

Differential 21.25 21.74 22.91 25.43








used; however, the projected average price of all Florida calves ranging
between $125.00 and $150.00 per pwt. by the spring of 1985 (8.5 percent
and 10.8 percent compounded annual increase in prices from the first
quarter 1980 to first quarter 1985) ias chosen. The projected cattle
price range chosen is between (95.00 and $120.00 per cwt. (7.2 percent
and 12.2 percent annual rate of increase). A lower bound fuel price of
$3.00 per gallon is chosen for 1985 while the higher price is $4.00 per
gallon (Figure 1). In effect, diesel fuel cost is assumed to increase
between 200 and 300 percent respectively over the five year projection,
while the calf prices increase between 80 and 100 percent and fed cattle
prices increase between 45 and 85 percent. a/
Using the cattle and fuel price projections assumed for 1985, fuel
as a percent of the value of Florida feeder calves would range from a
low of 1.14 percent to 1.67 percent, a value ratio which is approximately
double the percentage in 1980. Fuel costs attributed to transporting fed
cattle would increase from about 0.88 percent of the value of the animal
to between 1.48 percent and 2.49 percent of the value of the animal, an
increase of 100 to 200 percent over 1980 figures, but still a low fig-
ure in comparison to the value of the animal, relocation costs, etc.
Corn prices have been fairly steady over the last three and one-half
years and the long range outlook indicates only moderate price increases
(approximately 50 percent) whereas the per bushel transportation charges
wijl increase at least 100 percent. Our estimates for 1985 indicate the
transportation cost pf shipping Georgia corn could range from 10 to 20
percept of he value f corn, while the transportation cost of the corn
imported from other states would be slightly higher, ranging from 17 to
25 percent. The net result is that these estimates reflect little change
from the current transportation charge as a percent of the value of corn
imported from other than Georgia, but a 200 percent increase in the trans-
portation cost of importing Georgia corn as a percent of its value. As
a percent of the fed cattle value, the transportation cost for shipping
corn is projected to be about 0.20 percent, a slight increase above cur-
rent ratios.
The analysis indicates that in 1985, the net difference between
transportation costs attributed to hauling calves to Texas and fed
cattle to Florida on a backhaul and the transportation cost of importing












Transportation rate (dollars per cwt.)


- r 4 -
/


* .


0'
\'*


*il-.
^ .
0 0


L- C.
o' *'
0 . ,


*


0


.- 4




-
0.


00


9
5-Il

U\
S


4





%I


9%


*~


('-M3 jed SJelilop) seo!Jd ej-4e3o


c





o
0o
I_



*3-
0



C- in







co -
in




0
S L


(0
cr
0(
U)
-c c

ro
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0o




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a **








corn to Florida feedlots will increase to $46,40, which is about 82
percent more than in 1980, However, jn our judgement, this increase is
not sufficient to make feeding cattle in Florida appreciably more profit-
able.
SUMMARY

The analysis indicates there will be little additional incentive to
encourage feedlot development in Florida based on large diesel fuel and
transportation cost increases. This comment is because the value of
feeder and fed cattle will also increase. Consequently, there may be
a disincentive to encourage feedlot development if corn is to remain the
ration mainstay among feedlots as transportation costs are expected to
increase disproportionately faster than will the price of corn. Given
the current Florida supply of corn relative to its demand by Florida
poultry, dairy, and swine industries, the likeTihoodof greatly increased
corn production in Florida to meet all of these demands plus the feeder
cattle demand is not likely.
Consequently, our analysis reflects that the transportation cost
associated with hauling Florida calves out of state, and backhauling
fed cattle into Florida is not of sufficient magnitude to be a major
determinant in any decision to expand cattle feeding. Rather, we believe
that structure factors such as the packing industry, environmental reg-
ulations, and spatial equilibrium will be more important. The results
of our projections, although derived by simple methods compared to spat-
ial equilibrium computer models, support and complement the findings
associated with regional specialization and the comparative advantage
of resource utilization.









FOOTNOTES

a/ Calf prices increase much mone rapidly than fed cattle prices
at this level of prices because feed is held relatively constant
in cost. In effect, a cattle feeder can afford to pay proportion-
ately more for feeder cattle as price levels rise because feed be-
comes an increasingly smaller part of the fed animal's value. The
margin changes from positive to negative at about $40.)0 per cwt.
(Figure 1).











[I] Aylor, F.I. and M,E. Juillerat, Least Cost Movement Analysis of
Slaughter Cattle and Calves with Emphasis on the Southeast, Bulletin
133, Southern Cooperative Serlei, January, 1968

[2] Browser, Max F., and John W. Goodwin, Optimum Distribution Patterns
'for Feeder Cattle, Technical Bulletin T-123, Oklahoma State Univer-
sity, June, 1968.

[3] Carmon, Hoy F., California's Competitive Position in Cattle Feeding
and Poultry: A Review of Interregional Competition Studies No. 72-1,
Giannini Foundation of Agricultural Economics, University of Calif-
ornia, October, 1972.

[4] Dietrich, Raymond A., Interregional Competition in the Cattle Feeding
Economy, B-1115, Texas A & M University, September, 1971.

[5] Florida Crop and Livestock Reporting Service, Florida Agricultural
Statistics: Livestock Summary 1979, Orlando, 1980.

[6] Goodwin, John W., and J. Richard Crow, Optimal Regional Locations of
Beef Production and Processing Enterprises, Bulletin B-707, Oklahoma
State University, July 1973.

[7] Heady, Earl 0. and Uma K. Srivastava, Spatial Sector Programming
Models in Agriculture, Iowa State University Press, Ames, 1975.

[8] King, G.A. and L.F. Schrader, "Regional Location of Cattle Feeding--
A Spatial Equilibrium Analysis," Hilgardia, Vol. 34, No. 10, July,
1963, pp. 331-416.

[9] Liu, Charles Y., and Donald A. West, A Spatial Analysis of Beef
Feeding and Slaughtering with Emphasis on the South, Bulletin 177,
Southern Cooperative Series, 1973.
[I0] Mallett, James I., "Spatial Equilibrium and Regional Development,"
Contributed Paper, 1977 AAEA Annual Meeting, Texas A & M Agricultural
Experiment Station Techincal Article TA-9989, 1972.

[I11 Malphrus, L.D. C.Y. Liu and R.J. Freund, Cattle and Calf Movement
in the South, Southern Cooperative Series Bulletin 134, March, 1968.













n- .IAmFmc R.P -nd F-S. Rsimrw .Ar- -SqrInriAlrrI ;;nri nnt-rrn--inniI


in process for


and Operating Cc
Feedlots: Summa
Department, Univ

[15] U.S. Department
Statistical Bull

[16] 1979
Handbook No. 561

[17 ] Oper
No. 342, Washing


=ma ^ r.- Tural enort
m t


B. Bald
or Two
taff Pa
y of Fl

ricultu
No. 522

book of
hington

s of Fo
D.C., I


and F.S
s and T
142, Fo
a, Janu

Livesto
pplemen

icultur
C. 1976

re Live


ker, J
Sizes
nd Res
1980.

nd Mea
or var

harts,



k Truc


Station Bulletir

r., Investment
of Florida
ource Economics



t Statistics,
ious years.

Agricultural



king Firms, AER


I IM I IIrncn rt~1-tn I-i I Wcn iri m~.n1c in -Ihn I-r~rfr nnri I-ihnr


A--'I IOa;F;


I '~


r




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