Impact of price differentials and limited storage on soybean flows in West Tennessee, 1977

The purpose of this study was to determine to what extent farm and country elevator storage affects present observed soybean flows in West Tennessee and to estimate the consequences brought about by certain soybean price increases at Memphis with respect to the attraction of West Tennessee grown soybeans into Memphis for processing.

The method employed in the study was the use of a linear programming format, containing four quarters and five subregions. The multi-time dimension was necessary in order to capture the storage aspect in a commodity such as soybeans. The five subregions were used in order to depict the major marketing options and restrictions particular to each subregion. The model was constructed by using secondary data for transportation, storage, and production estimates and primary data obtained from a recent grain handling survey for estimating the 1977 grain flows in the study area.

The major conclusions of the study were: 1) farm and country elevator storage in West Tennessee does not seem to be a problem hindering increased soybean flows from West Tennessee into Memphis and 2) soybean prices at Memphis do not seem high enough at the present time to justify the additional transportation charges that would be incurred with additional soybean shipments from West Tennessee. This implies that certain price increases could be initiated by the Memphis processors to encourage additional soybean shipments from West Tennessee.