Grain Marketing Patterns in South Dakota: Methods of Purchase, Methods of Sale, Grain Destinations, and Modes of Transportation

The U.S. Agriculture is going through a transition. Federal spending on farm programs are being curtailed and agricultural policies are being modified to make production of farm commodities responsive to the market forces. In this competitive environment, efforts on the part of the commodity groups for market development are becoming increasingly more important. However, in order to devise any market development plan for a commodity, the understanding of the present status of the marketing system is important. At the minimum, one needs to know the methods of purchase and sale, types of buyers, shipment destinations, and transportation modes for the commodity. These aspects of grain marketing in South Dakota have not been researched for past three decades. The prior study on the South Dakota grain movements and transportation, containing the information for 1974, was completed by Lamberton and Rudel in 1976. In 1974, there were 427 licensed elevators in South Dakota, which handled 184 million bushels or 77% of total grain production in South Dakota (Lamberton and Rudel, 1974, 2 & 17). During the last three decades, the grain sector in South Dakota has gone through phenomenal changes. For example, since 1974, the soybeans, corn, and wheat production in the state have increased by 919 % , 377 % , and 67 % , respectively. During this period, the production of oats and barley in the state has become much less important and the state has emerged as the second most sunflower seed producing state in the U.S. Other changes in the South Dakota grain sector include, a decrease in the number of licensed grain dealers, a change in the relative competitive position of rail and truck transportation in the state, an increased use of grain futures and options for hedging, an increased use of complete commercially manufactured feed by the livestock and hog producers, and an increased use of grain in production of ethanol and other industrial products. Under these circumstances the need for updating and analyzing the information on grain marketing system in South Dakota cannot be overemphasized. With this back drop, the main objective of this study was to identify existing grain marketing patterns in South Dakota. Since a large proportion of the grain is handled by grain elevators, the data on grain marketing patterns were collected through a survey of the grain elevators in South Dakota during spring 1996. The specific objectives of the study were to identify: a) the quantities of different grains handled by the grain elevators, b) alternative methods of purchase by the grain elevators, c) alternative methods of sale by the grain elevators, d) major types of buyers for grain sold by the grain elevators, e) major destinations of grain shipped by the grain elevators, and f) the relative importance of alternative modes of transportation for different grains shipped by the grain elevators. The study investigated the marketing patterns for spring wheat, winter wheat, oats, barley, corn, soybeans, and sunflower seeds for the crop year 1994-95. The cash receipts from marketing of these grains and oilseeds accounted for $1.42 billion, 83.6% of cash receipts from all crops by South Dakota producers during the calendar year 1994. This research report is devoted to describing the study methodology and reporting the results for the whole state. Regional results are reported in four separate research reports, one for wheat, one for barley and oats, one for com and soybeans, and one for sunflower seeds. These research reports are cited in the list of references and their copies can be obtained by writing to the first author