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The importance of moving to a value-added economy E-mail
Opinion
Tuesday, 21 November 2017 13:58

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L&T Publisher Earl Watt



I grew up in the shadow of the grain elevators in Liberal, watching them grow in number and now to seeing the addition of ground storage on the west side of Pershing.

When I was a kid, we would play by the elevator, scooping up some of the loose grains that spilled out when train cars or semis were loaded.

Because of the food source, birds were always in the area, and we tried to run some down but never did. My great grandma told us to sprinkle salt on their tails and they couldn’t fly. It was years later that I found out this was akin to hunting for snipes, but it did keep us busy.

The local ag producers are very good at filling up the towering cylinders year after year.

When taking inflation into account, today’s wheat prices are some of the lowest since the Civil War.

On real earnings, farmers in the ’60s and ’70s made more than what a farmer makes ona  bushel of wheat today.

The only way farmers were able to survive was to grow more and more wheat and other grains, which in turn causes gluts in the market.

Another difficulty for farmers is how their taxes are assessed, based on historic prices rather than the current year. This causes an inaccurate picture and higher than necessary taxes.

But the worst part is how the farmer gets rock bottom prices for producing the raw food material while others along the way enjoy larger profits.

The price paid for a bushel of what is around $4.42. A bushel contains 60 pounds of grain.

From that 60 pounds of grain, 42 pounds of flour can be made.

Simply mashing the kernels into powder raises the price to $9.75, and that is for the cheapest 42 pounds of flour. Other brands can see as much as $20. And yet, the farmer that produced the grain sold it for $4.42. Remember, he had to plant it, fertilize it, water it, harvest it, maintain his vehicles, pay his hands, purchase enough supplies to start the next crop, and pay his taxes, all on that $4.42 cents per bushel. It is important to note that he doesn’t profit $4.42. He has to do everything it takes to grow the bushel for less than $4.42 and hope he makes a profit.

Knowing that the flour mill also has to make a profit and paid 4.42 for the raw materials, they, too, have to maintain equipment, place the flour in bags, etc., and make a profit. After deducting the price of the grain, they have $5.33 to work with to simply crush the grain into powder.

That same bushel of wheat can also produce 42 pounds of pasta. The cheapest pasta would bring in $33.60.

So, taking the grain, crushing it into flour, and then adding some water and shaping the dough to make dried pasta, the price increases from the $4.42 to produce the bushel of grain to $33.60, or $29.18 more for crushing the grain, making dough, and making it in the shape of your elbow.

A loaf of bread also sees a massive profit.

You can make an average of 65 loaves of bread from one bushel of wheat.

Taking one of the lowest prices for a loaf of bread at $1.50, the bread maker will earn $97.50 from that $4.42 bushel of wheat.

This time, the breadmaker crushed the wheat, mixed it into dough, baked it into a loaf, and earned $97.50 for the bushel that cost $4.42. That means the breadmaker had $93.08 more to work with to turn the grain into a loaf of bread, creating a much higher profit margin than the farmer who grew the grain in the first place.

While a simple country drive will show you just how much grain is produced on the high plains, what is missing are the mills, the bakeries and the pasta companies.

It would seem at these prices that farmers that could work together could invest in a mill/bakery/pasta facility.

The question is simple — why works so hard to produce the raw material for pennies when the real profit is in the finished product?

Even the simple process of crushing the grain into flour doubles the money. Going a step beyond to create pasta or loaves of bread would bring much higher profit margins.

Shipping would be reduced since the grains are produced right here, which would be an added benefit.

With the corporate distribution of groceries, it only takes a few contacts to get onto the shelves of thousands of stores, and with the constant increase in online purchases, shipping direct to customers is also becoming more and more prevalent.

Who could produce a final product that could be more healthy than farmers?

Conestoga is a prime example of taking a raw material and producing a finished product. They ship ethanol across the planet, and it is produced by forward-thinking agricultural folks who decided to take their grain to the next level.

When the Focus on the Future Committee was created in 1993, they saw a need to create value-added products to Southwest Kansas which would provide jobs, but more importantly a sustainable economic future.

Why should our producers work for pennies when the real money comes from adding value to their products? And why should they shoulder all the risk in feeding the world only to reap the smallest benefit?

Healthy farmers means a healthy economy, and we should be looking at every opportunity to enhance the value of the work done to produce these raw food materials.

An investment in a small mill, with grains pouring out of our elevators, would seem to be a sure-fired investment that our local producers should consider.

Simply crushing their grain would double the profitability, and turning it into bread would at least double it again.

We can export finished products and import cash like we’ve never seen before.

 

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The High Plains Daily Leader and Southwest Daily Times are published Sunday through Friday and reaches homes throughout the Liberal, Kansas retail trade zone. The Leader & Times is the official newspaper of Seward County, USD No. 480, USD No. 483 and the cities of Liberal and Kismet.  The Leader & Times is a member of the Liberal Chamber of Commerce, the Kansas Press Association and the Associated Press.

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