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

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

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.

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

3

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

4

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.

5

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.

6

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.

7

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.

8

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

9

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.

10

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.

I I

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.

12

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.

13

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.

14

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

15

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.

16

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.

17

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.

18

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.

19

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.

20

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.

21

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.

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.

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

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%

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.

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.

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.

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.

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

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.

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

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 ""

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.

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.