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Enhancing the Quality of U.S. Grain for International Trade

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Enhancing the Quality of U.S. Grain for International Trade Enhancing the Quality of U.S. Grain for International Trade February 1989 NTIS order #PB89-187199 ——— Recommended Citation: U.S. Congress, Office of Technology Assessment, Enhancing the Quality of U.S. Grain for International Trade, OTA-F-399 (Washington, DC: U.S. Government Printing Office, February 1989). Library of Congress Catalog Card Number 88-600592 For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, DC 20402-9325 (order form can be found in the back of this report) American agriculture, long the sector of the economy considered the most productive and competitive in the world, began to show signs of declining interna- tional competitiveness in the early 1980s. Many reasons have been given for this, including the problems of the quality of U.S. grain. The quality issue is receiving renewed attention in the current world buyers’ market for grain, Some are con- cerned that as the influence of important economic variables such as the strength of the dollar and the extent of agricultural price support cause U.S. exports to be- come more price-competitive, opportunities to increase exports may be hampered by buyers’ qualms about U.S. grain quality. Complaints of overseas buyers about low-quality U.S. grain receive widespread attention. Buyers protest that they receive dirty, molded, or infested grain, or that characteristics contracted for, such as a certain protein level, were not met. Ex- porters argue that foreign buyers are using quality complaints to bargain for lower prices. Farmers and many Members of Congress point to loss of market share to prove the importance of quality. The problems—real or perceived—have persisted for many years, and neither industry response nor congressional actions to date provide a satisfactory answer or reassure U.S. customers. During debate on the Food Security Act of 1985, the issue of the quality of U.S. grain was again raised, It became apparent that insufficient information was avail- able to make wise decisions. Congress then amended the act and directed the Of- fice of Technology Assessment to conduct a comprehensive study of the technol- ogies, institutions, and policies that affect U.S. grain quality and to prepare a comparative analysis of the grain quality systems of major export competitors of the United States. The study was also requested by the House Committee on Agri- culture and the Joint Economic Committee. This report is one of two in that assessment, It focuses on the U.S. grain system and possible changes within that system to enhance grain quality. A second report, Grain Quality in International Trade: A Comparison of Major U.S. Competitors, provides OTA’s analysis of the grain quality systems of other major exporters. OTA greatly appreciates the contribution of the advisory panel, authors of tech- nical background papers, the many industry associations, and other advisors and reviewers who assisted OTA from the public and private sector. Their guidance and comments helped develop a comprehensive study. As with all OTA studies, however, the content of this report is the sole responsibility of OTA. ///. Advisory Panel Enhancing the Quality of U.S. Grain for International Trade Donald E. Anderson Richard L. McConnell General Partner Director of Corn Research The Andersons Pioneer I-Ii-Bred International, Inc. Maumee, OH Johnston, IA Roger Asendorf Paul B. Mulhollem American Soybean Association Group President St. James, MN World Oilseeds Group Continental Grain Co. G. (Jerry) W. Becker New York, NY Vice President and General Manager Caldwell Manufacturing Co. Seiichi Nagao Kearney, NE General Manager Cereal and Food Research Laboratory James B. Buchanan Nisshin Flour Milling Co., Ltd. Vice President and Manager of Tokyo, Japan Grain & Feed Illinois Cereal Mills, Inc. Grayce “Susie” Pepper Paris, IL purchasing and Office Manager Zip Feed Mills, Inc. William J. Cotter Sioux Falls, SD Director of Operations Port of Corpus Christi Authority Harold E. Reese Corpus Christi, TX Vice President and Assistant Division Manager James F. Frahm Bunge Corp. Director of Planning Destrehan, LA U.S. Wheat Associates Washington, DC Thomas C. Roberts Executive Vice President Maurice A. Gordon Wheat Quality Council U.S. Feed Grains Council Manhattan, KS Rantoul, IL Ronald E. Swanson William W. Hay National Corn Growers Association Millers National Federation Gait, IA Minneapolis, MN D. Leslie Tindal Jerry P. Krueger Commissioner National Association of Wheat Growers South Carolina Department of Agriculture Warren, MN Columbia, SC Roald H. Lund Dean, College of Agriculture North Dakota State University Fargo, ND NOTE: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory .panel members. The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report and the accuracy of its contents. iv OTA Project Staff Enhancing the Quality of U.S. Grain for International Trade Roger C. Herdman, Assistant Director, OTA Health and Life Sciences Division Walter E. Parham, Food and Renewable Resources Program Manager Michael J. Phillips, Project Director David M. Orr, Senior Analyst Lowell D. Hill, Contractor William W. Wilson, Contractor Julie A. King,’ Analyst Linda Starke, Editor Administrative and Support Staff Sally Shafroth2 and Nathaniel Lewis,’ Administrative Assistants Nellie Hammond, Secretary Carolyn Swarm, Secretary ‘Through March 1987. ‘Through April 1987. ‘From May 1987. Major Contractors Enhancing the Quality of U.S. Grain for Stephen P. Baenziger Hagen B. Gillenwater University of Nebraska U.S. Department of Agriculture Savannah, GA Fred W. Bakker-Arkema Michigan State University Charles R. Hurburgh Iowa State University C. Phillip Baumel Iowa State University Howard L. Lafever Ohio State University Joe W. Burton U.S. Department of Agriculture Karl A. Lucken Raleigh, NC North Dakota State University Roy G. Cantrell Paul J. Mattern North Dakota State University University of Nebraska Jack F. Carter Marvin R. Paulsen North Dakota State University University of Illinois Harry H. Converse Tilden W. Perry U.S. Department of Agriculture Purdue University Manhattan, KS David B. Sauer Bert L. D’Appolonia U.S. Department of Agriculture North Dakota State University Manhattan, KS Robert Davis Mark D. Schrock U.S. Department of Agriculture Kansas State University Savannah, GA Rollin G. Sears Joel W. Dick Kansas State University North Dakota State University Thomas L. Sporleder Patrick L. Finney Texas A&M University U.S. Department of Agriculture A. Forrest Troyer Wooster, OH DeKalb-Pfizer Genetics Richard C. Frohberg North Dakota State University Paul Gallagher Kansas State University Contents Page Chapter 1. Summary . ... , . 3 Chapter 2. An Overview of the U.S. Grain System . 29 Chapter 3. Basic Grain Processing Industries. 47 Chapter 4. Quality Attributes Important to Domestic and Overseas Industries . , , . , , . 61 Chapter 5. The Changing Role of Quality in Grain Markets . 89 Chapter 6. The Genetics of Grain Quality . ................,,.103 Chapter 7. Technologies Affecting Quality . .. ...137 Chapter 8. Analysis of U.S. Grain Standards . ...............,,...,..,,.189 Chapter 9. Government Farm Policy and Economic Incentives Affecting Quality . ..219 Chapter 10. Comparison of Technologies and Policies Affecting Grain Quality in Major Grain-Exporting Countries . ..........237 Chapter 11. Policy Options for Enhancing Grain Quality . .251 Appendix A Glossary of Acronyms . .273 Appendix B Glossary of Terms . .......274 Appendix C Commissioned Papers and Authors, . ...................280 Appendix D Acknowledgments ., . ..............282 Index, . ,... ., 285 vii Chapter 1 .—— CONTENTS Page Major Findings . 4 Fundamental Advantages of the U.S. Grain System. 4 Competitors’ Policies ... 5 Problem Areas . 5 Quality in the Marketplace. 14 policy options . 16 Variety Controls . 17 Market Intervention.. 19 Grain Standards . 23 Interaction Between Standards, Variety Control, and Market Intervention . 24 Conclusions . 25 Figures Figure Page l-1. Moisture, Temperature, and Relative Humidity Interactions . 8 I-Z. Importance of Uniformity Between Shipments . 15 l-3. Components of the Interdependent Grain System . 17 Tables Table Page l-1. Comparison of Institutions and Policies Affecting Grain Quality of Major Grain-Exporting Countries ..,...... 6 l-2. Fundamental Policy Alternative s... 18 Chapter 1 Summary More competitors exist in the international developing varieties of grain, grain market now than ever before, and grain producing grain, quality has become an extremely important harvesting grain, competitive factor. In a mere decade, growth storing grain, in grain suppliers has been phenomenal. In the handling grain, and 1970s, one-third of the world supplied grain to testing grain, two-thirds of the world’s people. Today, the re- verse is true: two-thirds of the world supplies Understanding these relationships is the main grain to the other third. This competitive envi- goal of this assessment. ronment has made foreign buyers increasingly First, it is important to clarify what is meant sensitive about the quality of grain they receive. by grain quality. Webster defines quality as an During the debate on the Food Security Act essential character, a degree of excellence, or of 1985, many Members of Congress expressed a distinguishing attribute. In grain, such a def- concern about the quality of U.S. grain exports, inition has come to mean a variety
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