Innovation Helps Improve Grain Quality   Henry Bahn   Keywords: competitiveness, global marketing, grading system, and public response.

Innovation in Dealing With Grain Quality Increasing the quality of U.S. grain is an important topic, especially considering the increased global competition facing U.S. agriculture. Resolution of the "quality problem" will require individual farmers, elevators and merchandisers to take direct action to begin the process. It's difficult to take the first step, particularly if the rewards are not obvious. Reluctance to change can be dealt with in several ways. Market incentives provide financial rewards for change, regulation mandates it, and legislation may do both.

A lot of research has focused on grain quality over the past several years, and most everyone agrees that improving grain quality is a noble goal. To achieve it, three fundamental conflicts must be addressed. First is a conflict within the grading system. Should it facilitate the high volume trade which has made us a reliable supplier, or should it identify increasingly specific end use characteristics? Second, what's good for the market in the aggregate is not necessarily good for individual farms or firms. Therefore, individual firms may not act in a way that achieves broader goals. Third, incentives for developing and using varieties that better serve customer needs may conflict with other, more immediate, incentives.

Grain grades and standards serve three purposes: to permit buying and selling by description, to permit commingling of product from many sources under a few common categories, and to assign value to particular lots. The contemporary issue is that we now appear to need more categories and less commingling. The conflict arises from defining how many categories, what they are, and who pays the associated costs.

Individual firms act in their own best interest and try to maximize returns over the short run. This brings us to a second conflict: sometimes individuals don't act in a way that appears to benefit the whole. The farmer's survival depends on the production of an ample volume of grain, sold at a sufficient price to pay production costs and provide an adequate return. Yield times price per unit is the important consideration. Grain merchants depend on throughput and margin per bushel or metric ton for their returns. They seek to utilize their facilities efficiently. Volume times margin is most important to merchants. Intermediate and end users need consistent quality for the specific products they produce, in adequate volume to meet demand, at a price that results in a competitive product. Volume, quality, and cost are their motivating factors.

Breeders and farmers tend to chose varieties based on yield and other agronomic performance criteria. Variety descriptions typically focus on yield, test weight, straw strength, pest or disease resistance, maturity dates, and the like. Reference may be made to milling and baking characteristics, usually in very general terms. With market rewards, breeders and farmers have little incentive to respond if there are yield or agronomic penalties associated with planting varieties with the otherwise desirable characteristics. This is the third conflict.

The public sector responds to the quality issue through legislation, regulation, and education. A recent innovation that deals with all three is USDA's Committee on Grain Quality. Unique in its mission, the committee is a result of the Grain Quality title of the 1990 farm bill. Its purpose is to increase communication among nine agencies that have roles relating to grain quality. The committee is informational in nature. It assembles and evaluates concerns and problems relating to grain quality, implements coordinated efforts to educate and inform grain producers, buyers and users, coordinates programs and activities to enhance grain quality, and is a "clearinghouse" with respect to quality issues and competitiveness.

Routine communication between committee members not only helps coordinate efforts to support and enhance grain quality, but it also helps the participating agencies understand the complexities of managing quality from the broader perspective of the other agencies and the clientele they serve. This makes it easier to identify and deal with the diverse needs facing farmers, merchants, and users. For example, as the Federal Grain Inspection Service strives to develop more comprehensive inspection procedures, scientists at the Agricultural Research Service perfect accurate and rapid analytic technologies. The Extension Service, Agricultural Stabilization and Conservation Service, and Foreign Agricultural Service facilitate adoption of new procedures and analytic techniques by their respective clientele, and serve as an early warning system for problems or emerging needs. Interaction and communication between these agencies and Agricultural Marketing Service, Animal & Plant Health Inspection Service, Economic Research Service, and National Agricultural Statistics Service increases the efficiency and effectiveness of public sector efforts to enhance the quality and competitiveness of the American grain industry, from varietal development, through production and marketing, to the production of final products. Early identification of problems and needs, direct application of science and technology, rapid and accurate communication, and technology transfer will make it easier for producers, merchants, and users to take those important steps to enhance quality by making both the needs for change and the rewards for doing so more obvious.

Henry Bahn is National Program Leader for Grain Marketing at Extension Service, USDA, and is the USDA advisor to the Western Extension Marketing Committee.