Limits for shrunken and broken kernels are lowered from 5 to 3 percent for grade No. 1. Limits are set at 12 percent for grade No. 4 and 20 percent for grade No. 5.

Minimum moisture content for wheat graded "tough" is reduced from 14 or 14.5 percent (depending on the class) to 13.5 percent for all classes. The change also eliminates moisture as a factor in determining sample grade.

"Dockage" is recorded in half percent, whole percent, or whole and half percent, with other fractions reduced to the nearest whole or half. Dockage is material other than wheat which may be removed readily by cleaning. It is not a grade-determining factor but is recorded on inspection certificates. At present, dockage when equal to 1 percent or more-is recorded in whole percent. Fractions of a percent are reduced to the nearest whole percent.

Percentages of White Club wheat and Common White wheat in the subclass Western White wheat are to be stated on inspection certificates.

During a transitional period following May 1, grain inspectors will-on request-show the grade of wheat under the old as well as the new standards. Secretary Freeman noted that the changes in grade standards were made only after conferences with wheat industry representatives, a study of competitive conditions in world markets by a joint Government-industry team, and four public hearings around the country as well as a special hearing conducted by the Secretary and Under Secretary to hear arguments for and against the changes.

"I wish particularly to thank all those persons who presented testimony either at the hearings or in writing," the Secretary said, "because of the interest in the grade revisions, I am sure that the new standards will more accurately reflect the needs of this country as it moves more aggressively into world markets.

"No decision I have made as Secretary has absorbed more time, nor is there one to which I have given more thought. The evidence is impressive that present U.S. grade standards are no longer adequate in view of the competitive situation in world markets, or in view of advances in the technology of handling wheat.

"Present wheat grades permit excessive amounts of nonmillable materials, a situation hardly designed to encourage the sale of U.S. wheat. Between 1951 and 1961, the U.S. share of the world dollar market for wheat declined from 35 percent to less than 19 percent. U.S. dollar exports of wheat remained con

stant, but the total volume of trade increased.

"A study during 1959 to 1961 of European wheat imports shows that the total foreign material and shrunken and broken kernels in U.S. wheat was more than double that of wheat from Canada, Russia, Argentina, or Australia. Last year, a study team of Government and trade experts found that U.S. wheat was at a competitive disadvantage in European markets.

"If the United States is to export wheat-and wheat is historically an important earner of foreign exchange--then we must make up our minds that our wheat must be at least of comparable quality to that of other exporters. The new wheat grades are a step in this direction."

The changes announced today result from a comprehensive review of the standards made by USDA's Agricultural Marketing Service during the past 2 years in cooperation with members of the wheat industry, State departments of agriculture, and State and commercial inspection agencies.

Proposed changes in wheat standards were published in the Federal Register of August 3 (press release USDA 2594-63). During October a public hearing was held with four sessions, in Kansas City, Mo., Minneapolis, Minn., Portland, Oreg., and Toledo, Ohio.

Interested persons were also given opportunity to submit written views and comments, which were considered in making the decision on revision of the standards.

Complete details of the revised standards are scheduled to be published in the Federal Register next week.

Copies of the amended standards may be obtained from the Director, Grain Division, Agricultural Marketing Service, U.S. Department of Agriculture, Washington, D.C.

[Reprinted from Federal Register of January 25, 1964]

TITLE 7-AGRICULTURE

CHAPTER 1-AGRICULTURAL MARKETING SERVICE (STANDARDS, INSPECTIONS, MARKETING PRACTICES), DEPARTMENT OF AGRICULTURE

PART 26-GRAIN STANDARDS

Official grain standards of the United States for wheat1

Pursuant to authority of the United States Grain Standards Act, 39 Stat. 482, as amended (7 U.S.C. 71 et seq.) and section 4 of the Administrative Procedure Act (5 U.S.C. 1003) a notice of proposed rule making was published in the Federal Register (28 F.R. 7949) on August 3, 1963, regarding a proposed revision of the Official Grain Standards of the United States for Wheat (7 CFR 26.101 et seq.). Public hearings were held at 4 locations as follows: Kansas City, Mo., on October 1; Minneapolis, Minn., on October 4; Portland, Oreg., on October 8; and Toledo, Ohio, on October 11. Notice was also given that written data, views, and arguments might be submitted to the Agricultural Marketing Service of the United States Department of Agriculture to be received not later than October 31, 1963. Consideration has been given to all information obtained at the hearings, to written comments received and to other information available in the United States Department of Agriculture.

Statement of considerations. The aforementioned notice proposed changes to the Official Grain Standards of the United States for Wheat which were last revised effective June 15, 1957. The proposed revision set forth changes which were considered necessary to describe more acurately wheat inspected under the terms of the official standards. The need for these revisions has been reviewed for the past 2 years with wheat producer, trade, and processor groups and organizations.

General statement. Two features are involved in working on any set of grade standards. The first feature is to determine the factors or attributes of quality, including value and usability, and condition which (1) are important, (2) vary from lot to lot, and (3) can be satisfactorily measured using available and acceptable inspection techniques. All such factors are normally included in the U.S. grade standards for any agricultural product. The second feature is to determine how these factors of quality should be grouped or classified into a number of grades showing meaningful gradations in value or usability. This involves setting minimum or maximum allowances for each factor for each grade; setting tolerances or cut-off points for each grade; and coming out with a single grade designation (e.g., U.S. No. 1) which, because of specified limits on the individual quality factors, will provide a meaningful and useful yardstick of value or usability.

No new or additional factor of quality has been proposed in this revision of the wheat standards. Therefore, the official grade factors will continue to be confined basically to the weight, soundness, and cleanliness of the grain. These factors can be readily measured by simple mechanical or visual means, and are adapted to the customary, rapid inspection and certification job needed to sample and grade wheat at the time it is moving in interstate or foreign commerce. There are other important factors of quality, such as milling and baking characteristics of the wheat. Most tests for these characteristics are not simple or rapid. Also, the flour milling industry has many intricate and varied requirements as to milling and baking characteristics which would not be conducive at the present time to the adoption of a uniform, national set of standards incorporating these factors. Therefore, official certification of these factors remains entirely on a voluntary basis (e.g., protein, sedimentation, etc.) and they are not part of the official grade standards.

This revision, therefore, involves only the second feature-the tolerances or allowances for the existing quality factors to be established for the individual numerical grades. No change is proposed in test weights per bushel. The requirements for soundness and cleanliness for each numerical grade would be tightened. The purpose of such tightening is to improve the grade designations as yardsticks of soundness and cleanliness-which are still important quality factors in determining value and usability of wheat.

The specifications of these standards shall not excuse failure to comply with the provisions of the Federal Food, Drug, and Cosmetic Act.

General issues. The general issues are whether:

(1) Tolerances used in the past are far too broad and allow too much variability within each grade to serve their purpose of providing useful and meaningful yardsticks of value and usability.

(2) The competitive position of U.S. wheat in foreign markets is damaged because of these excessive tolerances.

(3) Wheat delivered to Commodity Credit Corporation under its storage contracts is of reduced value because of these excessive tolerances.

(4) Tightening the requirements for soundness and cleanliness is entirely feasible, would benefit growers, and would be in the general interest of the entire wheat industry.

Specific issues. The specific issues are whether the following changes in the official standards for wheat should be adopted:

(a) Delete the subclasses Red Winter Wheat and Western Red Wheat in the class Soft Red Winter Wheat. (Red Winter Wheat and Western Red Wheat heretofore have been designated as subclasses of the class Soft Red Winter Wheat.)

(b) Change the subclass Western White to Mixed White and require that the percentages of White Club and Common White Wheat be made a part of the grade designation. (The subclass Western White is White Club Wheat and Common White Wheat mixed in varying proportions but until recent years wheat of this subclass was about 40 percent Club Wheat. The official grade standards for wheat heretofore have not required such composition determination to be made and shown as a part of the grade for the subclass Western White Wheat.)

(c) Express dockage to the nearest whole and half percent (e.g., 0.3 to 0.7 would be called 0.5) or, as an alternative, disregard other fractions and express dockage in half percent, whole percent, or whole and half percent (e.g., 0.4 would be disregarded and 0.9 would be called 0.5).

(In the past, dockage when equal to 1 percent or more was recorded on inspection certificates in whole percent and when less than 1 percent was not recorded. A fraction of a percent was disregarded.)

(d) Provide maximum limits for total defects (damaged kernels, foreign material and shrunken and broken kernels) in the numerical grades. (In the past, no limitation on total defects was set other than that which results from a summation of the limits for each defect. As an illustration total defects for grade No. 1 would be reduced from 7.5 percent to 3 percent and in grade No. 2 from 10 percent to 5 percent.)

(e) Change the limits of shrunken and broken kernels from 5 percent to 3 percent for grade No. 1 and establish maximum limits of 12 percent and 20 percent, respectively, for grades No. 4 and No. 5.

(f) Combine the tables of grade requirements for all classes of wheat. (Heretofore 5 tables of grade requirements were given for the separate classes.) (g) Change the minimum and maximum moisture limits for tough wheat. (In the past, depending on the class, wheat with over 14 percent or 14.5 percent moisture was graded "tough" and if over 15.5 percent or 16 percent moisture was graded "sample grade." The minimum moisture content for "tough" would be reduced to 13.5 percent for all classes, the maximum limit would be deleted, and the application of "sample grade" based on moisture content would be discontinued.)

(h) Delete the provisions for making smut dockage determination on smutty wheat.

(i) Provide a special grade of "Heavy Wheat" for all classes of wheat. (In the past, the wheat standards defined only the minimum test weights permitted per grade and did not recognize superior test weights for any grade, except No. 1 Heavy Hard Red Spring Wheat.)

(j) Except for the class Red Durum, change the maximum limit for wheat of other classes for grade No. 1 from 5 percent to 3 percent and provide limits for contrasting classes. (In the past, the standards provided maximum limits (e.g., 0.5 percent, 1 percent, and 2 percent) for certain classes depending on the end use and ability to distinguish the classes on visual examination.)

(k) Renumber or otherwise redesignate the sections and paragraphs of the standards in the interest of clarity and make other minor changes as proposed. (1) Provide for determination by AMS of equipment and procedure to be used in making moisture tests. (In the past, the standards have provided by reference for the use of an air-oven test or "any method which gives equivalent results.")

30-080-64-pt. 1--12

Findings and conclusions. Findings and conclusions on the aforementioned issues, based upon the data presented at the hearings, written and oral comments received, and other information available in the United States Department of Agriculture, are as follows with respect to the general issues:

(1) Tolerances used in the past are far too broad and allow too much vari ability within each grade to serve their purpose of providing useful and meaningful yardsticks of value and usability.

Graded wheat of known quality, including soundness and cleanliness, has a higher value than does a heterogeneous mixture of ungraded wheat. If this were not a fact, there would be no reason for having any established grades or inspection system. There is evidence that the present grade requirements are so loose that they do not provide a reliable basis for judging soundness or cleanliness. Both domestic and foreign buyers make a price allowance (discount) because of the possible wide variation in nonmillable material whenever they buy solely on the basis of the U.S. grades. Unless he has examined a sample of the wheat or has other contractual specifications, the buyer has to protect himself against receiving wheat at the bottom of the grade by applying a price discount. As expressed by a representative of the milling industry at the hearings, "the ill effects of these wide open permissible limits are the fears that they may engender in the mind of the prospective buyer of wheat by contract."

The total limit for damaged kernels, shrunken and broken kernels, and foreign material in the present standards is 7.5 percent for U.S. No. 1 grade, 10 percent for U.S. No. 2 grade, and 17 percent for U.S. No. 3 grade. Inspection records show that the majority of the domestic shipments in each of these grades contain only a fraction of the allowable maximum of non-millable material. Since much of the wheat is bought on the basis of samples, both the seller and buyer in such transactions well know that the wheat-even though it is certified as U.S. No. 1, U.S. No. 2, or U.S. No. 3 grade-does not begin to approach the maximum nonmillable material tolerances permitted in the respective official grade. Consequently, such tolerances do not represent acceptable, commercial trading standards and, when the buyer does make a purchase solely on the basis of the official grades he has to protect himself by applying a price discount. The value of this objectionable material is that of mill-feed which is usually worth only 15 to 35 percent as much as sound, clean wheat.

(2) The present excessive tolerances in the U.S. grades for non-millable material damages the competitive position of U.S. wheat in foreign markets.

The Wheat Market Development Evaluation Team, composed of industry and government representatives, reported on its July-August 1963 survey of European markets as follows:

"Whenever the team met with representatives of the wheat trade, whether in the Netherlands, Belgium, West Germany, or the United Kingdom, it heard complaints regarding the quality and cleanliness of United States wheat. It was also asserted that price differentials were inadequate to offset these disadvantages that prices were, therefore, not competitive. United States wheat has acquired the unfortunate distinction of being considered one of the "dirtiest" wheats in international trade * * * A member of the Netherlands trade expressed his experience in the following words, "To the extent permitted by your grain standards, you will find foreign material present in the shipments of American wheat." Another went further, saying "I do not know of any other national system where artificial deterioration of a sound clean agricultural product is tolerated, or regarded as legal."

A study of European imports of wheat from November 1959 to January 1961 showed that the total foreign material, dockage, and shrunken and broken kernels in wheat from the United States was more than double the content of these non-millable materials in wheat from Canada, Russia, Argentina, or Australia. While slight improvement in the amount of some of these factors has been recorded in subsequent exports from the United States, the excessive non-millable material in wheat exports continues to the present time. Analysis of inspection certificates issued on export cargoes of wheat during 1962-63 shows that a much larger proportion of these cargoes contained more than 0.5 percent dockage than did the receipts of wheat at domestic markets or did the 2,561 samples of 1962 farm-stored wheat analyzed by State and Federal agencies.

Annual exports of wheat and flour have exceeded 500 million bushels since 1959. Foreign buyers depend almost entirely on official standards to measure the quality of wheat they buy. Although total exports have increased, dollar sales for export have not shared in this increase. The United States share of

commercial wheat exports dropped sharply between the crop years 1951 and 1961. Complaints from abroad indicate that the variable quality of U.S. wheat contributed to this drop.

The foreign wheat buyer has been operating in a buyer's market. He can buy wheat from other countries with greater uniformity of quality and containing less non-millable material than wheat exported from the United States. He objects to examining samples or writing special specifications for soundness or -cleanliness and paying premiums in order to protect himself against getting excessive non-millable material. Furthermore, he knows that wheat he receives from the United States would not be commercially acceptable at the regular market price to most domestic U.S. buyers.

It is incongruous to argue that foreign buyers can obtain any quality of wheat they want, if they are willing to pay the price, merely by writing a set of specifications or examining a representative sample to meet their specifications for each purchase. If such were the general marketing practice, there would be no need for any wheat standards. This type of argument runs completely counter to the universally accepted view that the official grade standards should facilitate the movement of wheat through trade channels by providing realistic and useful measures of the quality factors designated in the grades.

Most wheat importing countries have restrictions which govern the amount of wheat they can import. Transportation costs of non-millable material and the amount of millable wheat are important factors in selecting the final source of supply. Also, import levies and taxes are assessed on gross weight which is an important factor in the Common Market. Flour extraction, set by law in many countries, is also based on the gross weight received by the miller. The negative economic impact of non-millable material in U.S. wheat is intensified as these restrictions become more severe.

(3) The Commodity Credit Corporation is peculiarily vulnerable because of the excessive tolerances for non-millable material in the U.S. grade standards for wheat.

CCC has no practicable alternative to using the official grades in its price support and storage operations. Since wheat is a fungible commodity, CCC does not require delivery of the identical grain which its contractors receive for storage. Instead, deliveries of CCC-owned wheat are made against the official grade standards, including the full tolerances for non-millable material. Much of the wheat which CCC acquires under the price support program is U.S. No. 2 or No. 3 grade because of light test weight per bushel but these grades also allow the maximum total tolerances of 10 percent and 17 percent, respectively, for damaged kernels, shrunken and broken kernels, and foreign material. Much of the wheat as it leaves the farm and country elevators contains only a fraction of these defects. The 1962 crop, farm-stored wheat survey, showed that the 1,000 samples of U.S. No. 3 grade wheat in Nebraska averaged only 1.98 percent and 484 samples of U.S. No. 3 grade wheat in South Dakota averaged 2.56 percent for Hard Red Spring Wheat and 3.50 percent for Hard Red Winter Wheat as compared with the 17 percent total tolerance for these factors in the present U.S. No. 3 grade. Domestic buyers protect their interests by examining representative samples prior to purchase. CCC has no practicable alternative to accepting the full grade tolerance for all defects, without discount, if the storage contractor delivers such wheat.

(4) Tightening the requirements for soundness and cleanliness is entirely feasible, would benefit growers, and would be in the general interest of the entire wheat industry.

Since the original standards were established in 1917, better equipment and better methods have come into use in the production, harvesting, transportation, storage, cleaning, and drying of grain. The broad allowance for nonmillable material within each grade which was needed in 1917 is not needed in 1963. Historical data clearly point up the significant improvement in the cleanliness of U.S. wheat delivered at country points and received at terminal markets, which has taken place gradually over a long period of years. To further postpone full use of this knowledge and equipment is tantamount to leaving grain marketing in the first quarter of the 20th century.

Available facts indicate that the growers and the country elevator do not make use of the present wide tolerances. Many wheat growers are paid on a net clean wheat basis. Therefore, a change in the U.S. grade tolerances, which may be applied to the wheat at some point in the marketing channel after it has left the farm, should in no way penalize the grower or reduce his prices. During the