Revised Grades and Standards Needed to Enhance U.S. Agricultural Exports

February 9, 1995

Revised Grades and Standards Needed to Enhance U.S. Agricultural Exports
Accurate assessment of the quality of agricultural products is essential in today's rapidly globalizing economy. According to a report just released by the Council for Agricultural Science and Technology (CAST), a few changes in policies and regulations related to the quality of agricultural products could increase access to U.S. export and domestic markets.
The need for government action in the setting of grades and standards depends on the commodity. The CAST report identifies where additional regulations may be needed to ensure that the best technology is used to describe quality to potential buyers.
Dr. Lowell D. Hill of the University of Illinois Agricultural and Consumer Economics Department chaired the 19-member task force that created the comprehensive report Quality of U.S. Agricultural Products. "Current legislation allows the USDA to review grades and standards for the different commodities," says Dr. Hill. "But the dispersion of responsibility for quality related regulations among several agencies has resulted in many inconsistencies in the way grades are administered. Combining these responsibilities under fewer agencies would make development and implementation across commodities more consistent and administration more efficient."
The task force made a number of key recommendations to legislative and regulatory bodies.
Discouraging User Fees
The Congress and the USDA should halt or reverse the trend towards user fees to cover the cost of grading and standardizing agricultural products. Producers, marketing firms, and consumers all benefit from standardization.
Shifting industries back to private grades, product differentiation, and reliance on firm-specific grades though user fees will decrease uniformity, increase transaction costs, limit information available to buyers and sellers, and decrease competition throughout the industry.
Funding Congressional Mandates
The Food, Agriculture, Conservation and Trade (FACT) Act of 1990 directed the Federal Grain Inspection Service (FGIS) to move toward nationally uniform measurement of quality characteristics. The focus was on uniform calibration of moisture meters, but many other technologies and types of equipment were implicated.
Lack of funding to implement the moisture meter program, which was designed to improve equity among producers, caused long delays and damaging controversy. Future legislation must be accompanied by appropriate funding.
Emphasizing End-Use Characteristics
Framers of the 1986 Grain Quality Improvement Act and the FACT Act considered end-use characteristics critical. Grades help producers and end-users communicate about these economically important factors.
The secretary of agriculture, in consultation with the USDA-Agricultural Marketing Service (AMS) and the USDA-FGIS, should appoint a small task force for each commodity. The group should help develop a strategy to determine the appropriate role of government in grading and standardization. It also should work with the USDA to develop for each commodity an ideal set of grades based on end-use attributes.
Organizing Quality-Related Agencies
The many agencies that develop and implement regulations related to quality could be combined into fewer units. The 1995 reorganization of the Packers and Stockyards Administration and the FGIS into the new Grain Inspection and Packers and Stockyards Administration is a step in the right direction.
 
Several agencies still have direct or indirect responsibility for quality control regulations for various agricultural commodities. The secretary of agriculture should appoint a committee to reassign some agencies into a single unit.
Congress's Role
Congressional actions legislating quality, assigning value, or limiting range of quality available in the market should be discouraged. The appropriate role of Congress is to ensure that current policy guidelines and regulations encourage the USDA not to be unduly pressured by segments of the industry, but to develop the grades and standards best meeting the industry's overall needs.
Legislation should be reviewed with an eye to streamlining the grading process. Regulatory agencies should be directed to conduct periodic reviews ensuring that quality control continues to meet the needs of domestic and foreign buyers.
Commodity Specific Recommendations
The appropriate role for nationally uniform, government enforced grades depends on the commodity. In the dairy, fiber, tree-nut, fruit and vegetable, poultry products, and catfish industries, current grades as administered seem adequate. Periodic reviews will ensure that quality control is administered appropriately, without additional government involvement.
Wheat
Millers need improved measurement technology for determining grain quality. Research funds are required to develop and to distribute such technology. Improved information about end-use properties would enhance U.S. competitive position in many international markets and would help domestic millers select the best sources of supply.
Red Meat
The USDA-AMS has a major responsibility in setting quality standards for red meat, but certain aspects of consumer satisfaction have not always been reflected in official grades. Grades therefore could be revised to incorporate more information about composition, nutrition, and eating quality.
Foreign markets would be served better if quality was specified clearly by all U.S. processors and exporters. Although many changes in grading could be made by private industry, a move toward national uniformity requires leadership from a federal agency with responsibility for setting standards and grades.
Soybeans
End-use attributes, including oil and protein contents, have been incorporated in soybean grades very slowly, in part because confidence in the technology for measuring chemical composition was lacking. Although oil and protein contents are available upon request, such information would provide more of an incentive to improve quality if incorporated into official grading practices.
Lag time between the identification of needed changes and their implementation has resulted in a loss of support for certain recommendations proposed in 1992. Procedures should be developed to shorten the delays between research, official comment periods, and final rulings.
Feed Grains
Quality in the feed grains export market is critical because of fierce international competition. The trend toward specifying quality characteristics in addition to grade in a contract reflects the current grading system's failure to measure all characteristics of importance to end users.
Regulatory agencies should conduct research to find better measures of end-use value and then act to incorporate them into grades. Congress should accept the responsibility of funding research and implementing its findings.
Forage
Information about the characteristics of forage crops is scarce in the United States, and buyers often must rely on visual appearance when estimating nutritional value. Nationally uniform grades would strengthen the basis on which price is established for domestic buyers. The export market also has been hindered by the lack of uniform grades and measurement technology.
Private grades and association grades have developed slowly, in part because of the limits of measurement equipment. Government funding of research is needed in the areas of measurement and uniform grade development for domestic and export markets.
 Conclusion
The appropriate role of government in developing and enforcing grades in a market economy depends on the characteristics of the commodity, the structure of production and marketing sectors, and the market channel stage at which quality is measured. Government grades are essential to ensure efficiency and equity in some industries; grades may interfere and increase cost and complexity in others. These distinctions must be recognized before regulatory policies are established.