UNIVERSITY OF
ILLINOIS LIBRARY
AT URBANA-CHAMPAIGN
ACES
j Ate.
Costs dud Benefits of fledef ining the Grade Factor
Broken
Foreign Haterial
vtt?
Charles R. Hurburgh, Jr.
Karen L. Bender
Bruce L. Meinders
Agricultural Experiment Station • University of Illinois at Urbana-Champaign
College of Agriculture • NorthCentr.il Regional Research Publication 33d • December 1W4
This research is a contribution to NC-151,
"Marketing and Delivery of Quality Cereals and Oilseeds,"
and was supported by
the Illinois Agricultural Experiment Station,
Iowa Agricultural Experiment Station, Ohio Agricultural
Research and Development Center, GFIS and ARS, USDA,
National Corn Growers Association, National Grain and
Feed Association, and North American Export Grain
Association. The National Corn Growers Association
provided additional funds to subsidize publication costs.
Costs and Benefits of Redefining the Grade Factor
Broken Corn and Foreign Haterial
Lowell D. Hill and Karen L. Bender
Lowell D. Hill is the L.J. Norton Professor of
Agricultural Marketing in the Department of
Agricultural Economics at the University of Illinois
at Urbana-Champaign. • Karen L. Bender is a
Senior Research Specialist in the Department
of Agricultural Economics at the University
of Illinois at Urbana-Champaign.
Charles fl. Hurhrgh, Jr. and Bruce L. Heinders
Charles R. Hurburgh, Jr., is a Professor in the
Agricultural and Biosystems Engineering Depart-
ment at Iowa State University. • Bruce L. Meinders
was a Pre-doctoral Research Associate in the
Agricultural and Biosystems Engineering Depart-
ment at Iowa State University.
Agricultural Experiment Stations
of Illinois, Indiana, Iowa, Kansas, Michigan,
Minnesota, Missouri, Nebraska, North Dakota,
Ohio, South Dakota, and Wisconsin with
U.S. Department of Agriculture cooperating
North Central Regional Research Publication 336
Illinois Agricultural Experiment Station Bulletin 808
December 1994
z
no.
Table of Contents
Abstract 1
Executive Summary 2
Evaluating the Aggregate Costs and Benefits of Separating Broken Corn and Foreign Material .... 10
History of Changes in BCFM 10
Redefinition of BCFM 11
Properties of Corn Screenings 13
Review of Previous Studies 13
Estimating Particle-Size Distributions 13
Statistical Analysis 15
Relationship Between Particle Size and Grade Factors 17
Buyers' Estimates of Corn Screenings Composition 18
Value of Fines and Screenings 22
Nutritive Value in Feed Rations 22
Characteristics of Screenings That Affect Value 24
Characteristics of Screenings That Affect Price 24
Costs and Benefits of Cleaning 26
Costs of Cleaning 28
Cleaner Operating Costs 28
Weight Loss 28
Transportation Costs 31
Testing and Measurement 31
Storage Costs 32
Benefits of Cleaning 33
Discounts Avoided 33
Revenue from the Sale or Use of Screenings 34
Reduced Freight Expense for Corn 35
Reduced Physical Shrink 35
Reduced Mold and Insect Shrink .. ..35
in
Reduced Handling Costs 36
Reduced Aeration Costs 36
Moisture Shrink 39
Recovery of Discounts Assessed Against the Seller 39
A Worksheet for Calculations 40
Limitations of the Micro Approach 42
Evaluating the Scenarios 43
Developing the Scenarios 43
Assumptions 44
Descriptions of Alternative Scenarios 45
Alternatives for Reducing Breakage 50
Evaluating the Impacts of Alternative Scenarios 51
Support for Separating the BCFM Factor 59
Attitudes Toward Change 59
Opinions of Farmers 59
Preferred Method for Reducing Discounts 59
Base Level for Discounts 59
Opinions of Interior Elevator Managers About Changing BCFM 60
Attitudes by Type of Firm 61
Factors Influencing Attitudes 62
Opinions of Export Elevator Managers About Changing BCFM 62
Factors Influencing Attitudes 63
Summary 64
Recommendations 66
Endnotes 67
References 69
Glossary 73
Appendix: Using Grades to Enhance Competitiveness 79
IV
distract
The grade factor of Broken Corn and Foreign
Material (BCFM) is the most frequent cause of
lowering the grade of corn in the market
channel. Because the definition of this grade
factor includes broken kernels and corn dust as
well as non-corn material, it has been fre-
quently proposed that the factor be separated
into two factors — Broken Corn (BC) and For-
eign Material (FM). Samples obtained at each
point in the market channel identified that
most of the material classified as BCFM or corn
screenings (material removed from the corn by
mechanical devices) was broken corn. Less
than 0.5 percent of the weight of screenings
was identifiable as non-corn material.
The results of this study show that separa-
tion on the basis of particle size would have
little effect on the quality of corn in the market
channel or on the value of the information
provided by grades. If the two grade factors
were accompanied by lower limits on their sum,
the amount of BCFM at each point in the
market channel could be decreased, but only at
a significant cost of cleaning. Because addi-
tional broken kernels are created with each
handling in the market channel, a significant
reduction in BCFM could be achieved only by
repeated cleaning. Even with this reduction in
BCFM, the levels of BC at destination would
still be above those on the origin certificate as
the result of impacts due to handling between
the export elevator and the importer's plant.
Significant reduction of BC at destination
can only be accomplished by introducing
incentives for delivering corn with greater
resistance to breakage. Drying temperatures,
genetic differences, harvest moisture, and
combine adjustment all have an effect on
breakage susceptibility. An alternative to
separation on the basis of particle size is to
separate the BCFM fraction into Coarse For-
eign Material (CFM) and Total Broken Kernels
(TBC). CFM would be defined as non-corn
material readily removed by mechanical
scalping. TBC would be all material passing
through a 12/64-inch round-hole sieve. If
accompanied by appropriate price differentials,
this change in grades would encourage removal
of CFM at the farm, and there would be little
opportunity for reintroduction. TBC would be
identified at each point in the market channel,
allowing the buyer and seller to negotiate a
price differential that would be appropriate for
the intended use.
Executiue Summary
The United States has a long history of re-
search on the grade factor Broken Corn and
Foreign Material, with many proposals sub-
mitted for changing the definition, sieve size,
and grade limits. Broken Corn and Foreign
Material were defined as two factors in 1914,
combined into Cracked Corn and Foreign
Material (CCFM) in 1916, and then named
Broken Corn and Foreign Material (BCFM) in
1959. The idea of separating the factors was
discussed in congressional hearings in 1937,
1976, and 1986. Sieve sizes were changed in
1915, 1916, and 1921. Proposals for changing
sieve sizes were researched and debated in
1930, 1937, 1976, and 1986.
Importers of U.S. corn have registered their
complaints about poor quality since the begin-
ning of export trade from the United States.
Most of these complaints have been related to
the high levels of BCFM received after the corn
was unloaded at the foreign destination.
Numerous studies conducted intermittently
over the past century have documented that
levels of BCFM can increase dramatically be-
tween the level documented on the export
certificate and that recorded at the processing
plant at foreign destinations, especially when
the corn has been handled several times and a
vessel has been subdivided into numerous lots
before the processor receives it. High levels of
fine materials, dust, and broken kernels clearly
reduce the value of the corn for all purposes.
One of the concerns of foreign buyers has
been the lack of differentiation between non-
corn material and the broken kernels and corn
dust that are classified as BCFM by official
grade standards. The value of broken corn is
much greater than that of weed seeds or inert
material, but the percent BCFM reported on
the export certificate provides no information
about the composition of BCFM in the corn.
This lack of information also affects the value
of corn screenings that are removed during
cleaning to reduce the level of BCFM. Although
the screenings generated by cleaning consist
primarily of broken corn, the percent of weed
seeds, chaff, and plant parts can vary widely.
Objectives of the Study
The objective of the current study was to
evaluate the economic impact of separating the
grade factor BCFM into two factors, with and
without a reduction in the factor limits.
Although the original request for an eco-
nomic impact study (initiated at the Grain
Quality Workshops, sponsored by the National
Grain and Feed Association) focused on the
separation of BCFM into two factors, the
potential for reducing the levels of BC and FM
in the market channel was also included in the
project objectives.
The issue of including a measurement of
breakage susceptibility in grades was not
specified in the original charge to the research
team, but it became a question of importance
as the study developed.
Rssumptions and Procedures
Separation of BC and FM can take many alter-
native forms, with different definitions and
factor limits. One or both of the factors could be
made grade-determining. If one or both factors
are grade-determining, there are several
different possible limits for each numerical
grade. Seven alternative scenarios, with as
many as three variations each, were developed
and evaluated on the basis of potential impacts.
The assumptions common to all scenarios
were these: (1) changes in grades, such as
factor definitions, do not change quality directly,
and changes in quality come from actions by
firms in response to economic incentives associ-
ated with grades; (2) changes in grades will not
automatically shift profits from one sector of
the industry to another; (3) improved quality
will have little effect on total demand for corn,
unless it results in substitution of corn for
wheat or sorghum; (4) changes in grades will
not significantly alter U.S. market shares in
the world corn market; (5) in the aggregate, the
price of corn reflects the value of the products
derived from it minus costs of transportation
and marketing; (6) the majority of U.S. corn
exports will continue to be grade No. 3; and
(7) grain producers and grain elevator manag-
ers will respond to changes in grades when
opportunities exist for increasing value or
decreasing costs. It was also assumed that the
majority of corn in the market channel will be
graded at each point and that defects that
exceed the factor limits will be assessed an
implicit or explicit discount.
A firm level budgeting model was developed
to estimate costs and benefits to an individual
firm from cleaning under several different
economic conditions. The estimates required
several assumptions about the level of BCFM
in the corn at the farm and elevator, value of
screenings, weather conditions, and prices of
energy, corn, and screenings. Quantitative
estimates of aggregate costs and benefits would
require many additional assumptions about
responses by managers and the operating
conditions in each firm. Average values of the
many influencing variables at the industry
level were not available. This study used a
qualitative approach for estimating aggregate
impacts to avoid the implication that numerical
values for the industry had been accurately
calculated. Surveys of farmers, elevators, and
buyers of screenings provided data on produc-
tion, cleaning, and marketing practices and on
attitudes of managers toward changing the
BCFM grade factor.
Cleaning by Farmers and Eleuator Hanagers
Current production, harvesting, and handling
practices at farms and elevators result in levels
of BCFM that often may exceed the limits of
the No. 2 grade. To avoid price discounts,
farmers or elevator managers must clean or
blend to the allowable limit. Subsequent
handling increases the percent of broken
kernels, and additional cleaning may be re-
quired at the next point in the market channel.
The level of BCFM in the corn delivered to the
country elevator is usually less than the limit
for No. 2 (3.0 percent). Interior elevators
reported that less than 10 percent of their
receipts from farmers graded below No. 2.
Within the market channel the level of BCFM
approached the limit for No. 2 corn because
of increased breakage during handling and
drying. BCFM in the export elevator often
exceeded 4 percent, but most export corn at the
time of loading was close to 4 percent BCFM —
the grade limit for No. 3 corn. Excess screen-
ings were removed at each point in the market
channel. BCFM increased approximately
0.5 percent during each elevation and transfer
in interior elevators. The increase was greater
during loading and unloading of the ocean
vessel. The volume of corn screenings in the
market channel was estimated to be over
2 million tons (70 million bushels), which is
approximately 1 percent of the total volume of
corn handled by grain marketing firms.
The average volume of screenings removed
by farmers with cleaners was 23.6 tons per
farm in 1990. Animal feed was the primary
market for both farm screenings and country
elevator screenings. The majority of screenings
not fed or sold to feeders were sold to brokers,
for resale to feeders.
In a three-state survey (Iowa, Illinois, and
Indiana), about 40 percent of the farmers
reported using grain cleaners. Farmers with
cleaners indicated the most important reason
for cleaning corn was to increase storability.
Other reasons given were to improve the grade
or to avoid discounts and to increase the
efficiency of drying and aerating. Incentives for
cleaning included fewer discounts for excess
BCFM, income from the sales of screenings
removed, reduced physical shrink by having
cleaner grain in storage bins, reduced damage
from insects and mold, and reduced aeration
costs.
The reported cost of operating a grain
cleaner on the farm differed dramatically from
farm to farm but averaged 2.7 cents per bushel
for removing an average of 2 percentage points
of BCFM. Respondents did not identify fixed
and variable costs separately but made a gross
estimate of costs per bushel. The average fixed-
plus-variable cost estimated in an economic
engineering model of machine operation was
1.0 to 1.5 cents per bushel. Other costs associ-
ated with cleaning include the loss of weight in
BCFM removed that could have been sold at
the price of corn, additional costs of storing or
disposing of the screenings, and the cost of
transportation if the screenings are sold to a
buyer located off the farm.
Country elevators marketed over 1.5 million
tons of screenings in 1989. The majority of
screenings were sold to farmers or feeders, sold
to brokers, or used in their own feed mill.
Based on the survey of interior elevators,
64.2 percent of interior elevators have cleaners
installed, and 78.6 percent of those with
cleaners used them in 1988 or 1989. Most
elevators had gravity cleaners with square
mesh screens, and elevators removing the most
screenings operated their cleaners at higher
throughput. On average, these elevators
cleaned about one-half of their receipts and
shipments, removing 2.15 percentage points of
BCFM from the corn they cleaned. The use of
cleaners differed by type of firm, with river
elevators using cleaners less frequently than
country and sub-terminal elevators.
The destination of corn shipped from the
country elevator influenced the amount of
cleaning. Elevators whose primary market was
a processor or an exporter reported more
frequent cleaning than those shipping to
farmers or river elevators. Elevator size (as
measured by storage capacity or annual vol-
ume) was not related to percentage points of
BCFM removed during cleaning, although the
quantity of screenings sold increased by 0.25
ton for each 1,000-bushel increase in receipts
from farmers.
Properties of Corn Screenings
Almost any cleaning operation results in corn
screenings, with particle sizes ranging from
whole kernels to dust. Most of the material
smaller than whole kernels is broken corn.
Non-corn materials such as weed seeds may
be found in any particle size but tend to be
concentrated in particle sizes below 4.0 mm
(10/64 inch). The proportions of the various
particle sizes of corn remain relatively con-
stant as corn moves through the market
channel, even though the proportion of broken
corn relative to non-corn material in BCFM
and corn screenings increases due to the
increase in broken corn. The relative amounts
of BC and FM in corn samples from country
elevators, barges, and export elevators were
approximately the same; FM was 21 percent of
BCFM.
BCFM is determined by a 12/64-inch sieve
in the Carter-Day Dockage Tester, whose
results are correlated with, but not identical to,
those of a commercial cleaner. Commercial
cleaners remove a relatively higher proportion
of the smaller particles than the Carter-Day
Dockage Tester. Samples of commercial corn
screenings obtained from country elevators
contained a higher proportion of the smaller
particle sizes than would have been predicted
from laboratory (Carter-Day Dockage Tester)
cleaning of corn samples.
Samples of commercial corn screenings
obtained from country elevators contained an
average of 55.8 percent BC (between the 12/64-
inch and 6/64-inch sieves), 26.7 percent FM
(6/64-inch and below), and 17.5 percent "corn"
(greater than 12/64-inch diameter). The larger
particles of broken corn that are included in
commercial screenings represent an economic
loss to the elevator. Based on survey results,
this loss was estimated to be about 0.3 cent per
bushel when corn price is $2.75 per bushel and
screenings are selling at a 25 percent discount
to corn.
A statistically derived equation was success-
ful in estimating the relative concentrations
of BC and FM in corn. The percent BCFM
was a good predictor of the percent FM. The
particle-size distribution within samples of
corn was not correlated with any other
official grade factor, and no causality could
be identified between the level of BCFM in
the sample, the ratio of BC to FM, and the
values for the grade factors of test weight and
damage.
As cleaners were operated closer to rated
capacity, the relative amount of FM in the
screenings decreased and the relative amount
of corn increased, resulting in an economic loss.
Additional cleaning would probably result in
still more corn in screenings, further increasing
economic losses. Capacity, design, and operat-
ing characteristics of commercial cleaners did
not affect chemical composition, aflatoxin, or
fumonisin levels in the screenings.
Although cleaning strategies had a signifi-
cant effect on particle size distribution in
screenings, cleaning strategy did not affect the
distribution of particle sizes in the cleaned
corn. Different flow rates, different models, and
different screen sizes had little effect on the
ratio of BC to FM in the cleaned corn. Total BC
plus FM in cleaned corn could be lowered by
changing cleaning strategies, but the ratio
remained similar to the current ratio.
Corn screenings, whether from the Carter-
Day Dockage Tester separation or from com-
mercial cleaners, contained less starch and
more fiber than whole corn. The fiber content
was more variable among samples than the
other constituents. Protein content increased
as particle size decreased, so screenings con-
tained more protein than corn. However, the
energy content of screenings declined as
particle size decreased. The feeding value of
corn screenings is thus dependent on relative
prices of energy and protein. The loss of value
is less than the typical market discount for
screenings relative to corn (i.e., the discounts
for BCFM relative to corn are greater than the
differences in feed value).
In corn screenings, protein and oil contents
were positively correlated, and protein and
starch contents were negatively correlated.
Smaller particle sizes had lower bulk densities
(test weights) but higher particle densities than
larger particle sizes. Material up to at least
12/64-inch diameter must be included with
screenings for them to weigh about 40 pounds
per bushel (a common base quality for pricing
screenings). Fines (through the 6/64-inch sieve
on the Carter-Day Dockage Tester) had an
average test weight of 33.5 Ib/bu. The space
required to store a ton of screenings is higher
than for corn as a result of the lower test
weight.
The price of screenings is fairly responsive
to changes in the quantity of screenings in the
market channel, with an estimated reduction
in price of 14 cents per ton associated with an
increase of 1,000 tons of screenings.
Users of screenings identified moisture and
test weight as the two most important charac-
teristics in determining price and value.
Particle size and chemical analysis were
seldom identified as important factors, and
only 22.2 percent of the respondents identified
protein content as important in determining
price or influencing purchasing decisions. The
estimated composition and value of screenings
currently are based primarily on test weight.
Buyers of screenings estimated that a smaller
screen size for defining screenings would
reduce the value of screenings.
The possibility of the presence of toxins in
corn screenings is a concern for livestock
feeders. The samples of screenings from coun-
try elevators were analyzed for aflatoxin and
fumonisin. Only one sample out of 62 contained
measurable aflatoxin. Particle size did not
significantly affect the level or incidence of
aflatoxin in these samples or in previous
studies. Separation of smaller particles will not
create higher concentrations of aflatoxin in the
fines, although the presence of fines in storage
may accelerate biological activity that may
result in aflatoxin development. Nearly all
screenings samples contained fumonisin, with
the smaller particle sizes having higher concen-
trations. The weighted average fumonisin
content was 30 parts per million (ppm). In any
particle size, high test weight was negatively
correlated with fumonisin (less risk) and
positively correlated with higher starch
content.
Coarse FM (non-grain material readily
removed by mechanical sieving) differs dra-
matically in chemical composition and physical
properties from broken corn or whole kernels.
CFM can have 10 to 12 times more fiber than
broken corn, and its value for any use is quite
low. The level of CFM at any point in the
market channel is generally less than 0.2
percent. However, when expanded to the total
export volume this represents a significant cost
of transport and disposal at destination. The
effect of CFM on perceived quality is much
greater than the actual reduction in value.
Cost of Cleaning
The initial cost of the cleaner relative to the
bushels cleaned has the greatest effect on cost
of operating the cleaner. Economies of scale are
substantial, and the cost per bushel declines
rapidly as the number of bushels through the
cleaner increases. Costs are also influenced by
the efficiency of the cleaner. Cumulative and
incremental cleaning efficiency multipliers can
be used to estimate cleaning efficiency for any
particle size or group of sizes, if the cleaning
efficiency for BCFM (12/64-inch and below) is
known.
The cost of operating a cleaner at the eleva-
tor was less than at the farm, primarily be-
cause of economies of scale. Thus a greater
incentive would be required to induce farmers
to purchase cleaners than to induce country
elevator managers to increase the volume of
corn cleaned. The benefits from cleaning for an
individual firm are more difficult to quantify
than the costs. Small amounts of fines can
cause dramatic increases in airflow resistance.
For example, the airflow resistance of corn with
3 percent BCFM is approximately twice that of
clean corn. Removal of fines before storage may
be justified on the basis of improved storability,
lower energy required for aeration, and more
profitable marketing opportunities, regardless
of discounts and factor definitions. If corn
contains at least 3 percent BCFM and will be
stored 3 months or more, net benefits of 1 to 3
cents per bushel are theoretically possible from
cleaning. Considerable operator skill is re-
quired to capture these benefits.
Creating an incentive for increased cleaning
requires a significant reduction in limits on
BCFM. The magnitude of the incentive for
cleaning at the farm and the elevator depends
upon the market response to the lower limit on
BCFM. Prices and discounts control the eco-
nomic gain or loss from additional cleaning. If
FM is set at zero and charges are assessed for
cleaning in addition to the weight subtraction,
incentives may exceed costs. However, if a FM
allowance of even 0.2 or 0.3 percent is given by
the buyer and the only disincentive is a weight
subtraction, additional cleaning capacity will
probably not be purchased and the grade
change will generate little change in quality.
[palliating the Scenarios
Most scenarios evaluated in this study in-
creased inspection costs and generated more
discounts for producers. Among the seven
scenarios and five variations evaluated using
data from this study, only three (4b, 6c, and 7)
have the potential for significantly improving
corn quality in the export market. Of these, 4b
could improve quality but only at a high cost of
cleaning, segregating, and inspecting in the
market channel. Scenarios 6c and 7 could
improve quality by reducing CFM and would
not require additional segregation. Additional
costs would be much less than for Scenario 4b.
The increased information and quality incen-
tives of Scenario 6c would lower BCFM levels
in the market channel by one percentage
point, but the impact on destination quality
would still be small, since susceptibility to
breakage would not be changed. Inspection
costs would be increased primarily because
more time would be required to determine
CFM.
Only Scenario 7, which includes a measure
of breakage susceptibility, holds the promise of
significant improvement in visual and intrinsic
quality and a reduction in BCFM created
during loading and unloading at the foreign
destination.
Support for Separating the BCFM Factor
Implementing a proposal for changes in factor
limits requires support from all segments of the
industry. Active opposition with legitimate
justification can override an economic evalua-
tion. Surveys provided data on the support for
change by market participants.
About 30 percent of farmers in the three-
state survey favored changing or removing the
BCFM factor in corn. Farmers reported that
they believe that the most effective strategy for
reducing BCFM levels is to offer more premi-
ums for cleaner grain. Farmers also reported
that cleaner grain could be achieved by improv-
ing harvesting practices, combine adjustments,
and additional cleaning on-farm and at elevators.
When asked to identify strategies to reduce
the amount of foreign material in corn, 30 to 34
percent of the farmer respondents in Iowa,
Illinois, and Indiana suggested separating BC
and FM into two grade factors. Managers of
interior elevators generally supported the
separation of BCFM into two components; 46.6
percent gave positive opinions, 31.5 percent
gave negative opinions, and 21.9 percent were
indifferent.
6
Managers of export elevators were about
equally divided among positive, negative, and
indifferent attitudes toward separating the
factor of BCFM into two components.
The only significant explanatory variable
associated with the managers' attitudes toward
separating BC and FM was the percentage of
their shipments that had received discounts for
BCFM in the past. Those elevators reporting
the higher percentage of shipments receiving
discounts were most supportive of the idea of
separating the factor of BCFM.
Conclusions
Separation of BC and FM based on sieve size
segregates broken corn into different categories
according to particle size. Costs of inspection
and segregation would be increased if the
industry adopted two grade factors instead of
one. Chemical analysis shows relatively small
differences and no obvious breakpoint for
choosing the optimum sieve size. However,
there is a major difference in the power re-
quired for aerating corn in bins between the
smaller particles and larger particles in the
corn mass. Therefore, the greatest incentive for
removing smaller particles of broken corn from
larger particles lies in the reduced cost of
maintaining the quality of corn held in storage.
Creating two grade factors of BC and FM
(both primarily comprised of broken corn) dif-
ferentiated only on the basis of particle size
provides little additional information about the
value of the lot, while increasing the cost of
grading, segregation, and blending.
Separating BCFM into two grade factors
will not, by itself, induce significant changes in
management practices. Improved quality for
export can be achieved only by lowering grade
limits for BC, FM, or both, at significantly
increased costs of cleaning. In addition, the
separation of BCFM into two factors will
increase segregation costs. Given the design of
current cleaners, BC and FM will continue to
be included in corn screenings. The difficulty of
separating the two in commercial cleaners, plus
problems of handling and storing FM (particles
smaller than 6/64-inch), would be major deter-
rents to marketing BC and FM as separate
commodities.
Farmers may perceive two factors in place of
one as increasing the opportunity for buyers to
assess additional discounts. The authors have
concluded that a redefinition of BCFM without
any change in grade limits will generate
additional costs with little benefit and no
improvement in quality.
Lower limits on BCFM will reduce both BC
and FM, with FM being reduced proportionally
more than BC under current cleaning technolo-
gies and strategies. Lower limits on only FM
will have the same effect as a lower limit on
BCFM because current cleaning technology at
most elevators will not remove fines without
also removing BC. Changing cleaning strate-
gies to remove only FM will require major
investments in retrofitting or replacing current
systems.
Limits on fines or FM, less than the percent-
age created during handling, will significantly
increase cleaning costs because creation of
fines during handling will result in cleaning (or
discounts) at each point in the market channel.
The impact on destination quality will be small
because loading and unloading in the ports will
create enough fines and dust to exceed the
grade limit.
The separation of samples into CFM and BC
increases information for determining value
and does not require any additional segregation
or blending in the market. Cost of grading will
increase as a result of a second sieve or riddle
and the time required to weigh and record
CFM. The quantity of material to be removed
(or docked) will be a very small proportion of
the total grain delivered. Non-corn material
larger than 12/64-inch but small enough to
pass through the scalper will be included as
corn.
Although the percent of weight removed as
CFM is small (0.1 to 0.3 percent), total tonnage
of CFM multiplied by transport cost and by the
delivered price paid for the shipment results in
significant cost reductions if the CFM is re-
moved at the farm. In addition, the quality
perception of foreign buyers is heavily influ-
enced by the readily observed CFM in the
vessel.
Unlike BC, the quantity of CFM will not
increase during handling in the market chan-
nel. Once CFM is removed from the grain at
the farm or country elevator, there is no legal
way for additional CFM to enter the market
channel.
Adding an additional factor to measure
the percentage of CFM separate from the
percentage of BC is consistent with the
grades of the major competing exporting
countries that identify non-corn material as
impurities.
Benefits are difficult to quantify but can be
described for consideration. Identifying the
quantities of BC and CFM in the corn samples
provides additional information for use by the
buyer. Quality improvement will depend on
actions by managers in response to market
incentives. Increased value resulting from
small reductions in BCFM will be difficult to
detect in the plant of the foreign buyer. Higher
values will gradually be incorporated into the
base price, but the effect may be concealed by
the many other influences on price. Increased
value at destination will be achieved only if the
inherent resistance to breakage is incorporated
as part of producer incentives.
The results of this study suggest that only
two or three alternative formulations of the
BCFM factor in corn grades will lead to higher-
valued corn in the export market channel at a
cost commensurate with benefits. The issue of
redefining the factor of BCFM in corn grades
was expanded during conduct of the study to
include BCFM-related strategies for improving
corn quality.
Incentives for changing practices to prevent
breakage will always be a more efficient and
cost-effective means of improving quality than
efforts to remove or reduce the broken kernels
following each handling and impact in the
market channel.
Changes in grades should be approached
as a system where uniform terminology
providing accurate description of economically
important characteristics increases the effi-
ciency of the market in the aggregate. No
single grade factor can be demonstrated to
alter export volume, market shares in world
markets, farm income, or base price for corn.
Changes in grade factors must be justified on
the basis of their value and contribution to the
total system rather than on their individual
costs and benefits.
Recommendations
1. Breakage susceptibility should be
included as a non-grade standard to be
reported in all official inspections. Federal
Grain Inspection Service research efforts
should be directed toward the development
of a practical test for breakage susceptibility.
A temporary measure such as percentage of
kernels with stress cracks should be intro-
duced while a range of tests and technologies
are explored and a more objective and auto-
mated procedure is developed. The precision
of the test should allow identification of two
or three categories of quality rather than
developing a continuous scale for setting price
differentials.
Justification. Reducing breakage suscepti-
bility will be a much more cost-effective method
of reducing the levels of BCFM in the market
channel than separating the grade factor into
BC and FM on the basis of particle size or
lowering the grade limit. Reducing breakage
susceptibility will not only reduce the levels of
BCFM in the market channel but also dramati-
cally improve the intrinsic quality for most end
uses, reduce the amount of dust in the export
channel, and put the responsibility for quality
improvement back at the farm where the
producer can control variety, harvesting meth-
ods, and drying technology. If grades and the
market price differentiate low-breakage corn
from corn that has been dried at high tempera-
tures or damaged in harvesting, the average
quality of corn will be improved throughout the
market channel, and value in use will be
increased.
2. Grade definitions should include
dockage designated as CFM, defined as
non-corn material that can be readily
removed by mechanical scalping. The
factor should have a base level of zero and be
rounded to the nearest tenth. The specific
definition, including configuration of the sieve
for separation, should be developed by the
Federal Grain Inspection Service (FGIS).
Justification. Separation of BCFM into
coarse broken corn and finely broken corn
(the concept of BC and FM in current defini-
tions) does little to identify differences in
value.
The screen size selected is arbitrary, and the
difference in value from one particle size to the
next is generally insignificant. Separating CFM
from broken corn and fines increases the
information for determining value, adds little
to the cost of grading, and does not require
segregation or blending in the market. Unlike
broken corn, the quantity of CFM will not
increase during handling in the market chan-
nel. Once CFM is removed at the farm or
country elevator, there is no legal way for
additional CFM to enter the market channel.
The definition suggested for CFM approxi-
mates current scalping practices in the indus-
try, not the hand-picked CFM as defined in the
current corn grades. The quantity of material
to be removed will be a very small proportion of
the total grain delivered, so there will be little
economic burden on producers. Although the
removal of the small amount of CFM will have
only a small effect on actual quality and value,
there will be a direct impact on the foreign
buyers' perception of quality. Buyers frequently
complain about receiving low-value CFM and
the cost of transporting and purchasing it. The
proposed definition of CFM is similar to the
definition of impurities used in the grades of
the major exporting countries with which the
United States competes.
3. The current factor of BCFM should
be replaced with the factor Total Broken
Corn (TBC), defined as all material pass-
ing through the 12/64-inch sieve. The limits
on this factor for each grade should be one
percentage point less than the current limits on
BCFM, assuming that a breakage susceptibility
test is simultaneously introduced.
Justification. The decreased value of BC for
most uses is independent of the particle size.
Any broken kernel has a lower value than a
whole kernel for most purposes, including
storage and handling. There are no mechanical
methods for identifying whole, unbroken
kernels (although that may be a future goal in
development of test equipment). The use of the
12/64-inch sieve does not provide a complete
separation of whole and broken kernels, but it
is an acceptable compromise since it can be
accomplished mechanically and requires no
change in current grading methods. The lower
grade limits (if adopted) could create additional
incentives to adopt varieties, technologies, and
management strategies to reduce breakage
susceptibility. Once these have been adopted by
farmers and grain handlers, the levels of TBC
will be reduced throughout the market channel
and the lower limits can be met without addi-
tional cleaning.
4. FGIS should develop a master plan
that includes a set of ideal grades and a
strategy for implementing future changes
so as to minimize adjustment costs to the
industry.
Justification. Changes in grades should not
be introduced or evaluated one factor at a time.
The value of grades derives from having a
uniform system to describe value for use in
commercial trade. FGIS should develop a
set of ideal grades designed to meet the
purposes stated in the Grain Standards Act.
The ideal can be used to develop a plan for
moving toward a system that will enhance
quality and marketing efficiency while mini-
mizing disruption in the industry. Recommen-
dations 1 through 3 can contribute toward the
ideal grades by providing more information
about end-use value, creating incentives for
quality improvement, and increasing equity
among sellers who deliver corn of varying
qualities.
Eualuating the flggregate Costs and Benefits
of Separating Broken Corn and Foreign Naterial
The costs associated with corn breakage,
coupled with complaints of foreign buyers, have
generated interest in finding economically
viable methods to reduce the amount of broken
corn and foreign material in market channels.
Legislation to reduce foreign material through
prohibition of blending or mandated cleaning
has focused on improving the image of U.S.
corn in overseas markets, rather than on the
information provided by grades and quality
factors. One of the more important definitional
issues in developing and using grades is the
differentiation between whole kernels, broken
kernels, and non-corn material.
Corn grades in Argentina, Yugoslavia,
Thailand, and South Africa define impurities as
non-corn material handpicked from the sample
before sieving for broken corn. Broken corn is
based on particle size. In contrast, current U.S.
grades do not make this distinction. Hand-
picked non-corn material is combined with
material passing through a 12/64-inch sieve
into one factor called "broken corn and foreign
material" (BCFM). However, Federal Grain
Inspection Service (FGIS) regulations imple-
menting the 1986 Grain Quality Improvement
Act provided separate definitions for broken
corn (BC) and foreign material (FM) and
required the information to be recorded sepa-
rately on inspection certificates while leaving
the combined factor BCFM in the corn grades
[Federal Register, 1987].
History of Changes in BCFH
The debate over the best definition of non-corn
material and appropriate measurement tech-
nology predates the original legislation autho-
rizing a national system of grain grades. In the
grades for corn proposed by the Grain Dealers
National Association in 1908, dirt and broken
grains were combined into one grade-determin-
ing factor ["New Inspection Rules," 1908].
The 1914 voluntary grades for corn con-
tained two factors related to non-corn materi-
als: (1) foreign material, which included dirt,
pieces of cob, other grains, finely broken corn,
etc. (where finely broken corn was defined as
material passing through a 9/64-inch, round-
hole sieve); and (2) cracked corn, which in-
cluded all the broken kernels passing through a
16/64-inch sieve except finely broken corn
[Duvel, 1915].
When the mandatory corn grades were
promulgated in 1916, following passage of the
Grain Standards Act, a 14/64-inch sieve was
adopted because of widespread public opposi-
tion to the use of two sieves, and the two grade
factors were combined into "cracked corn
and foreign material" (CCFM) ["Corn Sieves,"
1937]. In 1921, the USDA substituted a
12/64-inch sieve because of charges that the
use of the 14/64-inch sieve lowered the grade
of high-temperature kiln-dried corn, even
though such corn met consumer demands and
warehouse requirements ["Corn Sieves,"
1937].
By 1930, complaints against the 12/64-inch
sieve prompted the Chief Grain Inspector to
pass a resolution requesting a change to a
10/64-inch sieve ["Annual Meeting," 1930].
The clamor for using this smaller sieve peaked
when high rainfall forced the trade to kiln-dry
an abnormally large percentage of the 1935
crop. Several other trade organizations joined
the call for using a 10/64-inch sieve to separate
CCFM in order to salvage pieces of corn classi-
fied as CCFM by the 12/64-inch sieve.
A special committee of the Chicago Board of
Trade argued for the use of the 10/64-inch sieve
10
and recommended installing a second sieve
with a special limit for fines and dust. The
USDA's Bureau of Agricultural Economics
argued against the use of the 10/64-inch sieve
on the grounds that it would have a negative
impact on storability. However, results of actual
handling tests conducted by the industry and
the USDA showed that changing to the
10/64-inch sieve and leaving larger pieces of
corn in the clean-corn fraction would have little
detrimental effect on the storability or value of
the corn [Hill, 1990].
Farmers and grain dealers appeared to favor
the change to the 10/64-inch sieve. According to
the editor of The Grain Dealers Journal, "The
farmers, the country shippers and the terminal
elevator men want the 10/64-inch sieve to the
end that the larger and valuable pieces of
broken corn may be included with the corn
when grading with the important improvement
on the present system of sieving out the fine
flour that is objectionable" ["Changes in Grain,"
1937].
In 1937, the annual convention of the
Farmers Grain Dealers Association of Illinois
approved the proposed change to a two-sieve
definition coupled with the use of a 10/64-inch
sieve instead of the 12/64-inch sieve ["Illinois
Farmer Dealers," 1937]. "The farmers produc-
ing the corn and the central market dealers
warehousing the corn seem to have made out a
good case for the desired change in the perfora-
tions of the sieve used in grading corn. The
smaller, 10/64-inch opening will retain more of
the valuable larger pieces of broken kernels to
go into the higher grades. The farmer's interest
is two-fold. First, he gets more feed value; and
second, the buyer of his corn can afford to pay
more for it by about 2 percent" ["Change in
Corn," 1937].
In spite of farmer support, the Grain Divi-
sion of the USDA's Bureau of Agricultural
Economics was responsive to the opposition
voiced by corn users and merchandisers who
did not want more broken kernels classed as
corn, and the 12/64-inch sieve was retained.
Attempts to redefine "broken corn and
foreign material" were renewed in the late
1970s. In February 1976, the USDA's Agricul-
tural Marketing Service proposed eliminating
BCFM as a grading factor and substituting
three factors in its place: (1) "Broken corn and
small kernels" would be all material passing
through a 15/64-inch round-hole sieve but
remaining on top of an 8/64-inch round-hole
sieve; (2) "screenings" would include all mate-
rial passing through an 8/64-inch round-hole
sieve; and (3) "foreign material" would include
all matter other than corn remaining on top of
an 8/64-inch round-hole sieve [USDA, 1976].
This idea was presented at hearings in several
locations around the United States but gener-
ated so much opposition from the grain indus-
try that the proposal never reached the Federal
Register. The major objections concerned
measurement difficulties, higher grading costs,
potential losses for producers through a reduc-
tion in the amount of BCFM that could be sold
as corn, and possible effects on the pricing
structure in foreign markets.
Redefinition of BCFN
During the past 10 years, several alternative
proposals have been reviewed for redefining the
materials classified as broken corn and foreign
material. The most widely accepted proposal
came from the Grain Quality Workshop (GQW),
sponsored by the North American Export Grain
Association. That committee cautiously re-
ported in favor of separating BC and FM in the
corn grades in their 1986 report to Congress,
Commitment to Quality. Their specific proposal
was the following:
In concept, broken corn and foreign
material should be separated for grading
purposes, subject to supportive results
from an in-depth impact study by FGIS,
industry and academia, the study to
begin immediately. The fraction of a corn
sample passing through a 12/64-inch
round-hole screen, but not through a
smaller screen (either an 8/64-inch or
6/64-inch round-hole) would be a grade
determining factor, broken corn (BC).
Grade levels for BC should be set consis-
tent with the objective of increasing corn
value. The portion passing through the
smaller screen, plus coarse handpicked
foreign material would be a non-grade
determining dockage (discount) factor,
11
similar in concept to wheat dockage, and
listed on the certificate to the nearest 0.1
percent [North American Export Grain
Association, 1986].
U.S. Grades and Standards define BCFM on
the basis of particle size; BCFM consists of all
material passing through the 12/64-inch round-
hole sieve. However, this definition does not
provide an accurate distinction because the
"whole corn" portion of the sample contains
some broken kernels, and some small whole
kernels pass through the sieve. In 1988, FGIS
adopted the 6/64-inch distinction between BC
and FM as proposed by GQW and required the
relative amounts of BC and FM to be included
in the remarks section of all official certificates
except export certificates. The following defini-
tions were used:
Broken corn (BC) is all material passing
through a 12/64-inch sieve, but not a 6/64-inch
sieve. FM is all material passing through a
6/64-inch sieve plus non-corn material hand-
picked from on top of the 12/64-inch sieve. BC
and FM are listed as information but do not
establish numerical grade. Their summation,
BCFM, is still the grade-determining, particle-
size factor for corn.
The impetus for separating the BCFM grade
factor came from several sources: (a) foreign
complaints, (b) congressional concern about
lost market share, (c) commodity groups con-
cerned over equity in payments for different
qualities, and (d) the poor image of U.S. corn
among international buyers. Thus, the primary
focus in the requests for change has been the
export market channel. Excess BCFM increases
storage and processing costs and reduces the
value of corn in the domestic market as well,
but few domestic processors or merchandisers
have pressured Congress or FGIS for change.
12
Properties of Corn Screenings
fleuieui of Preuious Studies
Hill et al. [1982] analyzed 1,080 samples of
corn from Illinois country elevators and
subterminals in 1976 and 1977. Table 1 lists
constituents found in these samples, along with
their size distribution. The material (corn,
weed seeds, corn by-products, and inert mate-
rial and dust) in each size category was deter-
mined by visual examination, with the aid of a
low-power magnifying glass.
Even the smallest size particles were prima-
rily corn. Most non-corn material in the samples
(58 percent by weight) was in the material
passing through the 10/64-inch sieve. The mate-
rial passing through the 12/64-inch sieve con-
tained 69 percent of the non-corn material. Non-
corn material on top of the sieve 12/64-inch sieve
would have been graded as coarse FM and
included as BCFM under current grades.
Several studies have reported the distribution
of fines of various sizes in market corn. These
data are summarized and averaged in Table 2
[Bern and Hurburgh, 1992]. The percentage
passing through a 12/64-inch round-hole sieve is
used as the reference weight. Amounts passing
through other sieve sizes are expressed as
percentages of the weight passing through the
12/64-inch sieve. As an example, on average, 19.2
percent of what is now BCFM would pass
through a 6/64-inch sieve. The remaining 80.8
percent of BCFM was between the 12/64-inch and
6/64-inch sieves and would be classified as BC
under the proposed redefinition. The relative
concentration of various particle sizes remained
constant through the market channel even
though the actual level of fines increased steadily
with repeated handling. For example, export lots
were consistently higher in BCFM than country
elevator lots, but their relative concentrations in
each of the particle sizes were not similar.
The average level of BCFM delivered to
country elevators was less than 2 percent in
the 1976 and 1977 study. Other studies have
found the same low concentrations of BCFM at
country elevators [Hurburgh and Moechnig,
1984; Hurburgh et al., 1983; Hurburgh, 1984].
Estimating Particle-Size Distributions
The particle-size distribution of market corn is
important information for estimating the effect
of alternative definitions of BCFtyl en the
Table 1. Constituents and Size Distribution of 1976 and 1977 Corn Samples
Delivered to Illinois Country Elevators and Subterminals
Whole corn
6.0mm
4.8 mm 4.0 mm
3.2 mm
2.4 mm
1.8 mm
(> 15/64-in.)
(15/64-in.)
(12/64-in.)
(10/64-in.)
(8/64-in.)
(6/64-in.)
(4.5/64-in.)
Cornb (%)
99.95
98.31
96.50
91.98
89.10
85.24
77.61
Corn by-products0 (%)
0.03
1.02
2.60
5.06
8.09
12.99
20.47
Weed seeds (%)
0.02
0.66
0.88
2.96
2.42
0.90
1.73
Dust and inert
material (%)
0.00
0.02
0.03
0.03
0.38
0.87
0.29
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Total non-corn
material (% of total)
17
13
11
16
13
8
21
Source: Hill et al., 1982.
"Size of particles in each category lies between that screen size and the next smaller one; Includes whole corn and
large pieces of broken corn remaining on top of the 15/64-in. sieve; "Non-kernel material originating on corn plant.
13
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amount of material classed as discountable.
Equations (1), (2), and (3) were derived from
the data of Table 2 for estimating the percent of
the sample passing through a sieve of any size.
Data provided by the FGIS were used to test
the validity of the prediction equations and to
determine if particle size distributions were
correlated with any other grade factors. FGIS
provided data on all grade and condition factors
according to the new definitions of BC and FM
from both export and domestic inspections.
Z_ a0.265S:
DO - ^
B,Sj
1.455
(1)
where
ZB s = the percentage of total sample
weight that would pass through a
round-hole sieve of size s.
s = the size of the round-hole sieve used
in separation, recorded in 64th
inches, and 3 < Sj < 16
The percentage of the total sample weight that
would pass through any round-hole sieve is
then
z,,
B (2)
B,S:
100
Table 3. Corn Inspection Data
Number of observations
Variable
Source
1988-89
1989-90
Type
Supervision"
Appeal8
Export original
15,617
5,718
1,819
15,410
2,342
2,049
Movement*-"1
Inbound
1,757
1,861
Outbound
10,447
10,159
Local
21
14
Submitted
3,392
3,376
Carrier"1
Truck"
1,112
1,409
Hopper car"
Barge8
Other"-b
8,618
2,488
3,399
8,394
2,221
3,386
Vessel0
1,819
2,049
where
B = the percent BCFM, using the FGIS
definition of 12/64-inch sieve
The percentage of the total sample between any
two screen sizes, s, and s2, is
ZTSj - ZTS2 = (ZBiSi - ZB S2) — (3)
where
ZBS and ZBS are calculated from equation 1.
Export data were taken from the Export
Grain Inspection System (EGIS) database.
There were 1,819 export lots certified in
1988-89 and 2,049 lots certified in 1989-90
(Table 3). Interior inspection data were
obtained from the Grain Inspection Monitoring
System (GIMS) database. Two types of inspec-
tions are recorded: (1) appeals of interior-
agency original inspections to FGIS field offices
and (2) field-office supervisory monitoring
random samples of 0.5 percent of interior-
agency inspections. Appeal data were not used
in this analysis because they are not represen-
tative of inspections as a whole.
The particle size factors identified as FM
and BCFM were measured directly by inspec-
tors. BC was calculated by subtracting the FM
percentage from the BCFM percentage. The
coarse FM (non-grain material larger than
12/64-inch) was included with FM. Any non-
grain material falling through the 12/64-inch
screen but not the 6/64-inch screen was included
in the BC fraction. The FM ratio, percent FM
divided by percent BCFM, was calculated for
each observation. The predicted FM ratio is the
solution of equation (1), with s. = 6/64-inch.
Statistical flnalysis
"Domestic corn only; bSubmitted samples plus other
carriers; 'Export only; dAppeals eliminated.
For export corn, averages and standard devia-
tions for all grade factors and the FM ratio were
calculated by year and grade. Paired t-tests were
used to determine if the FM ratio was signifi-
cantly different between grades (p - 0.05), and if
the measured FM ratios were different from
those predicted by equation (1). Mean values of
all numeric variables, by grade, for the two years
were tested for significant differences.
15
The domestic inspection data were sorted
by year, carrier, and grade. Boxcar samples
(N = 7) and "other carrier" category were not
used for analysis. Carrier designation was not
available for submitted samples. There were
no significant differences between inbound and
outbound inspection data by grade and carrier.
Therefore, no variable was included to identify
inbound versus outbound shipments. Statisti-
cal comparisons were made among grades,
carriers, and years.
A correlation matrix was formed with all
the quality test variables and the FM ratio.
Export and domestic data were combined, to
test the effect of other quality factors on the
relative amounts of BCFM and FM in corn
lots. Separate correlation coefficients were
calculated for each year.
Tables 4 and 5 give the averages for grade
factors along with the number of samples and
volume (export data only). The data were
divided by carrier (vessel, barge, hopper car,
and truck) and by grade (1 to 5 and Sample).
Appeal samples, samples with incomplete data
(factor-only inspections), and submitted
samples (carrier not known) were eliminated.
Average quality of the lots sampled deterio-
rated from predominantly No. 1 and No. 2
yellow corn at inland points to No. 3 yellow
corn at export locations. There was a steady
decline from truck to hopper car to barge and
finally to vessel. This decline was almost
exclusively due to BCFM increases, not to
reduction in test weight or increases in damage.
Table 6 relates percent FM to percent
BCFM, by grade, carrier, and year. There
was a slight trend of an increasing FM ratio
with increasing BCFM in all carriers except
vessels. There was also a small but signifi-
cant difference between 1988-89 and 1989-90
data, 1989-90 being higher. The difference
has no practical significance since the actual
change in the FM level for a 1-unit change in
the FM ratio was only 0.03 percentage points
of FM.
Trucks were the only carrier with an FM
ratio significantly different from other carriers
(Figure 1). This is logical because truck grain
is handled less, blended less, and therefore of
a quality closer to field-run than grain in any
of the other carriers. BCFM in truck samples
was not as close to grade limits as samples
Figure 1. BCFM and FM in No. 2 and No. 3 corn by carrier, 1989-90.
16
from the other carriers. As would be expected,
shiplot samples were the closest to the grade
limits, followed by barge samples, hopper car
samples, and truck samples. BCFM was the
only factor that changed noticeably by carrier
and was the only factor that consistently
approached grade limits. This suggests that
regardless of how BC and FM are defined
with respect to particle size, exporters will
feel the most pressure.
Relationship Between Particle Size
and Grade Factors
The FM ratio increased slightly with BCFM
concentration for three of the four carrier
types. Table 7 shows the regression equations
of FM ratio against BCFM. None of the coeffi-
cients was significant atp = 0.05. The slopes
(rates of change of FM ratio) were not large.
The R2 values, while statistically significant,
were very low, which indicates that the regres-
sion equations are not very useful for predict-
ing individual situations. From a practical
viewpoint, the mean value of the FM ratio is
nearly as good as the regression equations for
estimating future FM values.
No other grade factor was strongly related to
either FM ratio or percent BCFM, as shown in
Table 8. These data fail to support claims that
low test weight is indicative of breakage-prone
or moldy corn, or both. Since differences in test
weight can be caused by many genetic and
condition characteristics [Hall and Hill, 1973],
it is not a good predictor of BCFM and damage
(DKT) levels. Blending and cleaning cause
BCFM and DKT to be independent of other
quality characteristics.
Table 4. Corn Quality by Carrier and Grade, 1988-1989
Carrier
origin
Grade
MC
(%)
TW
(Ib/bu)
DKT
(%)
BCFM Number of
(%) lots
Volume
(tons)
Vessel
1
13.6
58.5
1.6
1.6
16
69,212
(export)
2
13.7
57.0
3.6
2.8
550
13,723,471
3
13.7
57.0
4.9
3.7
1,224
37,539,488
4
14.0
56.4
4.4
4.3
13
53,025
5
13.8
57.6
3.4
5.5
7
32,790
Sample
13.7
57.3
2.7
3.1
9
63,990
Average
shiplots
13.7
57.0
4.5
3.4
1,819
51,481,976
Barge"
1
13.8
57.7
2.1
1.6
139
(interior)
2
13.5
57.0
3.7
2.5
947
3
13.4
56.9
4.8
3.3
986
4
13.4
56.8
6.2
3.9
269
5
13.2
56.7
7.8
4.8
115
Sample
12.9
56.4
14.9
5.2
23
Average
barges
13.5
57.0
4.6
3.1
2,479
Hopper car" 1
13.8
57.5
2.1
1.6
1,095
(interior)
2
13.6
57.0
3.5
2.3
3,585
3
13.6
56.8
4.7
3.0
1,964
4
13.6
56.7
6.2
3.7
720
5
13.6
56.5
9.1
4.4
334
Sample
13.6
56.2
15.0
6.1
138
Average
hopper cars
13.6
57.0
4.3
2.7
7,836
Truck'
1
13.7
58.1
1.9
1.3
369
(interior)
2
13.4
57.3
3.4
2.2
287
3
13.3
56.9
5.0
2.8
174
4
13.1
57.1
7.4
3.1
139
5
13.0
56.6
9.6
4.1
83
Sample
13.2
56.6
14.8
5.8
58
Average
trucks
13.4
57.4
5.8
2.5
1,110
MC = moisture content; TW = test weight; DKT = total damage; BCFM
"Appeals and factor-only inspections eliminated.
broken corn and foreign material.
17
Buyers' Estimates of Corn Screenings
Composition
In a survey of buyers of corn screenings,
respondents estimated the percentage of their
screenings composed of three types of matter:
broken corn, other grains, and non-grain
material. Respondents' estimates of corn
screenings composition were 80 to 90 percent
corn, 0 to 8 percent other grains, and 0 to 15
percent non-grain materials. A previous study
[Hill et al., 1982] reported the composition of
BCFM in corn received from country elevators
as 92.7 percent corn; 0.1 percent dust and
inert; 0.7 percent weed seeds and other grains;
and 6.6 percent corn by-products (Figure 2).
The opinions of screenings buyers about the
proportion of corn in BCFM is consistent with
the results from the laboratory analysis.
Figure 2. Composition of BCFM at country
elevators.
Table 5.
Corn Quality by Carrier and Grade, 1989-1990
Carrier
origin
Grade
MC
(%)
TW
(Ib/bu)
DKT
(%)
BCFM
(%)
No. of
lots
Volume
(tons)
Vessel
1
13.8
57.6
1.4
1.5
17
89,863
(export)
2
14.1
57.0
2.7
2.7
265
18,698,938
3
14.2
56.9
3.0
3.5
1,258
40,287,484
4
13.8
57.1
4.3
4.3
1
1,271
5
—
—
—
—
0
—
Sample
14.1
57.4
3.9
3.5
8
43,196
Average
shiplots
14.1
57.0
2.9
3.2
2,049
59,120,752
Barge"
1
14.2
57.4
2.0
1.7
699
(interior)
2
14.1
57.2
2.8
2.5
1,040
3
13.8
56.9
4.0
3.1
376
4
13.7
56.9
6.2
3.6
73
5
13.6
57.2
7.1
4.6
17
Sample
12.9
56.9
10.1
8.5
8
Average
barges
14.0
57.2
3.1
2.6
2,213
Hopper car3 1
14.1
57.6
1.7
1.6
2,917
(interior)
2
14.2
57.0
2.7
2.3
3,182
3
14.2
56.8
3.9
3.1
1,403
4
14.0
56.6
5.4
3.7
486
5
14.0
56.4
7.0
4.7
181
Sample
13.9
54.3
15.1
6.5
62
Average
hopper cars
14.1
57.1
3.0
2.5
8,231
Truck"
1
14.2
58.3
2.2
1.3
1,013
(interior)
2
14.2
36.9
3.4
2.1
177
3
14.0
57.1
4.9
2.7
88
4
14.2
56.9
7.1
2.8
63
5
13.5
57.2
8.9
4.3
37
Sample
12.6
57.7
13.6
7.9
24
Average
trucks
14.1
57.9
5.4
2.6
1,402
MC = moisture content; TW = test weight; DKT = total damages; BCFM = broken corn and foreign material.
"Appeals and factor-only inspections eliminated.
18
Table 6. Particle Size Distribution by Carrier and Grade
- 1988-89 - - -
- 1989-90 - -
FM
FM
Carrier
FM
BCFM
ratio
FM
BCFM
ratio
origin
Grade
(%)
(%)
(%)
(%)
(%)
(%)
Vessel
1
0.44
1.59
27.9
0.39
1.51
25.6
(export)
2
0.59
2.75
21.5
0.62
2.72
22.7
3
0.82
3.70
22.2
0.84
3.51
24.0
4
1.02
4.28
24.8
1.00
4.30
23.3
5
1.09
5.54
19.7
—
—
—
Sample
0.72
3.08
24.7
0.98
3.53
28.1
Average shiplots
0.75
3.40
22.1
0.76
3.20
23.5
Barge"
1
0.39
1.63
23.6
0.40
1.66
24.0
(interior)
2
0.60
2.49
23.8
0.59
2.47
23.9
3
0.82
3.32
24.6
0.77
3.13
24.4
4
0.99
3.90
24.8
0.92
3.62
25.0
5
1.27
4.78
26.1
1.08
4.62
22.7
Sample
1.42
5.16
26.9
2.14
8.46
25.2
Average barges
0.77
3.09
24.4
0.62
2.56
24.1
Hopper car"
1
0.31
1.56
19.1
0.33
1.55
21.2
(interior)
2
0.46
2.27
20.2
0.54
2.30
23.2
3
0.65
2.97
21.6
0.77
3.06
24.6
4
0.88
3.66
23.3
0.97
3.69
25.4
5
1.10
4.42
24.3
1.29
4.66
26.3
Sample
1.65
6.09
25.9
1.98
6.45
27.5
Average hopper cars
0.58
2.66
21.0
0.59
2.45
23.2
Truck"
1
0.22
1.32
16.3
0.26
1.30
22.1
(interior)
2
0.36
2.23
16.4
0.33
2.05
16.4
3
0.48
2.83
17.1
0.43
2.69
16.4
4
0.61
3.11
18.8
0.51
2.82
17.9
5
0.79
4.13
18.8
0.92
4.28
19.9
Sample
1.46
5.81
22.6
1.65
7.87
20.0
Average trucks
0.46
2.49
17.3
0.49
2.64
18.3
FM — foreign material; BCFM — broken corn and foreign material.
"Appeals and factor-only inspections eliminated.
Table 7. Regression
Equations
ofFM Ratio Against BCFM Percentage,
by Carrier
Average
FM ratio
— Regression coefficients - - -
R2
Standard
deviation
Carrier
(%)
A C
(%)
(% points)
Truck
17.6
0.67 15.9
1.5
9.4
Hopper car
22.1
1.73 17.7
6.6
7.4
Barge
24.2
0.81 21.9
1.6
5.9
Ship
22.8
0.03 22.7
0.0
5.3
All carriers
22.4
1.40 18.5
4.6
7.1
Predicted from
equation 1
20.7
— —
—
FM = foreign material; BCFM = broken corn and foreign material. The regression equation was FM ratio = C + A
(percent BCFM), where C is the intercept term and A is the regression coefficient for the variable BCFM. FM ratio is
defined as (percent FM/percent BCFM) x 100.
19
If cleaning practices were altered to remove
only the smaller particle sizes classified as
FM in the proposed redefinition, the composi-
tion of corn screenings would be altered.
Survey respondents were asked to estimate
the effect on screenings composition if a
smaller screen were used for cleaning corn.
Specifically, respondents were asked whether
they would expect the following characteris-
tics to increase or decrease if the sieve size
for defining screenings were reduced: test
weight, energy level, fiber content, protein
content, and feed value. Respondents dis-
agreed about the effect on fiber; 33 percent
said fiber content would increase and 30
percent said fiber content would decrease if
Table 8. Correlation Coefficients (r) Among Corn Grade Factors and FM Ratio, 1988-89 and 1989-90 Data
1988-89
TW
MC
HT
1989-90
DKT BCFM
FM
FM ratio"
TW
1
NS
NS
NS
NS
NS
NS
MC
NS
1
NS
-0.20
NS
NS
NS
HT
NS
NS
1
0.35
NS
NS
NS
DKT
-0.22
NS
0.20
1
0.21
NS
NS
BCFM
NS
NS
NS
0.20
1
0.84
0.23
FM
NS
NS
NS
NS
0.85
1
0.61
FM ratio
NS
NS
NS
NS
0.27
0.61
1
All listed coefficients were significant at the 0.05 level. NS = not significant or <0.2. Appeals, submitted samples,
and factor-only inspections excluded. TW =test weight; MC =moisture content; HT = heat damage; DKT = total
damage; BCFM = broken corn and foreign material; FM = foreign material.
"(FM/BCFM) x 100.
Figure 3. Effects of particle size on protein and fiber contents in 1977 Illinois corn.
Source: Figures 4 and 5, Hill, 1982.
20
particle size of screenings were reduced. For
all other characteristics, most respondents
predicted that the change would cause the
average values to decrease.
Based on previous research, a reduction in
particle size would increase fiber content and
protein content, but would decrease energy
levels (Figure 3). The net effect on feed value
depends on relative prices of energy and
protein. Under current price relationships, the
feeding value would decrease. The lack of
agreement among responses indicates the lack
of sophistication in the corn screenings
market and reflects the large number of users
without sufficient knowledge, technology, or
experience to price screenings according to
value. Protein content provides an example.
Over 40 percent of the respondents expected
protein to decrease with decreased particle
size. This is the opposite of the conclusion
based on the analysis of screenings. Since few
buyers of screenings conduct a detailed
analysis of the screenings, buyers had no
basis for predicting the effect of changes in
particle size. It is not surprising that indi-
vidual opinions differed from actual analysis.
21
Ualiie of Fines and Screenings
Nutritiue Ualue in Feed Rations
Hill et al. [1982] measured the nutritive value
of various particle sizes of corn fines and whole
corn screened from the 1976 and 1977 crops in
Illinois. Martin [1981] studied dust from four
Kansas elevators. Their results are shown in
Table 9.
Protein content increased with decreasing
particle size. For fines passing through the
4.5/64-inch sieve, protein content (12.3 percent)
was more than two percentage points higher
than for whole corn. This suggests that this
smallest-size fraction contains a large portion
of high-protein germ. The smallest fraction
(through a 4.5/64-inch sieve) has by far the
highest ash content (4.6 percent), suggesting
that a high level of dust and inert material
exists in this fraction.
Al-Yahya [1991] determined the nutrient
value of corn liftings (material removed by a
Kice 6DT4 mini- aspirator) using corn contain-
ing 4.0 percent BCFM. Figure 4 shows the
effect of air velocity (and particle size) on
protein, oil, and starch of the liftings. The
starch level of liftings was maximized at a low-
velocity setting; the oil level was maximized at
a high-velocity setting. The protein level was
the least defined, with no evident trend of
variation with air velocity. Apparently, high-
starch particles have lower terminal velocities,
and high-oil particles have higher terminal
velocities.
The procedures used by FGIS since 1989
separate BCFM into CFM, BC, and fines with
essentially a 100 percent efficiency using the
Carter-Day Dockage Tester and handpicking
CFM. Substituting an 8/64-inch sieve for the
6/64-inch sieve shows an increase in protein
and fiber as particle size decreased, randomly
selected from the FGIS file samples from port
elevators in 1991. Protein and oil contents were
higher and starch content was lower in the FM
obtained with the 6/64-inch sieve than with the
8/64-inch sieve (Table 10).
Although commercial cleaners are much
less effective in separating particle sizes,
the relation-ship between screen size and
chemical composition still holds. A port eleva-
tor with cleaners using an 8/64-inch screen and
Table 9.
Nutritive Properties of Corn Fines
Property
Whole corn
(>15/64-in.)
6.0 mmb
(15/64-in.)
4.8 mmb
(12/64-in.)
4.0 mmb
(10/64-in.)
3.2 mmb
(8/64-in.)
2.4 mmb
(6/64-in.)
1.8 mmb
(4/64-in.)
Dust
Crude
protein (%)'
10.20
10.10
10.40
10.40
10.40
11.00
12.30
9.00
Ash (%)"
1.40
1.40
1.60
1.60
1.70
2.40
4.60
6.60
Oil (%)•
4.50
3.90
4.30
3.40
2.50
2.40
2.40
2.70
Crude
fiber (%)•
2.20
2.30
2.60
2.90
3.50
4.20
5.90
8.10
NFE (%)"•<
81.8
82.30
81.10
81.70
81.90
80.10
74.70
73.60
Digestible
energy11
MJ/kg
Kcal/lb
16.45
1,786
—
15.81
1,717
15.57
1,691
15.30
1,661
15.03
1,632
14.84
1,611
—
Source: Hill [1982] and Martin [1981].
- = Not available. "All percentages are on a dry basis. bSize of particles in each category lies between that screen
size and the next smaller one. 'Nitrogen-free extract. NFE = 100 - protein - oil - ash - fiber. dDigestible energy =
gross energy (calorimeter) - fecal loss.
22
a 12/64-inch screen split a barge load of corn,
running a portion over each cleaner. Random
samples of the screenings from the two cleaners
were analyzed for particle size and chemical
composition. The results show that screenings
still contain some particles larger than 8/64-
inch in size and cleaned corn still contains fine
materials smaller than 8/64-inch. The separa-
tion of this particular barge of corn resulted in
0.2 percent FM in the clean corn and as much
as 60 percent of the screenings consisting of
material larger than 6/64-inch. The use of the
Figure 4. Starch, protein, and oil of liftings as a
function of air velocity.
75
74
73
72
71
70
69
12.0
11.5
'55 11.0
^, 10.5
^ 10.0
I 9.5
I 9.0
8.5
8.0
3.8
3.6
.<« 3.4
CO
M
f, 3-2
T3
5? 3.0
O 2.8
2.6
2.4
I I
J_
I
10 12 14 16 18 20 22 24
Air velocity, m/s
8/64-inch screen in the cleaner, in place of the
12/64-inch screen increased the percent of fines
and decreased the percent of coarse broken
corn in the screenings as a result of a better
separation. There was little change in the
composition of the cleaned corn. The chemical
analysis of the screenings from the 8/64-inch
screen showed a higher protein, higher oil, and
lower starch than the screenings from the
cleaner using a 12/64-inch screen (Table 11).
The differences in starch and protein contents
were statistically significant atp = 0.05 [Hill et
al., 1991c].
Screenings are generally thought to contain
a greater incidence of afiatoxin than whole
corn. However, in the analysis of samples of
screenings collected at Iowa elevators, only one
sample out of 62 contained measurable levels of
Table 10. Effect of Particle Size on Chemical
Composition of Foreign Material
in Corn
Component
Sieve size (%)'
6/64-in. 8/64-in.
Protein
9.1
9.0
Oil
3.2*
3.0*
Starch
59.2
59.4
"Random samples from FGIS export file samples were
separated with the Carter-Day Dockage Tester using a
6/64-inch sieve for 57 samples and an 8/64-inch sieve
for 51 samples. The material passing through the sieve
was analyzed by near-infrared reflectance technology
calibrated for analysis of screenings. Analyses are
calculated on a 15 percent moisture basis.
*Statistically different atp = 0.05.
Table 11. Chemical Composition of Screenings
Obtained from Commercial Cleaners
Fitted with Two Screen Sizes
Component"
Sieve size (%)
12/64-in. 8/64-in.
Protein
9.6*
10.4*
Oil
3.1
3.3
Starch
57.9*
56.8*
Source: Al-Yahya, 1991.
"Calculated at 15.5 percent moisture.
*Statistically different atp = 0.05.
23
aflatoxin. Shotwell et al. [1972] found that
aflatoxin was present in both BCFM and whole
kernel portions of contaminated samples. In
the study, two of 13 contaminated samples
examined contained high concentrations of
aflatoxin Bt in the BCFM portion of the
samples. Hill et al. [1982] also reported a low
correlation between particle size and aflatoxin
levels. The results of these three studies
suggest that removal of BCFM or corn screen-
ings will not eliminate the problem of aflatox-
ins.
Most samples of screenings from country
elevators analyzed in this study contained
fumonisin in one or more fractions. There was a
generally declining trend of fumonisin levels as
particle size increased. This means that
smaller fines, if removed as a separate product,
would represent a greater risk of fumonisin
than current screenings derived under the
current definition of BCFM. The weighted
average fumonisin content of the 62 samples
analyzed in this study was 30 ppm. In general,
all forms of fumonisin toxins follow the same
pattern.
Characteristics of Screenings
That flffect Daiue
The value of screenings is influenced by their
physical and chemical attributes. When the
quantity of screenings is increased by removing
more BCFM from the corn, the majority of the
net addition will be broken corn, while the
quantity of CFM in the screenings remains
constant. Increased cleaning will therefore
improve the quality of screenings through
lower fiber and higher test weight. Test weight
was the primary factor that elevator survey
respondents thought would influence value.
Buyers of corn screenings were asked to rate
the importance of moisture, test weight,
protein content, fiber content, and particle size
in determining the value of the corn screenings
that they used. Respondents rated the charac-
teristics on a scale of 1 to 3, where 1 indicated
little or no importance, 2 signified some impor-
tance, and 3 indicated very important.
Over 66 percent of the respondents rated
moisture and test weight "very important"
(Table 12). Protein content and particle size
were secondary considerations, while fiber
content appeared to be of minor importance to
most users. Only 3.9 percent of the respon-
dents rated fiber as very important. Respon-
dents were also given the opportunity to list
any other characteristics that they thought
would influence the value of screenings. Odor,
cool and sweet, ash, and presence of aflatoxin
were listed by 15 percent or fewer of the
respondents. Respondents did not rate these
factors as to relative importance.
Characteristics of Screenings
That flffect Price
The value of screenings may not be reflected
in price, so buyers were asked which of five
characteristics were important in determining
the market price for corn screenings. The
alternatives presented in the survey were the
same as those used in determining value:
Table 12. Determinants of Value in the Corn Screenings Market
Ratings by respondents (%)"
Factor
(Little or no importance)
(Some importance)
(Very important)
Moisture
0.0
23.1
66.7
Test weight
0.0
15.4
74.1
Protein content
34.6
38.5
25.9
Particle size
29.6
42.3
26.9
Fiber content
51.9
38.5
3.9
"Percentages do not add to 100 because some respondents did not rate all factors.
24
moisture, test weight, protein content, fiber
content, and particle size. Instead of rating
these characteristics, however, respondents
were asked to indicate all that applied (Figure 5).
Over 90 percent of all respondents reported
that test weight affects the price of corn screen-
ings, while over 50 percent listed moisture
(Table 13). Protein content, particle size, and
fiber content were relatively minor consider-
ations. Buyers again were given the opportu-
nity to list other factors that affected price, and
they responded with answers of musty or moldy
screenings, ash content, and aflatoxin. It is of
interest that while ash content was listed as
affecting price, it was not rated as important to
value. Although 11.5 percent of the respondents
said fiber content affects price, only 3.9 percent
gave it a score of very important.
The survey identified moisture and test
weight as two of the most important character-
istics that influence price (or discounts) for corn
screenings. Test weight is a general indicator of
the composition of the screenings — low test
weight screenings will often have less grain,
smaller particles, and more plant by-products,
such as cobs and chaff. However, the actual
value as a feed ingredient is a function of the
energy, protein, and fiber contents. Particle size
also has an effect on palatability, and thus
Table 13. Quality Characteristics That Affect
Price in the Corn Screenings Market
Factor
% of respondents
identifying the characteristic
Test weight
Moisture
Protein content
Particle size
Fiber content
92.6
51.9
22.2
15.4
11.5
feeding value, if screenings are fed directly.
Over one-quarter of the respondents recognized
the importance of protein content and particle
size in determining value. However, only 15.4
percent said particle size was a consideration
in setting prices.
Separating BCFM by using a double sieve
(12/64-inch and 6/64-inch) will significantly
reduce particle size and increase fiber content
in the material defined as FM. It will also have
a small effect on the protein content. The BC
portion of the sample will contain less fiber and
protein and more starch and energy than the
current BCFM, although the differences will be
small since most of the BCFM under current
grades is comprised of BC.
Figure 5. Percent of respondents rating influence of quality characteristics on value and price
of corn screenings.
25
Costs and Benefits of Cleaning
Costs associated with varying levels of BCFM
in market corn are difficult to assess because
they vary with intended use, storage practices,
location in the market channel, and other
environmental and market conditions. Corn
screenings included in whole corn increase
costs of handling and storing corn and reduce
its value. They make the corn more difficult to
aerate [Grama et al., 1984]. They increase the
rate of spoilage [Kalbasi-Ashtari et al., 1979].
They segregate from whole kernels under a
filling spout [Stephens and Foster, 1976]. The
presence of fines is the grain quality problem
most commonly mentioned by grain elevator
and storage facility managers [Stroshine,
1992]. They are the most likely cause of a drop
in grade during shipment [Hill et al., 1979].
They add to processing costs because they are
usually removed prior to wet milling [May,
1987] and dry milling [Alexander, 1987]. Fines
existing as dust (solid particles that became
airborne) constitute fire, explosion, and health
hazards [Martin, 1981].
Breakage during transport and handling of
corn in the market channel often creates
additional BCFM, resulting in levels that
exceed the limit for grade No. 2 in domestic
markets or grade No. 3 in export markets
(Figure 6). Meeting these contract grades
requires cleaning, and cleaning generates corn
screenings. The additional costs of receiving
corn with BCFM levels above grade limits are
operation of grain cleaners, transportation of
screenings to the point of use (primarily
livestock feed), storage of screenings, and a
reduction in total weight sold. Inefficiency in
the system has often been illustrated by the
example of corn being shipped at 3 percent
BCFM by a subterminal elevator in the
Midwest, incurring transportation costs
between production areas and the port eleva-
tor. At the port elevator, where handling
increases BCFM above the No. 3 grade limit
(4 percent), the excess screenings must be
removed and may be shipped back to the
Figure 6. Changes in BCFM through the market
channel.
Farm:
At harvest: 1.54% BCFM
Breakage: 1.10% BCFM
Removed: 0.1 2% BCFM
Country Elevator:
On arrival: 2.52% BCFM
Breakage: 1 .55% BCFM
Removed: 1.1 2% BCFM
Sub-terminal Elevator:
On arrival: 2.95% BCFM
Breakage: 1.04% BCFM
Removed: 1.44% BCFM
Export Elevator:
On arrival: 2.55% BCFM
Breakage: 1 .87% BCFM
Removed: 1.12% BCFM
Export certificate 3.30% BCFM
Breakage: 1.5%
(loading)
In the Vessel:
4.8% BCFM
Breakage includes that occurring
in the firm and during transportation
to the next marketing point.
26
elevator that shipped the original 3 percent
BCFM. Shippers pay additional transport
costs for the return trip. While this may be an
unusual example, it does occur and illustrates
one of the issues demanding an analysis of
alternative systems. Lower levels of BCFM in
the market channel can reduce costs of trans-
port and storage. But cost savings through
reducing levels of BCFM must be balanced
against the costs created in removing excess
BCFM. Costs and benefits are determined in
part by the characteristics of the screenings
generated during cleaning. The value of corn
and screenings, the costs of aeration, and the
quality of corn are affected by the properties
of the material removed.
27
Costs of Cleaning
Reducing the level of BCFM in corn entails a
cost, whether done by combine adjustments,
weed control, or cleaning. Table 14 summarizes
the variables involved in determining the costs
of cleaning.
Cleaner Operating Costs
Operating the cleaner is one of the more
obvious costs incurred during cleaning. The
cost of owning and operating a grain cleaner
varies with size and type of cleaner, volume
cleaned, target level for BCFM, and location in
the market channel (farm versus country
elevator versus export elevator). Information
about cleaning practices and costs was obtained
through national surveys of farm and elevator
managers. The survey of farmers showed
average cleaning costs of 2.7 cents per bushel
per point. Average costs of cleaning at the
country elevator were 3.2 cents per bushel.
Even though the survey responses did not
specify the levels of other variables that could
influence cleaning costs, these estimates are
close to the costs calculated from the economic-
engineering approach reported later in this
study (Table 15). Reported costs on the farm
were lower than the calculated costs, but
farmers often consider only out-of-pocket costs
when responding to surveys. The engineering
cost study at farm and elevator was also based
on the purchase of new equipment. Many farms
and elevators already have cleaners and
cleaning capacity. Additional cleaning could be
accomplished at variable cost up to the maxi-
mum capacity achieved through more hours of
operation. The number, type, and capacity of
grain cleaners at each point in the market
channel are shown in Table 16. In order to
aggregate costs it is necessary to calculate all
values on the basis of bushels of corn cleaned.
In the economic-engineering model, the
purchase and operation of the cleaner, C{, was
calculated in dollars per bushel of corn
cleaned. Capital costs are based on compound-
interest amortization of initial cost (installed).
Tax savings for cash expenses are included
because this will decrease some costs but not
others. Furthermore, some benefits will
generate cash revenues, which are taxable,
while others will not. The formula for calcu-
lating the cost of operating a cleaner includes
the following variables: purchase price, tax
credits, capital recovery factor as a function of
years of life and interest rate, percent of
purchase price for annual repairs, insurance
premium, annual cash payment for interest,
useful life (years), annual depreciation deduc-
tion, annual labor charge, annual energy cost
(dollars per KWH), bushels cleaned per year,
income tax rate (decimal), and volume cleaned
(bushels) [Meinders and Hurburgh, 1992].
Most of these require case-by-case assump-
tions. Annual energy cost is based on hourly
throughput, bushels cleaned per year, the
hourly power consumption, and electricity
cost.
(Height Loss
Loss in weight of screenings removed, C2, was
calculated in the economic-engineering model
in dollars per bushel of corn cleaned.
The screenings removed during cleaning
represent weight that could have been deliv-
ered and sold at the price of corn as grain.
Discounts avoided (if any) and feed value of
cleanings are counted as benefits.
W
C = 5- P
56 c
(4)
where
Ws =
P =
loss in weight of screenings removed
weight of screenings generated per
bushel of corn cleaned
corn price in dollars per bushel
Reducing the level of BCFM in corn by 1
percentage point requires removal of more than
28
Table 14. Cost-Benefit Model Variables, Farm Cleaning Case Studies
Item
Rotary cleaner
Gravity cleaner
Cleaner cost, installed ($)
5,280
3,700
Tax credit ($)
0
0
Interest rate (%)
10.0
10.0
Useful life (years)
10
10
Repair percentage
5
5
Insurance premium ($/$ 1,000)
10
10
Depreciation allowance (%)
10
10
Annual interest payment ($)
0
0
Annual incremental labor ($/year)
0
0
Per-hour energy cost ($)
0.26
0
Throughput (bu/hour)
2,500
3,000
Bushels cleaned per year
50,000
50,000
Income tax rate (%)
30
30
Property tax rate ($/$!, 000)
20
20
Cleaning efficiency (all sizes 16 and below,
fraction of cleaning efficiency for BCFM)
0.75
0.40
Cleaning efficiency for BCFM (%)
43
50
Percent BCFM
1.5
1.5
Months screenings are stored
1.0
1.0
Value of storage ($/month)
0.02
0.02
Cost of elevation ($/bu)
0.005
0.005
Transportation — corn ($/bu)
0.05
0.05
Test weight — corn (Ib/bu)
56
56
Test weight — screenings (Ib/bu)
40
40
Screenings shipped (%)
0
0
Screenings value (% of corn price, $)
0.80
0.80
Cost of new test ($)
0
0
BCFM allowed without discount (%)
3.0
3.0
Discount rate (% of price per point above 3.0%)
1.0
1.0
Inbound discount ($)
0.00
0.00
BCFM increase after cleaning (%)
0.5
0.5
Months corn is stored
6
6
Aeration management factor
1.5
1.5
Cost of electricity ($/kwh)
0.07
0.07
Fan output elasticity
0.8
0.8
Airflow per watt — uncleaned (CFM/W)
0.8
0.8
Months of storage — fall, spring
3,3
3,3
Discount rate for new factors) (%)
0.0
0.0
Average value of new factor ($)
0.0
0.0
Limit for new factor (%)
0.0
0.0
Corn price ($/bu)
2.50
2.50
29
1 percent of original weight. The formulas for
calculation are
(100-BJW, =(100-B)W
DO a a
and
w =
wb-wa
WL
(5)
(6)
where
Bb = percent BCFM before cleaning
Wb = total pounds, tons, or bushels of clean
corn plus BCFM before cleaning
Ba = BCFM after cleaning
Wa = total pounds, tons, or bushels of
clean corn plus BCFM after cleaning
Wg = weight of screenings generated per
bushel of corn cleaned
Transposing equation (5) gives
(100 -BJ
W =
(100 -B.)
(Wb)
(7)
The amount of screenings removed to
achieve 1 percentage point reduction will vary
with the value of Bb as well as Ba, but it will
Table 15. Cost and Benefits for Two On-Farm Corn-Cleaning Examples
Rotary cleaner
($/bu)
Gravity cleaner
($/bu)
Costs
Fixed cost of cleaner
0.020
0.014
Variable costs of cleaner
0.001
0.000
Weight loss
0.032
0.022
Screenings storage
0.001
0.000
Transportation of screenings
0.000
0.000
Increased testing
0.000
0.000
Total costs
0.054
0.036
Benefits
Screenings value
0.026
0.017
Reduced freight
0.002
0.000
Shrink savings
0.004
0.004
Spoilage savings
0.003
0.003
Less handling
0.000
0.000
Discount avoided
0.000
0.000
Aeration savings
0.011
0.013
Moisture shrink
0.004
0.008
New discount
0.000
0.000
Total benefits
0.050
0.046
Net (benefits minus costs)
-0.004
0.010
Table 16. Number, Size, and Type of Grain Cleaners at Farms and Elevators
No. of
% owning
Average capacity of
cleaners
cleaners
cleaner (bu/hr)a
Farm
149
39.8
1,400
Interior elevator
Country
427
50.4
3,300
River
36
42.9
11,900
Sub-terminal
18
69.2
4,600
Export elevator
86
100.0
22,700
Sources: Unpublished national surveys conducted by the University of Illinois.
"Rounded to the nearest 100 bushels.
30
always exceed 1 percent unless Bb equals 0.
The mathematical relationship among percent-
ages and weight loss is the same for BCFM as
for moisture.
The mathematical procedures for calculating
an estimate of Ws based on cleaning efficiency,
type of cleaner, size of screen, and bushels of
corn cleaned are illustrated in Meinders and
Hurburgh [1992].
Transportation Costs
Increased cleaning will increase the quantity of
screenings on the market. If this increase
occurs in areas distant from the point of con-
sumption (for example, at the export elevator),
significant transportation costs will be incurred.
Under some circumstances there is a
trade-off between transporting a larger
quantity of corn and transporting a larger
quantity of screenings, since both may be
used in feed formulation. The transportation
rate for transporting screenings is usually
higher than that for corn, primarily because
of the greater bulk space required for a ton of
screenings.
The distance transported varies by geo-
graphical region, by use, and with seasonal
changes in supply and demand. The percent of
screenings removed was based on survey data.
Transport rates will be higher than for corn
and can be estimated in either of two ways. The
first is based on the assumption that transport
rates are a direct function of volume per unit of
weight. Screenings are less dense than corn.
Test weights of corn and screenings provide an
adjustment factor to apply to corn transport
rates.
tw
T - _ IT
1s ~ ic
tw
(8)
where
tw =
T =
transportation rates for screenings
(dollars per ton per mile)
test weight of corn (pounds per
bushel)
test weight of screenings (pounds per
bushel)
transportation rates for corn (dollars
per ton per mile)
In most transactions, transport rates for
screenings are not calculated as a percentage of
rates for corn. An alternative method for
calculating costs for transporting screenings
uses quoted commercial rates for screenings.
Total transportation cost is also a function of
rate times distance. Since many farmers and
elevators use screenings as feed on the pre-
mises, transportation rates and distance as a
cost factor should be used only for screenings
entering the market channel. Hill et al. [1991e]
found that about 65 percent of screenings
removed at interior commercial elevators was
processed on-site into mixed feeds. The remain-
ing screenings were shipped to other locations,
incurring a cost of transport. The percent of
screenings entering the market is a unique
number for each firm. Rates (Ts), distance
transported (Ds), and percent entering the
market (Ms) are incorporated into the second
equation for calculating costs of transporting
screenings in cents per bushel of corn cleaned.
= T w M D
3 s s s s
(9)
where
Ts =
Ws =
Ms =
D =
cost of transporting screenings
dollars per bushel of corn cleaned
transport rate for screenings in cents
per pound per mile
pounds of screenings generated per
bushel of corn cleaned
percent of screenings entering the
market channel
average distance transported (miles)
Testing and Measurement
Changes in grading practices will require a
change in costs, both at the country elevator
and in the official grading and inspection agen-
cies. While the increased cost for one inspection
procedure can be estimated, the number of
inspections and analyses performed by elevator
or FGIS employees will depend upon industry
response to the opportunity for obtaining the
new information. If, in the process of adapting
to a new set of grades, an elevator finds that it
must test grain for one or more characteristics
not presently measured, then the cost of the
new tests should be assessed against the
31
requirement (or opportunity) for increased
cleaning. FGIS-USDA has developed a table of
standard times for sample analysis and grade
determination for performing the various
activities associated with quality determination
(Table 17). The times required for each test
cover a wide range and differ markedly from
sample to sample. Hand operations, such as
picking damage or CFM, require more time
than mechanical operations.
Additional research is needed to determine
the times required for conducting other types of
analyses, such as using two sieves for deter-
mining BC and FM as separate factors. The
CFM handpick, at 6.8 minutes per sample,
costs about $2.25 per sample (about $0.005 per
bushel if the sample represents 500 bushels
and the wage rate is $20 per hour). Cost per
bushel of corn cleaned for this factor is the
additional cost per bushel of corn inspected.
Similar estimates are required for any addi-
tional sampling and grading required as a
result of changing grades to include separate
measurement of BC, FM, or CFM.
Testing costs can be modeled with a com-
plete economic analysis using time and
motion studies for each factor or can be an
estimated constant. The latter approach is
used here, recognizing that each test and
Table 17. Standard Times for Grading
Corn Samples
analytical operation will have a different cost
factor.
C4=Z,L
i= 1
where
C4 = dollars per bushel of corn cleaned
I. = inspection cost for measurement i
Storage Costs
Screenings removed from corn that are not sold
or fed immediately will require storage. Sea-
sonal changes in supply and demand also
provide incentives for storing screenings. Since
screenings are less dense than corn, they will
occupy more storage volume per unit of weight
than will clean corn or the same weight of
screenings mixed with corn. Assuming the
same pack factor of corn and screenings,
relative storage volume will be inversely
proportional to test weight. Storage space is
worth money to elevators, so an increased
volume of screenings removed will utilize more
short-term storage and reduce the storage
space available for corn. Interior elevators and
export elevators reported storing screenings for
1 to 3 months [Hill et al., 1991b, 1991d]; users
of screenings reported an average storage time
of 10 days [Hill et al., 1991e].
The calculation of storage and handling cost,
C5 per bushel of corn cleaned is
Description
Minutes
Sample ticket preparation
Boerner divider
Prepare file sample
Temperature and moisture meter
Test weight per bushel
Total damage
Carter-Day Dockage Tester
Handpick Coarse Foreign Material
Travel between equipment
Total standard minutes
0.47
2.56
0.30
2.46
0.75
16.70
1.90
6.80
0.55
32.49
Source: Items were selected from Tables 54 and 60 of
Federal Grain Inspection Service, 1980. Times varied
widely depending on quality of the corn as well as
operating conditions.
where
n =
Cst =
Ch =
twc =
twg =
W =
= (nsCst
CH)
tw
W.
(10)
number of months screenings are
stored
cost of storage for corn in dollars per
bushel per month)
cost of handling in dollars per bushel
test weight of corn in pounds per
bushel
test weight of screenings in pounds
per bushel
weight of screenings generated per
bushel of corn cleaned
32
Benefits of Cleaning
Mechanical removal of BCFM generates sev-
eral economic benefits related to cleaner corn
and the value of screenings.
Discounts fluoided
The market incentive for cleaning is reflected in
the discount. Any corn with BCFM above the
base level receives a discount in the form of
reduced price or reduced weight. This is the
reason most frequently given by interior elevator
managers for cleaning [Hill et al., 1991d]. Dis-
counts vary among elevators, geographical areas,
and over time. Elevators in Iowa reported typical
discounts of 2 cents per bushel for each percent-
age point above 3. The most prevalent discount
reported by Illinois elevators was 1 cent, al-
though 2 cents was not uncommon [Bekric and
Hill, 1991]. For purposes of illustration, a 2-cent
discount will be assumed.
If BCFM were separated into a BC factor
and an FM factor, the discounts would probably
change. One proposal has been to subtract 0.1
percent of the gross weight for each 0. 1 percent
of FM starting at zero [North American Export
Grain Association, 1986]. Since BCFM consists
primarily of BC, a discount of 2 cents per
bushel per percentage point above grade limit
will also be used for BC. However, given the
distribution of BC and FM, the grade limit for
BC was assumed to be 2.5 percent. Assuming a
corn price of $2.25 per bushel, 3.2 percent BC,
and 0.8 percent FM (4.0 percent BCFM), the
discount under current grades can be compared
to the discounts under the revised grade limits
and factor definitions.
Under current grades the total reduction in
value would be 2 cents per bushel (4.0 percent
minus 3.0 percent times $0.02 = 2 cents). Under
the proposed two-factor grades, the 4.0 percent
BCFM on average is distributed as BC = 3.2
and FM = O.S.Using a weight deduction of 0.1
percent for each tenth percentage point of FM
above zero and a discount of 2.0 cents per
bushel for each percentage point of BC above
2.5 percent, the reduction in value is 3.2 cents
per bushel, or 1.2 cents more than current
discounts. These discounts converge at high
BCFM levels.
$2.25 x 0.8 x .01= $0.018 =
$0.02 x 0.7 (3.2 - 2.5)= $0.014 =
1.8 cents
per bushel
1.4 cents
per bushel
Reduced value = $0.032 =
3.2 cents
per bushel
The reduction in value under the current
system relative to the proposed system varies
with the price of corn when the BC to FM ratio
is held constant, but discounts under the
proposed system are higher than under the
current system. In this example, at costs of
cleaning above 3 cents per bushel, market
discounts under the current system do not
provide an incentive for cleaning until BCFM
exceeds 4.5 percent. Under the alternative
system, BC plus FM must exceed 4 percent (BC
= 3.2; FM = 0.8) before the reduction in dis-
counts would exceed cleaning costs (Figure 7).
Other benefits from clean grain, such as reduced
costs of transportation, aeration, and handling
losses, would lower the break-even point.
The economic-engineering model included
the following equation to calculate discounts
avoided, (3,, in dollars per bushel of corn
cleaned:
- B) d
(11)
where
B =
max
d =
actual BCFM level (percent) prior to
shipping
BCFM limit (percent)
discount rate in dollars per bushel
for each percent over Bmax
The discount rate (d) can also be specified as
a percent of the price of corn. The benefit
calculation only applies if B is greater than Bmax.
33
fleuenue from the Sale or Use of Screenings
For immediate feed use, the value of screen-
ings is very close to that of whole corn.
Although screenings have lower total digest-
ible nutrient values and higher fiber, this
decrease in value is offset by a higher level of
protein. The value of screenings sold varies
with the price of screenings. The average
price at interior elevators in 1989 was $81.20
per ton, about 87 percent of the average price
of corn at country elevators in 1989. The total
screenings volume in the market (interior
plus export elevators) was estimated to be
2,118.9 thousand tons [Hill et al., 1991e].
Increased cleaning will generate additional
quantities in the market; a greater quantity
will result in lower prices.
Interior elevators reported cleaning 48.2
percent of the corn received and 49.5 percent
of corn shipped in 1989. On average, they
reduced BCFM by 2.15 percentage points in
the corn that they cleaned. If the BCFM
grade limit for No. 2 corn was lowered from 3
percent to 2 percent, it would be necessary for
elevators to clean an additional quantity of
receipts and shipments in order to ship No. 2
corn, removing an average of 1 percentage
point more BCFM on the corn already being
cleaned. Expanding the survey results to
represent all corn handled by all elevators
gives an estimated volume through interior
elevators in 1989 of 6.0 billion bushels (this
includes handling the same grain more than
once as it moves through the market chan-
nel).
Under a grade limit, below the current limit
of 3.0 percent, 50 percent of this volume will be
cleaned to remove 3.15 percentage points of
BCFM instead of 2.15. Assuming that another
25 percent not previously cleaned requires
removal of 1 percentage point, the estimated
volume of screenings generated would be 3.9
million tons — 1.9 million above 1989 volume. If
the price of screenings is approximately 75
percent of the price of corn, the transfer of 1.9
million tons of "corn" into "screenings" through
additional cleaning to meet lower BCFM limits
could represent a loss of $35 to $40 million.
However, a change of that magnitude would
also affect the price of corn, feed rations, and
other economic variables. Based on elasticities
calculated from the elevator surveys, every
additional 100,000 tons of screenings entering
the market reduced the average price of screen-
ings by $14.00 per ton. Based only on the
Figure 7. Discount for corn with increasing FM and BCFM.
10
03
_c
CO
(5
0.
'c
35
o
15 2
A: FM @ 6/64", deductible from 0.0%
C: FM @ 6/64", deductible from 0.5%
E: Current practice, BCFM discountable
from 3.0% at 2 cents per point
AC
1
0.2
0.4
345
| BCFM(%) |
0.6 0.8 1.0
FM: 6/64-inch definition (%)
1.2
Estimated
cleaning and
inspection cost
(3 cents per
bushel)
I
1.4
1.6
34
calculated elasticity, the price of screenings
would drop to zero under a scenario where the
volume of screenings increased by 1.9 million
tons over the 1989 volume. However, elasticity
estimates are valid only for small, incremental
changes in quantities. A 100 percent increase
in the volume of screenings is clearly beyond
the range over which the elasticity could be
assumed to hold. Additional information must
be used in estimating the price effects.
Since corn and screenings are partial substi-
tutes in many feed rations, the true feeding
value would temper the price reduction. As the
price of screenings falls, screenings would
replace a larger and larger volume of corn.
High-BCFM corn or pure screenings would be
used for feed, with the ratio between corn and
screenings prices reflecting relative value. The
nutritive value of screenings vis-a-vis corn,
minus handling and processing costs, would
put a floor below which screenings prices would
not fall. Analysis of screenings composition and
value in livestock rations suggests that the
price of screenings would not fall below 60
percent of the price of corn. As the quantity of
screenings increases by 1 ton (through clean-
ing), the quantity (weight) of corn in the
market channel would decline by 1 ton, prima-
rily in the more quality-conscious export
market. Price and quantity of corn and screen-
ings would both change, but there is no model
that can accurately predict a new equilibrium.
Cleaner corn results in higher yields of pro-
cessed products, increasing the value. In
competitive markets, price will follow value
subject to the additional influence of supply
and demand. The nutritive value of screenings
of various particle sizes also provides a rough
approximation of economic value, which will be
translated into prices.
The economic-engineering model equation to
calculate revenue from the sale or use of
screenings, 32, in dollars per bushel of corn
cleaned is
where
Ps =
W =
(12)
price of screenings in dollars per pound
pounds of screenings removed per
bushel of corn cleaned
Reduced Freight Expense for Corn
When additional BCFM is removed from corn,
a smaller volume of corn remains. Some mar-
kets will require the same volume and will
replace screenings removed with additional
clean corn. Other buyers may be satisfied with
a smaller quantity of cleaner corn that will
generate the same quantity of processed
products. Since there is a fixed quantity of total
production within a crop year, there will be
more screenings and less corn requiring trans-
port. If the rate in cents per bushel per mile for
shipping corn is Tc, then the economic-engineer-
ing equation for reduced freight expense for
corn, 33, in dollars per bushel of corn cleaned is
W
ob
T<D<
(13)
where
ws =
Tc =
D =
pounds of screenings removed per
bushel of corn cleaned
transport rate for corn in dollars per
bushel per mile
average distance cleaned corn will be
transported
Reduced Physical Shrink
Cleaning removes fine material, including dust,
some of which would ordinarily be lost in han-
dling. Bern and Hurburgh [1992] reported an
average of 0.1 to 0.2 percent dust loss in grain
handlings. This is consistent with opinions of
handlers. Retention of this material as screen-
ings reduces shrinkage losses according to this
equation:
= 0.002 P
(14)
where
P =
reduction of physical shrink in
dollars per bushel of corn cleaned
price of screenings in dollars per
pound
Deduced Hold and Insect Shrink
On average, U.S. corn deteriorates from about
2.0 percent total damage at harvest to about
35
4 to 5 percent at export. An increase of 3 per-
centage points of damage is accompanied by
about 0.5 percent weight loss in dry matter and
moisture [Saul and Steele, 1969]. Fines harbor
mold and prevent good aeration. It is not
unreasonable to assume that this deterioration
(which occurs primarily in storage on farms
and country elevators) could be halved by
cleaning, leaving more saleable weight in bins
for each bushel of corn that has been cleaned.
The economic-engineering model equation for
reduced mold and insect shrink, P6, in dollars
per bushel of corn cleaned is
= 0.0025 Pc (0.33B)
= .00083 PC B
(15)
where
Pc =
E =
price of corn in dollars per bushel
percent BCFM
0.33B is used to linearize the savings, centered
on 3% BCFM.
Deduced Handling Costs
Grain is often turned to maintain condition.
This analysis assumes cleaned corn will require
one less turning, saving the handling costs
associated with turning for each bushel of corn
cleaned. Elevators estimate turning costs at
about 1 cent per bushel, including shrinkage
losses. The equation to determine reduced
handling costs, (36, in dollars per bushel of corn
cleaned is
sh
(16)
where
Ch = handling cost
Cgh = value of shrink during handling
Reduced Deration Costs
Two factors influence aeration costs in han-
dling corn: airflow resistance and density. Fines
Figure 8. Airflow resistance prediction of clean corn and sized fines.
100
10
0.1
0.01
Bulk Particle
Size range density densit
(mm) (kg/rrn
- Shelled corn
---- Corn: 725.01 1,339
....... 4.0-4.8: 623.4 1,395
----- 2.4-3.2: 529.9 1,408
......... 0-1.8: 522.1 1,406
i i i i i 1 1 1 1
0.1
10 100
Pressure drop, Pascals'/meter
1,000
10,000
*248.9 Pascals = 1 in. water; 6,894.8 Pascals = 1.0 psi
Sources: Yang et al., 1990; Shedd, 1953 (shelled corn data).
36
in corn cause a substantial increase in airflow
resistance and aeration power requirements,
thereby increasing the cost of cleaning. Yang et
al. [1990] measured airflow resistance and
density of fines removed from corn by sieving.
Experimental airflow resistance data show that
the pressure drop through the grain mass is a
function of air velocity, particle density, and
bulk density. Three particle sizes and whole
corn are plotted in Figure 8. Airflow resistance
of each successively smaller particle size is
higher. Size 7 particles (material through a
4.5/64-inch sieve) exhibit an air pressure drop
about 40 times that of clean corn.
The major improvement in airflow comes
from removing material 8/64-inch and smaller,
as shown in Figure 9. This graph shows the
multiplier factor from a 1 percent addition of
fines, by size of particle. Removal of particles
12/64-inch and smaller will cut airflow resis-
tance in half. Figure 9 assumes 100 percent
cleaning efficiency for sizes below the screen
size and 0 percent efficiency for sizes above the
screen size. In practice this will not occur, as
noted, for example, by Hurburgh, Bern, and
Figure 9. Incremental airflow resistance multi-
plier per percent fines (bars) and
decrease in airflow resistance multiplier
from cleaning at 100 percent efficiency
(lines).
4.0% BCFM
Brumm [1989]. Lower removal efficiencies for
small sizes and some removal of large fines
would flatten out the curves, but the differ-
ences between BCFM levels would remain.
The airflow resistance, R, in any aeration
situation will be
R = R Y k
(17)
where
Y =
k =
clean corn airflow resistance (any
pressure units)
clean corn multiplier for fines
grade n containing a mixture of
particle sizes
clean corn multiplier for other
conditions
0 2 4 6 8 10 12 14 16
Round-hole screen size (64th-in.)
Fan output will be a simultaneous solution
of this equation and the fan performance curve
(output versus pressure).
Fans are less effective at higher static pres-
sures [Midwest Plan Service, 1980]. Therefore,
increased airflow resistance decreases output
and increases energy consumption per unit of
airflow delivered. Grama et al. [1984] showed
that clean corn (corn with all BCFM removed)
would reduce fan power needs from 10 percent
(for low-airflow, low-pressure aeration) to 200
percent (for high-airflow, high-pressure drying
applications). Low-temperature drying, which
relies on fan power rather than supplemental
heat, benefited most by cleaning.
Hurburgh [1987] applied this analysis to
aeration at grain elevators. No. 2 corn with all
BCFM removed showed a $0.006 per bushel
per year cost savings over No. 2 corn with
3 percent BCFM, based on 2,000 hours
annual fan operation time at 0. 1 CFM per
bushel.
Clean corn has lower airflow resistance
[Grama et al., 1984], which means that fans
will deliver more airflow at higher energy
efficiency. Increased airflow reduces operating
time needed for temperature change cycles.
Clean corn also has less spout line concentra-
tion of fines. Spout lines divert air and cause
excessive aeration of the outer grain in order to
cool the center. Hall [1985] estimated the
concentration of BCFM in spout lines to be
10 times the average level in the bin.
37
Aeration benefits can be calculated by model-
ing the difference in energy costs for aerating
cleaned versus uncleaned corn. Aeration cost is
a function of fan input power and operating
time. Reduced aeration cost, (37, is calculated as
the benefit of lower energy required for aerat-
ing clean grain in dollars per bushel.
- Oc F )
(18)
where
O,O
= aeration fan operating times in
hours for uncleaned and cleaned
corn
Fu, Fc = fan input power in kilowatts for
uncleaned and cleaned corn
Pe = price of electric power in dollars
per kilowatt-hour
The formulas for calculating power and time
requirements under varying conditions of
airflow, change cycles, spout lines, operator
skills, and particle size distribution are given
in Meinders and Hurburgh [1992] and Bern
and Hurburgh [1992].
38
Moisture Shrink
The time required to maintain grain tempera-
ture and condition through aeration is less for
clean grain than for grain with additional fines
unevenly distributed throughout the bin. The
need for additional aeration of uncleaned grain
will result in moisture reduction below 15
percent and subsequent loss of weight. For
average north-central U.S. weather conditions,
the moisture loss from evaporation, P8 (in
pounds per bushel), is
38 = 0.0050 RaFt (19)
in the fall, and
3S = 0.0075 R F. (20)
1 o HI
in the spring (Hurburgh, 1987), where
Ra = airflow rate (CFM per bushel)
F = hours of fan operation
This loss will continue down to 12 to 13
percent, the approximate equilibrium moisture
content for summer storage. Additional vari-
ables required for more detailed estimates are
given in Meinders and Hurburgh [1992].
Recouery of Discounts Hssessed
Against the Seller
Discounts assessed against the seller lowers
the purchase price of the grain. To the extent
that discounts can be recovered operationally
(e.g., by blending or cleaning) rather than
passed through, there will be a decrease in
procurement costs. Recovery of discounts, (39, in
dollars per bushel of corn cleaned is calculated
using the following equation:
P9 = (B - B ) d
(21)
where
B =
B =
max
d =
BCFM level (percent)
BCFM limit (percent)
discount rate in dollars per bushel
for each percent over B
39
R Worksheet for Calculations
The nine benefits and five costs can be set up
in a two-part worksheet format. This format
can also be written in a spreadsheet, such as
Lotus 1-2-3. The assumptions in the worksheet
example apply to a typical country elevator
operation, cleaning corn before storage, under
the current grades with BCFM as a grade
factor. The output comes in two parts — physical
Table 18. Information for Calculating Cleaning
Costs and Benefits for a
Typical Country Elevator
Item
Variable
Value
Cleaner cost, installed ($)
P
40,000
Tax credit ($)
t.
0
Interest rate (%)
i
10.0
Useful life (years)
ni
10
Repair (% of P)
Pr
5.0
Insurance premium ($/$l,000)
Pi
10
Depreciation allowance per year (% of P)
PD
10
Annual interest payment ($)
I
0
Annual incremental labor ($/year)
L
4,000
Per-hour energy cost ($)
e
0
Cleaner throughput (bu/hour)
T
10,000
Bushels cleaned per year
V
1,000,000
Income tax rate (%)
t.
30.0
Property tax rate ($/$l,000)
tp
20
Cleaning efficiency (all sizes 16 and below,
fraction of EB)
c,
0.50
Cleaning efficiency for BCFM (%)
EB
40
Percent BCFM
B
3.0
Months screenings are stored
ns
3.0
Value of storage ($/month)
V
0.02
Cost of elevation ($/bu)
ch
0.005
Transportation — corn ($/bu)
Rc
0.20
Test weight — corn (Ib/bu)
c
56.0
Test weight — screenings (Ib/bu)
Ts
40.0
Screenings shipped (%)
P,
50
Screenings value (% of corn price)
f
70
Cost of new tests ($)
C5
0
BCFM allowed without discount (%)
Bmax
3.0
Discount rate (% of price per poin above 3.0%t)
d6
1.0
Inbound discount ($)
—
0
BCFM increase after cleaning (%)
AB
0.5
Months corn is stored
n
6
Aeration management factor
f'2=f'2'
1.3
Cost of electricity ($/kwh)
Pe
0.07
Fan output elasticity
0 P
0.8
Airflow per watt — uncleaned (CFM/W)
i
0.8
Months of storage — fall, spring
nfns
3,3
Discount rate for new factor(s) ($)
dg
0
Average value of new factor ($)
Q
0
Limit for new factor (%)
Qmax
0
Corn price ($/bu)
p^
2.50
40
variables (Table 18) and cost estimates (Table
19).
It is clear that the key to capturing benefits
from cleaning is aeration management. The
aeration and moisture shrink savings (the
largest benefits) are both dependent on reduced
fan operation time. The major contributor to
shorter operating time is the elimination of
spout lines, thereby gaining a more even
distribution of air. Increased output of air per
kilowatt of energy used by the fan contributes
also, but not to the extent of the air distribu-
tion factor. The entire analysis presumes that
the operator has the skills and detection
equipment to know when the cooling fronts
have reached the top of a bin.
On the cost side, weight loss dominates. The
more BCFM that is removed, the more weight
that is lost. Thus, unless aeration management
captures benefits, more cleaning will not give
net benefits over costs.
For cleaning on the outbound side (no
storage), the only benefits that apply are (Jl,
revenue from sale of screenings; p"2, reduced
transportation costs; (33, reduced shrink; and
(36, discounts avoided. In the example scenario,
the elevator would have to face discounts of
about 4 cents per bushel to cover costs. This
would occur at about 5 percent BCFM. Based on
this analysis, the benefit from additional
cleaning at load-out will seldom exceed costs for
BCFM below 5 percent. Discounts provide the
major benefit for cleaning in the market chan-
nel. Exporters use cleaners more frequently
than farmers or interior elevators, because
BCFM increases with handling and the cost of
off-loading even small amounts of grain over
the contract limit is about $1 per bushel,
significantly more than the cost of cleaning.
Most of the cleaning of corn at export elevators
is done in response to absolute limits set by the
contract, rather than to avoid discounts.
Table 19. A Sample Income-Expense Statement for Cleaning Corn at a Country Elevator
Equation no."
$/bu
Costs
Fixed cost of cleaner operation
Variable cost of cleaner operation
Weight loss
Storage of screenings
Transportation of screenings
Increased testing
Total costs
0.008
0.003
0.043
0.001
0.002
0.000
0.056
Benefits
P.
Sale of cleanings
0.030
P2
Reduced freight
0.003
Ps
Reduced physical shrink
0.004
p<
Reduced mold, insect shrink
0.006
P5
Reduced handling cost
0.000
Pe
Discount avoided
0.013
P7
Reduced aeration costs
0.012
P8
Reduced moisture shrink
0.000
Pe
Additional discounts levied
0.000
Total benefits
0.068
Net (benefits minus costs)
0.011
"Equations for calculating each cost and benefit are described in the text, identified by the letter-number code.
41
Limitations of the Micro flpproach
Economic evaluation of the nationwide effects
of separating BCFM into two factors requires
that the cost-to-benefit calculation of Table 19
be aggregated across all farms and all elevators.
However, each firm is almost a unique case,
with different values for corn quality, aeration
strategies, type and age of cleaner, storage times
for corn and screenings, transport rate and
distance, etc. There are no national averages for
these variables, nor any basis even for estimat-
ing averages for most of them.
In addition, there are several alternative
ways of defining BC and FM and incorporating
them into grades and standards. Evaluating
the aggregate net benefit of grade changes
requires a different approach than a firm-level
budgeting model. The firm-level model can only
provide comparative insight into the probable
direction of response — more cleaning or less
cleaning.
42
[palliating the Scenarios
Deueloping the Scenarios
An evaluation of the economic impact of
changing grades and standards must be
conducted within the framework of the pur-
poses identified by legislation and economic
principles. Inherent in the request for eco-
nomic impact information is the implicit
assumption that these changes will somehow
alter the distribution of income among indi-
viduals or economic sectors of the market
channel or will increase the U.S. share of
international markets. However, the purposes
of grades and standards in the 1986 Grain
Quality Improvement Act do not include the
redistribution of income between farmers and
grain handlers. Better communication, im-
proved quality of information, and increased
marketing efficiency can all be deduced from
the purposes of grades and standards. Increas-
ing aggregate farm income is not included as
an objective of uniform federal grades and
standards. Increased income will come from
delivering better quality, from providing more
valuable services to buyers and final users,
and from supplying high-quality corn to new,
higher priced markets. Changes in grades or
factor definitions combined with price differen-
tials in the market may provide the necessary
incentives to change the production and
marketing practices that control quality, but
grade changes alone will have little effect on
prices, profits, or market share unless they are
accompanied by changes in the practices of
producers and handlers.
U.S. market shares in world trade are
influenced by many factors — prices, exchange
rates, trade policy, production costs, etc. Qual-
ity is not a major determinant in production
and export volume of competing exporters, and
the connection between grades, quality, and
market share has not been quantified as
statistically significant. Better quality and
customer service have the same effect as lower
prices; they discourage expansion of production
in other exporting countries. However, short-
run effects on market share will be small.
Costs and benefits must, therefore, be
evaluated on the criteria of market informa-
tion, market participant response, and facilitat-
ing efficiency in market transactions. Changes
in transportation and handling costs, delivered
quality, and value of the product are secondary
effects that are controlled by the response of
market participants: a change in factor defini-
tions or grade limits may be the stimulus that
initiates the response.
This principle is especially appropriate in
the evaluation of the benefits. The benefits of
nationally uniform grades and standards
accrue to the market in the aggregate; indi-
vidual firms may not recognize any direct
benefit from changes in their daily operations
as a result of FGIS regulations. The primary
benefit to the aggregate market is more effi-
cient communication in complex market trans-
actions. This "benefit to all" is often not recog-
nized as a "benefit to me," and individual firms
may logically oppose changes that appear to
improve aggregate efficiency.2
Economic impacts are generated only when
marketing firms make decisions that affect
prices, ownership, or resource allocation in
response to new information or new incentives.
Separating BC and FM in corn grades does not
directly alter quality, value, or prices of corn.
The impact occurs only if and when the grade
changes are accompanied by changes in prac-
tices of buyers and sellers. If the definitional
revision of a grade factor alters the economic
incentives as viewed by decision makers, it will
influence actions that determine corn quality. If
grain handlers ignore the new definition in
setting prices and discounts, the impacts will
be very minor. Estimating the impact requires
aggregating the individual firm responses that
were partially modeled in the preceding pages.
No empirical data or experimental results are
available to make such predictions. The re-
sponses of production and marketing firms will
43
differ depending on circumstances and how the
managers view the economic opportunities.
Although it can be demonstrated that changes
in grades and discounts, as well as prices, are
passed through the market channel from
export elevator to farmers fairly rapidly, it
cannot be proven exactly how that pass-
through will occur, nor under what circum-
stances the export elevator will make the
actual change that starts the chain reaction.3
The FGIS proposal for redefining the grade
factor of BCFM has been defined only in
general terms.4 There are several alternative
definitions and strategies for changing grades
and standards. One or both of the factors could
be made grade-determining. If one or both
factors are grade-determining, there are
several different possible limits for each nu-
merical grade. Either one or both of the factors
could be non-grade, optional criteria (available
on request) or could be mandated to be auto-
matically recorded as information on domestic
certificates, export certificates, or both.
Since the specific definition and factor limits
for the proposed grade change have not been
decided and aggregate industry response to the
various alternatives is unknown, the only
logical approach is to develop alternative
scenarios with accompanying assumptions.
Twelve scenarios were developed and each
scenario was evaluated using a set of potential
impacts as a basis for evaluation [Hill and
Bender, 1992]. Advice from operating managers
and information from other surveys6 and
research have been used to develop the sum-
mary of impacts for each scenario. The firm
budgeting model was used to estimate the
change in incentives to clean on farms and at
elevators.
Hssumptioiis
Several assumptions are equally appropriate
and essential for all of the analyses. These will
be presented as background for evaluating each
scenario individually.
1. Changes in grades, such as factor defini-
tions, do not change quality directly;
changes in quality come from actions by
firms in response to grades and associated
economic incentives.
2. Changes in grades will not shift profits from
one sector of the industry to another. Profit
levels in the industry are set by competi-
tion— competition between the farm sector
and the elevator sector as well as competi-
tion among individual firms within each
sector. If the market is operating in a
competitive environment, the value of the
products produced from corn minus competi-
tive margins minus transportation costs
generates prices paid to the next level back
in the market channel.
In the short run, a change in discounts or
grade limits may increase or decrease
discounts from a base price that does not
immediately reflect the new value. But,
given time for the market to respond, the
base price and average price will adjust to a
new equilibrium, and the prices paid in the
industry must reflect value-in-use minus
competitive margins and profits.6 If there
are structural imperfections in the market,
such as differential information available to
buyers and sellers, then changes in grades
could shift market power and redistribute
income by reducing these market imperfec-
tions.
3. Improved quality will have little effect on
total world demand for corn, unless it
results in substitution of corn for wheat or
sorghum. Quality differences may shift
preferred origin for an industry, but that
shift will be countered by an opposite shift
by other industries.
4. Changes in grades will not significantly
alter U.S. market shares in the world corn
market. An economically significant im-
provement in quality of U.S. corn may have
the immediate effect of transferring volume
to U.S. exporters away from our competitors.
However, exporters in other countries will
respond by changing price or quality in
order to dispose of the corn they have
already produced. The result may be a new
combination of buyer— seller transactions
and a shift in trading and transport pat-
terns, but the total volume of corn traded
will remain constant in the short run. In the
longer run an increase in quality (and value)
of U.S. corn will reduce the incentive for
44
further expansion in competing corn-export-
ing countries. The magnitude of this effect
will be small compared to price fluctuations
from other economic and political changes in
the market (see the appendix for additional
rationale).
5. In the aggregate, the price of corn reflects
the value of the products derived from it —
meal, starch, grits, etc. — minus costs of
transportation and processing. Price and
quality are balanced with value in each
transaction within the limits of the informa-
tion available to each buyer. Imperfect
information increases the probability that
cost will not be equated with value and less-
than-perfect competition could result in
inefficiencies and inequities.
6. For purposes of this evaluation it is assumed
that the majority of U.S. corn exports will
continue to be grade No. 3. If grade limits
are changed, importers could change con-
tracts, returning BCFM levels close to those
in current No. 3 grade. This option was not
included in the scenarios because it would
have added too many alternatives to be
evaluated in this report. Even if export
contracts move quality from the new tighter
restrictions, it is likely that the new contract
would still require some improvement in
quality.
7. Grain producers and grain elevator manag-
ers will respond to changes in grades when
opportunities exist for increasing value or
decreasing costs. It is assumed in these
evaluations that the majority of corn in the
market channel will be graded at some
point and that corn that exceeds the factor
limits will be assessed an implicit or
explicit discount. While some managers,
especially in the country, eliminate or
reduce discounts by lowering the average
bid price to all farmers [Bekric and Hill,
1991], that strategy removes incentives to
improve quality and results in inequitable
payments among farmers delivering differ-
ent qualities.
Descriptions of fllternatiue Scenarios
The alternative approaches to redefining BC and FM have been grouped into seven categories, with
additional variations on four alternatives resulting in 12 scenarios in total. The evaluation process was
systematized by identifying a list of actions and impacts (see Table 20, on page 51) and assigning each
item a qualitative change for each scenario.
Several definitions will simplify the terminology and reduce the potential for confusion in shifting
among scenarios. BCFM is all material passing through the 12/64-inch sieve plus all non-corn material
retained on the sieve. BC is all material (mostly broken corn) passing through the 12/64-inch sieve and
retained on the 6/64-inch sieve. Fines is all material passing through the 6/64-inch sieve. CFM is all
non-corn material readily removed by an appropriate scalper (yet to be designed). FM is fines plus CFM.
TBC is the material passing through the 12/64-inch sieve. The 12 scenarios are described in the follow-
ing pages. (A more detailed description and analysis is provided in Hill and Bender, 1992.)
45
Scenario 1.
BCFM as currently defined is retained in the grades, but the limit for each grade is lowered by 0.5
percentage point.
Proposed factor limits
Grade BCFM Current BCFM*
1
1.5
2
2
2.5
3
3
3.5
4
4
4.5
5
5
6.5
7
* Current limits and definition in U.S. grades.
Scenario 2.
In this scenario BC and FM, defined according to the current FGIS proposal, are not included as
grade factors; BCFM is retained as a grade factor at the present limits for each grade. The grades
and factor limits are identical to 1991 official grades (see table in Scenario 1).
(a) BC and FM are included as additional information in the comment section of all domestic
certificates. This is the procedure followed by USDA since May of 1989 on an experimental basis.
(b) BC and FM are optional criteria, available to all buyers on request.
Scenario 3.
BC and FM are defined according to the current FGIS proposal and are treated as two grade fac-
tors, with their sum equal to current levels of BCFM for each numerical grade. The ratio of FM to
BC was selected to approximate the current ratio at the export elevator.7 The elevator is assumed to
measure both BC and FM on all receipts even though some elevators currently grade only in prob-
lem situations.
Proposed factor limits
Grade BC
FM
Resulting
BC + FM
Current
BCFM*
1 1.5
0.5
2
2
2 2.3
0.7
3
3
3 3.0
1.0
4
4
4 3.8
1.2
5
5
5 5.3
1.7
7
7
* Current limits and definition in U.S. grades.
46
Scenario 4.
BC and FM are defined according to the current FGIS proposal and are treated as two grade fac-
tors, with their sum less than current levels of BCFM for each numerical grade. The ratio between
BC and FM will approximate current levels at export elevators.
(a) 1-percent reduction in BC + FM:
- - - Proposed factor limits •
Grade BC
FM
Resulting
BC + FM
Current
BCFM*
1 0.8
0.2
1.0
2
2 1.5
0.5
2.0
3
3 2.3
0.7
3.0
4
4 3.0
1.0
4.0
5
5 4.3
1.7
6.0
7
* Current limits and definition in U.S. grades.
(b) Greater- than- 1% reduction in BC + FM:
- - - Proposed factor limits •
Grade BC
FM
Resulting
BC + FM
Current
BCFM*
1 0.4
0.1
0.5
2
2 0.8
0.2
1.0
3
3 1.2
0.3
1.5
4
4 1.5
0.5
2.0
5
5 2.3
0.7
3.0
7
Current limits and definition in U.S. grades.
Scenario 5.
BC and FM are defined according to the current FGIS proposal. BC is included as a grade factor;
FM is included as a non-grade factor and the market uses a weight reduction. The market would set
the discount for BC, probably using the current 1 cent or 2 cents per bushel per point. This discount
rate for BC is approximately the same as the value of dockage for FM at the current price of corn.
Limits on BC and FM are low enough that the sum of BC + FM is below the current BCFM levels.
47
(a) Dockage is calculated as a weight subtraction of 0.1 percent for each 0.1 percent FM starting
at FM = 0. Results would be reported on the certificate, rounded to the nearest tenth.
- - - Proposed factor limits - - -
Grade
BC
FM
Resulting
BC + FM
Current
BCFM*
1
1.5
0
1.5
2
2
2.5
0
2.5
3
3
3.5
0
3.5
4
4
4.5
0
4.5
5
5
6.5
0
6.5
7
Current limits and definition in U.S. grades.
(b) Dockage is implemented by the market using a weight subtraction of 0.1 percent for each 0.1
percent FM starting at FM = 0.3. A cleaning penaltywould be needed to generate incentives for
removing FM above 0.5. Results would be reported on the certificate rounded to the nearest tenth.
- - - Proposed factor limits - -
Grade
BC
FM
Resulting
BC + FM
Current
BCFM*
1
1.0
0.3
1.3
2
2
2.0
0.3
2.3
3'
•
3
3.0
0.3
3.3
4
4
4.0
0.3
4.3
5
5
6.0
0.3
6.3
7
* Current limits and definition in U.S. grades.
Scenario 6.
BC is defined as the material passing through the 12/64-inch sieve and retained on the 6/64-inch
sieve; material falling through the 6/64-inch sieve is called fines; CFM is defined as non-corn
material readily removed by scalping.
(a) BC and fines are used as grade factors with limits equal to current BCFM; CFM is treated
as dockage (i.e., weight subtraction) starting at zero. A cleaning charge would be needed to generate
incentives for removing CFM.
48
Grade Fines
BC
CFM
Resulting
BC + FM
Current
BCFM*
1 0.2
1.8
0
2
2
2 0.4
2.6
0
3
3
3 0.6
3.4
0
4
4
4 0.8
4.2
0
5
5
5 1.0
5.0
0
7
7
* Current limits and definition in U.S. grades.
(b) BC is a non-grade standard required on official inspections and entered as information on the
certificate. CFM is treated as dockage (i.e., weight subtraction) starting at zero; fines is a grade-
determining factor starting at 0.2 percent for grade No. 1 and increasing by steps of 0.2 percent
between each numerical grade. The level of fines in each grade is approximately equal to the level
currently found in BCFM in the market channel. A cleaning charge would be needed to create an
incentive greater than weight subtraction. All percentages are rounded to the nearest 0.1 percent.
- - - Proposed factor limits - - •
Grade
Fines
CFM
Current
BCFM*
1
0.2
0
2
2
0.4
0
3
3
0.6
0
4
4
0.8
0
5
5
1.0
0
7
* Current limits and definition in U. S. grades.
(c) BC and fines are combined into a single grade factor TBC, which is defined as all material
passing through the 12/64-inch sieve. CFM is defined as all material readily removed by an ap-
proved device, approximating results from commercial scalpers as installed in farm and elevator
cleaners. TBC is included as a grade factor with maximum limits 1.0 percentage point below cur-
rent grade limits for BCFM. CFM is treated as dockage (i.e., weight subtraction) starting from a
zero base. A cleaning charge would be needed to generate incentives for removing CFM.
— Proposed factor limits - - -
Grade
TBC
CFM
Current
BCFM*
1
1.0
0
2
2
2.0
0
3
3
3.0
0
4
4
4.0
0
5
5
6.0
0
7
* Current limits and definition in U. S. grades.
49
Scenario 7.
BC and fines are combined into a single grade factor TBC with limits 1.0 percentage point below
current BCFM limits. CFM is listed as dockage with a weight subtraction. A cleaning charge for any
value above zero, measured to the nearest 0. 1 percent, would be needed to encourage removal of
CFM. Breakage susceptibility will be measured and recorded on all certificates and will be consid-
ered as a non-grade standard requiring mandatory measurement. The grades would appear as
follows:
- - Proposed factor limits
Grade
TBC
CFM
Current
BCFM*
1
1.0
0
2
2
2.0
0
3
3
3.0
0
4
4
4.0
0
5
5
6.0
0
7
Breakage susceptibility of % was
present in
this sample.
: Current limits and definition in U.S. grades.
Hlternatiues for Reducing Breakage
Changes in the definition and limits of BC and
FM, or BCFM, were proposed to deal with a
problem — excessive broken corn and fines —
created by harvesting, drying, and handling
methods. Since broken kernels and fines
increase with each handling in the market, the
problem is difficult to resolve after the dry
corn enters the market. If the objective is to
reduce the levels of BC and fines in the
market channel, some incentives must be
created to reduce breakage susceptibility by
changes in variety, harvesting, and drying
methods. Farmers are already shifting slowly
to modified drying systems, in which kernel
temperature is controlled. There are many
drying technologies that reduce breakage
susceptibility. For simplicity of exposition,
these will all be referred to as low-temperature
drying. It is assumed that a change in grades
to encourage price differentials for breakage
susceptibility will accelerate the change to low-
termperature drying on farms. Elevators
cannot easily convert to low-temperature
dryers. There are two forms of incentives:
• indirect. Low limits and high discounts
for fines will eventually force a search for
techniques for reducing breakage during
handling in order to avoid discounts in the
market channel.
• direct. A test for breakage susceptibility
included in the grades or standards will
provide a direct incentive, if it is accompa-
nied by a price differential.
Scenarios 1 through 6 create indirect
incentives at best. The grades and standards
proposed under Scenario 7 incorporate the
incentives directly.
50
Evaluating the Impacts of
fllternatiue Scenarios
Each scenario was evaluated on the factors
listed in Table 20, where symbols are used to
indicate a small increase (+) or decrease (-) or
no effect (0). A double (++) or triple (+++)
symbol indicates moderate or large impacts.
The only quantitative estimates were derived
from the budgeting models for a typical farm
and elevator (Table 21). The net benefit for
each scenario was converted to a qualitative
indicator and entered as a cost of cleaning in
Table 20. In the budgeting model, the base
case (current grades) generates net benefits of
$0.003 or $0.016 per bushel for farm and
elevator cleaners, respectively. All other
scenarios were compared against this base.
The firm budgeting model [Meinders and
Hurburgh, 1992] was configured as follows:
1. The on- farm assumptions were those per-
taining to the rotary cleaner (Meinders and
Hurburgh, 1992].
2. The elevator assumptions were those per-
taining to the gravity cleaner, and the
elevator was assumed to test for particle-
size factors if the scenario was more restric-
tive than present grades.
3. Neither farm nor elevator would clean with
two screen sizes; therefore the cleaner para-
meters would stay the same. In either case,
the cleaning removes essentially all the FM.
4. The discount rate for BCFM and FM would
be equal, at the current approximately 1.0
percent of price per percent over limits.
Actual discounts in the market will change
whenever the factor limits and definitions
are changed.
Table 20. Summary of Economic Impacts from Alternative Scenarios —
Separating BC and FM in Corn Grades
Scenario
3
Scenario
4b
Scenario
5a
Scenario
6c
Scenario
7
Information accuracy and detail
Inspection costs
Official grade
Private grade
Segregation and blending
Cleaning location
Farm
Country elevator
Export elevator
Corn screenings
Volume
Quality/value
Transport costs
Storability
Discounts to farmers
Incentives for change
Farmers
Grain handlers
0
0
0
0
0
0
Corn for milling
Processing value 0
Export volume 0
Export quality No. 3 yellow corn
Loaded quality 0
Perceived quality 0
0
0
0
0
0
0 = no effects; - = decrease; + = small increase; ++ = moderate impact; +++ = large impact.
51
The objective of the budgeting model was to
estimate the change in incentives to clean if
farmers and elevators wanted to keep their
sales within the same nominal grade (U.S. No.
2 in the interior, U.S. No. 3 at export) under
the proposed alternatives. These results were
included in the qualitative summary of impacts
for each scenario. Increases in incentives to
clean are not necessarily profits for cleaning,
but rather partial prevention of losses.
Only five of the 12 scenarios (3, 4b, 5a, 6c,
and 7) have been selected for detailed evalua-
tion in this publication. All 12 are discussed in
detail in Hill and Bender [1992].
Eualuation of Scenario 3.
Including BC and FM as two separate grade
factors associates additional information with
numerical grades.
Scenario 3 would increase the cost of grad-
ing for official and private inspections. It would
increase the cost of segregation and blending
because this scenario has added one more
factor on which blending must take place to
meet grade specifications. Buyers will need to
consider both factors in selecting numerical
grades.
If the limits are set so that BC plus FM
approximates the current levels of BCFM in
the market channel, practices will probably
remain unchanged. Country elevators, where
BCFM is checked only when there is evidence
of a problem, will continue the practice of
averaging inbound loads and blending out-
bound lots to avoid discounting farmers' corn.8
Discounts, incentives, and cleaning practices at
the farm level would be unchanged. In many
shipments, grain handlers will be able to meet
the grade limits on both factors by measuring
total BCFM because normal commingling prior
to load-out will generate the average ratio of
BC to FM. However, some country grain eleva-
tors will need to use slightly lower target levels
of BCFM to avoid possible discounts in cases
where the BC to FM ratio varies enough that
one of the factors could exceed the grade limit.
The slightly lower target levels would
require some additional cleaning, even though
the average ratio of BC to FM in the proposed
grades of Scenario 3 is similar to the ratio in
No. 2 and No. 3 corn using current cleaning
strategies. Export elevators would have suffi-
cient flexibility in blending to meet the limits
on the two factors without any increase in
cleaning. Additional cleaning at the country
elevator would result in a slight increase in the
volume of screenings. The increased screenings
would be absorbed in the local market with no
noticeable impact on transport costs. The
quality of corn screenings would be unaffected.
Farmer discounts would remain unchanged;
farmers might be encouraged to make combine
adjustments once they recognize the amount of
FM that they are generating separately from BC.
Table 21. Summary of Cost-Benefit Model Results for the Five Scenarios for Corn Grade Changes
Scenario
Benefits for cleaning (cents I bu) Quality level after cleaning (%)
Farm Farm Elevator0 Elevator" Farm Farm Elevator Elevator
total change total change BCFM FM BCFM FM
Base
-0.3
Base
1.6
Base
Base
Base
Base
Base
3
-0.3
Base
1.1
-0.5
1.2
0.1
1.8
0.1
4b
1.3
1.6
4.4
2.8
1.2
0.1
1.8
0.1
5a
0.7
1.0
2.0
0.4
1.2
0.1
1.0
0.1
6c
0.7
1.0
2.6
1.0
1.2
0.1
1.0
0.1
7
1.2
1.5
2.6
1.0
1.1
0.1
1.5
0.1
Base quality for in-bound corn: farm = 2 percent BCFM; elevator = 3 percent BCFM
"Country elevator, storing grain for six months or more.
52
However, there would be no economic incentives
to change farm harvesting, drying, or cleaning
practices. The psychological incentive might
induce a slight improvement in quality. The
firm budgeting model showed no change in
farmers' net benefit from cleaning (a negative
benefit of 0.3 cents per bushel) and a moderate
decrease in net benefits for elevators (0.5 cents
per bushel) relative to the base (Table 21).
The processing value of No. 2 or No. 3 corn
would be unaffected. The effect on export
volume and processing volume would be
small since this scenario provides no new
information about yields of grits or starch
and exporters would be loading to the same
grade limit. The loaded and perceived
quality at foreign destinations would remain
unchanged.
Eualuation of Scenario 4i.
The impact of this scenario would be quite
large because the grade limits for BC and FM
are over half of current grades (2 percentage
points for No. 2 corn). There will be an addi-
tional cost of official and private grading and
inspection relative to the current system with
new sieves for the Carter-Day Dockage Tester.
Information will be required on two factors
instead of one. The separation would provide
more information for the buyer, and No. 3 corn
for export would contain less FM than under
the current system.
Elevators blending to meet contract specifi-
cations— especially export elevators — would
need to bin according to one additional factor to
enable combining different levels of BC with
different levels of FM to meet grade limits.
Most export elevators have a sufficient number
of bins to allow the necessary segregation, but
each additional factor requires extra time,
expertise, and expense to achieve the perfect
blend. There will be instances where the perfect
blend cannot be achieved and the exporter will
have to deliver better-than-contract quality on
one or more factors. This also adds to the cost
of marketing that will need to be recovered
from importers or producers.
The costs of cleaning, blending, and handling
and the frequency of producer discounts would
significantly increase. More cleaning would be
required at interior elevators and at the ports in
an attempt to achieve the lower limits on BC and
FM. The limits are below the levels generally
created during normal handling, so cleaning
would be required at each point in the market
channel to meet No. 2 grade. Current capacity
and cleaning strategies would not be adequate.
The volume of screenings would increase,
but the amount of CFM removed during clean-
ing would remain the same. This would in-
crease the proportion of broken corn in screen-
ings, thus increasing the quality of screenings.
The cost of transport would increase as a result
of the larger volume of screenings, often located
outside the geographical area of consumption.
Benefits from this scenario include improved
storability throughout the market channel due
to the reduction in levels of BC and FM. At this
level of BC plus FM, nearly all farmers would
be affected. The incentive to reduce BC and FM
would be felt throughout the market channel.
The difficulty of meeting the very low grade
limits would create an incentive for country
elevators to pay premiums for corn with resis-
tance to breakage. Only corn with low breakage
susceptibility could be handled without exceed-
ing the grade limits for No. 2 and No. 3 corn.
The budgeting model showed an increase of 1.6
cents per bushel in the benefits from cleaning
on the farm under this scenario. The incentives
for cleaning at the elevator increased by 2.8
cents per bushel (Table 21).
The quality of corn would be improved, and
value of corn for milling would be increased.
The increase in processing value and improve-
ment in perceived quality would make U.S.
corn more competitive in the export market for
milling uses, thus increasing export volume.
The lower levels of BC plus FM in No. 3 corn
would reduce BCFM in exported corn by 2.5
percentage points, improving loaded quality.
The reduction in BC plus FM in No. 3 corn
would be sufficient to be noticeable at foreign
destinations, thus improving perceived quality.
53
Evaluation of Scenario 5a.
Defining FM as a non-grade factor with dis-
counts starting at zero, reported to the nearest
tenth of a percent, provides more accurate and
detailed information on the most objectionable
segment of BCFM — the fines plus non-grain
impurities — and restricts that factor to levels
below those in current grades.
There would be an additional cost of grading
in official and private inspections because FM
and BC levels would need to be identified.
Since the zero FM limit is non-operational from
the suppliers' viewpoint, corn would not be
binned according to FM but only according to
BC. Thus, this scenario would not add binning
or blending costs.
The zero base rewards cleaner grain at all
levels by a weight subtraction for any level of
FM above zero. Equity among farmers would be
increased because farmers currently delivering
No. 1 or better corn would receive a higher net
price under the proposed grades compared to
farmers currently delivering 2 percent or
3 percent BC and FM. The zero base would
create an incentive for every farmer and grain
handler to maintain cleaner corn. However,
with no charge for cleaning, the 1 percent
weight deduction for each 1 percent of FM is an
inadequate incentive to persuade farmers to
install a grain cleaner or reduce FM to zero.
Although farmers can reduce levels of FM
through improved harvesting practices,9 a one-
for-one weight reduction is still neutral — there
is no cost, except transport, to farmers who
deliver excess FM.
Current cleaning capacity at interior eleva-
tors is probably adequate to meet the limit of
2.5 percent BC for No. 2 corn in Scenario 5a.
However, lowering FM levels to approach zero
would require additional cleaning at those
elevators with cleaners installed (64.2 percent
in the survey)10 and installation of new cleaners
at other elevators. Each handling in the market
channel would add fines, requiring additional
cleaning to reduce FM toward zero FM. Eleva-
tors will also view FM as neutral except for
transport costs. Even though export elevators
would receive less BC and FM than under
present grades, receipts would be above zero
percent FM, and subsequent handling would
add more.
Cleaned corn in the market channel using
current cleaning strategies contains an average
of 1.4 percent BC and 0.4 percent FM.11 Cur-
rent cleaning strategies at the port will not
achieve a ratio of 2.5 percent BC and zero
percent FM in No. 2 corn or of 3.5 percent BC
and zero percent FM in No. 3 corn. In experi-
ments at export elevators, the only cleaning
strategy that was effective in removing more of
the fines was the use of a secondary cleaner.12
Changing flow rates or screen sizes changed
the total quantity of BC plus FM in the cleaned
corn but did not significantly change the ratio
of BC to fines. The cost of installing a second-
ary cleaner or changing cleaning technology
throughout the industry to achieve zero percent
FM would be prohibitive. The most likely
response by exporters would be to clean to meet
the 3.5 percent limit on BC and take the
discount or weight dockage on the excess FM.
An extremely high discount for FM, out of
proportion to the effect its presence would have
on value, would be required to induce interior
or port elevators to install secondary cleaners.13
More cleaning at the port would create
more screenings, adding to the cost of clean-
ing and transportation. Quality of screenings
would remain unchanged under the assump-
tion that cleaning technology will remove BC
and FM in proportions approximating the
current ratio. Removal of the smaller particles
(fines and FM) would improve storability in
the market channel as well as on the farm.
Since zero percent FM cannot be achieved or
maintained in the market channel, any corn
tested would receive a discount and conceivably
all farmers could be discounted. Farmers in our
survey strongly supported the concept of sepa-
rating BC and FM, and 37 percent supported a
zero base for beginning FM discounts.14 When
asked if they could lower current levels of FM
delivered to the elevator, 90.8 percent indicated
that they could achieve lower levels of BCFM by
improved weed control, harvesting practices, or
drying methods.15 The low levels of FM
present in farm-delivered corn (0.22 percent in
54
1977 study)16 would allow many country eleva-
tor managers to ignore the FM factor and not
test most receipts. However, the potential for a
discount would be an incentive for all farmers
to improve their practices, and even infrequent
application of a discount would encourage
changes in practices by farmers with high
levels of FM. The budgeting model showed an
increase of 1.00 per bushel in returns to
cleaning on the farm; 0.4(2 per bushel at the
elevator (Table 21).
The effect on milling quality will be small as
a result of less FM in deliveries from farms and
elevators. The foreign processors are not likely
to see enough additional value in the small
reduction in FM to justify an increase in
volume purchased.
The effect on loaded quality will be small,
and no effect on perceived quality at foreign
destinations, since the corn will be handled
several times before use, and BC and FM will
increase with each handling.
[ualuation of Scenario 6c.
The similarity in the composition of BC and
fines and the continuous gradation of particle
sizes of corn from 14/64-inch to 4/64-inch to
dust suggests that the distinction between BC
and fines at 6/64-inch is largely arbitrary.
Interviews with domestic and foreign proces-
sors have identified only a limited demand for
information on particle size of broken kernels.
The grade factor for Scenario 6c combines
broken corn and fines into one factor called
Total Broken Corn (TBC). This includes all
material passing through the 12/64-inch sieve.
It is similar in nature to the current factor
BCFM except that coarse FM is separated as
a non-grade factor and listed as dockage with
a weight subtraction plus a cleaning charge
for any value above zero percent. Combining
BC and fines into the one grade factor of TBC
eliminates the cost of grading, segregating,
and blending on both BC and FM as required
under scenarios where BCFM is separated into
two grade factors. The limits on TBC (including
fines) are less than current limits on BCFM,
increasing discounts and incentives to clean.
Reporting CFM as a weight subtraction
(and/or discounts) starting at zero provides
more information to buyers about the quanti-
ties of non-corn in the shipment. It rewards
all efforts to reduce CFM levels as close to
zero as possible, but allows the market to
select the acceptable levels by adjusting the
base for discounts beyond the weight subtrac-
tion. Although CFM represents a small per-
centage of the total weight in domestic and
export markets, the cost of transporting
material of little value offers an opportunity
to increase marketing efficiency by encourag-
ing its removal as close to the source as
possible.
Official inspection costs will be increased by
the need to determine CFM. Country elevators
doing their own grading would also experience
an increase in costs if they determine CFM
separately from BCFM. This scenario will not
require additional segregation since there is
only one grade factor.
Cleaning will increase only at the country
elevator. The lower limits on TBC will not
induce farmers to purchase new cleaning
equipment. The budgeting model showed an
increase of 1.0 cent per bushel in returns to
cleaning on the farm and 1.0 cent per bushel at
the elevator (Table 21). The export elevator will
receive corn with 1.0 percent less TBC, and
therefore exporters can load corn with 1.0
percent less TBC without changing their
current cleaning practices.
The quantity and transport cost of screen-
ings will increase and quality will improve as
well. Lower limits on TBC will improve
storability by reducing the amount of fines.
Loaded quality and processing value will be
increased by the 1.0 percentage point reduction
in TBC relative to current levels of BCFM. The
improvement will not affect export volume
because breakage during unloading will mask
the reduction in TBC at destination. Perceived
quality will be improved only by the reduction
of CFM. Corn will contain some non-corn
material passing through the scalper.
55
Eualuation of Scenario 7.
This scenario includes TBC and CFM as
defined under Scenario 6c. TBC is a grade-
determining factor with limits 1 percentage
point below current limits on BCFM. CFM is
set at zero with a weight subtraction and a
suggested cleaning penalty for each tenth of a
percent. CFM will be measured and recorded to
the nearest 0.1 percent. In addition, breakage
susceptibility will be measured and recorded on
all certificates as a non-grade standard, requir-
ing mandatory measurement on all official
grades.
BC and fines are combined into one factor
(TBC) because the difference between them is
primarily one of particle size. Differences in
chemical and physical properties are correlated
with particle size in an almost continuous
function. Protein and fiber content increase
and starch content decreases as particle size
decreases. There is no one sieve size that
generates a significant difference between fines
and BC on all characteristics. Any BC creates
problems of storability, handling, and milling,
so it is treated as one factor regardless of
particle size in this scenario. The same result
could be achieved by replacing TBC with a
factor defined as the percent of whole unbroken
kernels. However, the ease of measurement
argues for a definition based on a sieve separa-
tion.
The unique characteristic of this alternative
is the inclusion of a breakage susceptibility
test. This test would be mandatory for all
official inspections. Country elevators might be
slow to adopt this as a grading factor in their
farmer receipts; however, the advantages in
terms of reduced breakage and better storability,
added to the opportunity to sell premium grade
corn into the milling industries, should move
the industry to a system of price differentials
for differences in breakage characteristics.
In this analysis of impacts it is assumed
that country elevators and processors will
incorporate some measure of breakage suscep-
tibility into their system of premiums and
discounts. Many firms (especially dry millers)
are already using indicators of breakage
susceptibility and implementing price differen-
tials for corn that meets standards that will
assure low breakage during handling and
higher yields of processed products. Some
country elevators have also found it economi-
cally feasible to offer premiums for corn with
low stress cracks. A measure of breakage
susceptibility, or some other indicator of dam-
age resulting from high temperature drying,
would encourage the current trend towards
low-temperature drying and create incentives
for managing harvesting and drying so as to
minimize breakage later in the market chan-
nel. Measures of hardness or density are not an
acceptable substitute. High-density, hard
kernels will still perform poorly if subjected to
high temperatures during drying.
Farmers delivering corn that has not been
subjected to drying will find it easy to meet
lower limits on TBC and should not be dis-
counted for breakage susceptibility. Levels of
breakage susceptibility or percent stress cracks
should be low enough to avoid discounts on
freshly harvested corn. The effect of genetics or
harvesting methods on breakage susceptibility
is smaller than the effect of drying. However,
the damage is multiplicative, and adding
combine damage to dryer damage results in
defects that exceed the simple sum of the two
effects (Figure 5). The breakage susceptibility
test (or a proxy such as stress cracks) can be
used to identify corn that will have higher
yields of starch and dry milling products as a
result of careful handling. Farmers delivering
corn that has been dried and stored will see
additional discounts if the corn has been dried
improperly. However, farmers can avoid dis-
counts by adopting better harvesting methods
and low-temperature drying on the farm. The
budgeting model showed an increased return
to cleaning of 1.5 cents per bushel on the
farm and 1.0 cent per bushel at the elevator
(Table 21).
This scenario provides additional informa-
tion that reflects end-use value. Although
breakage susceptibility tests are not perfectly
correlated with the amount of BCFM created in
the market channel, high breakage-susceptibil-
ity values will generate problems during
56
subsequent handling. Lower values will enable
shippers to meet the lower limits on TBC with
less cleaning. Within most of the domestic
market the impact of the breakage test will be
on the yields for wet and dry milling products,
rather than on the creation of breakage during
handling. In the export market, the reduction
in dust and broken kernels may be as impor-
tant as the improvement in value for process-
ing. The breakage susceptibility test is corre-
lated with milling value. Corn resistant to
breakage (dried at lower temperatures) will give
higher yields of products in wet and dry milling.
The breakage-susceptibility test will result
in a significant increase in inspection costs for
official grades as well as private grades com-
pared to the current inspection system. Tests
for breakage susceptibility will require new
technology such as an impact tester or stress
crack determination. A simple measure such as
percent of kernels with stress cracks can serve
as a proxy until a more sophisticated objective
test can be developed. To the extent that these
measures are used at the country elevator, it
will be a major change in their grading and
analytical techniques, adding to the time and
cost of grading. Measuring and recording CFM
as separate information will also add to the
cost of grading.
We assume that some buyers will specify
limits on breakage susceptibility and that the
market will establish price differentials where
breakage susceptibility is an important charac-
teristic. Elevators may choose to segregate on
factors of breakage susceptibility as well as on
the factor of TBC. Segregation and blending,
however, take place in the market channel only
in response to positive economic incentives.
Since the presence of a factor in the grades does
not force segregation, the market must encourage
it. As incentives develop, segregation costs will
increase as more elevators choose to segregate.
The 1 percent reduction in TBC relative to
current BCFM limits will not induce farmers to
purchase grain cleaners. Those farmers deliver-
ing higher levels of BC and fines from storage
Figure 10. Relative magnitude of factors causing breakage susceptibility.
a,
CD
0
ca
CD
m
'/*
Strong
Proper
settings
Excessive
cylinder
speed
Concave
clearance
too narrow
Com
moisture
greater than
25%
Low-
temperature
drying
High-
temperature
drying
Rapid
cooling
or
Variety
Combine
adjustment
Drying
method
Cumulative
effects*
*The choice at one point influences the impact at the next point. The cumulative effect of the
more severe choice at each point could be many times greater than the simple summation of
breakage susceptibility.
Source: Hurburgh, 1992.
57
may receive additional discounts. Lower levels
of CFM can be achieved by combine adjust-
ments. Farmers using high-temperature dryers
will also receive discounts on the test for
breakage susceptibility. This incentive will
induce farmers to shift to new varieties and
low-temperature drying, reducing the levels of
TBC below the limits for No. 2 corn. In the
longer run, the frequency of discounts will be
significantly reduced.
The country elevator and export elevator
will also experience decreased cleaning require-
ments as a result of receiving low breakage
corn, even though the limits on BC plus fines
has been reduced by 1.0 percent. The extra
cleaning required to meet the lower limits on
TBC will be eliminated once the volume of low-
breakage corn is increased. Less cleaning will
reduce the volume of corn screenings in the
market, but farmers will also be delivering less
CFM. The quality of corn screenings is not
expected to change significantly. Transporta-
tion costs for screenings will decline with the
reduction in the volume and with screenings
located in the origin area rather than at export.
Storability characteristics will be increased not
only for the foreign buyers but throughout the
market channel, starting at the farm storage bin.
Cleaner corn and lower drying temperatures will
increase storage life and aeration costs.
Farmers will receive a strong incentive to
select varieties, drying technology, and han-
dling practices that produce low-breakage corn.
The price differentials for low-breakage corn
may even induce some country elevators to
alter their drying strategies. The lower limits
on TBC will also provide an incentive for
country elevators to improve their handling
and drying practices and to deliver cleaner corn
into the market channel. However, with higher
quality corn to work with, they will have the
opportunity to deliver better quality with less
total effort and cost.
Milling quality for both wet and dry milling
will be increased not only by the reduction in
TBC and CFM, but also because low-breakage
corn yields more of the high-valued products in
both the wet- and the dry-milling industries
[Weller et al., 1988; Hill et al., 1991a]. This
increase in the domestic quality will be notice-
able and will have a positive impact on yield of
processed products. The same relationship will
hold for foreign buyers and should attract a
larger volume of U.S. corn into the high-priced
milling markets. The increased value of corn
for milling should be reflected in prices. Even
the domestic feed market will experience some
benefit from cleaner corn, better storability,
and reduced risk of mold. The export feed
markets will also benefit from the reduced dust
that accompanies low-breakage corn.
The export quality of No. 3 yellow corn will
be dramatically increased with the reduction
in TBC and CFM. The quality and perception
of quality at destination will be noticeably
increased because of the low-breakage suscepti-
bility characteristics. Handling in the market
channel from port elevator to foreign process-
ing plant will not generate the amounts of dust
and broken kernels that have been experienced
in the past. Improved harvesting and drying
can produce corn with a clean, bright color,
distinctly different from most No. 3 corn, which
is usually coated with corn dust by the time it
reaches the processing plant in the country of
destination. Germination (a quality indicator
often used by wet milling) will also be signifi-
cantly better.
Support for Separating the BCFN Factor
flttitudes Toward Change
Support for changing the definitions of BCFM
in corn grades must come from those segments
most affected by the change — producers,
interior elevators, export elevators, and buyers.
Although a popularity poll should not be the
sole criterion for what is best for the industry
countrywide, the opinions of those affected
must be recognized and evaluated. These
opinions, obtained through mail surveys,
showed similarity between farmers and mar-
keting firms in the levels of support for sepa-
rating BCFM (Figure 11).
Figure 11. Percent of respondents supporting a
separation of the BCFM factor.
Opinions of Farmers
Since foreign material and broken grains have
received so much attention in foreign com-
plaints and legislative action, the survey
asked farmers for suggested ways of reducing
FM in both corn and soybeans. The three
most popular actions were (1) legislative
prohibition against blending and adding FM
to clean grain; (2) introducing premiums for
lower levels of FM content; and (3) separating
BC from FM (Figure 12). Less than 10 percent
of the farmers suggested lower limits on BC
and FM.
Preferred Nethod for Reducing Discounts
A majority of farmers favored legislative
prohibitions against blending foreign material
with grain. In the three states surveyed (Indi-
ana, Iowa, and Illinois), 58 percent of the
farmers considered this an effective measure
for reducing FM (Table 22). The question on the
survey did not differentiate between blending
FM from independent sources and reblending
material removed from corn at an earlier point
in the handling sequence. It was assumed that
farmers favoring prohibitions would include
both sources in the prohibitions. In addition (or
as an alternative), about half of the farmers in
those three states wanted to introduce premi-
ums or subsidies for FM content below contract
grade to motivate farmers to deliver cleaner
corn and soybeans. Changing the grade factor
definitions to separate BC from FM and treat
BC differently from FM was supported by 32
percent of farmers.
Figure 12. Alternative strategies for improving
corn quality.
Legislation
Premiums
Lower limits
Higher discounts • 6%
Farmers supporting
Base Leuel for Discounts
Farmers desiring the separation of BC and FM
were asked to indicate the percent of FM that
should be allowed before the market applied a
59
Table 22. Preferences of Illinois, Iowa, and
Indiana Farmers for Alternatives for
Reducing FM in Corn and Soybeans,
1986
List
of alternatives"
%of
farmers
supporting
1.
Legislate prohibition against
58
blending and introduction of FM.
2.
Provide premium (subsidy) for FM
51
below contract grade.
3.
Lower allowable limits in the
10
standard for FM.
4.
Raise discounts without
6
changing grade limits.
5.
Separate BC and FM.b
32
6.
Leave system as it is.
7
" Respondents were allowed to check more than one
alternative. b A check for "discount per point for FM
above 0 percent," for "discount per point for FM above
[x] percent," or for any discount recorded in the
question was counted as support for separation of BC
and FM.
discount. Remarkably, the limit suggested by
many farmers was zero percent: 37 percent of
the respondents from the three states sug-
gested that any FM in the grain should be
discounted (Table 23). Another 17 to 21 percent
of the farmers, who did not choose to start
discounts at zero percent, suggested starting
discounts at levels below the current limit for
BCFM in No. 1 corn. The remaining farmers
chose to separate BC from FM and supported 2,
3, and 5 percent limits for discounts. These
limits are familiar numbers for farmers, since
they correspond to the current limits for BCFM
for No. 1, No. 2, and No. 3 grades, respectively.
Although expressing dissatisfaction with the
lack of premiums, farmers clearly understood
the importance of price differentials to encour-
age quality improvement. When asked if they
would like to eliminate all discounts so that all
farmers would receive the same price, 61.4
percent of Illinois farmers said no. The percent-
ages for Indiana and Iowa farmers were 55.8
and 68.3, respectively.
Opinions of Interior Eleuator Managers
About Changing BCFM
Each elevator manager was asked for an
opinion on the proposal to separate-BC and
FM. The open-ended question asked for a short-
essay answer. The answers were categorized
roughly into positive (in favor of separation),
negative (not in favor), and indifferent (includ-
ing those with extensive qualifications to
positive or negative and those neutral or
undecided).
Each of the three categories of responses
was divided into three subcategories, creating
a total of nine subcategories of responses
(Table 24). Conclusions about opinions to
support or oppose the proposal were based
Table 23. Maximum Limit for FM Without Discount Suggested by Farmers
Who Recommended Separating BC from FM, 1986
Three-state total
Number Percent
0.0
0.5
1.0
1.5
2.0
3.0
4.0
5.0
6.0
7.0
Total
Factor Illinois Iowa Indiana
limit Number Percent Number Percent Number Percent
84
31.7
4
1.5
41
15.5
5
1.9
54
20.4
32
12.1
6
2.2
38
14.3
0
0.0
1
0.4
256
100.0
97
37.7
2
0.8
40
15.6
2
0.8
44
17.1
26
10.1
9
3.5
33
12.8
1
0.4
3
1.2
257
100.0
70
41.4
4
2.4
29
17.1
2
1.2
26
15.4
16
9.5
3
1.8
19
11.2
0
0.0
0
0.0
169
100.0
251
36.9
10
1.6
110
16.1
9
1.3
124
17.6
74
10.6
18
2.5
90
12.8
1
0.1
4
0.5
682
100.0
60
largely on the three general categories of
positive, negative, and indifferent, but the addi-
tional breakdown into subcategories provides
a partial explanation for differences in attitudes.
A high proportion (46.6 percent) of the 416
interior elevator respondents supported the
proposal to separate BC and FM; 31.5 percent
were opposed to the proposal; 21.9 percent
were indifferent. There was more support for
change from country elevator respondents
(47.6 percent) than from the river, subtermi-
nal, and "other" elevator respondents (30.5
percent).
The majority of the positive responses fell
into subcategory 2 — "BC and FM are not the
same and discounts should reflect value."
Although subcategory 3 (Table 24) had the
highest percentage of responses, that category
included several different reasons. Negative
responses were about equally distributed
between "would cost elevators too much"
(6.5 percent) and "would cost farmers too
much" (5.5 percent). Fewer than 4 percent of
the respondents claimed not to have enough
information to take a position.
flttitudes by Type of Firm
The attitudes toward the proposal to separate
BC and FM differed among types of elevators.
Because the number of responses was small,
the categories of river, sub-terminal, and other
elevators were combined for a comparison with
country elevators — those dealing most directly
with farmers. Several points are worth noting
in that comparison.
1. While nearly 22 percent of river and sub-
terminal elevator respondents expressed
concern about the potential cost to farmers,
only 4.6 percent of the country elevator
managers listed cost to farmers as a reason
to oppose the proposal.
Table 24. Opinions, by Type of Elevator, on the Proposal to Separate BC and FM, 1989
Percent of responses"
River,
Opinion
category6
Country
elevator
sub-terminal,
and other
All respondents
Number Percent
Positive
(1)
5.1
4.4
21
5.0
(2)
16.8
17.4
70
16.8
(3)
25.7
8.7
103
24.8
Negative
(4)
6.1
13.0
27
6.5
(5)
4.6
21.7
23
5.5
(6)
19.6
17.4
81
19.5
Indifferent
(7)
8.9
13.0
38
9.1
(8)
3.5
0.0
14
3.4
(9)
9.7
4.4
39
9.4
All
Number
393
23
416
—
respondents
Percent
94.5
5.5
100.0
•The 143 respondents who did not indicate an opinion were not included in this analysis.
bPositive response:
Negative response:
Indifferent response:
Respondent agrees that BC and FM should be separated.
(1) Separation would improve U.S. grain trade.
(2) BC and FM are not the same and discounts should reflect value.
(3) Miscellaneous other positives not falling into categories (1) or (2).
Respondent disagrees that BC and FM should be separated.
(4) Proposal would cost elevators too much in equipment and time.
(5) Proposal would cost farmers too much due to greater discounts.
(6) Miscellaneous other negatives not falling into categories (4) or (5).
Response could not be categorized as positive or negative.
(7) Indifferent to proposal; would not affect my elevator.
(8) Do not know enough about proposal to have formed an opinion.
(9) Miscellaneous, such as "not needed" or not falling into categories (7) or (8).
61
2. An indifferent attitude (category 7) was
more prevalent among river, sub-terminal,
and "other" elevator managers than among
country elevator managers (13.0 percent
compared to 8.9 percent). Many of the
managers in the indifferent category ex-
plained that they thought the change would
not affect the profitability of their operation
or their current practices.
3. The percentage of positive responses was
slightly higher for country elevators (46.6
percent) than for river and sub-terminal
elevators (30.5 percent).
In the comment section of the questionnaire,
many of the country elevator respondents in
the indifferent category stated that implemen-
tation of the proposal would not affect them in
any significant way and that they would be
willing to go along with whatever is mandated.
Many reported that BC and FM are not a big
problem for them. Other comments of interest
included several country elevator respondents'
suggestion that the problem was caused by
export elevators when loading corn for export.
On the other hand, many respondents felt that
corn buyers should be willing to pay for high-
quality corn and to provide the incentives for
change.
Factors Influencing Rttitudes
Many factors influence opinions and attitudes:
facts, impressions, past experience, and the
influence of others. The mail survey provided
data about opinions but no information about
their psychological bases. To help in explaining
the different opinions regarding the proposed
grade change, characteristics of each elevator
were recorded and statements of their manag-
ers about the advisability of separating BC and
FM were classified into nine categories of
support or opposition to the proposal. Six
independent variables were tested for their
influence on the nine categories of managers'
responses (Table 24). The variables were
(1) size of operation as measured by elevator
capacity; (2) percentage of shipments dis-
counted for excess levels of BCFM; (3) percent-
age of corn sold to processors; (4) percentage of
corn sold to export elevators; (5) percentage of
corn sold to river elevators; and (6) turnover
ratio as an indication of the relative importance
of corn in the makeup of the elevator's income.
Only one of these variables (percentage of
shipments receiving discounts) showed a
significant relationship with the opinions of the
respondents toward separating BC and FM. If
any of the other variables influenced the
managers' opinions, the influence was con-
cealed by other factors.
The frequency of discounts has a direct
influence on the income and profitability of
grain merchandising. Elevator managers with
frequent discounts for BCFM were expected to
be more interested in changing the system on
the chance that the changes might reduce the
frequency and the severity of discounts. Those
elevators that supported separation of BC and
FM because the two components have different
value reported that 12 percent of their ship-
ments had been discounted — nearly twice the
average of all respondents. Some other differ-
ences were evident from Table 24 but cannot be
matched with any logical explanation. For
example, those elevator respondents that were
indifferent to the proposal reported that an
average of 9.7 percent of their shipments had
been discounted — the second highest level of
the nine categories. The lowest percentage of
discounts (there were three categories between
4.0 and 4.2 percent) was distributed among the
positive "it would improve trade," the negative
"miscellaneous reasons," and the indifferent
"inadequate information to make a decision."
These data do not provide the basis for explain-
ing differences in the opinions expressed by the
managers.
Opinions of Export Eleuator Managers
flbout Changing BCFN
Just over one-third of the export elevator
managers supported the proposal to separate
the BCFM factor; an equal number opposed the
action. Twenty-nine percent stated they were
indifferent or declined to answer that question.
Comments ranged from "great idea!" to "not
feasible."
A majority of the respondents who sup-
ported the proposed revision in grades stated
62
that it would give the buyer more information.
Many of the respondents who opposed the
proposal were worried about an increase in
operating costs without substantial increase in
value. Two of the respondents (5.5 percent)
thought the change would hurt producers.
Factors Influencing Rttitudes
The attitudes toward the proposal might be
influenced by the characteristics of the indi-
vidual export elevator, such as size, corn
volume, location, and volume of screenings
marketed. Several of these relationships were
tested using analysis of variance. The average
grain storage capacity of elevator managers
who favored the proposal was 5.3 million
bushels. The average grain storage capacity of
managers who opposed the proposal was 5.5
million bushels. Those who were neutral,
undecided, or indifferent operated slightly
larger elevators, with an average capacity of
7.8 million bushels. Size apparently had little
influence on attitudes.
Managers of the export elevators who
supported the separation of BC and FM
handled a lower volume of corn than those
who opposed the proposal. The average corn
volume was 89 million bushels for managers
expressing disapproval of the proposed
change, 43 million bushels for those who
approved the idea, and 73 million bushels for
respondents who were indifferent or expressed
no opinion.
There were also some geographic differences
in the opposition to the proposed change.
Seventy-three percent of the export elevators
whose managers expressed disapproval were
located in the Pacific and Lakes regions, while
80 percent of the approval ratings came from
respondents located in the Atlantic and Gulf
regions. The indifferent responses were largely
located in the Gulf and Lakes regions.
The importance of corn relative to other
grains appeared to be slightly associated with
approval or disapproval of the proposed change,
with corn volume averaging 46.1 percent of
total volume for those elevators whose manag-
ers approved and 59.5 percent for those whose
managers disapproved.
The average volume of screenings marketed
in 1989 by managers opposing the change was
25,450 tons, compared to 21,050 tons for those
supporting the idea of separating BC and FM.
However, those supporting the change reported
significantly more screenings per 1,000 bushels
handled than the other elevators — 0.5 ton of
screenings per 1,000 bushels handled (1.7
percent) for those supporting the proposal,
compared to 0.3 ton per 1,000 bushels handled
(1.0 percent) for the group opposing the change
and also for those who were indifferent.
63
Summary
None of the scenarios will significantly increase
export volume or market share, although three
of the five scenarios would result in improved
quality in the export market. In a competitive
market, higher value will be reflected in higher
prices. The more difficult question is the
balancing of the value of information against
its cost. Several of the scenarios provide only a
marginal increase in economically important
information — scenarios 3, 4b, and 5a provide
information about particle size of a mixture of
corn and non-corn materials. Scenarios 6c and
7 provide more detailed information by separat-
ing CFM from broken corn.
The strongest incentives are accompanied by
the greatest number of discounts but the
greatest potential for improvement in quality.
Equity in payments to farmers is best achieved
with low limits on each factor and narrow steps
between grades. This results in more severe
discounts for more farmers, but equity requires
that there be price differentials among produc-
ers according to the value of the crop that they
deliver. In a competitive market, lower prices
for poor quality will be offset by higher prices
for good quality.
Scenario 3 results in no measurable im-
provement in corn quality. In contrast, Scenario
4b provides sufficient incentives to justify the
fixed cost of a new cleaner. Scenario 4b im-
proves quality by a significant reduction in BC
and FM, but at a high cost of cleaning and
discounts. The lower limits would probably
require purchase of additional cleaning capac-
ity. The combined effect of lower aeration costs,
better storability, and discounts on BC and FM
required to meet this restrictive grade limit
would justify additional cleaning.
The most promising alternatives are Sce-
narios 6c and 7. Scenario 6c controls BC with
numerical grade, reduces maximum limits for
each grade below current levels, and differenti-
ates among corn and non-corn material. Inspec-
tion procedures in this scenario are more
complex than under current grades but less
demanding than scenarios that include BC and
FM. Although Scenario 6c does not differentiate
BC according to particle size, it still provides
incentives to improve quality.
Scenario 7 would have the greatest positive
impact on quality by combining lower limits on
TBC with information about breakage suscepti-
bility. The impact will be greatest in processing
industries, although even feed manufacturers
prefer clean, unbroken corn with a minimum of
dust. Importers will see a significant quality
improvement. This scenario will entail the
largest increase in inspection costs, requiring
new equipment and new methods. Cleaning
and storage costs at the elevators will decline.
Farmers will face additional discounts on corn
dried and stored on the farm, but better farm-
ers will be able to meet the grade limits and
avoid these discounts after they have adopted
appropriate varieties, harvesting technology,
and drying methods. The breakage test accom-
panied by appropriate price differentials would
generate sufficient incentives to meet the
objective of cleaner corn and improved quality.
Creating two grade factors of BC and FM
(both primarily comprised of broken corn)
differentiated only on the basis of particle size
provides little additional information about the
value of the lot while increasing the cost of
grading, segregation, and blending. It also will
increase the number of factors that could
receive discounts, depending on the market
response. In contrast, the separation of the
sample into coarse FM (defined by mechanical
sieving) and BC increases information for
determining value, adds little to the cost of
grading, does not require segregation or blend-
ing in the market, and places little economic
burden on producers since it constitutes such a
small proportion of the grain delivered. Once
the objectionable material is removed from the
grain, there is little opportunity for reintroduc-
tion of coarse FM during handling and trans-
port through the market channel. Adding a
factor to measure the percent of CFM separate
64
from the percent of BC permits the identifica-
tion of non-corn material larger than 12/64-
inch. The grades of most other countries
competing in the international corn markets
contain a factor called impurities that results
in a similar separation. Some non-corn mate-
rial passing through the scalper would remain
with the corn portion of the sample.
The requirement that changes in grain grades
be justified by economic benefits that exceed costs
is an unrealistic expectation based on a miscon-
ception about the purposes of grades and stan-
dards. No single grade factor, definition, or factor
limit can be proven to significantly alter farm
income, export volume, or competitiveness in
international markets — that is not the purpose of
uniform grades. Economic analyses have pro-
vided no evidence that past changes in definitions
or grade limits have influenced market shares,
farm prices, or income distribution. No one has
systematically evaluated the structure of current
grades to determine if each factor meets the
criterion of value exceeding cost. This analyti-
cal void is the inevitable result of the impossi-
bility of aggregating costs and benefits associ-
ated with any one factor or definitional change
without introducing an unacceptably large
number of simplifying assumptions.
Aggregate, quantitative comparisons of costs
and benefits cannot be used to prove that there
will be a net positive benefit as a result of
lowering the limits on BCFM or separating BC
and FM as an isolated regulatory change by
FGIS. Aggregate statistical data about sales
volume, prices, or incomes are not adequate to
prove net gain or loss from a change in grades.
The same insurmountable obstacle is
present in any attempt to quantify costs and
benefits resulting from one individual factor in
the current grades; it cannot be proven that
any one grade factor has generated positive net
benefits. Which of the current factors have
increased exports, changed farm income, or
raised the base price for corn? Is there any
proof, or even supporting evidence, that remov-
ing heat damage or lowering test-weight limits
would damage market shares? Moisture was
removed as a grade factor for corn in 1985, and
the industry moved from a 15.5 percent mois-
ture base for No. 2 corn to a 15.0 percent base.
No one has yet provided conclusive evidence
that this change decreased farm income, raised
the base price of corn, or reduced export volume
(despite warnings of lost exports by some
importers). It was not an oversight when the
1986 and 1990 amendments to the Grain
Standards Act did not include in the purposes
of grades and standards "increasing farm
income" and "increasing export volume."
The benefits from national grades and stan-
dards derive not from any one factor, defini-
tion, or grade limit, but from having a system
to provide uniform measurements of quality.
The purpose of uniform grades is to facilitate
communication about value, thereby decreasing
transaction costs, creating incentives for
quality improvement, and allowing price
differentials to direct each quality into its
highest valued use.
The decision to change grades must be based
on an evaluation of whether the change meets
the six purposes of grades that have been
incorporated into the U.S. Grain Standards
Act. The definition of factors and the structure
of grades must be based on logic, consistency,
and their contribution to an efficient marketing
system. Changes are indeed needed to improve
communication, equity, incentives, and market-
ing efficiency, but industry participants should
not be misled into making changes with the
expectation of major changes in income and
market share.
The goal of changes in individual factors and
limits should be to move toward the ideal
system of grades and standards. This requires
that the ideal grade be developed to provide the
frame of reference for changes implemented at
different points in time. No factor should be
evaluated in isolation from the total system or
from a set of "ideal grades." This report violates
that principle by focusing only on the factors of
BCFM and breakage susceptibility in develop-
ing a set of recommendations. However, the
recommendations given in the following pages
are based on the authors' implicit set of "ideal
grades" developed from previous research and
experience as well as the results of the nar-
rowly focused research on BCFM [Hill, 1991].
65
Recommendations
The qualitative and quantitative analyses
reported in this study suggest that Scenario 7
or some variation thereof provides the greatest
potential for a positive cost-benefit ratio. The
most important element in Scenario 7 is the
introduction of a test for breakage susceptibility.
A measure of breakage susceptibility accom-
panied by a price differential in the market
would have a far greater effect on levels of
BCFM, dust, appearance, and intrinsic quality
than changes in factor limits. The use of this
measure is currently restricted by lack of
satisfactory commercial test technology.
It is recommended that FGIS redirect
research efforts to the development of a
practical test for breakage susceptibility. A
temporary proxy, such as percent of kernels
with stress cracks, should be introduced while
a range of test technologies are explored and a
more objective and automated procedure is
developed.
Following are suggested parameters for a
breakage susceptibility test, which must be
designed to be usable at country elevators:
1. The breakage susceptibility test should be
part of an automated add-on to other tests
done at elevators and by FGIS.
2. The test should require no more than one
additional minute, start to finish.
3. The test should be fully automated, or it
should not require more than one simple
operation action (e.g. a weighing to ± 0.1 g).
4. The test should have a universal moisture
correction equation.
5. The precision (repeatability) should be suffi-
cient to group corn in two or three categories,
rather than producing a continuous scale
value accurate to the three significant figures
typical of other grain quality tests.
It is recommended that grades for corn
include the following:
1. A test for breakage susceptibility or stress
cracked kernels, included as a non-grade
standard with reporting required on official
certificates.
2. A definition of dockage consisting of CFM
separated from the sample by mechanical
sieving and reported to the nearest tenth.
3. TBC (material through the 12/64-inch sieve)
will be a grade factor, with limits for each
grade 1.0 percent less than current limits on
BCFM. The lower limits can easily be met
with corn that meets the standard for
breakage-susceptibility. This change
should not be made without first having a
breakage-susceptibility test.
The specific definitions of TBC and CFM,
including sieve sizes and specifications, should
be developed by FGIS in conjunction with a
review of current equipment and technology for
separating BCFM. The 12/64-inch sieve for
TBC and a riddle approximating commercial
scalpers for CFM are points of departure for
the analysis. Additional considerations are the
use of aspirators, single-kernel separators,
square-mesh sieves instead of round-hole
sieves, different mechanical actions for the
sieves, and a combination of mechanical and
hand sorting to separate whole kernels.
A final recommendation is that changes in
grades should not be introduced or evaluated one
factor at a time. The value of grades is a uniform
system. It is suggested that FGIS develop a set of
ideal grades designed to meet the purposes in the
Grain Standards Act. With the ideal set of factor
definitions and grade limits available as a final
target, FGIS could develop a strategy for moving
toward the goal with a minimum of disruption in
the industry. Movement toward the ideal will
increase the efficiency of communication about
value, decrease the costs of marketing, and
encourage quality improvement consistent with
economic principles.
66
EndDotes
1. Sizes of all sieves and cleaner screens are
given in inches. The conversion from 64th-
inch to mm is given below.
Inches Millimeters
8/64
10/64
12/64
14/64
16/64
3.175
3.969
4.763
5.556
6.350
2. Comments from inland elevators illustrate
the concern that a change would be
detrimental to the individual firm. Four
illustrative comments are reproduced.
a. Increased costs will have to be absorbed
by the country elevator and will not
lead to premiums but rather more
discounts.
b. The producer and country elevator will
bear the cost of this, and the exporter
will reap the benefits.
c. It would be extremely expensive for the
local buyer of grain.
d. A lot of corn taken in by elevators using
the old standard could cost quite a lot of
money if that same corn gets graded
using the new standard when it is
shipped out. Also countries buying
3 grade corn because it is cheaper
should not expect No. 1 corn.
3. The base for moisture in corn-export con-
tracts shifted from 15.5 percent to 15.0
percent soon after moisture was removed as
a grade-determining factor. When the base
for moisture discounts at river elevators
changed, discounts by country elevators on
farm deliveries changed almost instantly.
Most country elevators pass discounts they
receive from their buyers on to farmers.
4. The proposal to introduce BC and FM as
separate factors on an experimental basis,
effective June 30, 1987, identified BC and
FM as information on the certificate. The
1986 Grain Quality Improvement Act and
the North American Export Grain Associa-
tion proposal did not define how these
factors were to be incorporated into the
grades. [Federal Register, 52(125):24432,
June 30, 1987].
5. Four mail surveys were conducted to
obtain data on operating practices and
opinions about separating the grade factor
BCFM into BC and FM. Four groups were
surveyed: export-elevator managers,
farmers, buyers of corn screenings, and
interior-elevator managers. Their re-
sponses are compiled in the table below.
6. Premiums and discounts are relative
prices, not absolute values. Changing the
number and size of the discounts will
almost always be compensated by a
Results of Mail Surveys (Endnote 5)
Survey Sample size
Number of
responses
Percent Percent
of sample of population
Export
elevators
98
31
31.6
31.6
Farmers
2,364
2,138
81.2
0.8
Screenings
buyers
107
27
25.2
25.2
Interior
elevators
1,992
559
28.1
7.7
67
change in the base price. The best illustra-
tion is in a proposal to change the mois-
ture limit for No. 1 soybeans from 13
percent to 14 percent, thus eliminating
discounts for 14 percent soybeans. A
processor cannot buy water at the same
price as soybeans. Because price is deter-
mined by the value of the oil and meal
produced from each bushel, more water
per bushel means less oil and meal per
bushel, and the base price must be ad-
justed accordingly. The same logic holds
for adding grade factors, removing grade
factors, or changing factor limits. Changes
in discounts will be accompanied by
changes in base price, so that total value
of the crop will be unchanged, but the
distribution of the value among farmers
delivering different qualities of grain will
be changed [Hill, 1982].
7. A review of FGIS export data for 1989 and
1990 shows BC to be approximately 75
percent of BCFM. [See Table 5-4, Meinders
and Hurburgh, 1992.]
8. Interior elevators reported that only 7 to 8
percent of inbound receipts were below No.
2 grade on the factor of BCFM. However,
average BCFM delivered to country
elevators was 1.24 percent in the 1977
study [Hill et al., 1982].
9. In a 1991 survey, 77.1 percent of those
surveyed indicated they could reduce FM
through improved harvesting practices
[Hill and Bender, 1992].
10. Managers of export elevators reported that
the primary reason for cleaning corn was
to meet the contract specification. Many of
the respondents who opposed the proposal
to separate BC and FM were worried
about an increase in operating costs
without any substantial increase in value
[Hill et al., 1991b].
11. If the country elevator cleans to exactly
2.5 percent BCFM, the estimated particle
size distribution would result in 1.4
percent BC and 0.4 percent FM [calculated
from Bern and Hurburgh, 1992, Table 3-4].
12. Changing speed or screen size had little
effect on the distribution of particle sizes in
the screenings removed[Hill et al., 1991e].
13. Export elevators estimated that installa-
tion of a new cleaner or redesigning the
cleaning system would cost between
$500,000 and $1,500,000 [Hill et al., 1991b].
14. Responses averaged for three states
showed 32 percent of farmers in Iowa,
Indiana, and Illinois supported separation
of BC and FM. Of those favoring a sepa-
rate factor for FM, 36.9 percent stated a
zero percent base was the most effective
strategy [Hill et al., 1991c].
15. Of the 109 responses to the question "Can
you deliver lower levels of BCFM," 90.8
percent answered yes to at least one of the
three choices: by (1) changing production
practices, (2) changing harvesting and
handling practices, or (3) doing additional
cleaning [Hill, 1992].
16. Of the 494 farmers answering the question
about the average level of BCFM in corn
at harvest, 403 respondents (81.6 percent)
stated that they already harvest corn with
2.0 percent or less BCFM, leaving 91
respondents (18.4 percent) who harvest
corn containing more than 2.0 percent
BCFM [Hill, 1992].
68
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72
Glossary
Deration
The passage of air over or through grain to control the adverse effects of
excessive moisture, temperature, and humidity. Forced airflow through a
grain mass, by reducing temperature and moisture content, improves
storability and storage life.
flspiratOT
A device that draws a column of high-velocity air across a flowing grain
stream to separate low-density materials (foreign material, chaff, insects)
from grain. The air pressure is based on the weight of the grain. An aspira-
tor can operate at a higher throughput capacity than screen cleaners but
may result in a higher corn loss. Aspirators are generally used to remove
low-density materials such as chaff and insects.
BCFN
"Broken corn and foreign material" refers to the current grade factor in corn
grades defined as all materials passing through a 12/64th-inch round-hole
sieve, plus any non-corn material remaining on top of the sieve.
BC
"Broken Corn" was defined by FGIS in response to the 1986 Grain Quality
Improvement Act as all materials passing through a 12/64th-inch round-hole
sieve but retained on a 6/64th-inch round-hole sieve.
Base Price
Prices for corn are usually quoted on the basis of No. 2 grade quality in the
domestic market. This price quote then becomes a base from which different
qualities are determined through discounts.
Blending
The systematic combining of two or more lots or kinds of grains to obtain a
uniform mixture of a desired specification.
Breakage Susceptibility
The tendency for corn to break when it is subjected to an impact. The oppo-
site of this test would be resistance to breakage, indicated by the ability of
the corn to withstand impact without breaking.
CFH
"Coarse foreign material" was defined by FGIS under current standards as
all non-corn material retained on top of a 12/64th-inch round-hole sieve
hand-picked from the sample. In this study CFM was also used to refer to
the material easily removed by mechanical sieving. This definition is compa-
rable to that used for the term dockage in other grains.
73
Cleanliness
The absence of non-grain materials in corn.
Corn By-products
Plant materials originating with the corn, including leaves, cobs, and por-
tions of the kernel that cannot be identified as corn but were derived from
some portion of the corn plant.
Corn Loss
The percentage of small, saleable corn kernels that are removed by the
cleaner or broken by the motion of the cleaner itself.
Corn Screenings
Material removed from corn by mechanical devices such as vibrating clean-
ers in the commercial market channel. It consists primarily of broken corn of
relatively small particle sizes. In practice, screenings contain a range of
particle sizes, from whole kernels to dust. The bulk of the material, however,
consists of small particle sizes, as defined under fines.
Country Eleuator
A grain-handling facility receiving the majority of its grain directly from
farmers.
Disc-Cylinder Cleaner
A machine that removes dockage on the basis of particle shape and length.
Grain passes through the middle of a horizontal revolving cylinder that has'
small indentations in the metal. Smaller material falls into the indentations
and is lifted as the cylinder revolves. As material approaches the top of the
cylinder, the material falls. Depending on the length of the material, it falls
into either the dockage compartment or the grains compartment of the
cleaner. Disc-cylinder cleaners are generally the most effective means to
attain low-dockage levels. However, their throughput capacity is generally
less than other types of cleaners.
Discount
A reduction in price used to reflect a difference in the level(s) of grade
factor(s) or quality characteristics that differ from a base quality used to
establish price level — in other words, a reduction from the base price offered
for grain. A discount is generally calculated for factors that lower the value
of the grain and may be expressed as a percentage of the price or as fixed
cents per bushel. Thus, a discount serves as a disincentive for selling grain
below the quality of the base market grade.
Dockage
Non-grain materials that can readily be removed by accepted mechanical
screening devices. The technical definition of dockage in official grades
differs among grains, but in general it refers to material readily removed
during screening.
74
Dry Hilling
A corn-processing technology in which the kernel is separated into its
component parts primarily through mechanical means. Primary products are
corn grits, corn flour, and corn germ.
Economic-Engineering Study
A research approach for assessing the relationships between costs and
output for a production process by separating the production process into
discrete stages and assigning costs to the input-output relationship.
Economic-Engineering Hodel
A model for calculating costs based on technical coefficients multiplied by
market prices of each input. In this study it refers to the cost of operating
grain cleaners, and under assumed conditions it calculates the cost for
different volumes handled. The method is in contrast to conducting surveys
in which respondents are asked to report their actual or estimated costs.
Export Eleuator
A grain-handling facility located at a port whose primary responsibility is
assembling grain from different regions, blending it to contract specifica-
tions, and loading it on ocean vessels for export.
FGIS/USDH
The Federal Grain Inspection Service of the U.S. Department of Agriculture,
the agency created by 1977 legislation, is charged with the responsibility for
administering the U.S. Grain Standards Act.
FN
"Foreign material" was defined by FGIS in response to the 1986 Grain
Quality Improvement Act as all materials passing through the 6/64th-inch
round-hole sieve, plus non-corn material retained on the 12/64th-inch round-
hole sieve.
Factor Limits
The maximum or minimum value for each characteristic for each grade is
specified in USDA grades. In this study, proposed scenarios introduce new
factors and alternative limits for those factors that will force samples to be
placed in different grades.
Fines
Finely broken material passing through a sieve. The size of the sieve varies
with the particular reference, but in general the term refers to material
smaller than 8/64th-inch.
Fumigation
The destruction of pests infesting grain by professional personnel, trained in
the application of fumigants (chemicals that at required temperature and
pressure can exist in a gaseous state in sufficient strength and quantities to
be lethal to a given pest). Fumigants are some of the most toxic and unique
pesticides. Methyl bromide and hydrogen phosphide are the fumigants most
commonly used on grain.
75
Grade
A number designation assigned to grain based on a pre-established set of
criteria.
Grade-Determining Factors
The attributes whose limits designate a numerical grade, such as damage
and broken corn and foreign material.
Grain Grades and Standards
Specific standards of grain quality established to maintain uniformity of
grains from different lots. Grades and standards permit the purchase of
grain without the need for visual inspection and testing by the buyer.
Inland Sub-terminal Eleuator
A grain- handling facility receiving the majority of its grain from other
country elevators. These facilities assemble sufficiently large grain lots to
take advantage of low-cost, large- volume transport by rail.
Intrinsic Ualue
The value of the raw grain that is inherent within the kernel. It is measured
in terms of the quantity and quality of products that it will yield; generally
based upon its value in processing for food, feed, or industrial products.
Low-temperature Drying
Drying technologies in which the temperature of the air forced through the
corn mass is increased by no more than 5°C above ambient air.
Nacro Hpproach (flggregate Hpproach)
A model that examines costs and benefits within the context of the total
industry using the assumptions that changes in volume, quality, and prices
will be reflected throughout the market channel in proportion to the total
magnitude of the change.
Nicro Hpproach
A model that examines costs and benefits as viewed by an individual firm.
In general the more widely distributed effects of all firms following the same
strategy are ignored, and the individual firm looks at current price-cost
relationships on the assumption that the firm's actions will not alter these
market relationships.
HHEGR
The North American Export Grain Association is an association whose
members are primarily involved in exporting grain.
Hon-grade-determining Factors
Factors that influence the quality of grain and must be reported as informa-
tion whenever an official inspection is made. However, they are not used in
determining the numerical grade. An example: moisture.
76
Premium
An upward adjustment in price per bushel to reflect difference(s) in quality
above the base quality used to establish price level; in other words, increases
from the base price offered for grain of higher quality characteristics than
specified. Generally, premiums are calculated for factors that increase the
value of the grain.
Protectant
An insecticide used to apply to or mix with grain to protect the grain from
insect infestation.
fliuer Sub-terminals
Grain-handling facilities with access to barge loading points, receiving grain
from both farmers and country elevators.
Screen Cleaner
A series of angled, perforated plates or wire screens that separate the grain
from particles that are larger than the grain. The screens may be stationary
or they may be shaken or rotated. Screen cleaners remove dockage or foreign
material on the basis of particle size. The screens may differ. Smaller open-
ings remove less dockage, but they also reduce throughput capacity. Gener-
ally, however, screen cleaners are used to remove large particles.
Screenings
The material removed from grain by means of mechanical cleaning devices.
Screenings generally include broken grain as well as non-grain material
removed on the basis of density or particle size.
Shrink
The reduction in weight of corn as the result of moisture loss, biological
activity, and respiration within a corn mass. Shrink is primarily the result of
changes in moisture content but may also be caused by reduction in dry
matter as a result of biological activity.
Spout Line
The line of grain as it is dropped into a container (bin or ocean vessel). Fines
in the grain tend to stay where they fall, but whole kernels tend to roll to the
outside. The result is an area directly under the filling spout that consists
primarily of fine materials through which it is difficult to move air and that
is more susceptible to damage from insects and mold.
Storability
The inherent characteristics and handling and storing history of a lot of corn
that determine its storage life. The greater the storability, the longer will be
the storage life, the time span during which the corn can be stored before
deterioration takes place.
77
Stress Cracks
Internal fissures or cracks within the corn kernel that increase the suscepti-
bility of the corn to breakage during subsequent handling. Stress cracks are
caused by rapid changes in temperature or moisture content within the corn
kernel or by other internal stresses, causing a break within the endosperm
that does not carry all the way out to the pericarp.
Test (Height
A measure of grain density based on the weight of one bushel determined by
volume (1.125 cubic feet). The overall weight is determined by weighing the
quantity of grain. The term test weight was used from the early beginnings
of corn grades and is related to density, but it is also influenced by many
other factors.
Ualue in Use
The value of corn in the market channel is determined in part by the value
of the products that can be derived from it. The value of final products is
generally reflected back through the market channel with appropriate
subtractions for competitive costs and margins and thereby influences the
price of the raw corn.
diet Hilling
A corn-processing technology involving some degree of steeping in order to
separate corn into its various chemical constituents. Primary products are
starch, sugar, alcohol, and oil.
78
Appendix: Using Grades to Enhance Competitiueness
In the longer run, U.S. market share can be
increased only if other countries reduce their
exports. Major shifts in resource use will be
made only in response to changes in profitabil-
ity of corn production relative to other crops. A
review of past changes in world supply shows
that an increase in world prices has usually
been followed by an increase in production of
corn from exporting countries. The response to
decreased prices has not been symmetrical
with response to increased prices. Small
increases in world prices have encouraged
expansion of production and exports — small
decreases have not decreased supply, but only
slowed the expansion. With the exception of the
United States, most production above domestic
needs must enter the export market — few
countries outside the United States provide
long-term storage of surplus production.
Therefore, changes in corn production in
Argentina, Thailand, China, and South Africa
are usually accompanied by similar changes in
export volume. The magnitude of changes in
world prices due to quality is much smaller
than price changes caused by variations in
supply and demand. Since price swings as large
as 50 cents per bushel have not deterred produc-
tion of corn in Argentina, it can be assumed that
changes in value due to lower limits on BC or FM
will not alter corn production in Argentina.
79
Sponsors
Sponsored by Agricultural Experiment Stations of Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan,
Minnesota, Nebraska, North Dakota, Ohio, and Wisconsin; and the National Economics Division,
Economic Research Service, USDA, Washington, D.C.; U.S. Grain Marketing Research Laboratory,
Agricultural Research Service, USDA, Manhattan, Kansas; National Center for Agricultural Utilization Research,
Agricultural Research Service, USDA, Peoria, Illinois; Stored-Products Insects Research Unit, Agricultural Research
Service, USDA, Madison, Wisconsin; and Federal Grain Inspection Service, USDA, Kansas City, Missouri.
NC-151 Administrative Advisor
James H. Brown
The Ohio State University
Ohio Agricultural Research and Development Center
1680 Madison Avenue, Wooster, OH 44691-4096
NC-151 Technical Committee
Illinois Agricultural Experiment Station: L.D. Hill
Indiana (Purdue) Agricultural Experiment Station: R.L. Stroshine
Iowa Agriculture and Home Economics Experiment Station: C.R. Hurburgh, Jr.
Kansas Agricultural Experiment Station: K.C. Behnke
Louisiana Agricultural Experiment Station: H.D. Traylor
Michigan Agricultural Experiment Station: F.W. Bakker-Arkema
Minnesota Agricultural Experiment Station: R.V. Morey
Missouri Agricultural Experiment Station: A.L. Karr
Montana Agricultural Experiment Station: F.V. Dunkel
Nebraska Agricultural Experiment Station: L.B. Bullerman
North Dakota Agricultural Experiment Station: L.F. Backer
Ohio Agricultural Research and Development Center: R.C. Pratt
Texas Agricultural Experiment Station: L.W. Rooney
Washington Agricultural Experiment Station: Y. Pomeranz
Wisconsin Agricultural Experiment Station and Stored-Product Insects
Research Unit, ARS, USDA: W.E. Burkholder
National Economics Division, ERS, USDA: M.N. Leath
National Center for Agricultural Utilization Research, ARS, USDA: J.A. Bietz
Federal Grain Inspection Service, USDA: D.E. Koeltzow
U.S. Grain Marketing Research Laboratory, ARS, USDA: J.L. Steele and C.R. Martin
Cooperative State Research Service, USDA: L.F. Flora
Industry Advisory Committee: R. Swanson
Project Coordinator: N.D. Schmidt
Administrative Advisor: J.H. Brown
Requests:
This bulletin (North Central Regional Research Publication 336) is published by
the Illinois Agricultural Experiment Station. Requests for copies of this bulletin may be sent
to the University of Illinois, Office of Agricultural Communications and Education,
67 Mumford Hall, 1301 West Gregory Drive, Urbana, Illinois 61801.
The participating agricultural experiment stations and government agencies
provide equal opportunities in programs and employment.
The mention of firm names or trade products does not imply that
they are endorsed or recommended by the U.S. Department of Agriculture and the
participating experiment stations over other firms or similar products not mentioned.
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