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UNIVERSITY  OF 

ILLINOIS  LIBRARY 

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AGRICULTURE 


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UNIVERSITY    OF    ILLINOIS    LIBRARY    AT    URBANA-CHAMPAIGN 


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OF  ILUNCUS 
LIBRARY 


t> 


Quality  Preferences 
of  Corn  and  Soybean 
Processors  in  Western 
Europe  and  Japan 

Lowell  D.  Hill,  Karen  L.  Bender, 

Kandeh  Yumkella,  Shailendra  K.  Pradhan, 

and  Kenji  Horiguchi 


Bulletin  801 

University  of  Illinois 

at  Urbana-Champaign 

College  of  Agriculture 

Agricultural 

Experiment 

Station 


^ 


Contents 

Introduction i 

Soybean-Crushing  Industry 2 

Volume  Processed 2 

Origins  of  Imports 3 

Market  Channel 3 

Quality  Factors  Included  in  the  Contracts 3 

Quality  Factors  Measured  by  the  Processors 4 

Full-Fat  Soybean  Industry 5 

Volume  Processed 5 

Origins  of  Imports 6 

Quality  Factors  Included  in  the  Contracts 6 

Quality  Factors  Measured  by  the  Processors 6 

Corn  Wet  Milling  Industry 7 

Volume  Processed 7 

Origins  of  Imports 7 

Market  Channel 8 

Quality  Factors  Included  in  the  Contracts 8 

Quality  Factors  Measured  by  the  Processors 9 

Corn  Dry  Milling  Industry 9 

Volume  Processed 9 

Origins  of  Imports 10 

Market  Channel 10 

Quality  Factors  Included  in  the  Contracts 10 

Quality  Factors  Measured  by  the  Processors 11 

Feed  Manufacturing  Industry : 1 1 

Volume  Processed 11 

Origins  of  Imports 12 

Market  Channel  for  Corn 12 

Quality  Factors  Included  in  the  Contracts 13 

Quality  Factors  Measured  by  the  Processors 14 

Summary  and  Conclusions 14 

Notes 17 

Tables.......  ..18 


UNIVERSITY  Of  IUJNQJS 
AGRICULTURE 


Introduction 

State  and  national  legislation  to  increase  grain 
exports  through  improved  grain  quality  is  often 
influenced  by  complaints  from  processors  in 
importing  countries.  The  questionable  validity 
of  these  complaints  has  prompted  several  stud- 
ies to  determine  the  change  in  grade  factors 
between  origin  and  destination.1  2  3  4  Buyers' 
preferences  for  better  quality  have  been  sug- 
gested as  one  cause  of  shifts  away  from  the 
United  States  as  a  source  of  corn  and  soybeans. 
However,  little  research  exists  that  identifies 
the  quality  preferences  of  processors  in  other 
countries.  Such  information  is  needed  as  a  basis 
for  changing  the  quality  of  U.S.  corn  and 
soybeans  in  order  to  increase  the  demand  for 
U.S.  exports.  U.S.  producers  also  need  to  know 
the  quality  specifications  desired  by  foreign 
buyers  in  order  to  meet  market  demands,  in- 
stead of  searching  for  markets  willing  to  buy 
the  qualities  already  produced. 

Because  grain  is  used  as  an  input  for  many 
different  products  as  well  as  for  direct  human 
consumption,  the  preferences  of  buyers  are 
varied  and  complex.  In  addition,  price  and 
technological  changes  alter  the  optimum  grain 
characteristics,  even  for  a  single  product.  Many 
qualities  of  grain  are  available  from  U.S.  pro- 
ducers and  grain  handlers,  and  genetic  changes 
provide  even  greater  possibility  for  variation 
in  the  future.  Geographical  regions  and  weather 
changes  introduce  additional  short-run  diver- 
sity in  quality. 

A  long  and  complex  marketing  chain  separates 
U.S.  producers  and  plant  breeders  from  the 
processors  in  distant  lands.  Communication  of 
preferences  through  this  market  channel  is 
currently  conducted  via  two  mediums:  (a)  U.S. 
grades  and  standards,  and  (b)  specification  of 
quality  characteristics  in  the  contracts  between 
importers  and  exporters.  The  quality  require- 
ments of  distant  processors  are  matched  with 
available  supplies  in  the  United  States,  using 
one  or  both  of  these  two  techniques.  However, 


neither  of  these  strategies  fully  meets  the  needs 
of  the  buyers. 

In  the  case  of  grades  and  standards,  commu- 
nication is  limited  by  the  number  of  factors 
currently  available  in  the  grades.  The  effec- 
tiveness of  quality  specifications  in  the  contract 
is  limited  by  the  lack  of  agreement  on  the 
definitions  of  quality  factors  and  the  technology 
for  measurement.  The  contractual  approach  to 
quality  is  also  limited  by  the  need  to  achieve 
agreement  about  the  specifications  among  all 
the  buyers  who  may  be  receiving  sublets  from 
the  same  vessel.  In  either  case,  price  differen- 
tials are  set  by  the  market. 

Not  all  the  relationships  between  grain  char- 
acteristics and  processing  yield  or  value  are 
known.  Different  processors  or  end  users  may 
view  the  characteristics  from  different  perspec- 
tives. However,  if  changes  are  to  be  made  in 
U.S.  grain  grades  and  standards  to  more  ac- 
curately describe  real  or  perceived  value  to 
buyers  and  final  users,  it  is  essential  to  identify 
the  preferences  of  buyers  in  each  industry. 
Preferences  may  also  differ  among  countries; 
therefore,  this  study  of  processors'  preferences 
on  two  continents  was  undertaken  to  provide 
a  basis  for  comparison. 

Processors  in  Europe  have  been  an  important 
segment  of  the  export  demand  for  U.S.  corn 
and  soybeans.  Despite  recent  reductions  in 
European  imports  of  corn,  they  continue  to 
represent  an  important  potential  market.  The 
quantity  they  will  import  in  future  years  de- 
pends on  the  growth  in  total  demand  and  on 
their  preferences  for  various  export  origins. 
Although  price  frequently  determines  the  choice 
of  exporter,  the  industrial  users  of  corn  and 
soybeans  in  Europe  are  increasingly  sensitive 
to  differences  in  quality  that  might  increase  or 
decrease  the  value  of  their  processed  products. 

Information  on  European  processors'  choice  of 
origin,  volume  processed,  marketing  channels, 
and  quality  preferences  for  corn  and  soybeans 
was  obtained  during  the  summer  of  1986  by 
a  mail  survey  of 


NOV  2  8 

UNIVERSITY  OF  ILLINOIS 


The  study  was  conducted  in  cooperation  with 
the  Institut  de  Gestion  Internationale  Agro- 
Alimentaire,  an  educational  and  research  in- 
stitute in  Cergy-Pontoise,  France.  In  addition 
to  the  mail  surveys,  personal  interviews  were 
conducted  with  the  five  largest  firms  in  each 
industry.  The  response  rate,  including  the  per- 
sonal interviews,  varied  from  3.2  percent  usable 
responses  in  the  feed  industry  to  55.0  percent 
for  the  soybean  processors  (Table  1).  The  small 
response  rate  from  the  feed  industry  was  due, 
in  part,  to  the  inability  to  differentiate  on  the 
mailing  list  between  those  feed  plants  using 
grain  and  those  producing  specialty  products, 
such  as  vitamin  or  mineral  premixes,  for  whom 
the  questionnaire  was  not  intended. 

Japan  currently  represents  the  largest  single 
market  for  U.S.  corn  and  soybean  exports  in 
the  world  and  continues  to  show  strong  growth 
in  demand.  However,  the  Japanese  have  several 
alternative  sources  from  which  to  import  both 
corn  and  soybeans,  and  their  choice  of  supplier 
is  based  on  quality  and  reliability  as  well  as 
price.  It  is  essential  that  the  quality  preferences 
of  this  important  market  be  recognized  in  order 
to  design  marketing  strategies  to  better  meet 
the  needs  of  these  customers  and  to  retain  or 
increase  U.S.  market  shares. 

The  study  in  Japan  was  conducted  as  a  joint 
venture  between  the  University  of  Illinois  and 
the  Tokyo  University  of  Agriculture.  Japanese 
grain  processing  firms  were  interviewed  over 
a  one-year  period  from  the  fall  of  1986  to  the 
fall  of  1987. 

As  with  the  European  survey,  the  objective  of 
the  Japanese  study  was  to  determine  the  quality 
preferences  of  firms  in  each  industry  as  a  basis 
for  selecting  factors  to  be  included  in  future 
grades  and  standards.  The  survey  also  provided 
estimates  of  growth  in  each  industry.  Individual 
questionnaires  were  received  from  14  feed 
manufacturers  and  11  com  wet  millers.  The  27 
corn  dry  millers  provided  a  single  composite 
response.  The  soybean  crushers  also  provided 
a  joint  response  through  the  Japan  Oilseed 
Processors'  Association  (JOPA),  speaking  for  its 


membership  (Table  2).  The  limited  number  of 
responses  in  both  countries  preclude  statistical 
analysis,  but  the  consistency  in  preferences  and 
unanimity  in  ranking  quality  factors  on  their 
economic  importance  were  sufficient  to  provide 
confidence  in  the  results  presented.  Although 
the  total  number  of  responses  was  small,  ver- 
ification of  general  trends  by  personal  inter- 
views also  provided  confidence  in  several  im- 
portant conclusions  for  each  industry.  In  this 
study,  each  of  the  four  major  industries  is 
described  individually  and  comparisons  are 
made  between  European  and  Japanese  re- 
sponses. 

Soybean-Crushing  Industry 

Forty  questionnaires  were  mailed  to  soybean- 
crushing  firms  in  western  Europe.  Twenty-two 
of  the  twenty-four  responses  were  sufficiently 
complete  to  be  included  in  the  analysis.  In 
Japan,  the  Japan  Oilseed  Processors'  Associa- 
tion insisted  that  it  be  allowed  to  provide  a 
single  consensus  response  to  the  question- 
naires. 

Volume  Processed.  The  total  volume  processed 
by  the  twenty-two  firms  in  Europe  fluctuated 
from  3.9  million  metric  tons  (mmt)  to  5.0  mmt 
with  no  discernable  trend  between  1981  and 
1986  (Table  3).  These  results  compare  closely 
with  aggregate  total  crush  data  during  this 
period.  The  processors  who  responded  repre- 
sented a  range  of  sizes;  the  volume  processed 
by  individual  firms  in  1986  varied  from  1,200 
metric  tons  to  .2.3  mmt.  The  average  volume 
for  1986  was  325,139  mt.  Data  from  JOPA 
showed  a  pattern  of  growth  between  1980  and 
1986.  Soybean  crush  increased  by  12.9  percent 
from  3.45  mmt  in  1980  to  3.90  mmt  in  1986 
(Table  3).  The  annual  rate  of  growth  in  crushing 
capacity  peaked  in  1983  with  an  average  of  2.1 
percent  per  year  for  the  seven-year  period. 

The  future  growth  in  the  volume  of  soybeans 
processed  will  be  influenced  by  many  economic 
and  political  factors.  No  attempt  was  made  in 
this  study  to  predict  future  utilization  or  im- 


ports.  However,  respondents  were  asked  to 
indicate  their  expectations  for  the  industry  for 
the  next  five  years  as  a  measure  of  optimism 
or  pessimism  by  those  people  directly  involved 
in  the  industry.  Twelve  respondents  from  Eu- 
rope anticipated  no  change  in  volume.  Four 
predicted  an  increase  and  three  predicted  a 
decrease.  In  the  aggregate,  these  responses 
suggest  no  significant  plans  for  major  expansion 
and,  therefore,  no  major  growth  in  the  demand 
for  U.S.  soybeans.  In  the  case  of  Japan,  the 
single  response  from  JOPA  indicated  that  soy- 
bean processors  expected  a  growth  rate  of  1  to 
2  percent  per  year,  significantly  less  than  during 
the  previous  five-year  period. 

Origins  Of  Imports.  The  percentage  of  soybean 
volume  imported  by  Europe  from  the  United 
States  during  this  period  declined  from  a  high 
of  87.9  percent  in  1982  to  only  51.2  percent 
in  1985  (Table  4).  The  market  share  of  Argen- 
tina grew  steadily  during  this  period,  while 
Brazil's  share  fluctuated  from  7.4  to  23.9  per- 
cent with  no  discernable  trend. 

The  response  by  JOPA  indicated  that  Japanese 
processors  imported  nearly  all  of  their  soybeans 
from  the  United  States  during  this  time  period. 
This  result  closely  follows  secondary  data  sum- 
marized in  Table  5.  In  addition,  secondary  data 
indicates  China  had  a  small  but  increasing 
share  of  Japanese  imports. 

Market  Channel.  Five  European  soybean  pro- 
cessors purchased  100  percent  of  their  soybeans 
through  European-based  importers,  and  three 
firms  purchased  100  percent  through  brokers. 
Processing  firms  purchasing  through  brokers 
or  importers  are  limited  in  their  ability  to  specify 
factors  other  than  numerical  grade  in  their 
contracts  because  their  orders  must  be  com- 
bined with  those  of  other  processors  to  assem- 
ble a  uniform  lot  consisting  of  the  usual  20  to 
50  thousand  tons  per  vessel. 

Nearly  all  grain  in  Japan  is  purchased  through 
Japanese  trading  companies.  JOPA  reported 
that  100  percent  of  the  soybeans  were  pur- 
chased through  trading  companies. 


Importers,  in  general,  assembled  orders  from 
several  processors  and  distributed  the  shipment 
among  several  plants  after  the  vessel  arrived 
in  Europe.  This  arrangement  required  all  of  the 
processors  to  accept  a  uniform  contract  speci- 
fication. Few  firms  would  be  willing  to  pay  the 
cost  of  a  hold-separation  in  order  to  specify  a 
lower  moisture  or  a  lower  foreign  material 
content  on  a  small  consignment.  Those  firms 
buying  directly  from  U.S.  exporters  were,  in 
general,  larger,  included  fewer  specifications  in 
their  contracts,  and  purchased  a  higher  pro- 
portion of  their  total  volume  from  U.S.  origins 
than  firms  purchasing  through  brokers  or  Eu- 
ropean importing  firms.  The  composite  re- 
sponses from  JOPA  did  not  permit  a  similar 
analysis  of  Japanese  purchases.  Since  Japanese 
crushers  purchase  nearly  all  soybeans  from  a 
single  source  through  trading  companies,  it  is 
unlikely  that  individual  responses  would  have 
generated  enough  variability  to  show  any  re- 
lationship between  market  channel  and  firm 


size. 


Quality  Factors  Included  in  the  Contracts. 

Contracts  between  buyers  and  sellers  of  soy- 
beans may  include  factors  in  addition  to  the 
numerical  grade.  In  the  European  surveys  and 
interviews,  respondents  were  asked  to  identify 
the  quality  factors  which  they  included  in  their 
contracts  with  each  exporting  country.  Of  the 
nineteen  crushers  in  Europe  who  purchased 
soybeans  from  the  United  States,  eighteen  in- 
dicated they  specified  numerical  grade,  fifteen 
indicated  moisture  and  eleven  indicated  foreign 
material  (Table  6).  Ten  crushers  indicated  they 
included  damage  (mold)  and  broken  beans, 
and  eight  reported  including  density  in  their 
contracts.  Since  all  of  the  above  factors  except 
moisture  are  included  in  U.S.  grades,  it  was 
assumed  that  respondents  who  reported  grade 
factors  and  numerical  grade  were  reporting  the 
same  information  twice.  It  is  possible,  but  un- 
likely, that  some  buyers  specified  a  limit  other 
than  that  set  by  the  contract  grade  for  factors 
such  as  density,  damage,  or  broken  beans.  A 
few  respondents  included  other  factors  not  in 


U.S.  grades  in  their  contracts  with  U.S.  ex- 
porters. These  included  germination  (one  re- 
spondent), oil  (two  respondents),  protein  (one 
respondent),  and  fiber  (one  respondent). 

All  soybean  crushers  purchasing  soybeans  from 
European  origins  included  moisture  and  foreign 
material  in  their  contracts.  Two  of  the  three 
respondents  reported  that  they  specified  a  nu- 
merical grade  (Europe  does  not  have  numerical 
grades  for  soybeans),  damage,  and  broken  beans 
in  their  contracts.  Only  one  respondent  re- 
ported that  oil  content  was  included  in  the 
contracts.  These  responses  may  have  referred 
to  purchases  of  U.S.  beans  from  other  European 
firms  because  none  of  these  three  respondents 
reported  purchasing  soybeans  grown  in  Eu- 
rope. 

Of  the  fourteen  processors  who  purchased 
soybeans  from  Argentina,  ten  included  mois- 
ture and  oil  content,  nine  included  foreign 
material,  and  five  included  mold  damage  in 
their  contracts.  Three  respondents  included  the 
percentage  of  broken  beans  in  their  contracts 
with  Argentina. 

Of  the  ten  processors  reporting  purchases  of 
beans  from  Brazil,  eight  indicated  they  included 
moisture,  and  seven  included  foreign  material 
and  oil  content  in  their  contracts  with  Brazil. 
Five  processors  included  mold  damage  and  four 
included  the  percentage  of  broken  beans  in 
their  Brazilian  contracts. 

There  are  many  differences  in  contracts  with 
the  various  countries  of  origin.  Purchases  from 
U.S.  exporters  were  most  frequently  based  on 
numerical  grade  and  moisture.  Moisture  was 
also  the  most  frequent  factor  specified  in  con- 
tracts with  other  countries.  Oil  content  was 
included  in  the  majority  of  contracts  with  Brazil 
and  Argentina,  but  only  two  respondents  in- 
cluded oil  in  their  contract  with  the  United 
States.  Only  one  respondent  relied  on  the  fair 
average  quality  (FAQ)  contract;  no  individual 
factors  were  specified  in  that  contract. 

It  is  evident  from  these  responses  that  European 
processors  were  concerned  about  most  of  the 


physical  properties  of  soybeans,  especially 
moisture  content,  foreign  material,  mold  dam- 
age, and  broken  beans.  Although  several  chem- 
ical properties  were  mentioned  by  the  respond- 
ents, the  only  factor  included  in  contracts  by 
a  majority  of  the  firms  was  oil  content  and 
then  only  with  Argentina  and  Brazil. 

The  Japanese  processors,  like  their  European 
counterparts,  placed  more  emphasis  on  the 
physical  properties  than  the  chemical  properties 
of  soybeans.  In  addition  to  the  four  physical 
properties  listed  by  the  Europeans,  the  Japanese 
also  specified  density.  Japanese  processors  re- 
ported that  no  chemical  factors  were  specified 
in  contracts.  Not  enough  soybeans  were  pur- 
chased from  Argentina  and  Brazil  to  permit  a 
comparison  of  contract  terms. 

Quality  Factors  Measured  by  the  Processors. 

While  information  on  many  factors  may  be 
requested  from  sellers,  those  selected  are  usu- 
ally automatically  included  in  standard  con- 
tracts and  export  grades.  A  better  measure  of 
the  relative  importance  of  the  various  chemical 
and  physical  properties  is  the  frequency  with 
which  firms  measured  quality  characteristics  in 
their  plant.  It  was  assumed  that  plant  managers 
conducted  only  those  tests  that  provided  in- 
formation more  valuable  than  the  cost  of  test- 
ing. Using  this  criterion,  the  most  important 
factors  for  European  soybean  processors  are 
moisture,  oil,  and  foreign  material  (Figure  1). 
More  than  80  percent  of  the  respondents 
checked  the  level  of  these  factors  on  every 
delivery.  Protein  ranked  fourth  in  importance 
with  79  percent  of  the  respondents  testing  for 
it  every  delivery.  The  level  of  damage  and 
protein  was  tested  by  two-thirds  of  the  re- 
spondents. Blanks  left  by  the  respondents  were 
not  assumed  to  be  an  implicit  "never  tested," 
although  that  may  have  been  their  intention. 
However,  21.1  percent  and  5.3  percent  of  the 
respondents  checked  "seldom"  or  "never,"  re- 
spectively, for  the  factor  of  density.  The  infor- 
mation least  desired  (i.e.,  density)  is  provided 
automatically  in  U.S.  grades  but  not  in  the 
grades  of  Argentina  and  Brazil.  Oil  content  (not 


included  in  grades  of  any  exporting  country) 
was  second  only  to  moisture  in  its  importance 
to  processors.  The  Japanese  processors  indi- 
cated that  all  physical  and  chemical  properties 
were  measured  in  every  delivery. 

Full-Fat  Soybean  Industry 

The  processing  of  full-fat  soybeans  (FFSB)  is  a 
subsector  of  the  soybean  processing  industry 
in  the  European  market  with  some  unique 
characteristics.  Six  of  twelve  known  FFSB  pro- 
cessors in  the  EC- 10  responded  to  the  ques- 
tionnaires. The  small  sample  is  inadequate  for 
statistical  analyses,  but  the  trends  suggest  some 
tentative  conclusions.5 

Of  the  six  respondents  processing  FFSB  in  1986, 
only  two  were  in  business  in  1980.  Two  of  the 
six  firms  entered  the  industry  in  1981  and  two 
more  in  1983.  The  quantity  of  soybeans  pro- 
cessed increased  rapidly  through  1983;  how- 
ever, in  1984,  the  high  price  of  soybeans  relative 


to  alternative  ingredients,  especially  soybean 
meal,  caused  a  decrease  in  the  use  of  FFSB 
(Table  7).  Although  soybean  imports  to  the  EC 
for  all  purposes  declined  in  1984  and  1986, 
the  tonnage  of  FFSB  processed  remained  almost 
constant  between  1984  and  1985.  The  1986 
tonnage  rose  as  soybean  prices  dropped  relative 
to  prices  of  soybean  meal. 

Full-fat  soybeans  are  produced  by  roasting  or 
extruding  whole  soybeans  to  kill  the  trypsin 
inhibitor  present  in  raw  soybeans.  The  roasted 
or  extruded  FFSB  are  used  mainly  in  swine 
and  poultry  rations  where  they  provide  both 
high  quality  protein  and  energy.  The  protein 
and  energy  available  in  FFSB  allow  the  pro- 
cessors to  replace  a  portion  of  feed  grains  that 
supply  energy. 

Volume  Processed.  Estimated  use  of  soybeans 
by  FFSB  processing  firms  exceeded  six  percent 
of  the  soybeans  imported  by  the  EC- 10  in 
1986.  In  the  United  Kingdom,  nearly  33  percent 


SOYBEAN  PROCESSING 
WET  MILLING 
DRY  MILLING 


Figure  1 

Percentage  of  European 
respondents  reporting 
measurement  of  selected 
quality  characteristics  on 
every  delivery. 


of  1986  soybean  imports  went  to  FFSB  pro- 
cessors. While  processing  of  FFSB  increased  48 
percent  between  1985  and  1986,  EC  imports 
of  soybeans  for  all  uses  dropped  slightly,  de- 
spite a  fall  in  soybean  prices.  The  average 
production  volume  per  responding  firm  in  the 
EC-10  in  1986  was  53,000  metric  tons.  Full- 
fat  processors  thus  had  a  small,  but  important 
part  in  keeping  EC  soybean  imports  from  falling 
further.  The  importance  of  the  FFSB  industry 
has  been  recognized  by  others.  An  increase  in 
EC  soybean  imports  in  late  1986,  despite  an 
increase  in  domestic  oilseed  production,  was 
noted  by  the  editor  of  Oil  World,  who  suggested 
that  one  explanation  for  this  occurrence  was 
"the  pick-up  in  usage  of  whole,  toasted  soy- 
beans in  mixed  feeds."6 

Origins  Of  Imports.  The  importance  of  the  FFSB 
industry  to  U.S.  farmers  lies  not  only  in  the 
quantity  of  soybeans  imported  by  the  EC,  but 
also  in  the  country  of  origin.  In  1982,  a  high 
of  92  percent  of  the  soybeans  used  by  the  FFSB 
companies  surveyed  was  imported  from  the 
United  States  (Table  8).  That  share  fell  to  87.6 
percent  in  1983,  79.2  percent  in  1984,  and  76.4 
percent  in  1985.  The  loss  of  market  share  in 
total  EC  imports  followed  a  similar  pattern 
(Table  4).  The  proportion  of  volume  imported 
from  U.S.  sources  was  generally  higher  in  the 
FFSB  industry  than  in  the  EC  soybean  oil  and 
meal  industry.  The  percentage  of  soybeans  im- 
ported from  Brazil  and  Argentina  for  FFSB 
processing  offsets  the  decline  in  imports  from 
the  United  States,  increasing  from  6  percent  in 
1982  to  22  percent  in  1985  (Table  8).  This 
reversed  the  situation  from  the  early  1980s, 
when  the  increasing  U.S.  market  share  offset 
declines  in  imports  from  Brazil  and  Argentina. 

Quality  Factors  Included  in  the  Contracts.  FFSB 

processors  choose  the  origin  of  their  soybeans 
according  to  quality  and  price.  The  processing 
of  feed  from  whole  soybeans  requires  that  the 
nutritional  values  of  the  soybeans  meet  mini- 
mum specifications.  This  will  assure  the  quality 
of  the  complete  feed.  The  percentage  of  oil, 
protein,  moisture,  and  foreign  material  all  in- 


fluence the  nutritional  value  of  the  FFSB  used 
in  swine  and  poultry  rations. In  addition  to  the 
numerical  grade  specified  in  contracts  with  the 
United  States,  four  of  the  six  FFSB  companies 
responding  to  the  survey  included  moisture 
content,  and  two  included  foreign  material, 
damage,  and  density  (Table  9).  Only  one  com- 
pany reported  that  protein  and  oil  content  were 
included  in  its  contracts  with  the  United  States, 
and  only  one  firm  included  oil  content  in 
contracts  with  Argentina. 

Quality  Factors  Measured  by  the  Processors. 

Sixty-seven  percent  of  the  firms  measured 
moisture,  oil,  and  protein  content  of  every 
shipment  received.  Only  thirty-three  percent 
of  the  firms  indicated  that  they  measured  the 
numerical  grade,  density,  and  foreign  material 
content  of  every  delivery.  This  suggests  that 
moisture,  protein,  and  oil  content  are  the  most 
important  qualities  to  FFSB  processors,  al- 
though moisture  content  is  the  only  character- 
istic (in  addition  to  numerical  grade)  that  is 
routinely  included  in  contracts. 

The  physical  properties  of  soybeans  that  are 
important  for  FFSB  processing  are  similar  to 
the  desired  physical  properties  of  soybeans 
purchased  for  crushing.  The  main  divergence 
between  the  FFSB  processors  and  the  oil  crush- 
ing industry  was  that  83  percent  of  the  crushers 
indicated  measuring  foreign  material  in  the 
soybeans  on  every  delivery,  while  only  33 
percent  of  the  responding  FFSB  firms  indicated 
doing  so.  It  appears  that  soybean  crushers  and 
FFSB  processors  demand  nearly  the  same  qual- 
ity characteristics  in  their  soybeans,  but  that 
low  foreign  material  is  more  important  to  crush- 
ers than  to  the  FFSB  industry.  This  is  a  logical 
difference  because  foreign  material  at  desti- 
nation consists  largely  of  broken  beans  and 
edible  plant  material.  This  foreign  material 
usually  provides  energy  in  feed  rations,  but  it 
may  often  create  problems  in  production  of 
oil.  The  foreign  material  caused  few  problems 
for  FFSB  firms,  unless  it  reduced  the  oil  and 
protein  content  of  the  final  product. 


Corn  Wet  Milling  Industry 

Twenty-one  questionnaires  were  mailed  to  firms 
in  the  wet  milling  industry  in  Europe  whose 
primary  products  were  starch  and  corn  sweet- 
eners. Nine  of  the  ten  respondents  provided 
sufficient  information  for  analysis.  Eleven  ques- 
tionnaires were  received  from  wet  millers  in 
Japan;  these  included  all  major  processing  firms. 

Volume  Processed.  The  total  volume  of  corn 
processed  by  the  nine  respondents  in  Europe 
increased  steadily  from  1.65  mmt  in  1981  to 
2.99  mmt  in  1985,  then  declined  to  2.08  mmt 
in  1986  (Table  10).  The  quantity  of  corn  pro- 
cessed by  individual  firms  varied  from  40,000 
mt  to  440,000  mt  in  1986.  The  average  volume 
processed  in  1986  was  260,375  mt. 

The  total  volume  of  corn  processed  by  the  wet 
milling  industry  in  Europe  is  influenced  by 
many  economic  and  political  factors.  The  major 
growth  between  1981  and  1985  was  stimulated 
by  strong  demand  for  starch  and  corn  sweet- 
eners, aided  by  national  policies  encouraging 
the  use  of  corn  for  starch.  In  addition  to 
processing  a  larger  percentage  of  domestic  corn, 
European  millers  have  also  shifted  from  corn 
to  wheat  as  a  feed  stock  for  their  production 
of  starch.  This  shift  was  largely  the  result  of 
changes  in  agricultural  policies.7 

When  respondents  were  asked  to  identify  their 
expectations  about  the  volume  of  corn  pro- 
cessed during  the  next  five  years,  six  of  the 
nine  anticipated  no  change  in  total  volume, 
two  predicted  an  average  increase  of  eight 
percent,  and  one  did  not  respond.  Of  the  two 
respondents  predicting  growth,  one  indicated 
plans  for  plant  expansion  and  the  other  thought 
the  growth  would  be  industrywide.  This  indi- 
cates that,  in  the  aggregate,  European  wet 
milling  firms  do  not  have  plans  for  major 
expansion,  and  there  will  be  little  or  no  growth 
in  corn  import  demand  from  the  United  States 
or  other  origins  for  use  in  wet  milling.  Several 
respondents  who  predicted  no  change  in  the 
future  commented  that  any  growth  in  demand 


for  starch  processing  would  be  met  by  wheat 
rather  than  corn. 

The  quantity  of  corn  processed  by  corn  wet 
millers  in  Japan  increased  steadily,  from  1.46 
mmt  in  1981  to  2.47  mmt  in  1985  (Table  11). 
In  1986,  the  trend  reversed  showing  a  slight 
decline  to  2.33  mmt,  a  5.9  percent  reduction 
from  the  previous  year.  The  average  annual 
quantity  of  corn  processed  per  firm  was  21 1,363 
mt  in  1986,  ranging  from  132,500  mt  in  1981 
to  224,600  mt  in  1985.  There  was  an  overall 
increase  in  the  volume  of  corn  processed  in 
the  wet  milling  industry,  as  well  as  an  increase 
in  the  average  capacity  per  firm. 

All  but  three  of  the  corn  wet  millers  anticipated 
an  increase  in  the  quantity  of  corn  processed 
in  the  Japanese  wet  milling  industry,  projecting 
an  average  annual  growth  of  about  2.9  percent 
in  the  quantity  of  corn  processed.  The  proces- 
sors indicated  that  this  growth  will  depend  on 
growth  in  the  Japanese  economy,  population 
growth,  the  extent  to  which  processing  firms 
diversify  their  products,  and  the  extent  to  which 
starch  is  imported  into  Japan  from  other  coun- 
tries. 

Origins  Of  Imports.  The  United  States  has  lost 
volume  and  market  share  in  the  European  wet 
milling  industries  (Table  10).  The  percentage 
of  European  corn  imports  coming  from  the 
United  States  decreased  from  a  high  of  81.5 
percent  in  1981  to  13.8  percent  in  1986.  The 
share  from  European  sources  showed  a  steady 
growth  from  17.7  percent  in  1981  to  86.2 
percent  in  1986  —  nearly  a  five-fold  increase 
within  the  six-year  period.  The  market  share 
from  Argentina  fluctuated  from  a  low  of  0.4 
percent  to  a  high  of  3.3  percent  during  this 
time  period. 

The  survey  data  for  corn  wet  millers  in  Japan 
show  that  the  major  sources  of  corn  imports 
are  the  United  States,  South  Africa,  and  China. 
These  three  countries  accounted  for  over  90 
percent  of  total  corn  imports  from  1981  to  1984 
(Table  11),  with  South  Africa  and  the  United 
States  as  the  primary  sources.  The  U.S.  share 


of  Japanese  corn  imports  increased  from  an  all- 
time  low  of  12.3  percent  in  1981  to  a  high  of 
88  percent  in  1984,  followed  by  sharp  declines 
in  1985  and  1986.  The  South  African  share 
changed  inversely  with  the  U.S.  share,  indi- 
cating an  almost  direct  substitution  between 
the  two  countries.  The  South  African  share 
was  in  part  determined  by  the  availability  of 
imports  during  South  Africa's  drought  periods. 
Corn  imports  from  China  accounted  for  less 
than  one  percent  of  total  import  volume  until 
1984,  when  China's  share  of  the  corn  imports 
increased  to  6.0  percent.  In  1985,  this  share 
jumped  to  21.1  percent,  coinciding  with  Chin- 
a's large  increase  in  domestic  production.  In 
1986  China's  share  declined  to  13.6  percent. 
Corn  imports  from  Argentina  were  minimal. 

Market  Channel.  Three  European  wet  milling 
firms  reported  purchasing  100  percent  of  their 
corn  through  European  importers,  and  one  firm 
reported  purchasing  95  percent  of  their  corn 
through  European  importers.  One  respondent 
purchased  86  percent  of  the  corn  directly  from 
U.S. -based  exporters,  and  four  firms  did  not 
specify  the  methods  of  purchase.  In  Japan,  all 
but  one  firm  in  the  wet  milling  industry  re- 
ported purchasing  100  percent  through  Japa- 
nese trading  companies.  The  one  exception 
purchased  85  percent  of  its  grain  from  trading 
companies  and  15  percent  from  U.S.  exporters. 

Quality  Factors  Included  in  the  Contracts.  All 

of  the  seven  European  wet  milling  firms  pur- 
chasing corn  from  the  United  States  reported 
that  their  contracts  specified  numerical  grade 
(Table  12).  Six  of  the  seven  reported  that  mois- 
ture was  also  specified.  The  major  grade  factors 
such  as  damage,  broken  corn,  and  foreign 
material  were  also  identified  by  three  respond- 
ents. It  can  be  assumed  that  this  identification 
was  simply  an  elaboration  because  these  factors 
are  automatically  part  of  the  numerical  grades. 
Two  firms  reported  using  contracts  specifying 
chemical  factors  that  were  not  a  part  of  U.S. 
grades. 

Five  of  the  seven  firms  purchasing  corn  from 
Europe  included  moisture  in  their  contracts, 


and  four  reported  that  they  also  specified  levels 
of  mold  damage,  broken  corn  and  foreign 
material  in  their  contracts.  Two  firms  reported 
including  germination  in  their  contracts  with 
European  sellers.  One  firm  reported  that  the 
country  of  origin  was  the  only  quality  control 
stipulation  included  in  its  contracts. 

Only  two  respondents  reported  purchasing  corn 
from  Argentina.  One  firm  specified  moisture 
content  and  germination,  the  other  firm  relied 
on  the  London  Grain  and  Feed  Trade  Associ- 
ation's FAQ  contract  to  assure  acceptable  qual- 
ity. 

Only  the  U.S.  and  European  origins  had  a 
sufficient  number  of  responses  to  permit  a 
comparison  of  origins  with  differences  in  fac- 
tors in  the  contract.  These  responses  showed 
that  numerical  grade  was  the  basis  for  quality 
specification  in  purchases  from  the  United 
States.  European  contracts  relied  primarily  on 
specification  of  individual  factors,  which  were 
often  the  same  as  those  included  in  U.S.  grades. 
The  exception  was  density  (test  weight),  which 
is  a  grade-determining  factor  in  U.S.  grades, 
but  was  not  included  in  the  contracts  with  any 
other  countries  supplying  corn. 

Eight  wet  millers  in  Japan  included  moisture 
content  in  their  contracts  when  purchasing  corn 
from  the  United  States  (Table  13).  Five  out  of 
eleven  corn  wet  millers  indicated  that  they 
included  numerical  grade,  damage,  broken  corn 
and  foreign  material  in  their  contracts.  Only 
one  firm  specified  density  in  its  contract.  Four 
chemical  factors  were  specified  by  four  corn 
wet  millers,  namely,  starch,  protein,  fiber,  and 
oil.  The  type  and  frequency  of  quality  factors 
specified  in  South  African  contracts  were  gen- 
erally similar  to  those  in  the  U.S.  contracts, 
except  that  there  were  slightly  more  millers 
specifying  numerical  grade  and  foreign  material 
in  the  South  African  contracts. 

Contracts  for  China  included  only  four  factors, 
namely,  moisture  content,  damage  by  mold, 
broken  corn  and  foreign  material.  Only  two 
respondents  specified  moisture,  and  one  re- 


spondent  specified  the  other  three  character- 
istics. 

Quality  Factors  Measured  by  the  Processors. 

More  than  85  percent  of  the  European  firms 
responding  to  the  questionnaire  measured 
moisture,  damage,  broken  corn  and  foreign 
material  on  every  delivery  (Figure  1).  Thirty- 
seven  percent  of  the  respondents  checked  nu- 
merical grade,  and  50  percent  checked  protein 
content  on  every  delivery.  Twenty-five  percent 
of  the  respondents  reported  testing  for  density 
on  a  regular  basis,  and  one  firm  noted  that  it 
never  analyzed  samples  for  density.  Although 
starch  and  oil  have  the  highest  value  of  the 
products  from  the  wet  milling  industry,  few 
firms  reported  testing  for  these  properties.  The 
lack  of  variability  in  starch  and  oil  contents 
may  be  a  partial  explanation. 

Wet  millers  in  Japan  appeared  to  test  more 
frequently  for  a  larger  number  of  quality  char- 
acteristics than  European  millers  (Figure  2). 


Moisture  was  tested  on  every  delivery  by  100 
percent  of  the  respondents;  foreign  material, 
starch,  protein,  and  oil  content  were  tested  by 
80  percent  of  the  respondents;  broken  corn  by 
70  percent;  mold  damage  and  fiber  by  60 
percent;  and  density  by  40  percent  of  the  corn 
wet  millers  responding  to  the  survey. 

Corn  Dry  Milling  Industry 

Questionnaires  were  mailed  to  seventeen  firms 
identified  as  the  dry  milling  industry  in  Europe. 
Of  the  six  responses,  five  provided  sufficient 
information  for  analysis.  Japan  dry  millers  pro- 
vided only  one  joint,  unanimous  response  for 
the  entire  industry,  assembled  by  the  Japan 
Corn  Grits  Association  (JCGA). 

Volume  Processed.  The  total  volume  of  corn 
processed  by  the  five  respondents  in  Europe 
increased  steadily  from  280,000  mt  in  1981  to 
449,000  mt  in  1986  (Table  14).  The  quantity 
of  corn  processed  in  1986  by  individual  mills 


80 
70 
60 
50 
40 
30 
20 
10 
0 


•  II   II 

I   II   •   I  II   II 

I   II   II   II  II 

•  •   •   II  II 

•  •   II   II  II 

II   II   II   II  II 


C9 


—  ^K  •  ?S 


I 


WET  MILLING 


Figure  2 

Percentage  of  Japanese 
respondents  reporting 
measurement  of 
selected  quality 
characteristics  on 
every  delivery. 


varied  from  15,000  mt  to  155,000  mt,  with  an 
average  size  of  89,800  mt. 

In  response  to  the  question  of  future  growth 
in  the  volume  of  corn  processed  in  Western 
Europe,  two  respondents  anticipated  no  change, 
three  respondents  anticipated  an  increase,  one 
indicated  expectations  of  a  2  percent  increase 
in  the  next  five  years,  and  another  anticipated 
a  growth  of  20  percent.  On  the  average,  this 
suggests  a  slight  increase  in  demand  for  corn 
by  European  dry  milling  industries. 

In  Japan,  the  quantity  of  corn  used  in  the  dry 
milling  subsector  ranged  from  a  low  of  267,000 
mt  in  1982  to  a  high  of  330,000  mt  in  1986 
(Table  15).  From  1980  to  1986,  corn  use  in 
Japan  increased  by  11.5  percent.  The  largest 
annual  increase  in  usage  occurred  in  the  1984 
to  1985  period.  The  average  total  quantity 
processed  from  1980  to  1986  was  303,100  mt. 
Without  questionnaires  from  individual  firms, 
no  further  analysis  of  size  distribution  was 
possible. 

In  Japan,  the  association  of  corn  dry  millers 
reporting  on  behalf  of  their  membership  antic- 
ipated a  3  to  4  percent  annual  growth  in  the 
quantity  of  corn  used  by  their  industry  over 
the  next  five  years. 

Origins  Of  Imports.  The  percentage  of  corn 
imported  by  Europe  from  the  United  States 
during  the  study  period  fluctuated  from  ap- 
proximately 6.8  percent  in  1982  to  21.8  percent 
in  1984,  with  no  discernable  trend  (Table  14). 
The  percentage  of  corn  purchased  from  South 
Africa  exhibited  a  significant  decline  from  a 
high  of  47.5  percent  in  1981  to  only  4.2  percent 
in  1985  and  zero  in  1986.  In  contrast,  Argen- 
tina's market  share  increased  dramatically  from 
zero  percent  in  1981  through  1984  to  29.9 
percent  in  1985  and  20.7  percent  in  1986. 
Purchases  from  European  sources  showed  a 
significant  increase  from  zero  in  1981  to  43.1 
percent  in  1985,  followed  by  a  decline  in  1986. 
In  general,  the  declining  U.S.  share  was  offset 
by  increases  from  Europe  and,  in  recent  years, 
from  Argentina.  The  preference  of  European 


dry  millers  for  hard  endosperm  corn  is  evident 
in  the  higher  proportion  of  their  purchases 
from  Argentina  and  Europe  where  flint  varieties 
are  grown. 

There  was  no  consistent  pattern  in  the  annual 
volume  of  corn  purchased  by  Japanese  dry 
millers  from  various  sources  (Table  15).  Japa- 
nese corn  dry  millers  purchased  corn  mainly 
from  the  United  States  and  South  Africa.  The 
percentage  of  corn  purchased  from  the  United 
States  was  above  55  percent  for  all  years  except 
1982,  when  it  dropped  to  40  percent.  The  South 
African  market  share  was  below  40  percent  for 
all  years  (reaching  a  low  of  5  percent  in  1984 
and  1985)  except  1982,  when  their  share  reached 
60  percent.  China's  share  of  the  market  was 
zero  from  1980  to  1983,  increasing  to  5  percent 
in  1984,  30  percent  in  1985,  and  20  percent  in 
1986.  No  purchases  were  made  from  Argentina 
except  in  1984,  when  it  accounted  for  5  percent 
of  the  market. 

Market  Channel.  Dry  millers  in  Europe  pur- 
chased corn  primarily  through  European-based 
brokers.  However,  two  firms  indicated  pur- 
chasing their  entire  volume  directly  from  U.S. 
exporters. 

In  Japan,  all  but  two  of  the  dry  milling  firms 
purchased  100  percent  of  their  corn  from  Jap- 
anese trading  companies.  One  firm  reported 
purchasing  75  percent  of  its  total  volume  di- 
rectly from  U.S.  exporters.  A  second  firm  re- 
ported purchasing  5  percent  from  U.S.  export- 
ers. 

Quality  Factors  Included  in  the  Contracts.  All 

three  of  the  European  mills  that  purchased 
corn  from  the  United  States  specified  numerical 
grade  and  moisture  content  in  their  contract 
specifications  (Table  16).  One  respondent  in- 
cluded several  factors  generally  associated  with 
the  yield  of  flaking  grits,  such  as  hardness, 
stress  cracks,  and  variety.  All  three  of  the  mills 
who  purchased  corn  from  Europe  included 
moisture  in  their  contracts.  Two  included  the 
factors  of  mold  damage,  broken  corn  and  for- 
eign material.  One  reported  that  numerical 


10 


grade  was  included  in  the  contract,  although 
Europe  does  not  have  numerical  grades  for 
corn  in  domestic  trade.  Purchases  from  Argen- 
tina were  reported  by  only  two  firms.  Both 
indicated  the  use  of  FAQ  contracts  with  no 
other  factors  identified.  The  one  firm  purchas- 
ing corn  from  South  Africa  reported  the  use 
of  numerical  grade  as  the  only  quality  factor 
in  the  contract. 

The  Japan  Corn  Grits  Association  indicated 
that  its  members  specified  numerical  grade, 
moisture  content,  mold  damage,  broken  grain 
and  foreign  materials  in  U.S.  contracts.  Con- 
tracts for  China,  South  Africa,  and  Argentina 
included  all  of  these  factors,  except  mold  dam- 
age. 

Quality  Factors  Measured  by  the  Processors. 

One-hundred  percent  of  the  respondents  in 
Europe  answering  the  question  on  factors 
measured  indicated  that  they  measured  mois- 
ture and  mold  damage  on  every  delivery  to 
their  plant  (Figure  1).  Eighty  percent  reported 
that  they  checked  for  broken  corn  and  foreign 
material  in  every  delivery.  Sixty  percent  checked 
for  density  in  every  delivery,  and  forty  percent 
of  the  respondents  indicated  they  measured 
stress  cracks,  protein  content,  and  oil  content, 
and  conducted  floater  tests  on  every  delivery. 
Twenty  percent  measured  hardness  and  flin- 
tiness  on  every  delivery.  The  contrast  with  the 
responses  from  the  wet  milling  industry  indi- 
cates the  relatively  greater  importance  of  den- 
sity and  hardness  in  the  dry  milling  industry. 

In  Japan,  the  JCGA  reported  that  it  measured 
every  factor  listed  in  the  questionnaire  on  every 
delivery. 

Feed  Manufacturing 
Industry 

Surveys  were  sent  to  a  random  sample  of  810 
firms  identified  as  feed-related.  At  the  time  of 
the  mailing,  information  was  not  available  that 
would  distinguish  between  feed-related  firms 
purchasing  corn  and  those  not  purchasing  corn. 


Because  most  feed-related  firms  were  not  pur- 
chasing corn,  a  low  response  rate  was  expected. 
Of  the  thirty-six  returned  responses,  twenty- 
six  were  sufficiently  complete  to  be  included 
in  the  analysis.  The  original  Japanese  mailing 
list  identified  67  firms  in  the  feed  industry. 
Fourteen  firms  returned  completed  question- 
naires. 

Volume  Processed.  Data  were  obtained  from 
the  European  respondents  on  the  volumes  of 
corn,  corn  gluten  meal,  and  soybean  meal 
processed  domestically.  The  volume  of  corn 
processed  varied  from  1.37  mmt  in  1981  to 
2.25  mmt  in  1986,  reflecting  a  steady  growth 
(Table  17).  The  size  of  the  firm  varied  widely 
with  the  1986  annual  volume  of  individual 
firms  ranging  from  150  mt  to  1,000  mmt.  The 
total  volume  of  soybean  meal  processed  by  the 
respondents  increased  steadily  from  1.04  mmt 
in  1981  to  2.01  mmt  in  1986  (Table  18).  Its 
growth  was  slowed,  in  part,  by  the  availability 
of  corn  gluten  feed.  The  total  volume  of  corn 
gluten  meal  processed  by  the  respondents  in- 
creased dramatically  from  270,000  mt  in  1981 
to  almost  1.5  mmt  in  1986,  reflecting  the  in- 
creased supply  of  corn  gluten  meal  as  a  by- 
product of  U.S.  wet  milling  industries  (Table 
19).  In  the  absence  of  import  restrictions,  Eu- 
ropean feed  firms  substituted  corn  gluten  meal 
for  other  feed  ingredients. 

When  asked  their  expectations  for  future  growth 
of  the  feed  industry,  five  mills  indicated  that 
they  did  not  anticipate  any  change  in  volume, 
five  respondents  anticipated  an  increase,  and 
nine  predicted  a  decrease.  Seven  firms  did  not 
respond  to  the  question.  In  the  aggregate,  this 
suggests  no  major  expansion  in  the  European 
feed  industry  and  the  possibility  of  a  decline 
in  the  total  volume  of  corn  purchased. 

The  fourteen  Japanese  feed  manufacturers  who 
responded  to  the  survey  did  not  provide  data 
on  quantities  processed.  However,  estimates  by 
industry  experts  in  Japan  suggested  that  ap- 
proximately 24  million  metric  tons  of  composite 
and  mixed  feed  were  produced  in  1983.  Annual 
volume  in  1983  ranged  from  100,000  mt  to 


11 


8.96  mmt,  with  an  average  of  358,209  mt  for 
the  total  of  67  surveyed  firms  in  the  industry. 
When  asked  to  indicate  their  expectations  of 
industry  growth  for  the  next  five  years,  nine 
firms  indicated  an  expected  increase  in  volume 
of  corn  purchased  varying  from  1.2  percent  to 
30  percent.  Two  respondents  expected  a  de- 
crease of  1  percent  and  5  percent,  respectively. 
One  respondent  anticipated  no  change;  two 
did  not  respond  to  the  question.  Combining 
the  diverse  answers  indicates  that  there  will  be 
continued  growth  in  demand  for  U.S.  feed 
grains.  Respondents  also  provided  an  expla- 
nation for  their  answers.  Those  predicting  ex- 
pansion in  the  industry  attributed  the  growth 
to  increased  consumption  of  meat,  growth  of 
the  livestock  industries,  and  an  increase  in  the 
use  of  corn  in  manufactured  feeds.  One  re- 
spondent predicted  a  decrease  in  the  demand 
for  feed  and  attributed  this  to  increased  imports 
of  livestock  products  as  demand  increases.  The 
other  respondent  who  predicted  a  decrease  in 
corn  use  related  the  decline  to  a  possible  in- 
crease in  the  price  of  corn. 

Origins  Of  Imports.  The  percentage  of  corn 
volume  imported  from  the  United  States  by 
the  European  feed  manufacturing  firms  de- 
clined continuously  from  18.1  percent  in  1981 
to  about  10  percent  in  1986  (Table  17).  The 
Argentine  share  showed  steady  growth  from 
0.4  percent  in  1981  to  4.8  percent  in  1985. 
However,  it  dropped  to  only  0.2  percent  in 
1986.  The  percent  of  corn  supplied  domestically 
(primarily  from  France)  fluctuated  around  the 
80  percent  level  until  1986  when  it  jumped  to 
a  record  high  of  88.3  percent. 

The  U.S.  share  of  the  European  soybean  meal 
import  market  was  only  8.1  percent  at  its  peak 
in  1983  and  had  fallen  to  only  5.4  percent  in 
1986.  Of  more  significance  was  the  gradual 
decline  in  the  percentage  of  soybean  meal 
purchased  domestically  (from  42.6  percent  in 
1981  to  32.7  percent  in  1986)  and  from  Brazil 
(28.7  percent  in  1981  to  24.1  percent  in  1985). 
Argentina  replaced  imports  from  both  countries 
with  an  increase  in  its  market  share  from  20.9 


percent  in  1981  to  30.9  percent  in  1985.  In 
1986,  however,  Brazil's  market  share  increased 
dramatically  to  38.5  percent,  while  Argentina's 
market  share  dropped  to  22.1  percent. 

The  percentage  of  European  corn  gluten  meal 
purchases  imported  from  the  United  States 
increased  dramatically  during  this  period  from 
a  low  of  38.9  percent  in  1981  to  83.7  percent 
in  1986  (Table  19).  In  contrast,  the  percentage 
of  corn  gluten  meal  purchased  from  domestic 
sources  in  Europe  declined  from  60.3  percent 
in  1981  to  only  16.0  percent  in  1986.  Similarly, 
the  percentage  imported  from  countries  other 
than  Europe  and  the  United  States  declined 
from  1.1  percent  in  1981  to  0.3  percent  in  1986. 
This  came  not  as  a  result  of  major  decreases 
in  the  volume  purchased  from  other  sources, 
but  as  a  result  of  the  dramatic  increase  from 
U.S.  sources. 

Corn  purchases  by  Japanese  feed  manufactur- 
ers primarily  originated  in  the  United  States. 
Over  90  percent  of  the  feed  manufacturers 
reported  purchasing  60  percent  or  more  of  their 
corn  requirements  from  the  United  States.  Some 
corn  was  also  purchased  from  China  and  Ar- 
gentina in  1985  and  1986,  but  there  was  no 
indication  of  a  trend  toward  these  other  coun- 
tries. Thirteen  of  the  fourteen  feed  manufac- 
turers who  responded  to  the  questionnaire  pur- 
chased between  80  and  100  percent  of  their 
soybean  meal  and  corn  gluten  meal  require- 
ments from  Japanese  crushers  between  1982 
and  1986.  The  remaining  20  percent  was  pur- 
chased from  the  United  States.  The  proportion 
purchased  from  the  United  States  increased 
slightly  in  1985  and  1986. 

Market  Channel  for  Corn.  Seven  European  feed 
manufacturers  purchased  100  percent  of  their 
corn  through  European  importers,  three  firms 
purchased  their  entire  volume  through  brokers, 
and  only  one  firm  purchased  100  percent  of 
its  corn  through  a  U.S. -based  exporter. 

In  the  case  of  Japan,  the  majority  of  grain  was 
purchased  through  Japanese  Trading  Compa- 
nies (JTC).  Ten  firms  purchased  grain  exclu- 


12 


sively  through  JTC;  one  purchased  95  percent 
through  JTC  and  5  percent  from  U.S.  exporting 
firms.  Only  one  firm  indicated  that  75  percent 
of  its  raw  grain  procurement  was  handled  by 
U.S. -based  firms.  Two  firms  did  not  respond 
to  the  question. 

Quality  Factors  Included  in  the  Contracts.  Of 

the  seven  European  feed  manufacturers  who 
purchased  corn  from  the  United  States,  six 
firms  included  broken  corn,  five  included  nu- 
merical grade  and  protein,  and  four  firms  re- 
ported moisture,  mold  damage,  foreign  mate- 
rial, and  fiber  content  as  specific  factors  in  their 
contracts  (Table  20).  Only  two  feed  manufac- 
turers included  density  in  their  contracts.  In- 
formation about  many  of  the  contractual  factors 
listed  by  the  respondents  is  automatically  avail- 
able as  part  of  the  numerical  grade.  These 
responses  indicate  the  importance  of  control- 
ling factors  such  as  damage  and  foreign  ma- 
terial, but  it  is  unlikely  that  the  contracts  include 
limits  on  these  factors  outside  the  official  USDA 
grade  limits. 

Of  the  thirteen  feed  manufacturers  that  pur- 
chased corn  from  Europe,  eleven  included  nu- 
merical grade,  ten  included  mold  damage  and 
broken  corn,  eight  included  protein,  and  seven 
included  density  and  carbohydrates  in  their 
contracts.  All  three  of  the  feed  manufacturers 
who  purchased  corn  from  Argentina  included 
foreign  material,  protein,  and  carbohydrates  in 
their  contracts,  while  all  three  of  the  feed 
manufacturers  who  purchased  corn  from  South 
Africa  included  only  carbohydrates  in  their 
contracts. 

Of  the  eleven  firms  that  purchased  soybean 
meal  from  both  the  United  States  and  Europe, 
all  firms  included  protein,  and  nine  firms  in- 
cluded moisture  and  fiber  in  their  contracts 
(Table  21).  All  of  the  five  feed  manufacturers 
who  purchased  soybean  meal  from  Argentina 
included  protein,  while  four  included  moisture 
and  fiber  in  their  contracts.  Thus,  moisture, 
protein,  and  fiber  content  are  standard  factors 
in  European  purchase  contracts  for  soybean 
meal,  regardless  of  the  country  of  origin. 


All  of  the  nine  feed  manufacturers  that  pur- 
chased corn  gluten  meal  from  the  United  States 
included  protein  in  their  contracts,  while  seven 
included  moisture  and  six  included  fiber  con- 
tent (Table  22).  Only  two  mills  included  car- 
bohydrates in  their  contracts  for  corn  gluten 
feed.  Of  the  six  firms  that  purchased  corn 
gluten  meal  from  Europe,  all  included  protein, 
five  included  fiber  content,  and  three  included 
moisture  in  their  contracts.  Only  two  feed 
manufacturers  purchased  corn  gluten  meal  from 
Argentina,  and  only  one  from  South  Africa. 
All  three  included  protein  and  fiber  content  in 
their  contracts.  The  corn  gluten  contract  ap- 
peared to  be  fairly  consistent  regardless  of  the 
country  of  origin,  with  protein  and  fiber  content 
the  primary  factors  of  concern. 

Of  the  fourteen  Japanese  feed  manufacturers 
that  purchased  corn  from  the  United  States, 
thirteen  included  numerical  grade,  eleven  in- 
cluded moisture  content,  and  eight  included 
mold  damage  and  broken  corn  in  their  contracts 
(Table  23).  Six  firms  included  density  and  for- 
eign material  in  their  contracts  with  the  United 
States.  As  only  three  firms  included  protein 
content,  and  only  two  included  carbohydrates 
and  fiber  in  their  contracts,  the  emphasis  of 
processors  was  on  physical  information  avail- 
able from  the  numerical  grade.  One  firm  in- 
cluded ash  content  in  its  contracts  with  the 
United  States,  China,  and  Argentina. 

Of  the  fourteen  Japanese  feed  manufacturing 
firms  that  purchased  corn  from  China,  ten 
included  moisture,  seven  included  mold  dam- 
age and  foreign  material,  six  included  broken 
corn,  and  five  included  numerical  grade.  Again, 
the  emphasis  of  purchasing  firms  was  on  phys- 
ical characteristics,  as  only  three  firms  included 
protein  content  in  their  contracts  with  China, 
and  only  two  firms  included  fiber.  No  Japanese 
firm  included  density  in  its  contracts  with  China. 

Thirteen  Japanese  feed  manufacturing  firms 
responded  as  having  purchased  com  from  Ar- 
gentina. Eight  respondents  included  moisture, 
seven  included  numerical  grade,  six  included 
damage  by  mold,  five  included  broken  corn, 


13 


and  four  included  foreign  material  in  their 
contracts  with  Argentina.  Two  respondents  in- 
cluded protein  and  fiber  content  in  their  con- 
tracts as  well,  while  no  firm  included  density 
in  its  contracts. 

Only  three  Japanese  feed  manufacturing  firms 
responded  as  having  purchased  corn  from  South 
Africa.  All  firms  included  numerical  grade  and 
moisture  in  their  contracts,  and  two  firms  in- 
cluded damage  by  mold,  broken  corn,  and 
foreign  material.  Again,  no  firm  included  den- 
sity in  its  contracts  with  South  Africa. 

As  with  Europe,  the  Japanese  feed  manufac- 
turers frequently  included  all  physical  charac- 
teristics except  density  in  their  contracts  with 
exporting  countries.  In  contracts  with  the  United 
States,  density  information  was  automatically 
provided  if  they  indicated  a  numerical  grade. 
Chemical  characteristics  were  included  in  con- 
tracts less  frequently  by  the  Japanese  than  by 
the  Europeans. 

Of  the  five  Japanese  firms  that  purchased  soy- 
bean meal  from  the  United  States,  four  included 
protein  and  one  included  moisture  content  in 
their  contracts  (Table  24). 

Two  firms  purchased  soybean  meal  from  China; 
of  these  firms,  one  included  moisture  in  its 
contract  and  one  included  protein. 

Of  the  three  Japanese  firms  purchasing  soybean 
meal  domestically,  two  included  fat  and  three 
included  ash  in  their  contracts. 

Western  European  feed  manufacturers  included 
protein  in  all  of  their  soybean  meal  contracts, 
regardless  of  country  of  origin.  Japanese  feed 
manufacturers,  however,  did  not  always  in- 
clude protein  in  their  contracts  with  foreign 
suppliers  and  never  included  protein  in  their 
domestic  contracts. 

The  United  States  was  the  only  source  of  corn 
gluten  meal  for  use  in  feed  manufacturing  as 
reported  by  ten  Japanese  firms.  Of  these  ten, 
six  included  protein,  four  included  moisture, 
and  one  included  carotenoid  color  in  their 
contracts.  The  primary  difference  between  the 


European  and  Japanese  contracts  was  the  Eu- 
ropeans' frequent  inclusion  of  fiber  in  their 
contracts. 

Quality  Factors  Measured  by  the  Processors. 

The  factors  most  frequently  measured  in  every 
delivery  of  corn  by  European  feed  manufac- 
turers are  moisture,  protein,  broken  corn  and 
foreign  material.  At  least  50  percent  of  the 
respondents  tested  for  all  of  these  factors  in 
every  delivery  (Table  25).  Few  feed  manufac- 
turers measured  broken  corn  after  every  deliv- 
ery because  most  of  the  feed  industry  grinds 
corn  during  processing.  Over  78  percent  of  the 
respondents  checked  for  moisture,  fiber,  and 
protein  in  every  delivery  when  purchasing  corn 
gluten  meal,  and  more  than  56  percent  of  the 
respondents  checked  for  these  factors  in  every 
delivery  of  soybean  meal.  In  addition,  half  of 
the  respondents  measured  carbohydrates  in 
every  delivery  of  corn  gluten  meal.  Trypsin 
inhibitor  was  the  only  additional  characteristic 
identified  by  the  respondents  with  30  percent 
testing  for  it  on  every  delivery  of  soybean  meal. 

Japanese  feed  manufacturers  were  concerned 
primarily  with  the  levels  of  moisture  and  pro- 
tein content  in  their  raw  material.  Fifty-seven 
percent  of  the  feed  manufacturers  tested  for 
protein  on  every  delivery  of  corn,  and  sixty- 
four  percent  tested  for  moisture  (Table  26).  The 
corresponding  figures  for  soybean  meal  were 
57  percent  for  protein  and  50  percent  for 
moisture.  For  corn  gluten  meal,  69  percent 
tested  for  protein  while  61  percent  tested  for 
moisture  on  every  delivery. 

Summary  and  Conclusions 

For  the  European  Community,  the  period  from 
1981  to  1985  was  one  of  general  growth  in 
the  volume  of  corn  and  soybeans  processed 
for  the  full  fat  soybean,  corn  wet  milling,  corn 
dry  milling,  and  feed  manufacturing  industries. 
In  1986,  the  full  fat  soybean,  dry  milling,  and 
feed  manufacturing  industries  continued  to  post 
increases  in  processing  volumes.  There  was  no 
discernable  trend  for  soybean  processing  vol- 


14 


umes.  Respondents'  expectations  suggested  no 
significant  growth  in  imports  of  corn  and  soy- 
beans for  most  of  these  industries  over  the  next 
five  years.  A  possibility  of  a  slight  increase  in 
demand  exists  in  the  com  dry  milling  industry, 
and  the  responses  from  the  full  fat  soybean 
industry  were  mixed:  three  responses  indicated 
no  change  in  processing  volume  was  expected, 
while  two  respondents  predicted  as  much  as  a 
15  percent  increase  in  processing  volume. 

In  Japan,  by  comparison,  the  volume  of  soy- 
beans and  corn  used  by  the  soybean  processing 
industry  and  the  corn  dry  milling  industry  grew 
through  the  entire  period  from  1981  to  1986. 
Corn  volume  processed  in  the  corn  wet  milling 
industry  paralleled  that  of  the  EC  corn  wet 
milling  industry,  showing  gains  in  1981  through 

1985,  then  declining  in  1986.  No  time-series 
volume  information  was  provided  by  the  Jap- 
anese feed  manufacturing  industry.  Future  ex- 
pectations were  much  more  positive  than  those 
of  the  European  firms,  with  continued  gains  in 
volume  expected  in  the  soybean  processing, 
wet  and  dry  milling,  and  feed  manufacturing 
industries  in  the  next  five  years. 

European  imports  of  corn,  soybeans,  and  feed 
ingredients  from  the  United  States  declined  for 
all  industries  except  the  feed  manufacturing 
industry,  which  dramatically  increased  imports 
of  U.S.  corn  gluten  meal  between  1981  and 

1986.  This  increase  reflects  additional  supplies 
of  corn  gluten  meal  available  from  the  United 
States,  following  growth  in  the  corn  wet  milling 
industry,   as   well   as  reflecting  the   nontariff 
status  of  com  gluten  meal  imports  into  the 
European  Community.  In  industries  using  corn 
as  a  feedstock,  loss  of  market  share  in  the 
United  States  was  primarily  due  to  Europe's 
increasing  dependency  on  domestic  sources.  In 
both  soybean  and  full  fat  soybean  processing 
industries,  however,  the  decline  in  imports  from 
the  United  States  was  offset  by  increases  in 
imports  from  both  Brazil  and  Argentina.  Even 
the  imports  of  soybean  meal  from  Brazil  and 
Argentina  increased  in  total  during  this  period, 
though  the  overall  increase  was  not  large  and 


displaced  mostly  soybean  meal  purchased  from 
domestic  sources. 

The  U.S.  share  of  Japanese  imports  of  soybeans 
did  not  change  as  dramatically  as  the  U.S. 
share  of  EC  imports,  though  the  volume  of 
com  imports  from  the  United  States  did  vary 
considerably.  During  the  1981  to  1986  period, 
nearly  all  of  Japan's  soybean  imports  originated 
in  the  U.S.,  with  only  a  slight  increase  in 
imports  from  China.  Corn  imports  for  the  wet 
and  dry  milling  industries  primarily  originated 
in  the  United  States  and  South  Africa,  with 
the  amount  purchased  from  one  country  in- 
versely related  to  the  amount  purchased  from 
the  other  country.  China  began  exporting  corn 
to  Japan  as  well  in  the  later  years.  Byproducts 
used  in  the  Japanese  feed  manufacturing  in- 
dustry were  produced  by  domestic  processing 
firms,  and  purchases  from  the  United  States 
were  minimal. 

The  market  channel  makes  factor  specification 
within  a  contract  difficult  and  expensive  if  those 
factors  are  not  included  in  the  grades.  This  was 
indicated  in  responses  from  the  European  pro- 
cessors who  are  buying  through  importers  or 
brokers.  The  complexity  of  buying  sublets  with 
unique  characteristics  generally  limits  this  mar- 
ket channel  to  the  use  of  numerical  grade. 

Some  of  the  characteristics  identified  as  im- 
portant indicators  of  value  by  respondents  in 
this  survey  were  important  for  all  industries; 
others  were  unique  to  one  of  the  four  industries 
studied  and  differed  among  countries.  Moisture 
content,  damage,  and  foreign  material  were 
identified  as  important  characteristics  regard- 
less of  the  intended  purpose  of  the  com  and 
soybeans.  As  determined  by  measurement  of 
selected  quality  characteristics  on  every  deliv- 
ery, chemical  composition  of  the  corn  was  more 
important  to  feed  manufacturers  than  to  dry 
millers.  The  dry  milling  industry  indicated  a 
greater  concern  about  density  and  the  extent 
to  which  the  kernels  would  remain  intact  dur- 
ing handling.  Oil  and  protein  content  were 
important  to  all  soybean  processors. 


15 


While  several  processors  specified  factors  in 
addition  to  numerical  grade  when  buying  from 
U.S.  origins,  individual  factor  specification  was 
used  more  frequently  in  contracts  with  Argen- 
tina, Brazil,  and  Europe.  This  demonstrates 
confidence  in  U.S.  numerical  grades.  The  fre- 
quency with  which  buyers  use  numerical  grades 
reflects  the  increased  efficiency  of  communi- 
cation and  simplicity  in  contracts  based  on  a 
single  number.  However,  the  specification  of 
additional  quality  characteristics,  especially  by 
wet  and  dry  corn  millers,  suggests  that  nu- 
merical grade  alone  does  not  provide  adequate 
information  on  which  to  estimate  value  related 
to  differences  in  quality.  The  characteristics 
measured  and  identified  as  important  to  the 
various  processors  were  consistent  with  re- 
search that  has  identified  relationships  between 
yield  and  value  of  products  from  corn  and 
soybeans  in  the  different  industries.8- 9- 10 

Japanese  processors  tended  to  exhibit  greater 
uniformity  among  firms  in  their  contracts  and 
factors  measured  at  the  plant  than  respondents 
from  Europe.  The  almost  exclusive  reliance  on 
Japanese  trading  companies  as  the  source  of 
imports  provides  a  partial  explanation  of  the 
differences  between  countries. 

Japan's  firms  in  the  corn  milling  industries 
relied  almost  exclusively  on  numerical  grades 
in  their  contracts,  while  European  processors 
frequently  specified  factors  separately,  espe- 


cially in  non-U.S.  purchases.  However,  Japan's 
firms  measured  a  greater  number  of  quality- 
related  characteristics  at  their  plant  than  did 
European  firms. 

The  purposes  of  grades  and  standards  are  to 
describe,  as  accurately  and  objectively  as  pos- 
sible, the  information  needed  by  buyers  and 
sellers  to  arrive  at  a  price  that  reflects  true 
value.  Information  is  obtained  only  with  the 
expenditure  of  time  and  money.  Therefore,  the 
information  provided  by  grades  must  be  eval- 
uated in  the  context  of  its  cost  versus  its  value. 
Although  this  study  does  not  provide  a  cost- 
benefit  analysis  of  the  alternatives,  it  does 
identify  that  many  processors  are  making  ad- 
ditional quality  measurements  at  their  plants 
at  their  own  expense.  This  information  is  ob- 
tained, however,  only  after  the  grain  has  been 
delivered  and  no  choice  is  left  to  processors  in 
terms  of  selection  or  alternative  pricing.  Such 
information  is  needed  prior  to  selecting  qualities 
and  establishing  price  so  as  to  direct  each 
different  quality  into  its  potentially  highest 
valued  use. 

Survey  results  primarily  reflect  opinions.  How- 
ever, when  these  opinions  are  consistent  with 
research  results,  they  warrant  careful  consid- 
eration and  the  necessary  analysis  to  determine 
the  cost-benefit  ratio  of  providing  additional 
information  at  the  point  of  origin  for  corn  and 
soybeans. 


16 


Notes 

1.  Hill,  Lowell  D.,  Marvin  R.  Paulsen,  and 
Margaret  Early.  Corn  Quality:  Changes  Dur- 
ing Export  (Special  Publication  58).  Agri- 
cultural Experiment  Station,  College  of  Ag- 
riculture, University  of  Illinois  at  Urbana- 
Champaign,  1979. 

2.  Hill,  Lowell  D.,  Marvin  R.  Paulsen,  Tim- 
othy L.  Mounts,  A.J.  Heakin,  and  G.R.  List. 
Changes  in  Quality  of  Corn  and  Soybeans 
Between  United  States  and  England  (Special 
Publication  63).   Agricultural  Experiment 
Station,  College  of  Agriculture,  University 
of  Illinois  at  Urbana-Champaign,  1981. 

3.  Hill,  Lowell  D.,  Marvin  R.  Paulsen,  Gene 
C.  Shove,  and  Terrence  J.  Kuhn.  Changes 
in  Quality  of  Corn  Between  United  States 
and  Japan,  1985  (AE-4609).  Department  of 
Agricultural  Economics,   Agricultural  Ex- 
periment Station,  College  of  Agriculture, 
University   of   Illinois   at   Urbana-Cham- 
paign, 1985. 

4.  Hill,  Lowell  D.,  Marvin  R.  Paulsen,  Ter- 
rence J.  Kuhn,  Barry  J.  Jacobsen,  and  Rich- 
ard J.  Weinzierl.  Com  Quality  Changes  Dur- 
ing Export  from  the  United  States  and  Japan 
(AE-4636).    Department    of    Agricultural 
Economics,  Agricultural  Experiment  Sta- 


tion, College  of  Agriculture,  University  of 
Illinois  at  Urbana-Champaign,  1988. 

5.  This  section  was  adapted  from  Soule,  Mer- 
ideth,  Lowell  Hill,  and  Duane  Erickson. 
The  Growth  of  the  Full-Fat  Soybean  Industry 
in  the  EC:  Quality,  Policy  and  Price  Issues 
(AE  4627).  Department  of  Agricultural  Eco- 
nomics, Agricultural  Experiment  Station, 
College  of  Agriculture,  University  of  Illi- 
nois at  Urbana-Champaign,  1987. 

6.  Mielke,  S.,  ed.  Oil  World.  Hamburg.  De- 
cember 19,  1986,  p.405. 

7.  Bailey,  Jeanne  Frances.  Factors  Affecting  the 
European  Community  Wet  Milling  Industry's 
Demand  for  U.S.  Corn.  Master's  Thesis,  Uni- 
versity of  Illinois  at  Urbana-Champaign, 
1987. 

8.  Paulsen,  Marvin  R.,  and  Lowell  D.  Hill. 
"Corn  Quality  Factors  Affecting  Dry  Mill- 
ing Performance."  Journal  of  Agriculture 
Engineering  Research  31(1984):255-263. 

9.  Weller,  Curtis  L.,  Marvin  R.  Paulsen,  and 
Marvin  P.  Steinberg.  "Correlation  of  Starch 
Recovery  with  Assorted  Quality  Factors  of 
Four  Corn  Hybrids."  Cereal  Chemistry  65, 
no.5(1988):392-397. 

10.  Sinclair,  James  B.,  and  Lowell  D.  Hill.  "In 
Search  of  Soybean  Quality."  Illinois  Re- 
search 29,  nos.  2-3(1987):10. 


17 


Table  1.  Responses  to  the  Survey  of  Grain  Processing  Firms  in  Western  Europe 


Firm  type 

Questionnaires 
sent 

ivespuiise: 

>  reeeiveu 

Total 

Usable 

Feed  manufacturers 
Soybean  crushers 
Corn  wet  millers 
Corn  dry  millers 

810 
40 
21 
17 

36  (  4.4) 
24  (60.0) 
10  (47.6) 
6  (35.3) 

26  (  3.2) 
22  (55.0) 
9  (42.9) 
5  (29.4) 

NOTE:  Numbers  in  parentheses  are  percentages  of  questionnaires  sent.  Responses  include  personal  interviews. 

Table  2.  Responses  to  the  Survey  of  Grain  Processing  Firms  in  Japan 


Firm  type 


Number  of 
firms 


Completed 
questionnaires 


Feed  manufacturers 
Soybean  crushers" 
Corn  wet  millers 
Corn  dry  millersb 


67 
12 
11 

27 


14 

1 

11 

1 


a  The  Japan  Oilseed  Processors'  Association  completed  one  questionnaire  representing  the  consensus  of  the  industry, 

including  12  firms  where  soybean  crushing  was  a  major  activity. 

b  The  Japan  Corn  Grits  Association  completed  one  questionnaire  representing  a  consensus  of  the  27  dry  millers  in  its 

association. 

Table  3.  Annual  Volume  of  Soybeans  Processed  in  the  European  Economic  Community  and 
Japan,  1980  to  1986  (Million  Metric  Tons) 


Year 

Total  volume  by  EC 

Total  volume 

by  Japan 

Respondents' 

Totalb 

Respondents" 

Totalc 

1980 

— 

— 

3.45 

4.40 

1981 

4.20 

9.97 

3.50 

4.20 

1982 

5.00 

11.59 

3.59 

4.34 

1983 

4.70 

10.24 

3.93 

5.00 

1984 

3.89 

9.30 

3.77 

4.52 

1985 

3.93 

9.64 

3.93 

4.19 

1986 

4.20 

12.86 

3.90 

4.82 

1  Data  are  from  survey  responses. 

b  Data  are  from  FEDIOL,  Statistique  1986,  Brussels,  Dec.  1987,  p.  13. 

c  Data  are  from  FAO  Trade  Yearbook. 


Table  4.  Country  of  Origin  for  Western  European  Soybean  Purchases 


Total 

United  States 

Brazil 

Argentina 

Others 

volume 

Year 

mmt 

Percent 

mmt 

Percent 

mmt 

Percent 

mmt 

Percent 

mmt 

1981 

3.47 

82.6 

.39 

9.3 

.29 

6.9 

.05 

1.2 

4.20 

1982 

4.40 

87.9 

.37 

7.4 

.23 

4.5 

.01 

0.2 

5.00 

1983 

3.35 

71.4 

.83 

17.7 

.43 

9.1 

.09 

1.8 

4.70 

1984 

2.33 

60.0 

.89 

22.9 

.53 

13.7 

.13 

3.4 

3.89 

1985 

2.01 

51.2 

.94 

23.9 

.73 

18.7 

.24 

6.2 

3.98 

1986 

2.20 

54.0 

.45 

11.1 

.96 

23.5 

.47 

11.4 

4.08 

18 


SOURCE:  Information  is  from  survey  responses. 

NOTE:  Others  include  European  sources  as  well  as  origins  not  identified  by  the  respondents. 


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19 


Table  6.  Frequency  of  Quality  Characteristics  Specified  in  Western  European  Soybean 
Processors'  Contracts  with  Major  Exporting  Countries 


Characteristics 

United 
States 

(19) 

Europe 

(3) 

Argentina 
(14) 

Brazil 

(10) 

Physical  properties: 

Numerical  grade 

18 

2 

1 

1 

Moisture 

15 

3 

10 

8 

Density 

8 

— 

1 

1 

Damage  (mold) 

10 

2 

5 

5 

Broken  beans 

10 

2 

3 

4 

Foreign  material 

11 

3 

9 

7 

Germination 

1 

— 

2 

2 

Chemical  properties: 

Protein 

1 

— 

— 

— 

Oil 

2 

1 

10 

7 

Free  fatty  acid 

— 

— 

1 

— 

Fiber 

1 

— 

— 

— 

Other 

1 

— 

2 

2 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  soybeans  from  each  country  of  origin.  Other  includes 
the  use  of  FOSFA  contracts  numbers  22  and  24  and  FAQ  contract. 

Table  7.  Quantity  of  Soybeans  Processed  by  Six  FFSB  Processors  Compared  with  Annual 
Average  Prices  of  Soybeans  and  Soybean  Meal  (c.i.f.  Rotterdam) 


Year 

FFSB  processed 
by  EC-  10 
respondents 
(000  mt) 

Average  price 
United  States 
soybeans 
($/mt) 

Average  price 
49  percent 
soybean  meal 

($/mt) 

Soybeans/ 
soybean 
meal 
price  ratio 

1980 

84.10 

294.00 

258.00 

1.14 

1981 

117.96 

288.00 

252.00 

1.14 

1982 

156.16 

244.00 

235.00 

1.04 

1983 

338.03 

281.00 

237.00 

1.19 

1984 

216.30 

282.00 

197.00 

1.43 

1985 

217.61 

224.00 

157.00 

1.43 

1986 

321.80 

208.00 

185.00 

1.12 

SOURCES:  Surveys;  Oil  World. 

NOTE:  Respondents  in  the  European  Community  included  two  firms  in  1980,  four  firms  from  1981  to  1982,  and  six 

firms  from  1983  to  1986. 

Table  8.  Country  of  Origin  for  EC-10  FFSB  Purchases 


Total 

United  States 

Brazil 

Argentina 

Others 

.  volume 

Year 

000  mt 

Percent 

000  mt 

Percent 

000  mt 

Percent 

000  mt 

Percent 

000  mt 

1980 

54.8 

65.2 

2.2 

2.6 

24.1 

28.6 

2.9 

3.5 

84.1 

1981 

95.8 

81.2 

5.5 

4.7 

14.5 

12.3 

2.0 

1.7 

118.0 

1982 

143.9 

92.1 

0.3 

0.2 

9.2 

5.9 

2.8 

1.8 

115.2 

1983 

296.1 

87.6 

18.3 

5.4 

23.3 

6.9 

0.4 

0.1 

338.0 

1984 

171.1 

79.2 

8.6 

4.0 

36.3 

16.8 

0.0 

0.0 

216.0 

1985 

166.2 

76.4 

11.5 

5.3 

36.6 

16.8 

3.5 

1.6 

217.6 

20 


NOTE:  Information  is  from  survey  responses. 


Table  9.  Importance  of  Selected  Quality  Characteristics  to  FFSB  Processors  and  Soybean 
Crushers 

FFSB  processors 

(6) 

Soybean  crushers  (19) 

Included  in            Measured            Included  in            Measured 
United  States               every              United  States              every 
contract                 delivery                 contract                 delivery 

Characteristics                           No.     Percent       No. 

Percent       No. 

Percent       No. 

Percent 

Physical  properties: 
Numerical  grade                     6         100             2 
Moisture                                   4            67              4 

33             18 
67             15 

100              9 
79             18 

47 
95 

Density                                     2           33              2 
Damage                                  2           33             1 
Broken  beans                          1           17             1 

33               8 
17             10 
17             10 

44               5 
56             13 
56             14 

26 
68 

74 

Foreign  material                      2            33              2 
Germination                             1            17              1 

33            11 
17              1 

61             16 

11                4 

84 
21 

Chemical  properties: 
Protein                                      1            17              4 

67               1 

6             15 

79 

Oil                                             1            17              4 

67               2 

11             17 

89 

Free  fatty  acids 
Fiber                                        1           17             1 

17               1 

12 
6               6 

63 

32 

NOTE:  Numbers  in  parentheses  represent  survey  responses. 

Table  10.  Country  of  Origin  for  Western  European 

Europe                 United  States 

Corn  Purchases 

Argentina 

by  Wet  Millers 

Others 

Total 
volume 
mmt 

Year                   mmt       Percent        mmt     Percent 

mmt      Percent 

mmt      Percent 

1981                   .29           17.7          1.34        81.5 

—           — 

.01           0.8 

1.65 

1982                    .44           26.3           1.21         71.5 

.02          1.3 

.02           0.9 

1.70 

1983                   .53          30.8           1.09        63.9 

.06          3.3 

.04           2.0 

1.71 

1984                  1.49           51.2           1.34         46.0 

.05           1.5 

.04           1.3 

2.91 

1985                  2.15           71.9             .82         27.5 

.01           0.4 

.01           0.3 

2.99 

1986                 1.80          86.2            .29        13.8 

—           — 

—           — 

2.08 

SOURCE:  Information  is  from  survey  responses. 
NOTE:  Others  include  local  purchases  and  unspecified  origins. 

Table  11.  Country  of  Origin  for  Japanese  Corn  Purchases  by  Wet 

Millers 

China                 United  States 

South  Africa 

Others 

Total 
volume 
mmt 

Year                   mmt       Percent        mmt      Percent 

mmt     Percent 

mmt     Percent 

1981                                                      .18          12.3 

1.28         87.7 

—           0.0 

1.46 

1982                                                     .34          19.1 

1.37        76.9 

.07          4.0 

1.78 

1983                                                   1.84          80.3 

.36         15.9 

.09          3.8 

2.29 

1984                   .14            6.0         2.06         88.0 

—           — 

.14          6.0 

2.34 

1985                    .52           21.1          1.12         45.2 

.33        13.5 

.50         20.2 

2.47 

1986                    .31           13.6            .66          28.4 

.99         42.5 

.36         15.5 

2.33 

SOURCE:  Information  is  from  survey  responses. 
NOTE:  Others  include  local  purchases  and  unspecified  origins. 

21 


Table  12.  Frequency  of  Quality  Characteristics  Specified  in  Western  European  Wet  Millers' 
Contracts  with  Major  Exporting  Countries 


Characteristics 

United 
States 

(7) 

Europe 
(7) 

Argentina 
(2) 

Physical  properties: 

Numerical  grade 

7 

1 

— 

Moisture 

6 

5 

1 

Density 

2 

— 

— 

Damage  (mold) 

3 

4 

— 

Broken  corn 

3 

4 

— 

Foreign  material 

3 

4 

— 

Germination 

2 

2 

1 

Chemical  properties: 

Starch 

1 

— 

— 

Protein 

1 

— 

— 

Fiber 

1 

— 

— 

Oil 

1 

— 

— 

Other  factors: 

Origin  country 

— 

1 

— 

FAQ 

— 

1 

1 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  corn  from  each  country  of  origin. 

Table  13.  Frequency  of  Quality  Characteristics  Specified  in  Japanese  Wet  Millers'  Contracts 
with  Major  Exporting  Countries 


Characteristics 

United 
States 
(11) 

South 
Africa 
(11) 

China 

(6) 

Physical  properties: 

Numerical  grade 

5 

6 

— 

Moisture 

8 

8 

2 

Density 

1 

— 

— 

Damage  (mold) 

5 

4 

1 

Broken  corn 

5 

4 

1 

Foreign  material 

5 

7 

1 

Germination 

— 

— 

— 

Chemical  properties: 

• 

Starch 

4 

4 

— 

Protein 

4 

4 

— 

Fiber 

4 

4 

— 

Oil 

4 

4 

— 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  corn  from  each  country  of  origin. 


22 


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23 


Table  16.  Frequency  of  Quality  Characteristics  Specified  in  Western  European  Dry  Millers' 
Contracts  with  Major  Exporting  Countries 


Characteristics 

United 
States 
(3) 

Europe                  Argentina 
(3)                           (2) 

South 
Africa 
(1) 

Physical  properties: 

Numerical  grade 

3 

1 

1 

Moisture 

3 

3 

— 

Density 

— 

1 

— 

Damage  (mold) 

1 

2 

— 

Broken  corn 

— 

2                              

— 

Foreign  material 

— 

2 

— 

Stress  cracks 

1 

—                             — 

— 

Floater  test 

1 

—                             — 

— 

Germination 

— 

j                              

— 

Chemical  properties: 

Starch 

— 

j                              

— 

Protein 

— 

1 

— 

Fiber 

— 

j                              

— 

Other  factors: 

FAQ 

— 

2 

— 

Misc.' 

3 

—                             — 

— 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  corn  from  each  country  of  origin. 
'  Other  factors  include  hardness,  variety,  and  odors. 

Table  17.  Country  of  Origin  for  Western  European  Corn  Purchases  by  Feed  Manufacturers 


Total 

Europe 

United  States 

Argentina 

Others 

volume 

Year 

mmt 

Percent 

mmt 

Percent 

mmt 

Percent 

mmt      Percent 

mmt 

1981 

1.12 

81.5 

.25 

18.1 

.  — 

0.4 

—           — 

1.37 

1982 

1.18 

80.6 

.26 

17.9 

.02 

1.4 

—           — 

1.46 

1983 

1.25 

81.3 

.26 

17.0 

.03 

1.7 

—           — 

1.53 

1984 

1.39 

78.4 

.30 

16.8 

.08 

4.6 

0.3 

1.77 

1985 

1.49 

79.7 

.28 

15.1 

.09 

4.8 

0.4 

1.87 

1986 

1.98 

88.3 

.22 

10.0 

— 

0.2 

.03           1.5 

2.25 

SOURCE:  Information  is  from  survey  responses. 

NOTE:  Others  include  local  purchases  and  unspecified  origins. 


24 


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25 


Table  19.  Country  of  Origin  for  Western  European  Corn  Gluten  Meal  Purchases  by  Feed 
Manufacturers 


Total 

Europe 

United 

States 

Others 

volume 

Year 

000  mt 

Percent 

000  mt 

Percent 

000  mt 

Percent 

000  mt 

1981 

163 

60.3 

105 

38.9 

3 

1.1 

270 

1982 

160 

57.3 

114 

40.9 

5 

1.8 

279 

1983 

217 

56.0 

166 

42.8 

4 

1.1 

388 

1984 

217 

58.0 

143 

38.2 

14 

3.7 

374 

1985 

271 

19.2 

1,130 

80.3 

7 

0.5 

1,409 

1986 

239 

16.0 

1,248 

83.7 

4 

0.3 

1,491 

SOURCE:  Information  is  from  survey  responses. 

NOTE:  Others  include  local  purchases  and  unspecified  origins. 

Table  20.  Frequency  of  Quality  Characteristics  for  Corn  Specified  in  the  Western  European 
Feed  Manufacturers'  Contracts  with  Major  Exporting  Countries 


Characteristics 

United 
States 

(7) 

Europe 

(13) 

Argentina 
(3) 

South 
Africa 
(3) 

Physical  properties: 

Numerical  grade 

5 

11 

2 

1 

Moisture 

4 

6 

1 

1 

Density 

2 

7 

— 

— 

Damage  (mold) 

4 

10 

1 

1 

Broken  corn 

6 

10 

1 

1 

Foreign  materials 

4 

4 

3 

3 

Chemical  properties: 

Carbohydrates 

3 

7 

3 

3 

Protein 

5 

8 

3 

3 

Fiber 

4 

— 

— 

— 

Other  factors: 

Energy 

1 

1 

1 

1 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  corn  from  each  country  of  origin. 

Table  21.  Frequency  of  Quality  Characteristics  for  Soybean  Meal  Specified  in  the  Western 
European  Feed  Manufacturers'  Contracts  with  Major  Exporting  Countries 


United 

South 

Characteristics 

States 
(11) 

Europe 
(11) 

Argentina 

(5) 

Africa 

(2) 

Moisture 

9 

9 

4 

1 

Protein 

11 

11 

5 

2 

Fiber 

9 

9 

4 

2 

Trypsin  inhibitor 
Fat 

3 
1 

2 

1 

1 

Urease 

— 

1 

— 

— 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  soybean  meal  from  each  country  of  origin. 

26 


Table  22.  Frequency  of  Quality  Characteristics  for  Corn  Gluten  Meal  Specified  in  the  Western 
European  Feed  Manufacturers'  Contracts  with  Major  Exporting  Countries 

United                                                                                      South 
States                     Europe                 Argentina                  Africa 
Characteristics (9) (6) (2) (1) 

Moisture  7311 

Carbohydrates  2111 

Protein  9621 

Fiber  6521 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  corn  gluten  meal  from  each  country  of  origin. 

Table  23.  Frequency  of  Quality  Characteristics  for  Corn  Specified  in  the  Japanese  Feed 
Manufacturers'  Contracts  with  Major  Exporting  Countries 


United  South 

States  China  Argentina  Africa 

Characteristics  (14)  (14)  0)  (3) 


Physical  properties: 

Numerical  grade  13                               5                               7                                 3 

Moisture  11                              10                              8                                 3 

Density  6 

Damage  (mold)  876                                 2 

Broken  corn  865                                2 

Foreign  material  674                                 2 

Chemical  properties: 

Carbohydrates  21                                                                  1 

Protein  332                                 1 

Fiber  222                                 1 

Other  factors: 

Ash  content  111 

NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  corn  from  each  country  of  origin. 

Table  24.  Frequency  of  Quality  Characteristics  for  Soybean  Meal  Specified  in  the  Japanese 

Feed  Manufacturers'  Contracts  with  Major  Exporting  Countries 


United 

States  China                          Japan 

Characteristics (5) (2) (3) 

Moisture                                                            1  1 

Protein                                                              4  1 

Fiber 

Trypsin  inhibitor 

Fat  1                                   2 

Ash                                                                   —  —                                 3 


NOTE:  Numbers  in  parentheses  represent  respondents  purchasing  soybean  meal  from  each  country  of  origin. 


27 


Table  25.  Percentage  of  Western  European  Feed  Manufacturers  Reporting  Measurement  of 
Selected  Quality  Characteristics  on  Every  Delivery 


Characteristics 

Com 

(18)' 

Corn  gluten  meal 
(14)* 

Soybean  meal 
(23)' 

Physical  properties: 

Numerical  grade 

16.7 

N/A" 

N/A 

Moisture 

72.2 

78.6 

69.6 

Density 

33.3 

N/A 

N/A 

Damage  (mold) 

38.9 

N/A 

N/A 

Broken  corn 

66.7 

N/A 

N/A 

Foreign  material 

55.6 

N/A 

N/A 

Chemical  properties: 

Carbohydrates 

27.8 

50.0 

N/A 

Protein 

50.0 

85.7 

73.9 

Fiber 

44.4 

78.6 

56.5 

Trypsin  inhibitor 

N/A 

N/A 

30.4 

a  Percentage  is  based  on  number  of  respondents  for  each  product. 
b  N/A  means  not  applicable. 


Table  26.  Percentage  of  Japanese  Feed  Manufacturers  Reporting  Measurement  of  Selected 
Quality  Characteristics  on  Every  Delivery 


Characteristics 

Corn 

(14)a 

Corn  gluten  meal 
(13)' 

Soybean  meal 
(14)' 

Physical  properties: 

Numerical  grade 

71.4 

N/Ab 

N/A 

Moisture 

64.2 

61.5 

50.0 

Density 

— 

N/A 

N/A 

Damage  (mold) 

14.3 

N/A 

N/A 

Broken  corn 

35.7 

N/A 

N/A 

Foreign  material 

35.7 

N/A 

N/A 

Chemical  properties: 

Carbohydrates 

14.3 

— 

N/A 

Protein 

57.1 

69.2 

57.1 

Fiber 

14.3 

7.7 

7.1 

Trypsin  inhibitor 

N/A 

N/A 

7.1 

'  Percentage  is  based  on  number  of  respondents  for  each  product. 
b  N/A  means  not  applicable. 


28 


AUTHORS:  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,  Illinois. 

Karen  L.  Bender  is  a  visiting  research  specialist  in  the  Department  of  Agricultural  Economics  at 

the  University  of  Illinois  at  Urbana-Champaign,  Illinois. 

Kandeh  Yumkella  and  Shailendra   K.   Pradhan  are  graduate  students  in  the  Department  of 

Agricultural  Economics  at  the  University  of  Illinois  at  Urbana-Champaign,  Illinois. 

Kenji  Horiguchi  is  a  professor  in  the  Department  of  Agricultural  Economics  at  the  Tokyo  University 

of  Agriculture  in  Tokyo,  Japan. 

Editor:  Anita  Povich 
Designer:  Krista  Sunderland 

Office  of  Agricultural  Communications  and  Education  at  the  University  of  Illinois  at  Urbana-Champaign. 
The  Illinois  Agricultural  Experiment  Station  provides  equal  opportunities  in  programs  and  employment. 

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