Hearings, Reports and Prints of the Senate Committee on Agriculture and Forestry

PROSPECTS FOR EXPORTS

The trend promises to continue. At one point this year, exporters had orders for about 1.3 billion bushels of U.S. corn. Now, exports for the season ending Sept. 30 are projected at about 1.08 billion bushels. Even that goal may be hard to reach, because only 874 million bushels have been cleared for export so far. Many dealers believe wheat exports will fall far short of the projected exports of 1.05 billion bushels in the season ending this month.

George Shanklin, an Agriculture Department official, who helps oversee exports, says grain prices have been eroding "as we've moved from a threat of scarcity to one of a carry-over" in surplus grain crops. "It's almost a fact of life that the quantity of complaints goes up as the prices go down," he says. "Whether or not we've really got a problem, I don't think it's the inspector thing." The "inspector thing" has certainly caused a stir in the grain-exporting industry, whatever its true role in the diminishing demand for U.S. grain. The inspectors in question are licensed by the Agriculture Department but usually employed by private weighing and inspection concerns to certify the cleanliness of the ships and the quality of the grain as it is loaded for export.

Federal agents investigating grain-handling and grading procedures at the nation's ports have obtained indictments in the past year against 13 of these inspectors, in most cases charging that they took bribes in connection with certifying transport ships as being fit to receive U.S. grain.

Last month, as a result of the continuing investigation, four others, including one grain inspector, were also indicted in New Orleans. This time, however, the charges involved an alleged scheme to sell nonexistent soybeans to Peavey Co. of Minneapolis.

More indictments are expected. And some officials contend that these alleged abuses indicate that the complaints from abroad about grain quality have substance. Indeed, several farm-state Congressmen now say they would like to legislate tougher grain-inspection procedures here to help protect the reputation of American grain among foreign customers.

Grain exporters themselves don't see any connection between the federal charges against the inspectors and any lag in sales. "The effect? Absolutely none," says a spokesman for Cook Industries Inc. A Cargill Inc. spokesman adds, “We haven't had any indication that this matter has affected our sales."

This isn't to say that exporters aren't worried about the situation. Cargill, for instance, requested that federal inspectors oversee inspection operations at its Baton Rouge, La., export facility a year ago because "we had heard of possible problems, and we were concerned enough to take precautions."

Many grain growers are alarmed as well. "We're darned concerned," says Jerry Rees, executive vice president of the National Association of Wheat Growers, a Washington-based trade group. "We've heard complaints in the past" about U.S. grain quality, Mr. Rees explains. "But we've always told them that it (the grain) met U.S. standards. Now we're wondering if it did meet those standards."

The inspection problems were discussed this week at a meeting of a European grain-purchasing delegation with Agriculture Secretary Earl Butz in Washington. Kenneth Arnott, president of the Federation of European Feed Compounders and head of the delegation, said after the meeting that the Europeans "have to accept a U.S. certificate of quality, and the thing that comes out of the other end of the ships' voyage is something rather different."

FEDERAL REPORT

Inspection problems were also the subject of an Agriculture Department report disclosed recently that cited incidents of inspectors taking "unapproved shortcuts" as long ago as mid-1971, and an official said steps are being taken to correct the situation.

But government and industry officials concede there have been quality problems beyond inspector procedures. As an example, they point to problems with the 1974 corn crop.

Some of this corn had brittle kernels that tended to break in transport. "Every time you handle it, you increase breakage," says Charles Pence, an Agriculture Department official investigating the foreign buyers' complaints. "By the time it gets to, say, Italy, you could add 10% breakage easily."

Broken kernels, resulting from rapid drying or other climatic conditions, reduce the value of the corn, experts say, partly because of oxidation of the corn oil.

The Russians have complained about breakage of this U.S. corn, saying it didn't meet their standards. (The Chinese, who have pulled out of at least one wheat contract this year, haven't complained lately about U.S. grain quality, but in the past, they have rejected a wheat shipment or two on such grounds.)

Exporters, however, contend that many foreign buyers were well aware of the corn problem before they bought. "It's just that they had to pay more for it," says one trader, "and so they're more upset about it."

Nonetheless, some foreign exporters are moving to take advantage of the U.S. situation. London dealers say French corn exporters are using the U.S. corn crop troubles to push sales of their own grain. Whether they'll succeed isn't known. "Buyers won't just listen to chitchat," a London trader points out. "They'll want to look at samples."

Too, there have been reports that other foreign exporters are making more than casual mention to potential customers of the grain-handling investigations in this country.

But right now, that's the least of the U.S. problems. For while the investigations aren't necessarily related to foreign complaints about quality, the combination of the two factors promises to have an impact here at home-if only in delayed shipments.

Take the case of Continental Grain Co.'s New Orleans export elevator. On May 17, the vessel Porto, a one-time oil tanker, arrived in the New Orleans port to pick up about 940,000 bushels of wheat destined for Egypt. The Porto is still there a month later.

What happened? The Porto by Continental's count, was inspected and reinspected-sometimes by both government and private inspectors together-on about a dozen occasions. On June 3, loading of the vessel began, but it was stopped the next day; the inspectors said they had discovered a petroleum odor in the ship's tanks during the loading.

At that point, Continental asked the Porto's mate to sign a receipt for the 505,000 bushels already on board. The officer declined, saying he needed the ship owners' permission. He also declined to move the Porto, saying the vessel was out of trim.

Because Continental Grain has room for only one ship at the New Orleans facility, four other vessels had to stand idly by. Finally, late in the evening of June 12, the Porto was moved to another anchorage in the port, still only half loaded. It remains there today, because the matter is now in litigation.

"The atmosphere is very distrusting right now," David Borchert, a company official, says. "Everyone is being ultracareful. I've never before seen anything like it."

STATEMENT OF F. E. POLASKI, CHIEF INSPECTOR-VICE PRESIDENT, ALL IOWA GRAIN INSPECTORS ASSOCIATION, CEDAR RAPIDS, Iowa

The present grain inspection system is a fine system-let us react by improving on its shortcomings, not by over-reacting and discarding the whole system for a system that would be even more difficult to control and extremely more costly. To implement such a federal agency of this nature, an additional 1000 more inspectors, 2500 samplers and technicians, plus a staff of weighers, clerks, typists, and secretaries would be needed, cost of which would stagger one's imagination; such cost to be paid not by the grain companies, but by the producer our farmers-who should not be saddled with any additional expense. I can see interior inspection being set back many years, especially truck lot inspection which will be completely eliminated because of the cost of federal inspection. Let us keep our grain inspection at the free enterprise level-complete government take-over is socialism in any man's language, something we do not need in this country.

Our great country is noted for its system of free enterprise. When government takes over a business, be it federal government or state government, the cost of doing business spirals in every phase of operation. I worked in state civil service for twenty years in the grain inspection service, so I can assure you it is a very expensive venture when the inspection service is provided by a government agency.

A good employee is a happy employee-if you are going to start moving inspectors around the country every two or three years, you are not going to have good inspectors because many will find other employment. A large majority of grain

inspectors are hard-working, honest, loyal and very professional people with a great many years of experience in the grading of grain. This grading experience is not something that can be gained in the classroom. A good grain inspector should have a number of years as a grain sampler, and/or grain technician before he or she is licensed to determine the grade upon which the price of grain is based. I fail to see and am unable to fathom why making a grain inspector a federal or a state employee-a civil servant-will make him honest if he is inclined to be otherwise. We now have laws to deal with the corrupt grain inspector and trades people-let us use these laws to the fullest. Also, if necessary, enact more stringent laws.

Let us beef up increase supervision, rid ourselves of conflict of interest, be they real or apparent, rid ourselves of the corrupt grain inspector or grain weigher, and I mean a trial by our courts, not by the news media. As for the increase in supervision, these new supervisors should come from the ranks of the now federally-licensed inspectors, the men that really know every facet of this very interesting and challenging profession. No supervisor should have less than five years of grain grading; no money should be spared to recruit the best possible men available.

The Department of Agriculture should make a concerted effort to make a study of the manner grain is handled as it be being loaded onto ships after final inspection. There is no way any grain (especially corn) can grade anywhere near the original inspection after going through a trimming machine while being loaded aboard ship.

I am hopeful these comments and observations will help in some way to better our present grain inspection system so we can return our thoughts to the business of providing the best grain inspection service to the producer and the industry.

I wish to thank Senator Clark and his committee for the opportunity to present my views on the Grain Inspection Act of 1975 (S. 2256) and the Senate Joint Resolution 88.

HEARINGS

BEFORE THE

SUBCOMMITTEE ON

FOREIGN AGRICULTURAL POLICY

AND THE

SUBCOMMITTEE ON AGRICULTURAL PRODUCTION, MARKETING, AND STABILIZATION OF PRICES

OF THE

COMMITTEE ON

AGRICULTURE AND FORESTRY
UNITED STATES SENATE

NINETY-FOURTH CONGRESS

FIRST SESSION

GRAIN INSPECTION IRREGULARITIES AND PROBLEMS