for U.S. grain loaded aboard a ship at a U.S. port. This system instantly places foreign funds into American hands, from our ports all the way back to the farmer. There are additional steps which should be instituted to guarantee integrity in the classification and weighing of American grain in both domestic and overseas markets. They include: 1. Revision of the grain grading factors to provide qualitative improvements to satisfy legitimate foreign complaints. (Incidentally, as an official inspection agency, we have never been given a list of complaints of foreign buyers, which we could use as a guideline in either making recommendations for change or in improving our own performance. We have been grading grain going aboard 450 to 550 ships a year, and we were advised only recently of a complaint in November of 1972 of one case of supposed misgrading by one of our inspectors.) 2. Review of shiploading techniques at export elevators to ascertain that the physical handling systems do not adversely affect quality after the grain has left the inspection sampling point. 3. Institute new procedures to help reduce the possibility of political influence in the designation of private inspection agencies. 4. Require mandatory official inspection of grain moving in domestic markets as well as in export. 5. Tighten examination procedures for licensing of official inspection personnel. Institute the same licensing procedures for federal supervisory personnel. 6. Increase the USDA supervisory and appeal staff as necessary. If proper steps are taken to improve official inspection agencies, it would not be necessary to build a large federal staff. As a matter of fact, if the Congress should legislate an all-federal inspection system, the only way it could be activated within a short time would be for the federal government to hire most of the 800 grain inspectors and many of the 3,000 samplers now working for official inspection agencies. If an all-federal or federal-state inspection system were created, and most of the 800 present private agency inspectors were not hired, there would be no immediate way for the federal government to create a technically competent staff by means of a rapid training program. A chaotic condition would apply in the grading of grain for some years, adversely affecting turn-around time of vessels and driving up shipping costs. 7. Finally, increase the severity of penalties for violations of the Grain Standards Act. We also offer five recommendations to safeguard integrity in weighing grain. These are: 1. Assign the same division of the USDA responsibility for supervising both inspection and weighing of grain. 2. Require all weighing of grain at terminal and export elevators be performed by official personnel instead of elevator personnel. (Under the present system, licensed elevator weighers do the actual weighing and keep primary scale records. Official inspection agency weighing personnel only supervise weighing and issue official certificates.) 3. Require the USDA, which oversees the program, to test weighers for skill and knowledge and to conduct frequent, unscheduled inspections to assure honest and competent performance. 4. Require all elevator scales to be tested by a certified independent and technically competent agency at least once every three months. 5. Require elevators to file with official inspection agencies and federal supervisors drawing layouts, which set forth accurately and completely the routing of all grain through the "house." Require safeguard lock-out systems placed on grain legs. turnheads, or other mechanisms which might be used to divert grain, once weighed, from its legitimate destination. 6. Tighten restrictions against entry by unauthorized personnel in areas where testing and classification of grain is performed. These recommendations for revisions in the nation's grain inspection and weighing systems should safeguard the authenticity and accuracy of the certificates issued by the official inspection agencies. The organizations and legal framework exist. They include a built-in system of checks and balances. If the proper reforms are inaugurated, the existing system should work more effectively than an all-federal system or a federal-state system, without building up the federal bureaucracy. NATIONAL FARMERS UNION, Hon. HUBERT H. HUMPHREY, Hon. WALTER D. HUDDLESTON, U.S. Senate, Washington, D.C. DEAR SENATORS HUMPHREY AND HUDDLESTON: This letter is in response to your recent announcement of further hearings on irregularities in the nation's grain inspection system. I request that it be made a part of the record of hearings which will begin on July 8. The evidence developed in the hearings of your agricultural subcommittees on June 19 clearly documents the need for extensive corrections in the nation's grain inspection system. The Farmers Union recommends that a Federally-operated grain inspection and grading service should be established immediately with an explicit legislative mandate from Congress. We believe that a Federal system of grain inspection and grading is necessary to correct the shocking corruption and other irregularities which have been so widely publicized in recent weeks. Our present-day grain market is not only inter-state commerce; it is international commerce. The need and the Constitutional sanction for a unified, uniform, and reliable Federal grain inspection and grading system is beyond question. Farmers need and deserve to know and to believe that the integrity of the grades on which they are paid at markets in the hinterland will be preserved and honored faithfully when the grain is transferred to foreign customers in our ports. We are sick and tired of hearing foreign buyers complain that grain from the United States is delivered to our overseas customers in far worse condition than it was when it left our combines and bins and local elevators. We further urge that the Committee lend its support to a review of grading standards with a view of up-dating and correcting any inadequacies and deficiencies that may be found. There is a question, for example, as to whether cracked kernels should be regarded as "foreign matter" in No. 2 grade yellow corn. The newer methods of harvesting and drying of grain have resulted in more cracked kernels. Although it is clear that the grading standards need to reflect the extent of cracked kernels, it appears to us that such kernels, which are useable for many purposes, should be differentiated from other kinds of "foreign matter" in the grading of grain. Sincerely, TONY T. DECHANT, President. [The following information was referred to on p. 138:] [From the Milling and Baking News, Sept. 2, 1975] KANSAS GRAIN INSPECTION REMAINS UNIQUE "State department has 'model' image through independent operation and past record; takes stand against proposed federal takeover." TOPEKA, KANS.-In a time when much criticism has been directed at grain inspection services on all levels, the Kansas State Grain Inspection Department has maintained the image of a fair and efficient examiner of the state's grain shipments. In 78 years of continuous operation, the Kansas department has built up the reputation of a "model" for other grain inspection operations, both state and private. It is such a reputation that prompted this review of the Kansas department in the hope that analysis would be helpful as changes in the grain inspection system are reviewed and proposed. According to federal grain inspection officials in Washington, the Kansas grain inspection operation has certain "desirable" characteristics which make it unique among the 23 state inspection departments across the U.S. Among these are the fact that all employees of the department, aside from its director, are hired through civil service, eliminating political appointments. Another different aspect is that the department operates entirely on its own revenue, and actually contributes funds to the state treasury. One important measure of the accuracy with which an inspection agency performs its functions is the level of requests for re-inspections. From June 29 to July 25 of this year, at the height of the rush coincident with the harvest of a near record wheat crop in Kansas, the department's staff graded 21,378 rail cars. Requests for re-inspection numbered only 125, a rate equal to 0.58%. To service the state's grain movement and storage facilities inspections, district offices are staffed at Kansas City, Topeka, Atchison, Salina, Hutchinson, Wichita, Belleville, Dodge City and Wellington. HEADED BY RALPH CRAWFORD Since May 2, the Kansas inspection department has been headed by Ralph J. Crawford, a former president of the Kansas City Board of Trade. Mr. Crawford retired from Union Equity Cooperative Exchange, Enid, Okla., three years ago, and was appointed to the state post by Governor Robert Bennett in April. During his first few months as director of the department, Mr. Crawford has acted as overseer of operations and is required to make periodic reports to the governor. He cites the "tremendous background and history of the organization," and states that no major changes have been made during his directorship, since "there is no need for me to interfere with the quality work that has been done here in the past." He is also very aware that his "coming on board" coincided with the greatest public focus ever cast upon grain inspection as a result of the federal grand jury indictments at the Gulf. Mr. Crawford has been associated with the grain industry since 1933 when he supervised country elevators in Kansas, Missouri and Texas for Farmers National Grain Corp. He joined the Kansas City Board of Trade in 1953, and later was associated with C-G-F Grain Co. in Topeka and Lincoln Grain Inc., Kansas City. He was elected president of the Kansas City Board in 1966, and in 1968 was appointed vice-president and general manager of Producers' Export Co., New York. During the same year, while still with Producers' Export, Mr. Crawford headed a sales team to Japan which consummated the first cooperative-tocooperative grain sale to that country. As director of the department, Mr. Crawford is assisted by Nicholas P. Fabac, who also acts as chief inspector at the Topeka main office. Together they are responsible for operations of the department's divisions-administration, warehouse, inspection and scale with a combined workforce of 193 employees. Mr. Crawford pointed out that aside from himself, the department staff is made up entirely of civil service employees. BROAD LEVEL OF RESPECT In building a reputation for integrity, the Kansas department has gained the respect of the state's farmers, of the operators of the grain receiving and storage facilities, and of the receivers of grain inspected in Kansas located outside the state. That respect certainly includes the flour milling companies and the export elevator operators who have come to look upon Kansas-inspected samples with considerable trust. Not the least of those sectors holding the Kansas inspection system in great respect are the banking institutions. As providers of sizable amounts of credit to grain inspected by the Kansas department and on warehouse receipts issued on elevator stocks under the department's purview, banks across the state and throughout the U.S. hold the Kansas system in great esteem. METHOD TO ASSURE GRADING Grain sampling methods adopted as policy in Kansas leave little room for error or misrepresentation in grading. As of the first of this month, inspection offices are required to keep samples on file for inspection by official inspection agencies. The retention period for samples on boxcars and closed top hoppers is 15 days and on barge samples, 30 days. A unique feature of the method used by Kansas state grain samplers is the use of a large metal box, which is kept locked at each grain elevator location. As soon as a sample is taken from a car, the grain sampler deposits the sample in the box, and this procedure eliminates any possibility of tampering with individual grain samples. DEFENDS INDEPENDENT AGENCY CONCEPT Mr. Crawford said the state of Kansas has complete control over inspecting shipments of grain both entering and leaving the state, and is quick to defend the concept of a department independent from federal control. "We want to be federally supervised, but it would be catastrophic to operations of this department if it were completely taken over by the federal government," he said. Mr. Crawford is outspoken against proposed legislation which would place federal employees in charge of primary inspections of grain shipments. He is particularly critical of a bill recently introduced by Senator Dick Clark of Iowa which would abolish private and state grain inspection agencies and would turn over all inspection and grading of U.S. grain to the federal government. Senator Clark's bill would set up a new branch of the Department of Agriculture to be in charge of ali grain inspection agencies and establish a cooperative federalstate grain inspection service. As an alternative to complete federal control over grain inspection in the state, Mr. Crawford said he would not object if a federal officer were placed in his - Mião in a supervisory capacity, but added that any more control than that by U.S.D.A. or any other federally-imposed body would only mean confusion in presently stable operations of the department. He pointed to the fact that during the 1974 fiscal yzr 596 barges were inspected by the Kansas department at Kansas City and Atchinson for shipment on the Missouri River. Mr. Crawford said that the department was requested to furnish one-half the original sample from each barge to the Federal Grain Inspection Department. He noted that his office was notified that of the 596 samples, 127 were inspected by the federal department, and of these 127 samples only seven were changed to another grade. "It was expected of us, by the federal department, to deliver to them one-half of the original samples so that they could check our grades and advise us if there were any differences on any and all of the 596 barges," Mr. Crawford said. "Since they checked only 127 of the 596 samples, it seems a little useless for us to continue to send them samples of the loadings. "In some recent news media reports, it has been indicated that new legislation could be introduced to have all licensed inspectors become federal employes," he added. "This is absurd if one considers the fact they only had enough employes to check 127 of the 596 samples that were submitted. What would be their justification to take over all of the licensed inspectors and make them federal employes?" CHOICE FOR ELEVATOR INSPECTION Mr. Crawford cited as an example of the Kansas department's reputation the operations of the warehouse inspection division, under the direction of Sam J. Reda. Mr. Crawford pointed out that each licensed elevator in the state can choose between either federal or state examination of grain stocks. He indicated that out of approximately 1,000 licensed elevators in the state, his office inspects about 830, and only about 170 are federally inspected. As a further indication of the good reputation of the Kansas department, Mr. Crawford said state license fees for grain warehouses are considerably higher than the cost of federal license fees. He said that for a 10-million-bu elevator, his department charges $1,300 each year for license fees while the federal charge is an initial $1,000 for the first year, and the government requires no charge for subsequent years. To carry this example a step further, he said, the state license fee for a 20-million-bu elevator is $1,900 each year, while the federal charge is $1,000 for the first year, and no cost thereafter. Mr. Crawford said this vote of confidence in the Kansas department stems from a good image with the elevator manager, "who knows we are dependable." He said his office conducts unannounced examinations at least twice a year at elevators and provides certified proof to elevator customers of the amount of grain actually held at each location. "In this way," Mr. Crawford said, "we are protecting the elevator man, and at the same time we are protecting the farmer." He added that each spring the department, along with the extension service of Kansas State University, Kansas Wheat Improvement Association and Kansas Grain and Feed Dealers Association, conducts grain grading schools at nine locations throughout the state. These sessions, he said, are attended by both elevator managers and farmers. FIFTH OF FEES TO STATE FUNDS The Kansas inspection department is required by law to forward 20% of its gross income to the state general fund. During the 1974 fiscal year, this 20% amounted to $460,410. Effective this fiscal year, due to a change in funding legislation, the department's financial obligation to the state is set at a constant annual level of $200,000. Mr. Crawford said that due to the change in law, a study would be conducted by the department to determine whether present inspection charges should be revised. The last fee increase was made in June, 1974, and grain sampling charges now made by the department are $4 for boxcars and $7 for closed top hopper cars. NOT OUT TO MAKE PROFIT Mr. Crawford indicated that the department is not out to make a profit on its services, and "if we see we are making money, then we are going to lower our inspection fees." He added that in important factor to be considered in reviewing the current fees is the out look for future grain movement, since the income of the department "is definitely based on movement of grain both in and out of the state." He added that producer holding is becoming more and more significant to operations of the inspection department since "the more grain the farmer holds, the less grain movement we have to inspect." O |