Spring 1995
Remember the Protein Premium Controversy?
Studies say Financial Gains Offset Losses
By Tracy Sayler, Communications Specialist; Minnesota Assn. of Wheat Growers & Minnesota Wheat Council
Library
Home
E-Mail
Back
Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
In January, 1994, the new protein test is recalibrated, taking into account problems with its original calibration. The recalibration resulted in slightly higher wheat protein readings, but financial gains were generally offset by lower protein premiums.
Those are conclusions of two federal studies brought on by wheat protein testing complaints, culminating in late 1993 and early 1994.
NIRT: WHEAT'S DENVER AIRPORT
The first study was completed by the General Accounting Office upon the request of northern state lawmakers, including U.S. Representatives Collin Peterson and David Minge.
Since 1978 the Federal Grain Inspection Service (FGIS) had used Near Infrared Reflectance (NIRR) technology for official protein testing. NIRR estimates wheat protein by measuring infrared light reflected from a portion of ground grain.
In May, 1993, FGIS switched to Near Infrared Transmittance (NIRT) technology, which measures infrared light that passes through whole grain kernels, not ground kernels.
Before it was introduced, the NIRT (also referred to as a whole grain analyzer) was evaluated and proven to reduce operator errors, decrease analysis time, and provide more consistent results than NIRR technology.
However, several circumstances impeded a smooth transition to the NIRT technology. Many non-FGIS inspection sites, including grain elevators, did not begin using NIRT for protein testing at the same time. Some knew very little about the switch to NIRT, or the technology itself.
Consequently, there was a period where two different technologies were used that did not necessarily produce equivalent results.
According to the GAO study, "Those in the wheat market that purchased wheat on the basis of one technology's test results and sold it on the basis of another's saw, in some cases, differences in protein results. These differences created disparities between expected and actual prices."
The FGIS had anticipated transitional difficulties, but not to the extent of what actually occurred. Compounding the problem: scab, which blanketed the spring wheat growing region just months after the NIRT was introduced.
When FIS originally calibrated the NIRT equipment in 1991, it used market samples from 1991 and prior years that did not represent the unusual quality problems found in the 1993 crop. As a result, there were inaccurate readings on some samples.
By underestimating protein levels in heavily damaged spring wheat, the NIRT technology indicated an apparent additional shortage of high-protein wheat. The artificial shortage, resulting from the lower readings, created price premiums that were higher than they would have been if the protein levels had been measured accurately, the GAO study says.
The NIRT technology inflated protein premiums by about 53 cents per bushel for 13 percent to 15 percent spring wheat sold in the Pacific Northwest export market, the GAO estimates. For the Great Lakes export market, premiums were artificially boosted by 82 cents.
However, the GAO notes that the trade-off of lower protein readings for higher premiums may not have included everyone.
"While our economic analysis shows that losses from lower protein readings were offset by higher premiums in the aggregate, some farmers we spoke with believed that they had incurred severe financial losses," the GAO study says.
Country elevators joined farmers in the protein testing fray.
"Elevators had bought and sold based on the NIRR but started getting paid on the new official NIRT, that was eventually found to test consistently lower," says Bob Zelenka, executive director, Farmers Elevator Association of Minnesota.
"We have made the necessary calibrations, so now we're consistent with the new NIRT results," he says. "Unfortunately, the poorly publicized change by FGIS and use of equipment that was initially way out of line ended up costing some of our members a lot of money, with no recourse."
RECALIBRATION: EFFECTS FLIP-FLOPPED
In January, 1994, FGIS updated the original NIRT calibration to more accurately represent a range of growing conditions and protein levels, as well as reflect the quality of the 1993 crop.
The FGIS requested the USDA's Economic Research Service to study how the announcement of the NIRT calibration change affected the wheat market.
Comparing protein premiums from before the Jan. 3, 1994 recalibration announcement to that month's average, here's what happened in the market, according to the ERS report: Wheat protein readings increased by 0.16 percent (the average amount of protein underestimated by the old NIRT calibration) and protein premiums declined by an average 18 cents per bushel.
Thus, the ERS study concludes, wheat producers' gain from the NIRT's recalibration was offset by an equal amount of loss.
PROTEIN TESTING SITUATION NOW
Most country elevators continue to rely primarily on the use of NIRR protein analyzers "because they continue to be as reliable and accurate as the newer NIRT technology," says Zelenka.
"Producers should have faith in the results being provided by their local elevators," he says.
Expanded use of NIRT by country elevators is uncertain, according to Zelenka, since the National Conference of Weights and Measures, a standards-writing group, is studying a move toward even newer, self-contained, tamper-proof standardized equipment for testing both protein and moisture.
At any rate, protein testing is an issue that will continue to be debated, perhaps infinitely. Indeed, the most sophisticated testing equipment in the world will never resolve this truth-in-life: Just as sure as there will be another harvest, there will be a farmer who's dissatisfied with the protein test results on his wheat, justified or not.