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Results of Funded Research

Grading Practices and Dockage Impacts on the Value of Kentucky Wheat

Sam McNeill
University of Kentucky

Objectives
Project Overview

Objectives:

• Conduct survey of grain grading practices and dockage schedules for soft red winter wheat among Kentucky buyers and those within 50 miles of the state line.
  

• Determine specific discounts for grain moisture test weight, foreign material, damaged kernels, and insect and garlic levels.
  
• Collect five bushel samples from 10 different locations from 10 counties in the state and subdivide and analyze them according to the grading standards found in objective 2.
  
• Work with Opti-Crop and Wheat Tech representatives to identify cooperators for this study. Compute the economic value of the grade discounts each sample collected to assess differences between buyers within the region.
  
• Develop an extension publication to report the results of this project at producer meetings and field days.

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Project Overview:

Justification for Research

Typical grain grading practices for soft red winter wheat specify discounts for low test weight, heat/total damaged kernels, foreign material, shrunken and broken kernels, defects, insects and garlic bulbs. Although kernel moisture is no longer set by the USDA/GIPSA grade standard table, most elevators and millers specify a maximum moisture content of 13.5 percent and set discounts for grain lots above that level because of the importance of grain moisture to storability. Grain buyers are at liberty to apply different discount levels to these grain traits.

An informal telephone survey was conducted by UK personnel in 1993 and revealed that several different discount schedules are used by different wheat buyers for many grain grading parameters. For example, moisture discounts are computed in three general methods: 1) a fixed rate per point of moisture; 2) percent of selling price or wet weight per point of moisture (which results in essentially the same discount); and 3) a "shrink and dry" schedule where the amount of wet grain is "shrunk" to the base moisture (13.5 percent for wheat) and a drying charge is applied per point of moisture.

A simple method to compare different discount schedules would help producers make a quick fair comparison between buyers and ultimately allow him/her to maximize the price for their wheat.

The 1993 survey of eight elevators revealed a wide range of discounts for moisture, kernel damage, test weight, and the presence of insects or garlic bulbs (see Appendix A). The range of moisture discounts is shown in Table 1 for wheat based on original moisture content of 23.5 and 18.5 percent. Note the wide range of discounts vary from $0.60 to $1.13 per bushel for the high moisture level and $0.30 to $0.56 per bushel for the moderate moisture level.

Variations in the discounts for low test weight wheat are shown in Table 2. Note that discounts vary more at lower test weight levels (i.e., greater differences at lower test weight values). This obviously implies greater economic opportunities for producers, provided that transportation costs don't off-set the observed differences.

These differences are additive which points to the fact that thorough evaluation of elevator bids are essential to provide an accurate assessment of the net price for a lot/load of grain. For example, consider wheat that has been allowed to dry in the field but has lost some test weight in the process and is in the following condition: 18.5% moisture content, 53 lb./Bu test weight, and is free of insects, garlic bulbs and kernel damage. The discounts for high moisture and low test weight are added to calculate the total discount for the lot (see Table 3). The range of total discounts in this case varies among elevators from a low of $0.60/Bu to a high of $.863/Bu - a difference of over 26 cents per bushel! This wide range in potential returns indicates that an updated survey of wheat grading practices needs to be conducted. Such findings would be of interest to crop producers, elevators, millers, processors and livestock feeders.

Work Plan

Elevator survey: An anonymous survey of grain grading practices among SRW wheat buyers in Kentucky and within 50 miles of the state line will be conducted prior to wheat harvest next year to determine current discount schedules for test weight, moisture, FM, damaged kernels (mold, heat, broken) and insect and garlic contamination.

Sample collection and evaluation: Five bushel composite wheat samples of known variety will be collected directly from storage bins at 10 locations around the state (one per county from 10 counties). Bin samples will be subdivided and analyzed according to the grading practices used by wheat buyers in the region and compared with grading standards established by USDA/GIPSA protocol. Samples will also be screened and inspected for insect and garlic contamination. The principle investigator will coordinate with Opti-Crop and Wheat Tech personnel to select cooperators for this study.

Economic evaluation: An economic value of the grade discounts will be computed for each sample analyzed to assess discount differences between buyers within the region. This effort will identify specific economic incentives for producers to enable them to focus on areas in their operation that will impact the profitability of their wheat enterprise. An extension publication will be developed to summarize the results of this study for distribution at field days and extension meetings in addition to the final project report to the KSGFUC.

Table 1. Moisture Discounts from 1993 Elevator Survey.

Table 2. Test Weight from 1993 Elevator Survey.

Table 3. Total of Moisture and Test Weight Discounts from 1993 Elevator Survey.

With test weight of 53 lb/Bu.

Appendix A. Summary of Elevator Discounts from UK phone survey in 1993.

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