In the late 1980’s, articles began appearing in farm magazines that claimed the recent decline in wheat exports was being caused by our “dirty wheat.” (See my discussion here.) Some of these articles advocated federal legislation requiring all U.S. wheat exports to be mechanically cleaned. In response, I wrote an article arguing that cleaning was unlikely to make our wheat a better “value” for most of our customers:
In the process of writing that article, I realized that the way a dockage discount schedule is constructed has a big impact on whether low and high dockage wheat is blended or segregated. If high dockage is heavily penalized, upland elevators will blend high dockage wheat with the “clean” wheat they receive and every shipment exporters receive will have the average dockage of the inland elevator from which it came. If some customers want “clean” wheat, why not ship the clean and dirty wheat in separate barges and let the exporters blend it to our customer specifications at the ports? My article examining these issues is:
Several years ago, John Oades of U.S. Wheat Associates and I worked to simplify these ideas and put them in a form that John could present to the Portland grain exporters:
Unfortunately, we haven’t had much positive response yet.
For many years, I was puzzled about why our customers complain about our “dirty” wheat even though the dockage they receive is always less than the maximum specified in their purchase contracts. I began to understand when I read Bob Drynan’s excellent paper:
For most of our customers, dockage is now deducted from the weight of the shipment and they are not charged for the dockage they receive. However, our customers are still charged for other non-millable material in our wheat, i.e. “foreign material” and “shrunken and broken kernels.” Forcing us to run our wheat through mechanical cleaners reduces both a) dockage and b) foreign material and shrunken and broken kernels. Hence, having dockage specifications strict enough to require mechanical cleaning increases the percentage of millable wheat in each ton of the shipment and reduces the cost of the millable wheat in the shipment. Our customers, who specify very low dockage specifications in their purchase contract and hence force us to clean our wheat before it is loaded on the ship, may not really want lower dockage. They may be forcing cleaning to get cheaper wheat. Since cleaning is expensive, this is an inefficient way of getting around a faulty grading system.
Change our export contracts to charge for only Net-Millage bushels
If we want to deal with the dockage issues and the charges about our “dirty wheat,” we must first remove the perverse incentives that our current system provides and change to a moisture-adjusted, “net-millable” bushel grading system. We should deduct all non-millable material from the weight of the wheat and charge our customers only for the wheat they can mill into flour. I discuss this a column published in Oregon Wheat Magazine in 2001: