India entered the realm of international trade in grains in late 2000’s, India was not ready as an exporter, but sold products of a price point and continues to do so. Prior to the green revolution, India was an importer of agricultural produce and followed the standards set by the exporting countries. Standards serve as reference, when used in context of contracts or international trade on which the commercial transactions are based.
One of the major strengths any grain production system can have is to offer a grade of grains that is consistent so as it is easy to trade and the users can identify the same without any problems. US grain production and marketing system has the capability to offer a variety of grades to its end users, which are priced accordingly. The differentiation in grades is possible due to the differences in topography, soils and climate from one region to another and the same is true for India as well, but Indian standards are not harmonized with International systems and hence Indian grains tend to be traded at a discount. Within Indian context there are two standards one proposed by Food Corporation of India for food grade maize and one for trade as per NCDEX.
The standards from FCI suggest as under :
The Maize shall be the dried and matured grain of Zea mays. The grain shall have uniform size, shape and colour. It shall be in sound merchantable condition and shall conform to standards framed under Prevention of Food Adulteration Rules.
1. Maize shall be sweet, hard, clean, wholesome and free from Argemone maxicana and Lathyrus sativus (kesari) in any form.
2. It shall be free from colouring matter, moulds, obnoxious smell and admixture of deleterious substances.
Recently Indian corn faced rejection in Canada as the samples were found to have higher levels of Alflatoxins, more than 20 times the permissble limit of 20 ppb (Parts per billion). Indian corn has also been rejected earlier in Indonesia and Vietnam due to higher level of Aflatoxins etc. While there are standards in place, the grain is exported without proper inspection. Also it seems that the grain standards for Industry are not the same as used by other countries for trade.
In the US, the Congress passed the U.S. Grain Standards Act (USGSA) in 1916 at the request of local trade and governments that wanted a national inspection program and, for the first time, a national weighing program. The U.S. Grain Standards Act, with few exceptions, requires official certification that export grain sold by grade has been inspected and weighed. Official services are provided upon request for grain in domestic commerce. The Federal Grain Inspection Service (FGIS) is a program of the U.S. Department of Agriculture’s (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA). FGIS administers a system for officially inspecting and weighing grain and other commodities and is available at all ports.
The U.S. Grain Standards Act provides for the establishment of official U.S. grain standards that are used to measure and describe the physical and biological properties of the grain at the time of inspection. The grades, classes and conditions reported on official certificates are determined according to the factors defined in these standards. These factors may include test weight per bushel (one bushel equals 25.4 kg) and percentages, by weight, of damaged kernels, foreign material, broken kernels and other factors. The certificate also notes specific conditions of the grain, such as moisture content and infestation. No seasonal adjustments are made on U.S. Grades. On an average one bushel of US corn has 90,000 kernels (as per a report from purdue university) and based on this the count will be 354 grains per 100 gm.
Under normal circumstances, trade priecs are based in U.S. no. 2 and discounts are offered on U.S. No.3 (As per CBOT the contracts are based in #2 and #1 Yellow is at a premium of 1.5 cent/bushel premium and #3 at a 1.5 cent/bushel discount). Meaning if #2 is valued at $3.81/bushel=$150/MT, #3 will be valued at $ 3.795/bushel=$149.4/MT, a discount of $0.6/MT on CBOT).
While it is true that standards need to be simple, but then they tend to be impractical for trade and if the standards are too complex, then they tend to become impractical. In order to move up the ladder on the World’s Bank ‘Ease of doing Business’, India must act and hormonize its trading standards with that of the world. It could work both ways, open the imports as well and open the opportunities for Indian traders to export as per International standards. It is not for the Government to decide, but for the trade to demand that the harmonized standards be set in place and end users to demand that they would follow the standards to procure.
Be ready, we are not far from it.
