Wheat Pricing:

Information on Transition to New Tests for Protein

RCED-95-28: Published: Dec 8, 1994. Publicly Released: Dec 19, 1994.

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Pursuant to a congressional request, GAO reviewed the Federal Grain Inspection Service's (FGIS) introduction of near infrared transmittance (NIRT) technology for estimating the protein levels of wheat, focusing on: (1) wheat prices in 1993; (2) the economic impact of NIRT technology on the wheat industry; and (3) recent efforts to standardize unofficial protein testing of wheat.

GAO found that: (1) prices for high-protein wheat reached record levels in 1993 because of low supplies caused by poor crop quality and bad weather; (2) although FGIS took reasonable steps in introducing NIRT technology, difficulties with technology transfer and the poor crop conditions in 1993 undermined the wheat industry's confidence in FGIS actions and the NIRT technology; (3) NIRT technology generally provided lower protein readings for some damaged high-protein wheat and, in response, the industry increased the premiums for high-protein wheat by an average of 50 cents per bushel to offset losses due to the lower NIRT readings; (4) unofficial protein testing is generally more common than official testing; (5) the National Conference on Weights and Measures and FGIS have proposed standards for unofficial protein testing to make such testing more consistent; (6) although the standards are not yet enforceable, manufacturers can use them as guidelines in designing their protein-testing equipment; and (7) FGIS plans to begin testing inspection equipment using the standards in late 1994.

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