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Given the complexity and uncertainty of the situation this very unusual year, we 

 believe the market reacted in a very sophisticated and prudent way. We think a few facts 

 will help the committee understand why the market reacted as it did: 



— First, millers and grain elevators report there has been a premium in the 

 market for some time for wheat with protein exceeding 14 percent. In feet, 

 millers and grain elevators tell us that premiums for wheat meeting the quality 

 specifications of millers have increased over the last several months to 

 historically high harvest-time levels. As a result, millers have tended to retain 

 relatively low stock levels to avoid excessive inventory costs. This 

 consideration has made millers extremely sensitive to the quality of in-bound 

 shipments. Maricet signals passed on by millers are quickly relayed to raw 

 grain handlers in the form of premiums for high-quality, high protein wheat, 

 and discounts for lower qualities. 



— Second, as I mentioned earlier, our industry was operating in a period of 

 regulatory uncertainty for several weeks as the wheat harvest began and the 

 first incidences of vomitoxin were reported. Until the FDA issued its new 

 vomitoxin advisory levels on September 16, 1993, there was legitimate 

 concern by elevators about their potential legal liability and whether there 

 would be acceptable markets for weather-damaged wheat accepted from 

 fermer-customers. It also should be noted that despite the agency's action, 

 many fiseders adopt quality standards more restrictive than FDA sanctions. 



— Third, this regulatory and market uncertainty was compounded by the feet that 

 stocks of milling quality wheat were extremely low. Carryover stocks of 

 wheat prior to the 1993 harvest were at historical lows. With little wheat on 

 hand to meet end-user requirements, elevators were very reluctant to take 

 delivery of large quantities of weather-damaged wheat from fermers until it 

 was clear that it would be merchantable. 



