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Mr. Chairman and Members of the Subcommittee: 



The National Grain Trade Council appreciates this opportunity to address the Subcommittee's 

 concern about 1993 crop quality issues. I am John Campbell, assistant vice president for 

 Corporate Affairs, Ag Processing, Inc., which is headquartered in Omaha, Nebraska. Ag 

 Processing is a farmer-owned cooperative involved in soybean processing, bulk grain merchan- 

 dising, and feed manufacturing. 1 am a member of the Farm Policy Committee of the National 

 Grain Trade Council, on whose behalf I appear before you today. 



The Council is a national trade association whose regular members include grain exchanges, 

 boards of trade, and national grain marketing organizations. The Council has a number of 

 associate members representing a large cross-section of the grain marketing industry. 



Council members cover the full spectrum of the agricultural industry. Our members include 

 firms who handle bulk grains and oilseeds, the markets where the price risk associated with 

 merchandising grain is hedged, transportation firms, and companies that process agricultural 

 products into consumer-ready items we purchase on the grocery shelf. 



We hope today's hearing will help moderate some of the highly inflammatory rhetoric that has 

 surrounded the market's reaction to vomitoxin-contaminated wheat. Our testimony will outline 

 the purpose and function of the grain marketing system. We wrill discuss how the marketing 

 system copes with differences in quality and how the industry interacts with its customers - 

 farmers and end-users - through the marketplace. Our testimony will show that, contrary to 

 popular belief, the market is paying premitmis for vomitoxin-contaminated wheat and 

 abnormally high premiums for higher quality wheat. 



Grain Merchandising System Adds Value 



As a premise to our discussion, it might be helpful to remember why the grain merchandising 

 system was built in this country. Only a few generations ago farmers used most of their grain 

 production on the farm. Com, oats, barley, and even wheat were produced primarily for live- 

 stock and family consumption. As machinery and chemical power began to replace horsepower, 

 and as production began to exceed on-farm family needs, farmers moved from self-sufficiency to 

 marketing grain to the outside world. As a result, small grain storage operations began to 

 spring up. Some of these were private operations, but many were built by farmers in the form 

 of local cooperative associations. 



If you travel in states like Iowa, you will see tall storage facilities dotting the countryside. Rail 

 access was critical, but so was distance from the farm. Many of these facilities are spaced about 

 12 miles from each other. In those days, a facility would draw grain from about a six-mile 

 distance because the 12-mile round trip from the farm to the elevator and back was about all a 

 wagon and team could do in a day. 



Even though times have changed dramatically from the early part of this century, the purpose 

 for building those facilities has not. The primary function of the grain elevator - then and now 

 " is value enhancement. An elevator adds value through collective marketing (including stor- 

 age), enhanced transportation leverage, volume clout with end-users, and quality management. 

 QuaUty management is the merchandising function that is the focus of today's hearing. 



