Installation and Improvement of Grain Cleaning Equipment

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

Installation and Improvement of Grain Cleaning Equipment

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Notice.

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SUMMARY: The Commodity Credit Corporation (CCC) is soliciting public

comment on the merits of whether the CCC should finance, in some

manner, the installation or upgrading of grain cleaning systems at

wheat export elevators in the United States. The goal of this

initiative, if undertaken, would be to improve the quality and

competitiveness of U.S. wheat exports by insuring that foreign buyers

may readily purchase U.S. wheat with dockage specifications

substantially lower than currently available from export elevators.

DATES: Written comments on this notice must be received on or before

December 29, 1999 to be assured of consideration. A public meeting

concerning the subject matter of this notice will be held. The place,

date, and time of the meeting will be announced in the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Please direct written correspondence

to: Timothy J. Galvin, Administrator, Foreign Agricultural Service,

Room 5071, 1400 Independence Ave. SW, Washington, DC 20250. Telephone,

fax or e-mail correspondence may be directed to: Sam Dunlap, Assistant

to the Administrator, Foreign Agricultural Service, Phone: (202) 720-

1743, Fax: (202) 690-0493, e-mail: [email protected].

SUPPLEMENTARY INFORMATION: U.S. producers of wheat--particularly

growers of Hard Red Winter Wheat--cite on-going complaints from foreign

buyers about the cleanliness (and therefore perceived quality) of U.S.

wheat, especially in comparison to the wheat available from certain

foreign competitors. Although this complaint has been a long-standing

theme among some public and private sector buyers, as well as some U.S.

producers, the increasing trend toward privatization of grain imports

throughout the world during the 1990's may be giving the issue greater

importance. The growing ranks of private sector buyers are increasingly

more discriminating in making their purchase decisions, compared to

their publicly-owned predecessors.

While price competitiveness remains central to purchasing

decisions, major wheat export competitors have apparently capitalized

on buyers' concerns about U.S. wheat cleanliness in their marketing

programs. For example, the wheat offered by key export competitors,

notably Australia and Canada, contains average dockage levels of about

0.2%. By comparison, dockage levels for U.S. wheat inspected for export

during 1998 averaged from 0.5% to 0.7% depending on class.

A 1992 study by the USDA Economic Research Service concluded that

the mandatory cleaning of all U.S. wheat exports could increase wheat

exports by 2%, and that voluntary cleaning for selected markets, while

not likely to attain the export increase projected by mandatory

cleaning, would nevertheless have positive economic results in the form

of increased exports. The Economic Research Service concluded that an

overall reduction in dockage and foreign material could benefit the

U.S. wheat industry only if cleaner U.S. wheat induces sufficient trade

benefits to overcome the net domestic cost.

Public and private importers of wheat, especially in Asia, continue

to tighten specifications for their imported wheat purchases. For

example, the changing purchase specifications of one major buyer in the

Pacific Rim, Japan, has already brought about the installation of wheat

cleaning systems in the U.S. Pacific Northwest. An apparently growing

number of smaller buyers in Latin America and other regions are seeking

cleaner wheat but claim not to be able to secure the wheat from U.S.

sources. They can, and reportedly have, turned to competitors to fill

their needs. Yet some in the U.S. private sector apparently conclude

that the costs of installing and operating grain cleaning equipment in

many U.S. ports are not justified by the potential returns to private

firms.

The CCC is considering providing financial assistance to support

the installation or upgrading of grain cleaning equipment at export

elevators. Authority for this activity is section 5(b) and (f) of the

CCC Charter Act, 15 U.S.C. 714c(b) and (f). These provisions,

respectively, authorize CCC to ``[m]ake available materials and

facilities required in connection with the production and marketing of

agricultural commodities'' and to ``aid in the development of foreign

markets'' for agricultural commodities.

The CCC must consider numerous issues before initiating any

activity to support the installation or upgrading of wheat cleaning

facilities, including the likely scope and cost of such an initiative

(with a preliminary cost estimate of approximately $5 million per

facility); the extent and form of CCC's financing role; and how to

ensure that those existing elevators, primarily in the Pacific

Northwest, who have already undertaken such investments are not

competitively disadvantaged.

Comments are invited on all aspects of this proposed initiative.

However, it would be particularly helpful if comments addressed the

following:

(1) The size and scope of such an initiative. For example, should

the program be available to essentially all elevators providing wheat

for export, or should the program be established on a pilot basis at a

small number of facilities?

(2) Impact on those elevators in the United States that have

already undertaken the expense of installing grain cleaning equipment.

Should financing be limited largely to those regions of the country in

which elevators have not yet undertaken such expenditures?

(3) The CCC's financing role. What is the appropriate role of

government financing when the private sector declines to invest in

grain cleaning equipment on its own? What should be the extent of CCC

subsidy, ranging from guaranteeing loans on commercial terms to cost-

share grants? If cost-share, should the CCC's contribution be

established at a fixed percentage? Alternatively, should an elevator's

willingness to finance relatively more of the investment be a

competitive factor in awarding CCC financing? What costs should be

financed by the CCC?

FAS will announce the place, date, and time of the public meeting

regarding this proposal.

Signed at Washington DC on November 23, 1999.

Timothy J. Galvin,

Administrator, Foreign Agricultural Service; Vice President, Commodity

Credit Corporation.

[FR Doc. 99-30909 Filed 11-26-99; 8:45 am]

BILLING CODE 3410-10-P