Midwest Grain Quality

Pursuant to a congressional request, GAO reviewed damages to the current year's small grain crop, focusing on whether: (1) market conditions justify significant discounts in grain prices; (2) large grain companies use a systematic discount system for low-quality grain; and (3) large grain buyers blend low-quality grain with high-quality grain and then resell it at normal market prices. GAO found that: (1) buyers' uncertainty concerning grain quality and supply and the level of vomitoxin in grain products have contributed to the increase of discounts for low-quality or damaged grain and premium prices for high-quality grain; (2) most grain buyers have a systematic process for setting discounts and premiums for grain products; (3) buyers frequently blend low-quality grain with high-quality grain to create a uniform product that meets market standards; and (4) ongoing and planned research efforts should provide information on price distortions caused by large grain buyers' market power.