History of Soybean Grades, Standards, Foreign Material and Component Pricing (1917-1921)

William Shurtleff, Akiko AoyagiISBN: 978-1-948436-48-9

Publication Date: 2021 Aug. 26

Number of References in Bibliography: 396

Earliest Reference: 1917

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Brief Chronology/Timeline of Soybean Grading, Foreign Material, Component Pricing, and Yield

GRADING SOYBEANS & FOREIGN MATERIAL:

The United States may well have been the world’s first country to develop soybean grades or standards (A.K. Smith in Soybean Digest. 1958 Oct. p. 16).

1922 – The earliest soybean grade standards are said to have been developed by a pioneer processor whose main business at the time consisted of manufacturing starch from corn [probably A.E. Staley Mfg. Co.]. It is not strange therefore, that the early grade standards were patterned after the grades applying to cereal grains (Iftner 1943, p. 11).

1924 Aug. 29-30 – At the Fifth Annual Field Meeting of the American Soybean Association in Ames, Iowa: “Mr. J. E. Barr of the United States Department of Agriculture read a paper on ‘Progress in the Study of Soybean Grades,’ and made definite recommendations regarding the grading of soybeans (Proceedings of the American Soybean Association, Vol. 1, p. 49).

A good summary of this paper is given by Oil, Paint & Drug Reporter (see below).

1924 Oct. 27 – Tentative soya bean grades are proposed by J.E. Barr of USDA’s Bureau of Agricultural Economics “for the information of boards of trade, merchants' exchanges and others interested in this product, in the hope that they will be tried out in connection with the marketing of this year's crop, and in order to get data bearing on possible revision of the tentative standards before they are officially and finally promulgated for application to next year's crop (Oil, Paint and Drug Reporter, p. 20).

1925 Sept. 1 – Official soybean quality standards/grades are first issued by USDA’s Bureau of Agricultural Economics (See Table 1, p. 81). (Proceedings of the American Association. Vol. 1, p. 77-83).

This is the earliest English-language document seen that uses the term “foreign material” in connection with soybean grading.

1934 – J.E. Barr of USDA’s Bureau of Agricultural Economics states: “The soybean is one of the few cash crops for which U.S. standards were available as soon as production reached commercial proportions. These have been in use in marketing soybeans since September, 1926.” (Grain & Feed Journals Consolidated. p. 72).

1941 May 8 – The word “dockage” is first used in connection with soybeans in USDA grading standards (Decatur Daily Review, p. 42; USDA Extension Service AWI-35).

1942 – The harvest this year gave the existing soybean standards a severe test and found them wanting. When discounts on the same lot of beans varied as much as 50 cents per bushel there was a general demand for their revision, which resulted in a less drastic schedule of discounts on damaged beans being announced for the 1943 crop. But not until after months of study and work by G. H. Iftner, director of Grain Marketing for the Illinois Agricultural Association, and others.

1949 Sept 1 – New U.S. soybean grading standards take effect; they allow No. 2 soybeans to contain 3% foreign material – up from 2% previously. Foreign buyers soon complain about dirty U.S. soybeans (Soybean Digest, 1955, p. 16).

1949 Nov. – George Strayer, in the first of 28 articles in Soybean Digest, reports that overseas buyers are unhappy with the poor quality of U.S. soybeans. “Dockage, damaged beans, cracked beans and foreign material have been way out of line.” The last of these articles appears in Dec. 1965.

1955 Sept. 1 – New U.S. soybean grading standards take effect; they allow No. 2 soybeans to contain only 2% foreign material – down from 3% from 1949 to 1955 (Federal Register. 1955 April 14).

COMPONENT PRICING:

1932 Sept. 12 – The earliest document seen that discusses the many advantages of adopting the practice of buying and selling soybeans on the basis of their oil and protein content appears in Oil, Paint and Drug Reporter (p. 17+).

The same idea is next discussed in the March 1939 issue of Country Gentleman (p. 23+), and after that in the May 1944 issue of Soybean Digest (p. 12-14).

1944 – For the first time soybeans are sold on the basis of their oil content as determined by the official A.O.C.S [American Oil Chemists’ Society] method. World War II is raging and the U.S. government, the buyer, wants to be sure it is getting what it is paying for (Oil and Soap, Oct. 1944, p. 305-06).

1946 April – George Strayer writes a prescient editorial in Soybean Digest (p. 5): “For one thing, there is a distinct need for an accurate, rapid and economical test for the oil content of soybeans. No such thing exists today. Logically, soybeans should be traded on an oil content basis, just as hard wheats are traded on a protein basis. The new Lincoln soybean, with an oil content considerably higher than previous varieties, should command a premium over average run beans.”

1968 July – A new technology, known as direct near-infrared spectrophotometry, is first mentioned in print. The term “near-infrared” first appears in this context in the Israel Journal of Agricultural Research (p. 125-32).

1977 Oct. – “Near-infrared spectrophotometry,” a technique now becoming well known, is first abbreviated as “NIR” in connection with soybeans (Cereal Foods World, p. 534+).

1979 – The term “component pricing” is first used in connection with soybeans to describe the practice of buying and selling soybeans on the basis of their oil and protein content (Updaw. 1979. “Market analysis of the component pricing of soybeans”).

1985 – The term “constituent pricing” is first used in connection with soybeans to describe the practice of buying and selling soybeans on the basis of their oil and protein content (Burton in Shibles 1985, p. 361-67).

2000 – Ag Processing Inc. (AGP), a farmer-based cooperative headquartered in Omaha, Nebraska, is the first company in the USA to launch a program where they pay growers more for soybeans having a higher oil content. As the cooperative’s Annual Report 2000 states (p. 9): “AGP Processing group launched the Oil Premium Program. It is a marketing program that rewards soybean producers for the component value of their soybeans, and it represents the future of soybean marketing.”

2001 – AGP’s already successful “Oil Premium Program” is now renamed the “Soybean Component Premium Program.” It will be expanded in fiscal 2002 to include a protein component (AGP 2001 Annual Report, p. 8, 10).

2002 AprilSoybean Digest (p. 8-9) is the earliest document seen that uses the term “value-based pricing” to refer to AGP’s new system of paying growers more for soybeans having a higher oil content,

2021 Aug. 23 – A talk with Wayne Johnson of AGP indicates that the Soybean Component Premium Program is still alive, and well and growing.

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