Domestic Quality Standards
and Trading Rules
and Recommended Export Contract
Specifications
for
Information
Only Factors
Protein
& Oil
Recommended Purchase Specifications for Soybean Meal
Table 3 Types of Damages as Defined by FGIS
Table 4 Reproducibility of Results of NIR
Equipment in Measuring Oil & Protein
Table 5 Sliding Scale of Discounts Concept
Table 6 NOPA Trading Rules -44% Protein Soybean
Meal
Table 7 NOPA Trading Rules -Dehulled Soybean
Meal
Table 8 Amount of Protein Contained in Soybean
Meals of Varying Qualities
Table 9 Comparison of Cost Per Unit Of Protein
of Three Types of Soybean Meal
Table 10 Variation in Quantity of Soybean Meals of
Differing Protein Contents
Table 11 Recommended Purchase Contract
Specifications for US Soybean meal
Table 12 NOPA Trading Rules -Crude Degummed Soybean
Oil
Table 13 NOPA Trading Rules -Once Refined Soybean
Oil
Table 14 NOPA Trading Rules -Fully Refined Soybean
Oil
INTRODUCTION
In
this paper we will review the domestic standards for U .S. soybeans, soybean
meal and soybean oil, delineate the appropriate responsible inspection
entities, make recommendations as to informational factors in contracting, and
minimum quality specifications to reduce risk and ensure product quality upon
receipt. The focus of this paper will be soybeans that are destined for
crushing, i.e., the production of oil and soybean meal.
In order to make appropriate decisions on contractual quality specifications, it is best that one understand the inspection system and normal marketing practices of the supplier. Deviation from normal marketing practices and the choice among standard quality specifications can directly affect costs and risks. While the costs vary considerably with changing market conditions, the risks are more clearly defined. Hopefully, this paper will be helpful in evaluating and/or validating current contractual specifications for imports and domestic production.
The
current U.S. Standards for Soybeans list six grade-limiting factors. They are
test weight (bulk
density), splits, total damaged soybeans, heat damaged, foreign material and
soybeans of other colors. In addition, moisture is determined on each lot and
the results appear on all official inspection certificates, and oil and protein
analysis will be performed upon request. Of these eight factors, five determine
quality and yield of end products and the other three are of little
significance in determining quality or in causing deterioration. U.S. Standards
for Soybeans are shown in Table 1.
1. Test
Weight (Bulk Density)
Of
the enumerated quality factors in Table 1, test weight is of the least
significance in determining value or storability. Test weight is merely a measurement of the
weight of a specific volume of soybeans. No published research has found a
relationship of soybean bulk density to either oil or protein content. The only
study showing a significant correlation was a study of 20 vessels received in
2. Soybeans
of other Colors
The
second factor of limited value to the soybean crusher is soybeans of other
colors. Commercial soybean varieties grown in the United States, when mature, have
yellow or green seed coats and yellow cotyledons. Other than for factors
related to immaturity, discoloration of the seed coat generally results from a
viral or fungal infection. Bicoloration or "hilum bleeding" is caused
by the soybean mosaic virus and purple seed stain or mottling is caused by a
fungus (Cercospora kikuchii), both of which are confined to the seed
coat and cause no deterioration of the seed or its constituents. Other types of
discoloration caused by fungi are determined under damage interpretations and
are considered damaged seed.
3. Splits
The
third factor of limited value, except in exceptional circumstances, is
splits. The rather broad limitation of
20% in U .S. #2 soybeans attests to the limited value of this factor. However,
the negative effect on oil quality of splits increases directly with increased
moisture content. Splits in the presence of high moisture (greater than 13%)
lead to activation of the lipoxygenase enzyme, which in turn catalyzes
oxidation of the oil fraction. This results in a breakdown of triglycerides in
to diglycerides and free fatty acids. This effect is measured by higher acid
values and results in higher oil losses during refining. One could conclude
then that the relative importance of splits increases with increased moisture,
temperature and duration of storage.
It is suggested that with proper purchasing specifications, adequate care in storage and “first in - first-out” inventory management, splits should not be a major concern.
1. Foreign
Material
We
will discuss the three grade limiting factors considered significant not
necessarily in order of their importance. Of these, foreign material is most
often of concern since export shipments contain near the maximum allowed by
contract.
Foreign
material is defined as all material which readily passes through an 8/64 inch
(3.2 mm), round-hole, perforated sieve and any material other than soybeans
remaining atop the sieve. The limitation
in U.S. #2 soybeans is two percent. The presence of foreign material in
soybeans adversely affects storability and drying/aeration efficiency, and,
unless removed prior to processing, will affect the quality of both the oil and
the protein meal.
Various
foreign materials will segregate because of differences in particle size,
shape, bulk density and adhesiveness. Because of dissimilarity in density,
fine, more dense materials tend to accumulate near the impact point in the
container being filled, forming a cone in the spout line. The coarser, lighter
materials tend to migrate to the exterior of the storage container during
loading. Therefore, the foreign material tends to concentrate during handling
which can have a effect on storability which is related to its physical
attributes The foreign material is generally more hygroscopic than the soybeans
and may therefore be higher in moisture than the soybeans which can result on
heating. Even during aeration, forced air will tend to flow around the spout
line making aeration less efficient and temperature less uniform. The
non-uniform temperatures in the storage mass can generate convection currents
resulting in moisture migration and accumulation with subsequent quality
deterioration.
In
addition, if the foreign material is processed with the soybeans it can cause
the production of poorer quality oil. In
November 1987, the Federal Grain Inspection Service examined the oil content
and oil quality of twenty samples of foreign material found in commercial lots
of soybeans. The results of this analysis are shown in Table 2.
Assuming
this information represents average lots of
#2 soybeans, one can make two general statements; (1) FM can adversely
affect oil quality if not separated prior to extraction, and (2) for each
percent increased FM extracted one might expect a 0.12 percent rise in acid
value of the extracted oil.
If
FM is extracted or removed prior to extraction then added back to the meal
fraction one should expect a small increase in fiber and small decrease in
protein content of the resulting meal.
2. Heat
Damaged/Damaged Kernels Total
Probably
the second most important factor of economic importance to the crusher is heat
damage. For calculation and reporting,
FGIS separates damage into three categories. Heat Damage (HT) is a separate
grade-determining factor with a limit of 0.5% in U.S. Standards for Number 2
Soybeans. Insect stung or stink bug stung kernels is contained in the factor
damaged kernel total (D KT), but is identified separately since it is
calculated at one-fourth the rate of other types of damage. The third category
is other damaged kernels and contains those types of damage caused by fungi,
frost, immaturity and insects. Heat damaged, stink bug damaged and other
damaged kernels combined have a limitation of 3.0% in U.S. Standards for Number
2 Soybeans.
Damage
is determined by comparing soybeans appearing damaged in a 125 gram
representative sample to a set of interpretive line slides (35mm color slides)
placed on a special viewer. If individual soybeans appear equal to or worse
than the damage depicted in the slide, it is considered damaged
(cross-sectioning is often required to determine some types of damage).
All
but one of the 12 types of damage thus depicted has an effect on oil
quality. Damage can result in higher
acid values, higher peroxide values, higher non-hydratable phosphatides, off
color and oil with a reduced shelf life.
The lone exception is downy mildew, which is limited to seed surface
infection. It is not known to have detrimental effects on processing or value
in end use.
The
twelve types of damage listed by FGIS are listed in Table 3.
Through research, FGIS correlated damage to free fatty acid (FFA) content of oil. The research was used to support a more strict interpretation of damage being imposed in September 1986. Predicted FFA value in soybeans containing 3% damage would be approximately 0.7%, below prevalent world trading rules for crude degummed soybean oil maximum of 0.75%.
1. Moisture
The
most important storability factor in soybeans is moisture content. The
interaction of moisture, temperature and time is responsible for by far the
vast majority of storage related quality deterioration in soybeans. Proper
moisture specification and storage management are the keys to successful
long-term storage of soybeans. Dependent upon end use and ambient storage
condition, there is a range of recommended moisture contents considered safe
for storage. For direct food use or for use as seed, protein solubility and
germination are important considerations.
A moisture at or below 11 % is recommended for these uses. For solvent
extraction 12.5-13% moisture is not likely to result in any loss of processing
quality within a year. Average moisture
beyond 13%, a blend of widely divergent moisture lots, or storage conditions
that lead to moisture migration and accumulation can often result in serious
quality deterioration in a relatively short time span.
Moisture
is not a grade-limiting factor but is mandatory information in all official
inspections. It is determined by use of
a Motomco 919 moisture meter on whole sample basis (inclusing FM). The moisture meter is calibrated to an
air-oven method.
2. Protein
and Oil
The
newest informational factors for soybeans in U .S. grain standards are protein
and oil content. Effective September 4,
1989, FGIS began analysis of protein and oil content upon request. If a party to a contract does not request
such information, an analysis will not be performed. FGIS uses near infrared
reflectance (transmittance) technology to make the analysis. Various
constituents in soybeans absorb different light spectra at varying rates. The
NIR instrument uses this principle in the near infrared spectrum of light to
correlate different spectra absorption rates to the protein and oil
constituents, which is then calibrated to traditional wet chemistry
methodology. Reproducibility of results is reported by FGIS is presented in
Table 4.
This
means that a given protein result will fall within 0.6 percentage points of the
wet chemistry methodology (combustion method for protein; Soxtec for oil)
two-thirds of the time, or within ±1.2
percentage points 95 percent of the time. Most of this variability is due to
sampling error, not the accuracy of the instrument, per se. The same sample presented to the same
instrument a hundred times should not vary more than ±0.05 percentage points from the original result.
There
are five instruments that have been approved for measuring protein and oil in
official Inspections. Four are
reflectance type fixed filter instruments requiring a finely ground
sample. The approved grinder must be
cleaned after each use and must be on a slow feed, resulting in a restriction
on the number of samples run per hour to a maximum of eight per grinder. The
fifth instrument is a transmittance-type instrument with a scanning
monochrometer that analyzes the sample of FM-free whole soybeans. Costs of
instruments range from a low of about US $10,000 to a high of US $41,000 for
the transmittance-type
FGIS
has indicated that there will be no additional inspection fees charged at
export to provide this information. Results will be reported to the nearest
tenth percent on a standard 13% moisture basis or other moisture basis, if
desired.
As
the purchase decision is formulated, the only document that has the force of
law is the purchase contract. This document must contain the minimum quality
specification acceptable to the buyer to which the seller must comply. There
are a number of standard contracts for the sale of U.S. soybeans including the
North American Export Grain Association (NAEGA) contracts for FOB and CIF
shipments. Our recommendations represent only the barest minimum quality
specifications for soybeans that will be used by the soybean crushing industry
in the production of edible oil and soybean meal for animal feeding. Soybeans
used for production of soy foods for human consumption are beyond the scope of
this paper.
Following
then are our contract specification recommendations:
1. U.S.
Number 2 Yellow Soybeans
For
crushing purposes the standard U.S. Number 2 Yellow Soybeans are perfectly
adequate for the production of soybean meal for animal feeding and soybean oil
for further refining. Significant deviation to a less stringent specification,
while lowering the price, will increase the risk of production of poorer
quality products are products that are unacceptable in the market. Conversely, specifications
with more stringent requirements typically require price premiums that more
than offset the economic advantages gained by the higher standard. That is not
to say that less or more stringent specifications are not utilized by importers
of U.S. soybeans. But in those cases, reasons are expressed which mayor may not
be economic.
There
are a number of examples of differing contract specifications. Taiwan buyers in
recent years have specified a minimum oil and protein content, with a scale of
discounts if the minimum specifications were not met. In 1987 Japanese buyers
specified a lower foreign material. This practice was discontinued since the
price premium was higher than the economic return. A specific German processor
buys U.S. Number 2 soybeans, but specifies a maximum one percent foreign
material. Another German processor in the past had consistently, and still
today on occasion, purchased U.S. Number 3 Soybeans.
2. Moisture
Dependent
upon the desired end use and the storage condition, season of year and
anticipated time lapse before consumption or processing, there are a number of
possible recommendations as to contract specifications for moisture. Unless
stored in a cool climate, deterioration risks rise rapidly when moisture
exceeds 13%. Large importers of U.S. soybeans, Japan being one example,
typically limit moisture to a maximum of 13.5% .In a tropical or semitropical
climate with anticipated extended storage the recommendation would be lowered to
13 % .In most years, U.S. exports of soybeans contain moisture well below 13%.
Further,
the risk of deterioration during ocean transport increases as the moisture
level increases or the as moisture variability increases. This is particularly
the case in the long transportation times to Asia. Contrary to common
perception there is no detectable increase in the average moisture content of
soybeans during ocean transportation. There are reports, however of moisture
migration, condensation and accumulation especially during winter months when
cold cargoes pass through warm tropical waters and the hot sun of the tropics
falling on the hatch covers.
Deterioration may result, but there is not an increase in the average moisture
level. A lower moisture specification will limit this risk.
3. Oil &
Protein Content
If
there are specific reasons why a buyer may wish to specify minimum oil and
protein contents, it is recommended that the contract be based upon a sliding
scale of discounts and/or premiums. Stating absolute minimums, even at
reasonable levels, may limit the ability of the seller to find sufficient
quantities of soybeans meeting both standards. Thus, the price premium required
may be prohibitive. The sliding scale provides flexibility, yet compensates the
buyer if minimum oil and protein levels are not met. The sliding scale as a
concept is explained in Table 5.
Even
if minimum levels of oil and protein are not specified, since the service is
free, the contract should specify oil and protein analysis by FGIS. Although
this will not affect the quality delivered, the buyer gains significant
information to determine value or end use preference with documentation
arrival, long before the vessel arrives in port.
3.
Inspection Certification
Likewise,
the contract should require a copy of the Inspection Log as part of the
required documentation. This no cost requirement provides much more detailed
information on the shipment than the export inspection certificate alone. The
Export Inspection Certificate describes only the weight, stowage and the
averages of the quality factors. The Inspection Log shows a sublot-by-sublot
inspection results, and thus may identify variability that may be important in
how the soybeans are stored (segregation) and processed.
Soybean
meal is considered a processed product or a by-product; therefore, governmental
standards were never established to describe the product. In U.S. domestic
markets the trading rules adopted by the National Oilseed Processors
Association (NOPA) serve as "de facto" standards for soybean oil and
soybean meal.
For
soybean meal, NOPA trading rules prescribe are two designations of quality,
i.e., 44% protein meal, and dehulled, high protein meal. The specifications for
both types of meal are shown in Tables 6 and 7.
Table 6
NOPA Trading Rules 44% Protein Soybean Meal |
|
|
Factor |
Specification |
|
Protein Fat Fiber Moisture |
Minimum 44.0% Minimum 0.5% Maximum 7.0% Maximum 12.0% |
Under
the trading rules there is no provision for urease activity or other
specification to insure proper heat treatment to inactivate anti-nutritional
factors (trypsin inhibitors) present in raw soybean meal. Most feed
manufacturers would prescribe this additional specification in the contract.
The typical urease specification in the U.S. market where the animal species to
be fed is non-ruminants is a pH rise of no less than 0.05 units but no more
than 2.0 units (Caskey Knapp test). If
the soybean meal is to be fed to ruminants in combination with molasses and
urea, a pH rise of 0.12 or less is desired. Sufficient data is not available to
make recommendations on urease activity for soybean meal fed to fish and
prawns, but is probably similar to non-ruminant livestock. Less than a 0.05
unit increase in pH suggests that there is a good chance the protein and amino
acids were damaged from overheating.
The
trading rule for moisture is a maximum 12%, however the rules allow moisture up
to 12.5% without discount. Only when the moisture exceeds 12.5% is the discount
applied and then it is applied back to a base of 12%. The discounts are two
times the delivered invoice price if between 12 and 13% moisture, and 22 times the invoice if above
13% moisture.
The
trading rules further prescribe that a non-nutritive, inert, non-toxic
conditioning agent to improve flowability can be added up to a maximum of 0.5%
by weight. The conditioning agent must be shown as an added ingredient. The
material most often used in the past for this purpose has been calcium
carbonate (ground limestone). This is an important constituent especially in
swine nutrition where the calcium/phosphorus ratio is a critical
consideration. More recently this flow
agent has been ball clay (bentonite clay).
There
are specified penalties in domestic markets, with cargo rejection possible
under certain conditions, if minimum specifications are not met. Samples for
trade dispute settlement are drawn at point of origin and referee laboratories
are specified in the trading rules.
At
export, NOPA trading rules do not specify minimum quality standards,
principally due to the varying specifications of some buyers who may wish to
purchase poorer quality than the minimum specified by NOPA rules. The trading rules
do, however, restrict blending to soybean mill feed, soybean mill run, and
soybean hulls, and provide rules for sampling and weighing. The majority of soybean meal traded in
international markets is traded under Grain and Feed Trade Association (GAFTA)
contracts. For U.S. soybean meal GAFTA 100 contract is used for C.I.F. terms
and GAFTA 119 for F.O.B. terms. There are a number of quality specifications
that can be utilized under these contracts to include minimum protein as well
as minimum "pro-fat" (a minimum value of protein plus fat).
Sampling
and analysis of soybean meal at export is typically performed by an independent
superintendence company and its certificates accepted as final by buyer and
seller. The finality of the certificate is absolute in the absence, naturally,
of fraud or collusion. The risk of deterioration in transit due to
"inherent vice" is totally the buyers. Buyers can limit risk in this
regard by specifications in the contract.
The
most important considerations in purchasing soybean are all related to
economics. Many would argue that the most important such consideration should
be whether to purchase 44% protein soybean meal or dehulled soybean meal. What
I will present here is an economic case for purchasing dehulled soybean meal.
As
one would expect the higher the protein level the higher the price of soybean
meal in terms of price per ton. This does not, however, mean that it is more
expensive in terms of cost per unit of protein or cost per unit of nutrient in
the diet. The cost per unit of protein should be calculated on the cost of
soybean meal delivered to the feed mill.
Table
8 defmes the units of protein contained in several differing qualities of
soybean meal. Meal A, purchased on a 44%
"pro-fat" contract contains 40.5% protein; Meal B contains 44%
protein; and Meal C is dehulled soybean meal containing 48% protein.
To
determine the cost per unit of protein, the total price at the feed mill is divided
by the amount of protein received. While the price per metric ton will vary at
the F.O.B. port, the cost for ocean freight and local transportation will be
the same. Import duty and other taxes are normally based upon landed tonnage or
value. These duties may vary. Table 9
compares the three types of soybean meal based on cost per unit of protein
delivered.
Based
on the comparative costs presented in Table 9 it is obvious that the logical
choice should be dehulled (48% Protein) soybean meal. Although it costs $17/MT
more than 44% profat and $10 more than 44% protein soybean meal, its price per
unit of delivered protein is decidedly lower.
As
demonstrated in Table 10, the variation in protein content between 40.5% and
44% protein soybean meal is not 3.5%. In fact, 44% protein is more than 6%
higher than 40.5% (3.5 + 41.5). The far right column demonstrates the added
value of purchasing 48% protein soybean meal versus 44% profat. That is, at the
feed mill even after paying the higher price for 48% protein soybean meal the
feed mill receives 8.25% more value by purchasing 48% meal.
Further
advantages of dehulled soybean meal are not reflected in the above
analysis. These factors include lower
fiber, higher metabolizable energy, and lower coefficients of variability. This
latter attribute enables the feed miller to make lower allowances for
variations, translating into less over formulating and better utilization of
the protein.
Based
on the foregoing quality considerations and economic analyses, it is
recommended that the soybean meal buyer specify at a minimum soybean meal
quality characteristics as shown in Table 11.
Table 11
Recommended Purchase
Contract Specifications For US Soybean Meal |
|
|
Factor |
Specification |
|
Protein Fat Fiber Moisture Urea | |