AgDM newsletter article, May 2003

Quality Management Systems for Grain Markets

by Charles Hurburgh, Jr., Chair, Ag Quality Initiative, and professor of agricultural engineering

(Second in a series of two)

Recent security concerns have lead many to believe Quality Management Systems (QMS) are needed to provide trace-ability, chain-of-custody, and security against food supply threats even in basic staple commodities. There are two routes by which QMS are being introduced at the local level through normal grain markets (that are often owned by producers), and through producer-held companies created to develop markets and coordinate very specialized production.

Development Process - Grain Handler Driven

Several grain companies are developing internal quality management systems. There are examples of International Organization for Standardization (ISO) certification such as Colusa Elevator Company, Consolidated Grain and Barge, Inc., and of other systems such as American Institute of Baking Quality Systems Evaluation (AIB QSE) such as Farmers Cooperative Elevator Company, Farmland Industries.

Firms that have an audited quality management system are good candidates for direct marketing arrangements – producer to end-user. Transportation and logistics have often prevented direct sales of bulk products; the firms creating source verification are becoming large enough that coordination of source verified bulk shipments is much more feasible than in the past.

In the grain industry program, source verification was divided into nine general areas, and specific procedures/controls were created for each.

At this time, there is not an active specialty grain market; the benefits and targets are all based on commodity corn and soybeans. However, some firms are in an excellent position to discuss specialty needs, such as non-GM or other attributes on a larger scale basis than individual producers might be able to offer.

Part of grain handling source verification is the tracking of product from receipt to resale or use. This is important if a special trait is involved, and even more so if some consumer health or safety issue is involved. Logically grain handlers will extend the QMS process back to the producer in measured steps working backward from the scale ticket (receipt document of delivery). A gradual progression of activities moving back from delivery will bring producers to the level for certification without impressing major work with little tangible value to offer in exchange. QMS are essentially people training and interaction activities, such as:

Development Process - Producer Supply Network

Producers organized to form supply network companies have some advantages in the initial stages of specialty grain production and QMS establishment. Member’s investment in these companies makes the creation of a full QMS system easier to achieve. Time investments are made to support the financial commitments. Investors in these companies, while targeting high-value premium grains, are more likely to also recognize operating efficiencies that present themselves in the course of creating a full system QMS. The intangible time-based learning activities are more easily accepted in the investor-owner format. Owner-operators can also benefit from promoting the idea “dealing with the grower”.

Producer networks lack distribution and logistics capabilities. The capital required for marketing to sophisticated users may be hard to obtain. Traits of smaller incremental value will be difficult to administer in this format. Therefore it will be very important for producer networks to understand their strengths and target products carefully.

This concept is essentially an extension of the organic and container markets now operating for premium soybeans. The addition of increasing food safety and consumer concerns will impress more rigorous documentation and structure, such as is offered by QMS, but these markets will readily adapt to source verified QMS. The key addition will be third party audit and verification.

There are several groups in Iowa, that are organizing themselves in this way, or are upgrading their already successful organizations to more formal source verification.

The Importance of the Grain Buyer in Source Verification

To capture the market benefits of source verification, the buyer must see value in the closer contact and chain-of-custody documentation that will exist. Some actions that only buyers can impress are:

Source verification and audited quality management systems are opening new direct market channels that require much more openness and transparency.

Third Party Audit

All source verification systems require audit by disinterested third parties. Auditing services are being created. Among them, USDA is now deciding whether it should become a quality management system auditor, most likely to the ISO 9000-2000 standards.

Summary

Producers and grain handlers in Iowa are national leaders in developing source verification programs for grain. These programs allow close contact between producer and user, and provide quality assurance to meet consumer product and safety demands. Source verification requires detailed, documented and audited quality management systems. Direct supply of products in quantities previously thought not feasible will be enabled by source verification.

States themselves are not grain growing boundaries but they can be centers of thought and creativity. Source verification and customer service are people issues, not geography issues which means that choice of purchase sources can and will provide benefits.

Previous article: Source Verification for Iowa Specialty Grain Markets

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