OPTIMAL U.S. TRADE FOR AGRICULTURAL PRODUCTS UNDER CHANGING COMPARATIVE ADVANTAGE Marketing Costs, Structures and Practices

Domestic freight transportation at the present time enhances the competitive position of U.S. agricultural commodities on world markets. Regulatory reform has made pricing of railroad transport more competitive. Excess capacity in moving equipment and facilities, and innovations in operating patterns have resulted in timely/high-quality transport services at relatively low prices. Ocean-going bulk transport, similarly enhances the competitive position of U.S. agricultural commodities in world markets. Even in periods of high export volumes, the world ocean grain freight market has been behaviorally competitive. A high world bulk shipping price flexibility and a small route price flexibility for grain shipping indicate the free movement of bulk shipping capacity between commodities and between routes in search of opportunity. However, cargo preference rules place U.S. shipments at a significant delivered cost disadvantage for affected cargoes. Expansion of cargo preference will inhibit the competitiveness of U.S. grains and cotton in world markets. U.S. grain standards and inspection procedures and practices facilitate orderly of grain in the world market. In today's market, which is a buyers market, the issue of the quality of U.S. grain has captivated the interest of farmers, their organizations, and politicians in ririition to those usually interested who are in the handling and merchandising of grain beyond the farm gate. Grain quality in the world market is important and plays a role in the foreign buyer's choosing among several supplying countries, given that all other economic factors are equal. However, the foreign buyer's decision is most often based on price, availability of foreign exchange, credit policy, the reliabilities of supply and promptness of execution of his contract. To increase U.S. grain exports, quality concerns of foreign buyers need to be considered. But there needs to be an understanding between legitimate complaints and negotiating-type complaints of foreign grain-buyers. Quality of U.S. grain for the world market has its origin and continuity in every step of cur system -- rrciiL the plant breeder, farmer, handler, processor, exporter to the importer. Regardless of changes that are being made in U.S. grain standards, and possibly those in the future, how will the marketing system respond? What will be the costs to the participants in the production and marketing system? Will the benefits outweigh the costs? What incentives are there to improve the quality of grain delivered to and handled in marketing system? Will changes in grain standards enhance the determination of the value of a lot of grain? Will disincentives for delivery in better grain above the basic buying grade continue? How can we encourage improved grain quality and still meet the purposes of standards in efficiently marketing U.S. grain in the world market?