The Grain Inspection Price Premium: What 50 Years of Research Says about Grain Prices and the U.S. Grain Standards Act

By Zach Helder, Senior Manager

When we think of major agricultural legislation that Congress considers every five years, the farm bill understandably comes to mind. But, since June of this year, the House and Senate Agriculture Committees have been working on their other five-year-bill: the U.S. Grain Standards Act (USGSA), which authorizes the American grain inspection and weighing system.

On July 22nd, the House Agriculture Committee passed their draft bill out of committee, and a week later their counterparts in the Senate held a hearing to inform their own draft. The Act’s upcoming reauthorization deadline—on September 30—calls for a review session for agriculture policy watchers. Though USGSA may be uninterpretably dry to the uninitiated, the federal grain inspection system is key economic infrastructure that helps explain how the U.S. has maintained its dominance as the world’s leading agricultural exporter. Moreover, it points to an inflection point in our history when that future was greatly threatened.

Contemporaneous reports, subsequent economic research, and industry testimony over the past fifty years shed light on how American grain inspection assumed the privileged position as the “gold standard” of trust in the grain trade, and how that trust, in turn, became a price premium for U.S. producers and exporters.

Pre-1976: Inefficiencies, Mistrust, and Depressed Prices

Prior to the mid-1970s, the U.S. grain market suffered from quality control abuses that undermined international trust. Most damaging was the “grain scandal” of the early 1970s, when investigations uncovered widespread misgrading of grain, “short” weighing (delivering less grain than sold), bribery of inspectors, and blending of inferior product into export shipments.[1] These abuses eroded foreign buyers’ confidence in U.S. grain. A 1975 TIME report noted that overseas customers had received cargoes “short-weighted, composed partly of inferior-quality and broken grain, or contaminated by dirt or moisture,” making buyers “wary of U.S. grain” and directly threatening America’s $10 billion export market.[2] In other words, importers began to doubt they were getting the quality they paid for, and they responded by either discounting U.S. grain or shifting purchases elsewhere.

Multiple sources from that era document that U.S. grain was mistrusted and potentially undervalued due to quality concerns. Overseas grain company officials traveled to Washington in 1975 to press complaints about substandard shipments.[3] U.S. farmers and lawmakers also recognized the problem: a contemporaneous Office of Technology Assessment (OTA) study noted persistent buyer complaints of “dirty, molded, or infested grain” and contract specifications (e.g. protein content) not being met.[4] U.S. exporters argued that foreign buyers were using quality problems as leverage to “bargain for lower prices,” while Members of Congress pointed to America’s loss of global market share in the 1970s as evidence that inadequate quality was driving customers away.[5] In short, before the 1976 reforms the U.S. grain trade’s reputation suffered, likely forcing American grain to be sold more cheaply than it would have been if buyers had full confidence in its quality and weight.

The 1976 Grain Standards Act Reforms

Facing these issues, Congress enacted major reforms via the United States Grain Standards Act amendments of 1976 (P.L. 94-582). This law federalized and strengthened the grain inspection system. It established the Federal Grain Inspection Service (FGIS) within USDA and for the first time mandated that all export grain be officially inspected and weighed by unbiased personnel (either federal inspectors or authorized state agencies under federal supervision).[6] The 1976 Act also cracked down on conflicts of interest by barring grain companies or exchanges from owning inspection agencies. In short, it created a single, standardized inspection regime with strict oversight and legal penalties for fraud. President Gerald Ford, upon signing the Act, underscored that without such reforms “our whole international grain trade is jeopardized.”[7]The expectation was that these measures would restore integrity and transparency, thereby rebuilding buyer confidence in U.S. grain.

Contemporary evaluations credit the 1976 Act with improving trust in U.S. grain quality. A Congressional Research Service report notes the mid-1970s scandals “threatened the credibility of the U.S. grain marketing system,” prompting the 1976 law to tighten inspection and recordkeeping and thereby remove the bad incentives that led to misgrading.[8]The Government Accountability Office (GAO) similarly observed that the 1976 Grain Standards Act was passed “to correct widespread abuses in the quality and quantity of grain delivered in the mid-1970s”, establishing FGIS and mandatory export inspection to ensure buyers get the quality/weight they pay for.[9] In effect, the official U.S. grading certificates issued under the new system became a form of “third-party assurance” for grain quality. Each cargo’s grade is stated on an FGIS-issued certificate, which buyers can rely on as proof of factors like test weight, moisture, foreign material, and damage percentages.[10] This standardized certification facilitates trade by serving as common contract language, reducing transaction costs and information asymmetry for international buyers.

Post-1976: Evidence of Price Effects Premiums

Did these reforms translate into price premiums for U.S. grain exports? A wide range of research and gray literature suggests that the stronger inspection system added value to U.S. grains by bolstering buyer confidence. Many stakeholders, including AAGIWA and NGFA, argue that the trust and reliability afforded by official U.S. grain standards allow American exporters to obtain better prices (or avoid discounts) compared to a scenario without such oversight. For instance, the American Soybean Association has lauded FGIS’s role as “the gold standard to assure foreign buyers about the high quality of our exported grain.” In a 2020 Senate hearing, an ASA representative reminded lawmakers that FGIS was created 40 years ago because of severe quality problems, and emphasized that today the federal inspection certificate “helps assure foreign buyers” that U.S. grain will meet expected standards.[11] This credibility is a selling point: importers know an independent USDA-licensed inspector has certified the shipment, which reduces the risk of receiving sub-par grain. The National Association of Wheat Growers likewise testified that having a “functioning and respected grain inspection system” is essential for the U.S. to be a reliable exporter, and that past disruptions in inspection services “resulted in billions of dollars of lost value throughout the production chain.”[12]

Several industry and academic sources indicate that buyers are willing to pay for assured quality. Over time, international grain markets have increasingly rewarded higher quality with higher prices, which in turn rewards countries that can consistently deliver quality. For example, studies of wheat exports in the late 1970s and 1980s found that importers began paying greater premiums for intrinsic quality factors like protein content, test weight, and cleanliness. One analysis noted that a 1% increase in wheat protein was associated with only a 0.3% price premium in the late 1970s but commanded a larger premium by the mid-1980s,[13] reflecting a shift toward quality-differentiated pricing. The U.S. Grain Standards Act’s uniform grading criteria made it easier for buyers and sellers to negotiate such quality premiums based on objective measures. In other words, the official standards enabled quality to be reflected in price more transparently, to the benefit of producers who deliver superior grain. The USDA’s Federal Grain Inspection Service is explicitly tasked with encouraging the marketing of high-quality grain, and it has undertaken initiatives since 1986 to tighten standards – for instance, prohibiting reintroducing dockage into cleaned grain – so that U.S. grain would earn price premiums rather than suffer discounts.

Beyond academic analysis, trade practitioners strongly believe U.S. grain earns a premium due to its reliable inspection system. In 2019 testimony, a Kansas wheat farmer representing the National Association of Wheat Growers explained that “certainty and reliability” from the Grain Standards Act is “a significant advantage” when overseas customers compare U.S. wheat to other origins.[14] According to this testimony, a team of Brazilian flour millers visiting an FGIS lab “walked away with more confidence in buying U.S. grain because of this unbiased, third-party…system.” The farmer noted that a “strong grain inspection process” helps prevent exporting grain with excessive foreign material, thereby “keeping quality of U.S. wheat at a premium and preventing international customers from looking to other countries.” The logic is straightforward: if buyers trust that “U.S. No.2 Hard Red Winter Wheat” on an official certificate truly meets that grade’s specifications, they are willing to pay the appropriate price for that grade. If they doubted it, they would demand a lower price to hedge against quality risk. The North American Export Grain Association (NAEGA) similarly emphasized that “the reliability, integrity, competence, and reputation of the originating country’s grain inspection” is “paramount in buyers’ minds” when assessing value.[15] NAEGA asserts that the U.S. Grain Standards Act provides an efficient, transparent system for price discovery that benefits all parties, and FGIS’s work in resolving trade disputes has proven valuable in maintaining overseas customer trust.[16]

Crucially, the official U.S. system not only adds credibility for established grain traders, but also levels the playing field for smaller exporters. A GAO report found that while large multinational grain companies rely their own reputation and quality control alongside independent verification, smaller and medium exporters “place a higher value” on mandatory official inspections as a selling point.[17] Big grain companies often have internal labs and stringent protocols, so foreign buyers may trust their brand alongside FGIS verification. But a lesser-known seller can use the USDA certificate as a trusted seal of quality to assure buyers that the shipment meets contract specs. In GAO’s words, the “required official inspection provides all foreign buyers with assurances as to the grain” quality, helping smaller firms compete with the majors. GAO’s findings supported the notion that the U.S. inspection system broadly raises the baseline credibility of all U.S. grain exports, preventing the market from fragmenting into “trusted” and “untrusted” sellers. That, in turn, supports overall demand and pricing for U.S. grains.

However, these benefits are hardly set in stone, and the grain industry’s competitiveness abroad depends on the system’s ability to enforce standards and adapt to new market demands at the same time. Indeed, in recent decades many foreign buyers have started requesting extra tests or third-party inspections beyond the official grade. By the 2010s, an estimated 20–25% of U.S. export shipments were “reinspected by third parties to verify inspection results,” and over 70% of exports had supplementary quality tests for specific attributes (e.g. protein, falling number) not fully captured by the base grade.[18] The trend towards supplementary testing implies that while the U.S. official grade is the respected baseline, sophisticated buyers now demand even more granular quality data. Competing exporters like Canada, Australia, Brazil, and the Black Sea region have also improved their grain quality oversight or opened their markets to independent inspectors. The implication is that the U.S. inspection system gives a necessary credibility boost, but not a static or exclusive advantage – the U.S. must continually maintain high standards to stay competitive. If U.S. grain quality slips, even within official grade limits, buyers can and will seek alternatives or insist on price discounts.

Conclusion: Does the U.S. Earn an Export Price Premium from its Inspection System?

50 years of reporting and academic literature tell the same story: that the U.S. Grain Standards Act and official inspection system have been pivotal in building trust and adding value in international grain trade. Before the 1976 reforms, U.S. grain exports were discounted and constrained by mistrust, as evidenced by buyer complaints, lower relative prices, and lost sales. The establishment of FGIS and uniform standards helped correct those market inefficiencies by ensuring buyers get what they pay for, thereby enhancing the reputation of U.S. corn, wheat, soybeans and other grains. Numerous government and industry sources validate the claim that today U.S. grain can command better prices or avoid hefty discounts thanks to the goodwill premium of reliable quality certification. Representatives of wheat growers and soybean farmers credit the official inspection regime with making U.S. commodities more competitive and sustaining demand at strong prices, even in the face of global competition. In essence, the U.S. leverages a “trust premium”: foreign millers and feed buyers are generally willing to pay full value for U.S. grain because they trust the grade specs and cleanliness, whereas grain from a country without such a system might be viewed with caution.

At the same time, the magnitude of any price premium is nuanced. It may not appear as a simple surcharge on U.S. grain, but rather as the absence of a risk discount. As one scholar put it, grain quality factors are embedded in prices– if U.S. grain did not have a trustworthy system, its prices would likely be lower relative to competitors. The post-1976 system ensured U.S. exporters get the fair market price for the quality delivered, whereas before 1976 they often took a hit due to credibility problems. Today, when U.S. grain does earn a premium, it is usually for verifiable superior qualities in combination with the reputation for honesty in weights and grades. As we’ve seen in the past month’s reauthorization hearings, stakeholders continue to view FGIS’s work as a “gold standard” that underpins the high-quality image of U.S. grain in the world.[19]

Nearly fifty years of investigations and industry consensus support the view that, prior to 1976, inefficient and untrustworthy practices in the U.S. grain trade undermined export prices, and since the advent of official standards and inspections, U.S. corn, wheat, soybeans, and other grains have benefited from greater buyer confidence – allowing them to either secure a price premium or at least avoid a price discount due to quality concerns. As the GAO succinctly noted, because grain price depends on grade and weight, “inspection and weighing are critical to grain merchandising to ensure that buyers actually obtain the quality and quantity paid for.” The U.S. official system provides that assurance, which in turn sustains the ability of U.S. exporters to get full market value – something they might not consistently enjoy without the trust and transparency engendered by the Grain Standards Act.

“Chapter 4 - Grain Quality: U.S. Standards and Grades.” 2022. In Importer Manual. U.S. Grains Council.

Gerald Ford. 2025. “Statement on Signing the United States Grain Standards Act of 1976.” The American Presidency Project. Accessed June 19.

Linin, Brian. 2019. “NAWG Testimony on U.S. Grain Standards Act.” National Association of Wheat Growers.

“Review of the U.S. Grain Standards Act.” 2015. Washington, D.C: U.S. Government Publishing Office.

“SCANDALS: Dirty Grain.” 1975. TIME Magazine, June.

Shields, Dennis A. 2014. U.S. Grain Standards Act: Potential Reauthorization in the 114th Congress. R43809. Congressional Research Service.

U.S. Congress, Office of Technology Assessment. 1989. Enhancing the Quality of U.S. Grain for International Trade. OTA-F-399. Washington, D.C: U.S. Government Printing Office.

U.S. Government Accountability Office. 1993. Grain Inspection: Industry Views on the Decline in Official Inspections and Inspection Costs. RCED-93-147.

Wilson, William, and Bruce L. Dahl. 1998. “Grain Quality and North American Hard Wheat Exports.” Research Discussion Paper.

[1] (Shields 2014; “SCANDALS: Dirty Grain” 1975).

[2] (“SCANDALS: Dirty Grain” 1975).

[3] (“SCANDALS: Dirty Grain” 1975).

[4] (U.S. Congress, Office of Technology Assessment 1989).

[5] (U.S. Congress, Office of Technology Assessment 1989).

[6] (Shields 2014; U.S. Government Accountability Office 1993).

[7] (Gerald Ford 2025).

[8] (Shields 2014).

[9] (U.S. Government Accountability Office 1993).

[10] (“Chapter 4 - Grain Quality: U.S. Standards and Grades” 2022).

[11] (“Review of the U.S. Grain Standards Act” 2015).

[12] (Linin 2019).

[13] (U.S. Congress, Office of Technology Assessment 1989; Wilson and Dahl 1998).

[14] (Linin 2019).

[15] (“Review of the U.S. Grain Standards Act” 2015).

[16] (“Review of the U.S. Grain Standards Act” 2015).

[17] (U.S. Government Accountability Office 1993).

[18] (“Review of the U.S. Grain Standards Act” 2015).

[19] (“Review of the U.S. Grain Standards Act” 2015).