Making Life Tougher For The Little Guy:
USDA Good Delivery Standards Have Not Kept Up With Industry Standards
Jim Prevor’s Perishable Pundit, September 26, 2013
We received a bittersweet letter today from a longtime colleague and friend. We think it speaks to an important industry problem, though, one different than the one our correspondent identifies:
We are, of course, sorry for Mike’s travails. We know nothing of this particular transaction, but have never known Mike to tell a lie in more than three decades of association. So we hope his appeal goes well and that he can end his career with an unblemished record.
Yet, whatever the merits of this particular case and whatever the truth about bias at PACA, we identify the root problem here in antiquated grade standards that have the effect of biasing the whole system against smaller operators.
Look, it's tough in business. It looks like the USDA Good Arrivals Guidelines allow 4% decay on arrival for garlic, which means one needs 5% to be out of grade. On a product like garlic, which the industry perceives as a hardware item and expects to be perfect, an arrival with 4% decay and 11% other defects would be considered complete garbage in the trade. Yet, it would still pass good arrival. This is a major problem for the industry, and it does not just apply to garlic.
Sure, one might argue that a smart broker/buyer would demand a higher standard, but it would be hard to get this, especially if a shipper is selling the garlic for a grower and doesn't have specific rights to offer this. Of course those with great market power can and do impose tougher standards. No major chain store will accept garlic with 4% decay and 11% other defects. Not one.
This poses a great question for the USDA: Why do we have grade and good delivery standards at all in 2013? Wal-Mart and Costco don’t need them. The purpose of grade standards is to help the little guy to facilitate commerce by establishing a lingua franca and a default position in the marketplace. But if those standards have drifted over time to be far from the industry norm, those low standards disadvantage the small receivers who have little choice but to buy at the norms established by USDA.
In general, the USDA good arrival standards (and even the grade standards at shipping point) were created at a time when standards in the marketplace were lower and technology of shipping, precooling, packing, etc., were nowhere near what they are today. The "good arrival guidelines" are the same now as they were when The Grandpa Pundit would buy carrots shipped in an unrefrigerated railcar that was topped with ice at all the major cities along the way. To require that garlic with 4% decay and a variety of other condition defects must legally be accepted at the same price as perfect garlic makes the USDA standards largely irrelevant and makes the integrity of the shipper much more important.
As an old USDA employee, Mike thought he could rely on legal standards to protect him, but the standards are so low and so disjointed from industry expectations that they can’t serve that purpose.
For receivers, this is a warning. The integrity of the shippers one deals with is everything. Any top garlic shipper, given an inspection showing 4% decay and 11% other defects would realize the product isn’t suitable for the purpose intended and would work with the receiver — legalities aside — to mitigate the damages.
For shippers, it is, of course, an opportunity. It shows that building reputation, enhancing Blue Book moral responsibility ratings and the like are crucial.
Yet for the USDA, all of this is troubling. The point of having grade standards is so that anyone can buy from anybody and be confident in what they are getting. If “what they are getting” is so distant from what the trade expects as to be irrelevant, the USDA standards quickly become irrelevant as well.
We wish Mike Pflueger a happy retirement and think it should be noted that his final act in the trade has been of great service in raising this important industry issue.