Thanks go to my colleague Robert Moore for submitting our first guest blog and sharing the following expertise on the issue of vomitoxin detection in corn.
by Robert Moore, Attorney, Wright Law Company, LPA
Ohio and other areas of the Corn Belt have seen unusually high levels of vomitoxin in corn. Vomitoxin is a mycotoxin that can cause livestock to reduce feed intake and reduce weight gain. Some elevators and ethanol plants have been rejecting corn that has tested too high for vomitoxin. What legal standing do producers with rejected corn have?
Producers with a Contract
Producers who have a contract with a buyer must look to the contract to determine their rights. All provisions, including any small print on the back of the contract, must be read entirely before assessing legal rights. The language of the contract is what matters; any verbal agreements made outside the contract have very little effect in enforcing legal rights. Even if the producer and buyer agree to certain terms, if the terms do not find their way onto the contract then the parties are probably not bound by the terms.
In regards to Vomitoxin, the key terms are those describing the quality of the corn required to be delivered. Grain contracts will include at least the bare minimum “No.2 Yellow Corn” requirement. No. 2 Yellow corn is a grade established by the USDA and may have up to 5% damaged kernels. The USDA defines damaged kernels as “kernels and pieces of corn kernels that are badly ground-damaged, badly weather-damaged, diseased, frost-damaged, germ-damaged, heat-damaged, insectbored, mold-damaged, sprout-damaged, or otherwise materially damaged.” Therefore, if the only grade standard in the contract is No. 2 Yellow Corn, a producer’s corn should not be rejected or discounted solely for Vomitoxin unless more than 5% of the kernels are diseased. However, corn could likely be rejected if 3% of the kernels were diseased with Vomitoxin and another 3% were damaged in another manner. The 5% threshold is the accumulation of all damaged kernels and not just a single type of damage.
Some contracts will include more restrictive grade terms such as “must be suitable to be fed to livestock” or “must meet all FDA guidelines”. The FDA has established a 5 part per million (ppm) threshold for hogs and 10 ppm threshold for cattle and poultry. Therefore, an elevator that requires corn to meet FDA standards or to be safe for livestock consumption can reject corn if it has more than 5 ppm vomitoxin. It is important to note that corn could have less than 5% damaged kernels but have more than 5 ppm vomitoxin. That is, the USDA No.2 Yellow Corn grade is a completely different standard that the FDA’s ppm standard. Ethanol plants must be extra concerned with vomitoxin becoming concentrated in the distillers grain by-product and may have even more restrictive terms than FDA.
Producers that have corn rejected can have the dual problem of having corn rejected and still being obligated to fulfill the contract. A worse case scenario would see a producer not being able to sell his corn due to high vomitoxin levels while still being required to fulfill his contract obligations for untainted corn with the elevator. Local reports indicate that elevators have been letting producers out of their contracts if their corn has been rejected for vomitoxin but this could change at any time.
Producers without Contracts
A producer who intends to sell a load of corn to the elevator without a contract has very little legal protection from the corn being rejected. The elevator is under no obligation to buy the corn and can simply opt not to buy the corn for any reasonable reason. Without a contract, the elevator is not bound to any predetermined grade standards. Even the smallest amount of vomitoxin in the corn could cause it to be rejected.
Disputed Grain Samples
Producers have the right to appeal the grain grading determination performed by the elevator. The Federal Grain Inspection Service (FGIS) oversees grain grading procedures and methods and also provides inspection and appeal services. A producer who disputes the elevator’s grading can send a sample to FGIS and FGIS’ determination will be binding on both parties. A FGIS office is located in Toledo. For more details and information on grading appeals, contact FGIS at 419- 893-3076.
Some crop insurance policies cover Vomitoxin damage. It is best to have the corn checked by an adjuster while still in the field to avoid tainted corn from being mixed with untainted corn in bins. Many producers have opted to not file a claim due to the significant impact on APH. They would rather maintain a higher APH than to file a marginal crop insurance claim. The deadline for any claims on vomitoxin was December 25, 2009. In the future, a producer’s crop insurance agent should be contacted at the first sign of Vomitoxin to ensure that all claim procedures are property followed.
Will we see grain contracts move away from the USDA No.2 Yellow Corn standard and towards the FDA ppm standard for vomitoxin and other mycotoxins? Elevators relying on the USDA standard could get stuck buying corn that exceeds the FDA’s ppm standards. Unless blended with non-tainted grain, this grain would seemingly be unmarketable as it could not be used for human consumption, livestock consumption, and/or export. Producers should anticipate possible changes to grading standards in contracts offered by elevators and other buyers. A careful reading of all new grain contracts should be a must for producers to make sure they fully understand the quality and grade of grain they are expected to deliver to the buyer.