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Contract Specifications


Contract Specifications

Buyers of hard red spring wheat and durum have a large array of quality options from which to select via their contract specifications. To acquire the quality desired, it is important to understand the options available.  Buyers should work closely with their grain trade representative for contract specifications.  The North American Export Grain Association (NAEGA) is a good source for contract specifications and information on contracts. Some options for contract specifications are listed below.

Hard Red Spring Wheat

Grade
As outlined elsewhere in this website, U.S. grades 1-5 and Sample Grade reflect the overall soundness of the wheat. 

Class/Subclass
In this case, the class of wheat is hard red spring, with subclasses controlling for dark, hard and vitreous kernel content. Subclass options include Dark Northern Spring (DNS), Northern Spring (NS), and Spring (S). 

Protein Level
Examples of minimum protein options adjusted to a constant 12 percent moisture basis include: 13.0% 13.5% 14.0% 14.5% 15.0% 

Moisture Content-Maximum moisture content options include: 13.5% 13.0% 12.5% 12.0% 11.5% 11% 

Soundness-Limits may be placed on specific types of damage such as sprout, frost or insects. Maximum sprouted kernel options include: 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% 

Falling number (FN) analysis includes many options such as: 
  • FN minimum 300 cargo composite
  • FN 300 sublot average
  • FN no sublot under 300

Cleanliness/Purity
Many options are available for controlling the amount of dockage, foreign material, and shrunken and broken kernels including: 
 
  • Absolute maximum content limit.
  • Deductibility of dockage content from contract weight.
  • Cash discounts based on dockage content.
  • Reimbursement of freight and/or insurance on content.


Contract Specification Basics
In the very competitive U.S. wheat export market, contract terms are critically important in assuring quality. By observing three simple principles buyers can be assured of quality wheat at the most competitive price:
 
  • Don't ask for the impossible. While some demands may be technically possible, the cost may be prohibitive. Buyers must consider the cost of the specification versus the economic value that quality will return. U.S. Wheat Associates and grain trade representatives are available to help analyze these options.
  • Changes in contract specifications should be known well in advance. This helps reduce "price shock" offers, allows ample time to refine the contract terms and allows time for the export trade to assess its risks fairly and thus offer the best price.
  • When possible, allow for flexibility in contract specifications. That way the buyer will get essentially the same quality but often at a significantly lower price by reducing risk to the exporter.

Examples
Buyers can always require more restrictive limits than those stated in USDA grades. Here are samples of contract specifications using options described in the contract specification section. 

Rigorous Specifications
  • U.S. grade No. 1 Dark Northern Spring
  • Protein, minimum 15%, no sublot below 14.9%
  • Dockage, maximum 0.5%, no sublot to exceed 0.5%, all dockage deductible from the contracted weight
  • Moisture, maximum 12%
  • Maximum sprouted kernels 0.1%
  • Falling number, minimum 350 sublot average


Relaxed Specifications
  • U.S. grade No. 2 or better
  • Northern Spring or Dark Northern Spring
  • Protein, minimum 13.0% average
  • Dockage, content above 1.0% deducted from contract weight
  • Moisture, maximum 13.5%
  • Maximum sprouted kernels 4%

Durum

Grade 
As described elsewhere in this website, U.S. grades 1-5 and Sample Grade are determined by test weight, percentage of defects (damaged kernels, shrunken and broken kernels, and foreign material) and the percentage of wheat from other or contrasting classes. Typically, most buyers of U.S. durum specify No. 2 or better. 

Class/Subclass 
In this case, the class of wheat is durum, with subclasses controlling for hard, vitreous kernel content. Subclass options include: 
Hard Amber Durum (HAD) with more than 75 percent vitreous kernels, 
Amber Durum (AD) with 60 to 74 percent vitreous kernels, and 
Durum (D) with less than 60 percent vitreous kernels.

Most buyers prefer hard amber durum (HAD).

Protein Level 
Quoted on a 12 percent moisture basis. Protein specifications have recently become more important in durum contracts due to labeling requirements on the finished product, especially in the United States. Most buyers specify a minimum of 12 or 13 percent protein. 

Moisture content-Maximum moisture content options include: 13.5% 13.0% 12.5% 12.0% 

Soundness 
Maximum limits may be placed on specific types of damage (sprout, frost, disease or insects).
Examples may include:
1.0% 0.5% 0.4% 0.2% 0.1% 0.0% 

Falling number 
Generally a minimum of 300 seconds but some will specify 350 seconds.
Options may include: 
FN minimum 300 cargo composite 
FN 300 sublot average 
FN 300, no sublot under 300

Cleanliness/Purity-Dockage
Foreign material and shrunken and broken kernels are the three major components impacting the cleanliness or purity of a sample. Dockage is not included as a grading parameter and needs to be specified separately. If you want tighter specifications for foreign material and shrunken and broken kernels, than the limits defined by the grade, then you also need to add those specifications to the contract. 

Dockage options include: 
Maximum dockage 
Maximum dockage, all deductible from contract weight 
Maximum dockage, all deductible with reimbursement for freight and insurance on dockage 
Maximum dockage, with cash discount applying above a certain level

Contract Specification Basics 
Buyers need to be aware of actual production quantities and qualities when setting contract specifications for durum. Durum production is concentrated to a smaller geographical area than other classes of U.S. wheat, which puts the crop at an increased risk from adverse weather. There is no good substitute for durum in the production of premium pasta, so the market is highly sensitive to changes in quality from year-to-year. Price premiums and discounts for quality factors, such as vitreous kernel content, test weight, and total defects can be significant. 

If premium, durum pasta is the end-use desired, then you may wish to use tighter specifications for vitreous kernel levels, falling number, test weight and total defects. On the other hand, if total extraction is more important than semolina extraction, and a bright, yellow color is not vital , you may be able to obtain a lower price by using more relaxed specifications. 

Examples of specifications which may be used:

Rigorous Specifications 
U.S. grade No. 1, minimum 85% hard vitreous kernels 
Moisture, maximum 12% 
Maximum shrunken and broken kernels 1.0% 
Falling number 325, no sublot below 300 seconds 
Protein, minimum 13.5%, no sublot below 13.2% ( 12% moisture basis) 
Dockage, maximum 0.7%, all deductible from contract weight with reimbursement for freight and insurance on dockage

Relaxed Specifications
U.S. grade No. 2, Hard Amber Durum (HAD) or better 
Damaged Kernel content, maximum 3% 
Sprouted Kernels, maximum 0.5% 
Moisture, maximum 13.0% 
Falling number, 250 average, no sublot below 225 seconds 
Protein, minimum 13.2% average (12% moisture basis) 
Dockage, maximum 1% average, all deductible

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