[Federal Register Volume 88, Number 62 (Friday, March 31, 2023)]
[Proposed Rules]
[Pages 19229-19233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06679]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 800 and 810

[Doc. No. AMS-FGIS-22-0083]


United States Standards for Soybeans

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Agricultural Marketing Service (AMS) proposes to revise 
the United States Standards for Soybeans by removing soybeans of other 
colors (SBOC) as an official factor. In addition, AMS proposes to 
revise the table of Grade Limits and Breakpoints for Soybeans to 
reflect this change.

DATES: Comments must be submitted on or before May 1, 2023.

FOR FURTHER INFORMATION CONTACT: Barry Gomoll, USDA AMS; Telephone: 
(202) 720-8286; Email: [email protected]. Copies of the proposed 
U.S. Standards for Soybeans are available at https://www.regulations.gov. Copies of the current Standards are available at 
https://www.ams.usda/govgrades-standards/grain-standards.

SUPPLEMENTARY INFORMATION: This proposed action, pursuant to 5 U.S.C. 
551 et seq., would amend regulations, at 7 CFR part 800 and part 810, 
issued under the United States Grain Standards Act (7 U.S.C. 71-87k), 
as amended (USGSA). Section 4 of the USGSA (7 U.S.C. 76(a)) grants the 
Secretary of Agriculture the authority to establish standards for grain 
regarding kind, class, quality, and condition.

Executive Orders 12866 and 13563

    AMS is issuing this proposed rule in conformance with Executive 
Orders 12866 and 13563. Executive Orders 12866 and 13563 direct 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits, reducing costs, harmonizing rules, 
and promoting flexibility. This proposed action falls within a category 
of

[[Page 19230]]

regulatory actions that the Office of Management and Budget (OMB) has 
exempted from review under Executive Order 12866.

Executive Order 13175

    This proposed rule has been reviewed under Executive Order 13175--
Consultation and Coordination with Indian Tribal Governments, which 
requires agencies to consider whether their rulemaking actions would 
have tribal implications.
    AMS has determined that this proposed rule is unlikely to have 
substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian tribes.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This proposed action is not intended to have 
retroactive effect. There are no administrative procedures that must be 
exhausted prior to any judicial challenge to the provisions of this 
rule.

Background

    AMS regularly reviews grain standards to ensure their effectiveness 
in meeting the quality requirements of grain moving in the value chain. 
Under the current soybean standards, soybeans of other colors (SBOC) is 
a grade determining factor in the class Yellow Soybeans. As such, SBOC 
content is not typically a factor that determines the numerical grade 
for a sample. Damage or foreign material typically has the greatest 
impact on the numerical grade of a given soybean shipment.
    Until recently, yellow soybeans have shown phenotypic stability in 
seedcoat color; however, modern breeding technologies have produced 
varieties that have a higher tendency to demonstrate variations in seed 
coat color. Industry interactions (with producer groups, exporters, 
grain elevators, and grain processors) suggest that these varieties are 
gaining popularity with soybean growers and likely will be present in 
the value chain for the foreseeable future.
    Official inspection data shows a sharp rise in the amount of SBOC 
found in soybean samples over the past two years. In 2019 and 2020, 
only 0.4% and 0.2%, respectively, of all inspected soybean lots failed 
to meet the standard for U.S. No. 1 Yellow Soybeans, as was typical in 
the years leading up to 2021. In 2021, 3.1% of all inspected soybean 
lots failed to meet the standard for U.S. No. 1 Yellow Soybeans, 
followed by 8.8% of lots inspected so far in 2022. The figures for 2022 
also show an uneven distribution based on mode of conveyance, with 
17.7% of container lot inspections failing to meet the standard versus 
5.3% of shiplot inspections.
    The increase in SBOC over the past two years has made it more 
difficult for shippers of U.S. soybeans to meet contract grade 
requirements, based solely on the factor of SBOC. Although research 
shows that SBOC do not impact the intrinsic quality of soybeans, such 
soybeans, present at certain levels, still influence the final grade of 
soybeans because of the current soybean grade standards.
    The Department of Agriculture (USDA) Grain Inspection Advisory 
Committee recommended, at its June 2022 meeting in Kansas City, MO, 
that the Federal Grain Inspection Service conduct a study to determine 
whether the presence of higher SBOC has any impact on the oil and 
protein content of soybeans. The results of the study show no 
significant correlation between SBOC and protein and oil content.\1\ 
Additionally, based on visual analysis, the color variation in the 
seedcoat does not extend into the cotyledon. Since most commercial 
crushing operations remove the hull before crushing, this is not likely 
to affect the color of the finished product.
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    \1\ https://www.ams.usda.gov/sites/default/files/media/FGISSBOCStudy.pdf.
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    Several producer and exporter groups have reached out to AMS to 
request that the soybean standards be reviewed to address the marketing 
challenges introduced by the higher presence of SBOC in U.S. soybeans. 
The groups requested that consideration be given, and provision be 
made, for those soybean processors who may desire soybeans with yellow 
seedcoats. In such instances, applicants for service would maintain the 
ability to request that soybeans be inspected for SBOC.
    This proposed rule would remove SBOC as a criterion for determining 
the grade of U.S. Yellow soybeans (e.g., U.S. No. 1, No. 2, No. 3, 
etc.). It also would retain SBOC as a class-determining criterion in 
the class ``Yellow soybeans.'' Official inspectors would only determine 
SBOC if needed to meet the definition of ``Yellow soybeans'' or at the 
request of an applicant for service. Accordingly, official certificates 
for Yellow soybeans would not show SBOC content unless requested by the 
applicant for service. Any sample of soybeans containing more than 10.0 
percent of SBOC would continue to be graded as the class Mixed 
soybeans.
    A 30-day comment period is provided for interested persons to 
submit comments on the proposed revised Grade Standards. Copies of the 
proposed revised standards are at https://www.regulations.gov.

Implementation Period

    The USGSA requires that changes to the grain standards may not be 
made effective within one calendar year of their promulgation ``unless 
in the judgment of the Secretary, the public health, interest, or 
safety require that they become effective sooner'' (7 U.S.C. 76(b)(1)). 
This provision was put into place to allow industry participants 
adequate time to make adjustments and transition to new standards. 
However, in this case, the soybeans that are more likely to exhibit 
discolored seedcoats and trigger higher determinations of SBOC in 
soybean samples are already present in the supply chain. Additionally, 
based on AMS research showing that the color variation does not 
materially affect the end use of the soybeans, AMS does not foresee any 
deleterious effects to farmers or merchandisers by making the rule 
effective sooner. AMS believes that implementing this proposed rule 
effective September 1, 2023, would be in service of public interest. 
AMS invites all interested parties to comment on whether this change is 
necessary to implement effective September 1, 2023.

Initial Regulatory Flexibility Analysis

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 601 et seq.), AMS has considered the 
impact of this proposed rule on small entities. Accordingly, AMS has 
prepared this initial Regulatory Flexibility analysis. The purpose of 
the RFA is to fit regulatory actions to the scale of businesses subject 
to such actions in order that small businesses will not be unduly or 
disproportionately burdened.
    As stated earlier in this proposed rule, modern breeding 
technologies have produced varieties that have a higher tendency to 
demonstrate variations in seed coat color. Official inspection data 
shows a sharp rise in the presence of soybeans that demonstrate these 
color variations, as well as impacts to the grade of U.S. soybeans. For 
instance, soybean discoloration can cause soybeans to be downgraded, 
which can potentially reduce the price of soybeans to producers, or 
even cause the soybeans to be rejected by some purchasers.
    It is estimated that these modern soybean varieties are being 
adopted rapidly and could have market share as

[[Page 19231]]

high as 30 to 50 percent of the soybean seed market according to 
industry sources.\2\ This rapid rate of adoption indicates that soybean 
producers see benefits exceeding costs in the production of soybean 
from this new seed breed. The proposed rule would eliminate color as an 
official factor that affects the grade of soybeans.
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    \2\ Green, Jerry M., ``The rise and future of glyphosate and 
glyphosate-resistant crops'', Pest Management Science, 2018, Volume 
74, pp. 1035-1039.
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    The proposed rule has been initiated at the request of industry, 
which recognizes the costs associated with lower grades and 
discounting. Reduced discounting due to the removal of the color 
requirement represents a benefit to producers. Costs of the rule 
primarily accrue to the government and would mainly involve the cost to 
the federal government for changing the standards electronically and in 
printed material.
    The 2017 Agricultural Census (Census) reports soybean production, 
and classifies producers by income class, acreage, and other factors. 
The Small Business Administration (SBA) determines the cutoff level 
between large and small firms. The most recent SBA guidance has a size 
cutoff of $2.25 million for soybean producers. This classification is 
not specified in the Census, however, using current production and 
market data in combination with Census data, we can approximate the 
proportion of producers affected.
    The Economic Research Service (ERS) reports that in 2021 soybean 
prices were $13.25 per bushel, and the per acre production was 51.4 
bushels per acre. Therefore, the per acre revenue is $681. To be 
considered a large soybean producer, it would take $2,250,000/$681 or 
3,304 acres. According to the Census, there were a total of 303,191 
soybean producers, 1,624 of which were farms exceeding 3,000 acres. 
Thus, 0.5 percent of all soybean farms could be considered large.
    However, to determine the impact of the rule on small farms, we 
must look at production of producers with less than 3,000 acres. Again 
from the Census, a total of 4.356 billion bushels were produced, with 
0.332 billion bushels produced on farms of 3,000 or more acres, or 7.6 
percent of production. Therefore, 92.4 percent of total production in 
2017 came from small farms, according to the SBA definition.
    The ERS reports that in 2021, 4.435 billion bushels of soybeans 
were produced in the U.S., with a carryover inventory of 0.257 billion 
bushels, for a total of 4.692 billion bushels available. Assuming the 
same production proportions between small and large farms as in the 
2017 Census would yield a total of 4.334 billion bushels produced by 
farms of less than 3,000 acres.
    AMS has data on the share of soybeans that are graded based on 
color for each of the four grade categories. Table 1 shows the 
distribution for an average over the 2010-2020 period. Individual 
years' data varies little from the overall average. However, data from 
2022 shows a sharp decline in the share of soybeans with the highest 
grade, and an increase in the lower grade levels. The last line in the 
table shows the difference between the two, indicating a significant 
change in grading based on color since the introduction of the new 
seeds.

                        Table 1--Share of Soybeans Graded Based on Color by Grade Level *
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                    Category                         % #1 SBOC       % #2 SBOC       % #3 SBOC       % #4 SBOC
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2010-2020 Average...............................           99.60            0.24            0.11            0.05
2022............................................           83.12           11.42            4.98            0.48
Difference......................................           16.48           11.18            4.87            0.43
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* SBOC = Soybeans of other colors.

    The price impact on graded soybeans is less significant than Table 
1 might suggest, as there is typically little price difference between 
grades #1 and #2. However, grades #3 and #4 are discounted by 1.5 cents 
and 3.5 cents, respectively. The total impact on small farm revenues is 
shown in Table 2.

                    Table 2--Calculation of Discounts for SBOC Under Current Grade Standards
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                                   Share                                               Discount
             Grade               (percent)    Production (Bu.)    Affected bushels    (per Bu.)   Total discount
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#3............................         4.87       4,334,091,811         211,018,410       $0.015      $3,165,276
#4............................         0.43       4,334,091,811          18,587,862        0.035         650,575
                               ---------------------------------------------------------------------------------
    Total.....................  ...........  ..................         229,606,272  ...........       3,815,851
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    Using the difference in grading shares between the 2010-2020 
average, and applying the share to production by small farms, shows 
that a total of nearly 230 million bushels of soybeans we discounted in 
2022, and the total discount was $3.8 million. While we do not know the 
exact market share of the genetically modified soybeans in 2022, if we 
assume it was 30 percent, then an increase in market share of each 
additional 10 percent would be approximately $1,272,000.
    The total value of discounts due to color represents a benefit to 
small producers from removing the color standard. Given that the 
majority of producers are considered small entities and the majority of 
production comes from small farms, AMS believes the impacts of the 
proposed changes to the standards would not be disproportionate or 
unduly burdensome to small producers.

Inspection Plan Tolerances

    To reflect the removal of SBOC as an official factor, AMS proposes 
to revise the tables pertaining to soybean grade limits in section 
800.86 of the regulations. Shiplots and unit trains are inspected in 
accordance with a statistically based inspection plan (55 FR 24030; 
June 13, 1990). Inspection

[[Page 19232]]

tolerances, commonly referred to as breakpoints, are used to determine 
acceptable quality. AMS's proposal to remove SBOC as an official factor 
necessitates removing soybean SBOC breakpoints from the Grade Limits 
and Breakpoints for Soybeans table. However, because SBOC would still 
be used to determine class in Yellow soybeans, the Breakpoints for 
Soybean Special Grades and Factors table will remain unchanged. Under 
this proposal, that breakpoint would only apply to determining the 
class of a sample of soybeans. Inspection plan breakpoints would not 
apply to SBOC when an applicant requests that it be inspected on an 
official criteria basis.

Proposed AMS Action

    AMS proposes to revise 7 CFR 810, Subpart J, United States 
Standards for Soybeans. It is proposed that SBOC be eliminated as a 
grading factor but be retained in the standards as part of the 
definition of the class Yellow soybeans. AMS also proposes to revise 7 
CFR 800.86, Inspection of shiplot, unit train, and lash barge grain in 
single lots, paragraph (c)(2) by removing SBOC from table 17.

List of Subjects

7 CFR Part 800

    Administrative practice and procedure, Conflict of interests, 
Exports, Freedom of information, Grains, Intergovernmental relations, 
Penalties, Reporting and recordkeeping requirements.

7 CFR Part 810

    Exports, Grain.

    For reasons set forth in the preamble, the Agricultural Marketing 
Service proposes to amend 7 CFR parts 800 and 810 as follows:

PART 800--GENERAL REGULATIONS

0
1. The authority citation for part 800 continues to read as follows:

    Authority: 7 U.S.C. 71-87k.

0
2. Amend Sec.  800.86 by revising Table 17 to paragraph (c)(2) to read 
as follows:


Sec.  800.86  Inspection of shiplot, unit train, and lash barge grain 
in single lots.

* * * * *
    (c) * * *
    (2) * * *

                Table 17 to Paragraph (c)(2)--Grade Limits (GL) and Breakpoints (BP) for Soybeans
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                                                                    Maximum limits of--
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                                                    Damaged kernels           Foreign material  Splits (percent)
                                         ------------------------------------     (percent)    -----------------
                  Grade                     Heat damaged     Total (percent) ------------------
                                              (percent)    ------------------
                                         ------------------                      GL       BP       GL       BP
                                             GL       BP       GL       BP
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U.S. No. 1..............................      0.2      0.2      2.0      0.8      1.0      0.2     10.0      1.6
U.S. No. 2..............................      0.5      0.3      3.0      0.9      2.0      0.3     20.0      2.2
U.S. No. 3 \1\..........................      1.0      0.5      5.0      1.2      3.0      0.4     30.0      2.5
U.S. No. 4 \2\..........................      3.0      0.9      8.0      1.5      5.0      0.5     40.0      2.7
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\1\ Soybeans which are purple mottled or stained shall be graded not higher than U.S. No. 3.
\2\ Soybeans which are materially weathered shall be graded not higher than U.S. No. 4.

* * * * *

PART 810--OFFICIAL UNITED STATES STANDARDS FOR GRAIN

0
3. The authority citation for part 810 continues to read as follows:

    Authority:  7 U.S.C. 71-87k.

0
4. Amend Sec.  810.1602 by revising paragraph (a)(1) and removing 
paragraph (g). The revisions read as follows.


Sec.  810.1602  Definition of other terms.

    (a) * * *
    (1) Yellow soybeans. Soybeans that have yellow or green seed coats 
and which, in cross section, are yellow or have a yellow tinge, and may 
include not more than 10.0 percent of soybeans of other colors. 
Soybeans of other colors are soybeans that have black or bicolored 
seedcoats, as well as soybeans that have green seedcoats and are green 
in cross section. Bicolored soybeans will have seed coats of two 
colors, one of which is brown or black, and the brown or black color 
covers 50 percent of the seed coats. The hilum of a soybean is not 
considered a part of the seed coat for this determination.
* * * * *
0
5. Revise Sec.  810.1603 to read as follows:


Sec.  810.1603  Basis of determination.

    Each determination of class, heat-damaged kernels, damaged kernels, 
and splits is made on the basis of the grain when free from foreign 
material. Other determinations not specifically provided for under the 
general provisions are made on the basis of the grain as a whole.
0
6. Revise Sec.  810.1604 to read as follows:


Sec.  810.1604  Grades and grade requirements for soybeans.

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                                                                         Grades U.S. Nos.
                 Grading factors                 ---------------------------------------------------------------
                                                         1               2               3               4
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                                           Maximum percent limits of:
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Damaged kernels:
    Heat (part of total)........................             0.2             0.5             1.0             3.0
        Total...................................             2.0             3.0             5.0             8.0
Foreign material................................             1.0             2.0             3.0             5.0
Splits..........................................            10.0            20.0            30.0            40.0
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                                            Maximum count limits of:
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Other materials:
    Animal filth................................               9               9               9               9
    Castor beans................................               1               1               1               1
    Crotalaria seeds............................               2               2               2               2
    Glass.......................................               0               0               0               0
    Stones \1\..................................               3               3               3               3
    Unknown foreign substance...................               3               3               3               3
                                                 ---------------------------------------------------------------
        Total \2\...............................              10              10              10              10
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U.S. Sample grade are soybeans that:
(a) Do not meet the requirements for U.S. Nos. 1, 2, 3, or 4; or
(b) Have a musty, sour, or commercially objectionable foreign odor (except garlic odor); or
(c) Are heating or otherwise of distinctly low quality.
\1\ In addition to the maximum count limit, stones must exceed 0.1 percent of the sample weight.
\2\ Includes any combination of animal filth, castor beans, crotalaria seeds, glass, stones, and unknown foreign
  substances. The weight of stones is not applicable for total other material.

* * * * *

Melissa Bailey,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2023-06679 Filed 3-30-23; 8:45 am]
BILLING CODE P