As winter rapidly draws to a close, many farmers start to think about the new season and what lies ahead. Grain buying companies are not slowing down at the moment either. They have already started to offer farmers advance purchase contracts for the next harvest. Some farmers have been surprised to see that they have added two more subclasses to the existing grain classes. 

Lithuania's unique grain procurement system

In general, grain procurement in Lithuania is carried out in accordance with the LST 1524:2019 standard developed and approved by the Lithuanian Standardisation Department.

Aušrys Macijauskas, head of the Lithuanian Grain Growers' Association (LGAA), points out that this parameter is more necessary for the buying companies. Meanwhile, looking at the world market, there is no such distinction between cereals – there are only food and feed cereals. Therefore, according to the LGAA manager, even when buying-in companies buy different grades of grain, they end up with the batches of grain needed for the world market, where protein is the most important grain value.

That is, the most highly valued grains are those with a protein content of at least 12%. And protein is an indicator that cannot be corrected. If the moisture content or the specific gravity can be corrected by drying, cleaning, the protein content is what it is.

Even the grain buying companies that export grain to world markets fill their thousands of tonne ships with the right grain. How? The only way to adjust the protein content of grain is to mix grains of different protein contents. So the class system is essentially only needed by buyers to distinguish between high and low protein grains, and then to create the blend needed by buyers on foreign markets.

Buyers manipulate the class system

Of course, the grading of grain becomes a reference point for farmers in terms of how much they are paid. Is it fair when the same grain is then mixed and supplied to a global market with different parameters?

„Dividing grain into classes, sub-classes or using different parameters really only allows for manipulation, while by dividing Class II into sub-classes the buyers have a clear plan“ – convinced A. Macijauskas.

Some of the cereals with the required protein content will go into containers, while others of a slightly lower quality will have to be mixed with high quality cereals.

Buyers want to make sure that when a full ship leaves Lithuania, it will be of the right standard for the world market. However, for the farmers, the emergence of such subclasses is certainly not beneficial and creates even more conditions for manipulation.

Of course, the most affected are the small farmers, who do not have the capacity to store their harvests and have to take them immediately to the buying companies after harvesting. However, according to the head of the LGAA, around 80% of Lithuanian farmers do not have the conditions to store their grain and look for opportunities to sell it at a higher price.

It is disappointing when, when the harvest arrives at the collection point, the moisture content is found to be too high and the price is undercut, but when the grain is dried, it turns out to be of the highest quality. The farmer is, in a sense, cheated.

Set standard vs. contracts

Shouldn't global standards also apply in Lithuania? Shouldn't all buying companies in our country at least follow the same rules?

A. Macijauskas echoes the expert and confirms that, despite the existence of a standard in Lithuania, farmers and buying companies work on the basis of contracts. The head of the LGAA also notes that there are fewer and fewer small companies in the market of purchasing companies, the larger ones buy the smaller ones, and thus the market participants become bigger and bigger, and at the same time the conditions are created for the creation of "their own rules", manipulation and profiteering of the farmers.

Farmers' (un)tied hands

A. Macijauskas believes that farmers' cooperatives can expect better conditions. The larger the quantity of grain offered to buyers, the more room they have to negotiate and dictate their terms.

„There are certainly cases where it is the seller who dictates the terms, not the buyer. Sometimes even indicators that are difficult to measure (e.g. gluten measurement) are abandoned in favour of a European standard, says the LGAA's head – Co-operatives should be more courageous in their negotiations.“

Farmer Justas Galginaitis, from Griskabūdis, says he is not expecting contracts with two more subclasses, but thinks it is completely unnecessary because there are already too many classes.

„Three classes – food, feed and maybe some sort of intermediate variant“ would be quite sufficient,– he says.

J. Galginaitis is convinced that the introduction of two more subclasses would be a reason to cheat farmers.

„I have long been calling for a conversation on this topic and even for the abandonment of these so-called standards. You can pay as you do for sugar beet, for example, not for kilograms of sugar beet, but for the amount of sugar it contains. So, if it is the protein in the grain that is important for the market, one of the options for an agreement could be to price the protein in particular," concludes Mr Macijauskas.