A sample grade is the quality of a commodity that is too low to be acceptable for delivery in satisfaction of futures contracts. The grade that is acceptable for delivery is called standard grade. First grade or high grade is the opposite of the sample grade. The different grades are defined due to the variations in the quality of commodities. Grain is especially affected by a broad range of these variations.
To guarantee a specific quality, the United States Grain Standards Act defines inter alia the sampling, licensing of inspectors, and inspection requirements for commodities. The Secretary of Agriculture of the United States is authorized to issue regulations under the Act to ensure the efficient execution of the provisions.
Included in the regulations are the Official Grain Standards of the United States. These standards have been developed for wheat, corn, barley, oats, rye, flaxseed, soybeans, etc. They include descriptions for different quality grades including sample grades.
For instance, for corn, U.S. sample grade is corn that does not meet any requirements of the other quality grades, that includes a determined amount of contaminants such as glass, stones, or unknown foreign substances, that has a commercially objectionable foreign odor, or that is otherwise of distinctly low quality. If a commodity is U.S. sample grade, it is not allowed to be delivered.
The grading of a certain commodity is accomplished by licensed inspectors. They are obliged to satisfy criteria set by the Secretary of Agriculture regarding requirements for taking a correct and representative sample and for determining the accurate grade of any commodity.