Debt Revisions Key to Russian Grain Purchases

RUSSIA and its foreign government lenders, the so-called Paris Club, will meet this week to try to finalize a debt rescheduling plan, the Treasury Department has confirmed.

An agreement is crucial to solving a payment dilemma threatening Russian purchases of United States grain and other agricultural products.

"Russia is a very important market to Texas and US wheat producers," notes Rodney Mosier, at the Texas Wheat Producers Board. Texas exports 90 percent of its wheat harvest.

Farmers bringing in crops, futures traders in Chicago, export development organizations in Washington, and bankers who finance grain shipments have all been on tenterhooks as a result of a recent string of delinquent payments by Russia - heretofore a big customer that invariably paid promptly. In arrears for sometime

Russia had, however, long been in arrears to Canada, France, Germany, and other governments.

"Apparently [Russia] attached a very high priority to the US credits," says a banker whose institution underwrote a "very substantial" part of $5.7 billion in US government-backed loans to the Soviet Union and, after its breakup, to Russia.

A Treasury Department official says that the Paris Club has long been working on "comprehensive and generous" debt rescheduling for Russia. If that plan succeeds, virtually all observers agree, the payments problem should be easily corrected.

"Everybody is very interested in resolving this before the end of the year," the banker says.

In the last two weeks Russia has missed deadlines on payments totaling more than $27 million for shipments of US farm products. Most observers blame Russian officials' preoccupation with the country's ongoing political turmoil.

"As soon as they figure out who's in charge and who's writing the checks," the Russians will resume payments, says Howard Tice, executive director of the Kansas Association of Wheat Growers. "They need the trade. They've got to pay the bills."

The Congress of People's Deputies, which is dominated by former Communist Party officials, battled reform-minded Boris Yeltsin for almost two weeks before reaching a compromise in the last few days.

Russia had been purchasing US farm products under a Department of Agriculture (USDA) credit guarantee program that spreads repayment over three years. In case of default, the US will repay lenders 100 percent of their principal, and interest based on 52-week Treasury bills.

While they await action by the Paris Club, banks are not asking the federal government to make the loans good. Lenders have 180 days to submit claims. Russia suspended

Still, the delinquent payments caused the USDA to suspend Russia from its credit-guarantee program on Nov. 30. The action removes $171 million in unused credits for this year and another $275 million available to Russia on Jan. 1.

"This is very frustrating," says Eric Erickson, who develops markets in the former Soviet Union for the US Feed Grains Council, an organization that promotes exports of corn, sorghum, barley, and oats. Those producers want to nurture the Russian livestock industry through the difficult transition to a free-market economy, and USDA credits are an important tool, Mr. Erickson says.

In volume and dollar value, corn is the US's largest agricultural export commodity. Farmers do not want any constraint in foreign demand to add to the downward pressure on prices from this year's bumper crop.

With 83 percent of the corn harvest complete, the USDA last week forecast a crop of 9.3 billion bushels, almost 2 billion higher than last year, thanks to record yields. Even if exports increase by a forecast 100 million bushels, ending stocks will double to 2.1 billion bushels. As a result, corn fetched only $2.03 per bushel in November compared to $2.41 a year ago.

"If Russia continues having trouble with their payments, we may not reach" that export estimate, says USDA corn analyst Larry Van Meir.

Corn exports have not been immediately affected by the credit cutoff, Erickson notes, because Russia had almost used up the credits allocated for that commodity. The next feed grain credits were to be available in February.

"The impact should be biggest on wheat, to the extent that there is an impact," says Robert Kohlmeyer of World Perspective, a Washington service that tracks agricultural trade issues. So far, he says, the markets reflect the belief in a rapid solution.

This year the US has a 3-billion-bushel supply of wheat, slightly larger than last year, says USDA wheat analyst Ed Allen. While the harvest was almost 500 million bushels higher, that only offset the smaller size of beginning wheat stocks.

Based on strong sales to all foreign markets this fall, this year's export forecast was increased last week to 1.3 billion bushels. Wheat is forecast to fetch $3.15 to $3.35 per bushel, compared to last year's $3 average, Mr. Allen says.