New US grain sales to Soviets: the question isn't if, but how soon
Chicago — Moscow and Washington are edging closer to signing a new multiyear agreement covering the sale of US wheat and corn to the Soviet Union. But the continuing negotiation posturing somewhat resembles a cowboy trying to rope a frisky calf -- with neither side sure which is the one about to be roped.
Some observers expect new Soviet purchases almost immediately, following this week's announcement from the US Department of Agriculture that the Soviets can buy up to 6 million tons of grain before Oct. 1 and a similar amount after that date without further consultations. Others expect no sales and no new long-term agreement until well after the current five-year grain agreement expires in September.
With a good deal of prodding from farm leaders, the Reagan administration has been working hard to encourage the Soviets to reenter the market for US grain. But both Washington and Moscow are keenly aware of the diplomatic and political implications that must be weighed along with economic reasons for reopening the grain pipeline.
Economically, the benefit to the United States its that over the past 10 years the Soviet Union has become a high-volume cash customer. All indications are that Soviet demand for US feed grains for livestock will continue to grow in order to provide more meat for Soviet consumers. And as in the past, the Soviets are expected to continue cashing in their gold in exchange for golden corn and wheat from the American Midwest.
Moscow clearly would prefer to raise its own grain, as shown by its yearly grain production targets -- which have remained out of reach even in good years. So while there is economic benefit for the US, economic pressures force the Soviets into importing 30 million metric tons of grain each year to avoid disrupting overall plans for the Soviet economy.
The natural flow of abundant US grain to the hungry, gold-endowed Soviet Union was cut off abruptly by President Carter's January 1980 grain embargo in response to Soviet intervention in Afghanistan. Instead of an expected 25 million tons, the Soviets were limited to importing only 8 million.
President Reagan took the first step toward reopening the Soviet market by ending the grain embargo seven weeks ago. In theory, the Soviets could have resumed grain purchasing immediately. In fact, economic, political, and diplomatic obstacles remained. Economic incentives for new Soviet purchases have been lessened because the Soviets have drawn up grain-supply agreements with Argentina and Canada.
Yet, according to US government officials and grain traders in Chicago, the greatest remaining obstacles to new purchases have been political and diplomatic. From this viewpoint, the Soviets would have admitted defeat if they had rushed in to buy US grain the instant the embargo ended. It would have been a political defeat to admit that the Soviet Union can't feed its own people without relying on US grain. And it would have been a diplomatic defeat to admit that Washington, not Moscow, can set the timetable for Soviet grain purchases.
The way out of this impasse came from Washington. After talks in London with Soviet officials June 8 and 9, the US Department of Agriculture invited the Soviets to purchase grain immediately and suggested discussions on a new long-term agreement, while asking for nothing in return.
According to Chicago Board of Trade member Jordan Hollander, the American offer means that "we have extended a face, and the Soviets haven't slapped it." Giving the Soviets this opportunity, apparently, should reopen the diplomatic doors and permit purchases to resume "after a decent interval," say grain trade analysts in Chicago. They expect that even if the Soviets don't need grain immediately, they will make at least "a token purchase" this summer to show that they too are ready to reopen the pipeline.
American farmers look forward to resumed Soviet grain purchases. In anticipation of better prices once the Soviets start buying again, farmers are holding grain off the market and sending prices up in the grain trading pits. Farmers are not looking forward to Washington signing a new long-term agreement with Moscow. From their viewpoint, such agreements in effect set price ceilings by guaranteeing deliveries to overseas purchasers. With such agreements, "You don't get an upward pressure in the market," says American Agricultural Movement spokesman David Senter, "as you do when purchasers bid prices up."
Yet even farm groups strongly opposed to grain agreements e xpect one to be signed with the Soviets.