Good Harvest

A new U.S.-Soviet grain deal

"This is a happy hour," beamed Secretary of Agriculture John Block last week. The reason for his exultation was a new five-year U.S.-Soviet grain agreement, the first since 1976. Negotiated in London, Vienna and Moscow during the past two months, the deal raises the annual minimum Soviet grain purchase required under the earlier agreement from 6 million to 9 million tons. That means a boost for farm exports, but nowhere near the 16 million tons the Americans had originally wanted. Yet Block said the accord achieved "reasonable expectations" and "puts us in a better place to sell a little more."

The agreement helps soothe the jangled nerves caused by U.S. policies during the past few years on sales to the Soviet Union. In 1980 the Carter Administration imposed a partial embargo on such sales in retaliation for the Soviet invasion of Afghanistan. The Soviets responded by lining up other suppliers, including Argentina, Canada, the European Community and Australia. Result: the embargo was almost ineffective and cut the U.S. out of sales just when Soviet demands were surging. During the past twelve months those sources supplied 80% of Moscow's import needs. Before the embargo, the U.S. provided 70% of Soviet grain imports.

The new agreement will be welcomed by American farmers. The U.S. offered the Soviets 23 million tons this year, but so far has sold only the required 6 million tons. The impact of the smaller sales was made worse by the global recession and the debt problems of customers for U.S. agricultural products in the Third World. The strong dollar also made it more difficult for foreigners to buy American grain and encouraged competition from other producers. As a result of all those troubles, the U.S. is expected to export $34.5 billion worth of farm goods this year, a drop of more than 20% in two years.

Awash in grain, Washington began the Payment In Kind program to cut down on the huge surpluses by encouraging farmers not to plant. PIK has reduced the oversupply of some crops, and wheat output is expected to drop from 76.4 million tons to 66.3 million tons this year. But wheat stocks are nonetheless expected to rise, even with fewer acres planted.

As far back as the 1980 campaign, Ronald Reagan pledged to keep international politics out of the grain trade. It was a hard promise to fulfill. Under pressure from U.S. farmers, he removed the partial embargo in April 1981. But that December, the White House saw the imposition of martial law in Poland as reason enough to bar grain negotiations with the Soviets. This April, though martial law was still in effect, the President gave the green light to begin the negotiations that resulted in the grain deal. Last week's successful talks coincided with another sign that Washington is ready to be more conciliatory about Poland. The U.S. agreed to join Western creditors in rescheduling Poland's $17.5 billion foreign debt.

The new grain agreement comes when the Soviet Union is enjoying a rare good harvest. The Agriculture Department forecasts a healthy Soviet grain crop of 200 million tons this year, short of Moscow's hoped-for 239 million tons but still the best since 1978. That will reduce the Soviets' grain-import needs for the next twelve months to 30 million tons, from a peak of 46 million tons two years ago.

Once the Reagan Administration had removed the political stumbling blocks, the technical negotiations were easy. After years of erratic policies and irregular trade, the U.S. team was eager to strike a deal. Said one Department of Agriculture official: "The most important thing is to get a new agreement, to keep trading, to keep the doors open." The new accord should accomplish that. This file is automatically generated by a robot program, so viewer discretion is required.