Wheat for Coffee

Unable to find foreign purchasers for its wheat, the Federal Farm Board last week reverted to an antique form of barter to help reduce its surplus. Into the Brazilian Embassy on 18th Street marched George Milnor, who as general manager of Grain Stabilization Corp. is official custodian for some 200,000,000 bu. of U. S. wheat. There he was greeted by suave, dark Ambassador Rinaldo de Lima e Silva. After exchanging amenities, they sat down together at a table, squiggled their names to a document. When they got up and shook hands, the U. S. had contracted to trade Brazil 25,000,000 bu. of wheat for 1,050,000 bags of Sao Paulo coffee.

Brazil tried and failed to valorize its coffee production long before the U. S. attempted the same thing with wheat and cotton. In dead storage are some 19,000,000 bags of Brazilian coffee for which no market exists. The U. S. agreed to start shipping wheat next month. Brazil would deliver its coffee to Bush Terminal in Brooklyn, N. Y. where it would be handled, graded and stored for the Farm Board which promised to sell none of it for at least a year. After that time the Board would market its coffee at the rate of 62,500 bags per month through "established channels." If coffee prices rise in the next twelve months the Farm Board will be able to show a worthwhile profit on the swap.

The wheat the Farm Board will ship Brazil is worth about 50-c- per bu. at current prices, a total of $12,500,000. With 132 lb. to the bag, Brazil's coffee weighs 138,600,000 Ib. and at a trading price of 8 1/2-c- per Ib. is worth $11,781,000. It amounts to 8% of U. S. coffee consumption. (Last year's imports: 1,728,569,297 Ib.)

The discrepancy between the coffee value and the wheat value Brazil made up by agreeing to pay Bush Terminal 225,000 bags of coffee (value at current prices: $2,524,000) for its services as commission merchant and storage man.

Originators and executors of the barter idea were two New York private bankers of the younger generation--William Henry Hamilton Jr. and his partner H. Charles Winans. Mr. Hamilton is Samuel Vauclain's widower son-in-law. Mr. Winans' wife is smart Novelist Katharine Brush (Glitter, Young Man of Manhattan). Both men used to be with Guaranty Trust Co. Partner Winans knew Brazil through having held a post there for White, Weld & Co. The idea of a direct barter between the U. S. and Brazilian Governments occurred to Banker Hamilton one evening last winter after a meeting of the council of New York University, in which he sits. Many trips to Washington followed, getting the approval of the Farm Board and the President, which was easy; working out with Bush Terminal Co. the innumerable practical details which an idea so simple but so large involved--grading the wheat and coffee, figuring out most economical means and routes of shipping, planning the care of the cargoes, for seldom has so much U. S. wheat been shipped across the hot Equator.

Partner Winans skillfully conducted the negotiations in Brazil, beginning several months ago. Secrecy was essential. Under the saucy nose of Empire Salesman Edward of Wales, under the noses of Argentines and Russians with mountains of wheat for sale or barter, secrecy was kept, the two partners and their friends communicating in code. At the last moment came a scare: the Russians, having traded wheat for Italian fruit, had the same idea. They would dump the coffee they received into the U. S. market instead of marketing it in an orderly way. U. S. coffee men who had been taken into the secret were worried, but the new Brazilian Government--wealthy conservatives led in this matter by Minister of Finance Jose Maria Whitacker--were true to their U. S. friends. The deal went through, and in it the participants thought they saw significance far beyond the benefits to the Brazilian coffee and U.S. wheat situations: 1) It strengthened the new Brazilian Government, perhaps saved that country's financial structure; 2) it thus saved U. S. investors who hold $401,424,000 of Brazilian bonds.

China Too? Earlier last week the Farm Board got a nibble at some 15,000.000 bu. or more of its wheat. The Nationalist Government of China inquired through diplomatic channels if the U. S. would consider negotiations whereby Nanking would buy on long-term credit some wheat to relieve Yangtze flood victims (see p. 18). In less than three days the Farm Board responded that it would be delighted to sell to China. Then it waited for the Nationalist Government to make a bid, discuss price and credit terms, show what it would use for money.

This file is automatically generated by a robot program, so reader's discretion is required.