Back in Business Again

A grain deal with the Soviets may benefit both sides

When Ronald Reagan in April lifted the partial grain embargo against the Soviet Union that had been imposed by Jimmy Carter 16 months earlier, it was clear that the U.S. was willing to sell its harvest surplus. Not so certain was whether Moscow was willing to buy, and, if so, how much. After a day and a half of bargaining in London last week, American and Soviet trade officials announced that the U.S.S.R. will be allowed to purchase 3 million metric tons of wheat and 3 million metric tons of corn above the 8 million tons it is allowed to acquire under the existing five-year agreement, which expires on Sept. 30. Both sides will meet again to discuss a new long-term pact; in the meantime, the Soviet Union will be permitted to buy up to 6 million tons of grain from exporting firms after Sept. 30 without consulting Washington. Declared U.S. Spokesman Don Looper: "The agreement should benefit both sides."

The talks took place in a nondescript conference room within the walled compound of the Soviet Office of Trade. Seeley Lodwick, Under Secretary of Agriculture for International Affairs and chief U.S. negotiator, described the bargaining as "cordial and frank." The Soviets carefully refrained from castigating the U.S. as an unreliable trading partner for imposing the embargo, although as one U.S. official put it, "I am sure they are thinking it." The Soviets, however, gave no indication of just how much of the 6 million additional tons of grain they might buy before Sept. 30. Moscow has satisfied nearly all its grain import needs for this year by relying on Argentina, Canada and Australia. The Soviets are looking forward to a better than average domestic crop in 1981 after two poor harvests in a row. The U.S. Department of Agriculture, however, estimates that Moscow will fall short of its goal of 236 million tons, thus forcing the U.S.S.R. soon to resume purchasing significant amounts from the U.S. Another reason why the Soviets need to import more grain: they are attempting to increase meat supplies while also enlarging their livestock herds.

For U.S. farmers, the agreement brought only smiles around the silos.

Growers are still trying to sell off surpluses from last year's record-breaking wheat harvest, and this year's winter-wheat crop promises to be the most bountiful ever. The new Soviet deal, predicts Maurice Van Nostrand, research director for AGRI Industries, an association of low cooperatives, "will make a big difference News of a major new purchaser is bound to have a psychological impact on the market, and it will bring in buyers from other nations more aggressively.'' The only cloud on the horizon is the nagging poor weather--either too much or too little rain--that continues to plague patches of the Midwest and may affect the price of grain over the next few months. Observes Conrad Leslie, a Chicago commodities analyst: "The Soviets are going to be watching the weather in Des Moines and Springfield as well as in Moscow over the next few months. It depends on the weather 100% now."

Even as the grain deal was being put together, the Administration was pondering sales to Moscow of a different but complementary farm product. The U.S. Government currently has stored more than 400 million Ibs. of surplus butter, and the stockpile is growing by 10 million Ibs. per week. The DOA wants to begin selling the yellow hoard abroad. Secretary of State Alexander Haig fears that the butter may end up in Soviet hands, and he wants specific restrictions on the sales so that none of the butter can be resold to the Soviet Union.

Haig argues that selling butter to the Soviets would send the wrong signals to Moscow at a time of heightened East-West tensions over Poland and the Middle East. Haig used this same argument when he unsuccessfully opposed the lifting of the grain embargo, but he may win with it this round. Reagan pledged to lift the embargo during the campaign, but there is no political pressure from dairy farmers to sell surplus butter to the Soviets. If the President does settle in Haig's favor, the bread without butter decisions will make political sense but will seem inconsistent in foreign policy terms. qed

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