September 7, 1973
Page 28927
LESSONS TO BE LEARNED FROM THE SOVIET GRAIN DEAL
Mr. HUDDLESTON. Mr. President, the Department of Labor earlier today announced that wholesale prices rose faster in August than in any single month since records have been kept, mostly as a result of increases in the cost of agricultural products.
The seasonally adjusted increase for farm products was 26.1 percent; for wheat, the basis of flour products, and feed grains, which help determine poultry, pork and beef, and dairy product costs, the increase was even greater.
Between July 10 and August 14, the price index for wheat rose more than 89 percent, and for soybeans 76 percent.
For corn, barley, and oats the increase was in the mid-50 percent range.
When reviewing these figures, the tendency will be to blame the American farmer for the increases.
But, recent governmental policies also have to be considered as contributing factors to the increase.
And one of these policies is the Soviet grain sale of last year.
Mr. President, the story of the Soviet grain deal is not over.
In fact, a new chapter may have opened.
If so, this new chapter provides further evidence that the sale of large amounts of U.S. grain to the Soviet Union in the summer of 1972 was not handled in the best interests of this Nation.
It now appears that the Soviet Union, which cornered about a sixth of the 1972– 73 U.S. wheat crop at modest prices before our agricultural officials, farmers or our citizens fully realized what had happened, is now selling wheat in Italy under highly favorable world market conditions.
This is not to say that the Soviets should not take advantage of the current market conditions and sell wheat or that the Italians, faced with a grain crisis at home, should not be buying.
But, it does raise further questions about the advisability of the Soviet grain sale and a variety of other U.S. agricultural policies, which have contributed to shortages and high prices here at
home and a series of seesaw trade policies abroad.
According to an August 31 story in the newspaper Il Tempo, the vessel, Jagatt Neta, has unloaded 22,000 metric tons of Soviet grain at the port of Civitavecchia, near Rome.
In addition, there has been suggestion that two other vessels, including the Krusevaz, may have brought Soviet grain to Italy.
As Il Tempo, the Rome newspaper, noted in the article–
Even with soft grain, on the other hand, the (Italian) market has a scarcity.
The proof of it is in the arrival from overseas of grain.
In fact, yesterday in Civitavecchia the first ships arrived from France with grain.
Also, a Soviet merchant ship, the Jagatt Neta, has started to unload 22,000 tons of soft grain.
It appears to be grain that the U.S.S.R. has bought at favorable prices from the United States and that it now resells to Italy at current international rates.
In this way, the market regulations are followed with wide attention and interest by the U.S.S.R.
By now, the details of the Soviet grain sale are well known. They have been recited a number of times.
The U.S. Government, in the summer of 1972, loaned the Soviet Union $750 million over a 3-year period for the purchase of U.S. grains – wheat, corn, barley, sorghum, rye, and oats.
The loan was made at 6.125-percent interest and no more than $500 million could be outstanding at any one time.
While various Soviet officials were dealing with officials in the Department of Agriculture on the terms of credit, other Soviet officials – from their export bureau – were dealing with large U.S. grain companies from whom they purchased more than 440 million bushels of grain.
The wheat purchases were mostly made at a target price of $1.63 to $1.65 per bushel, which, at least toward the end of the summer proved to be artificially low – by then domestic grain prices were at least $0.75 per bushel higher, the world market price was higher than the target price and the United States was known to be in a favorable export position.
In addition, the sale was subsidized in a number of ways, all of which cost the U.S. taxpayer money – through a basic subsidy designed to cover the difference between the world market price and the domestic price, a carrying charge subsidy for owning wheat, a rail subsidy for hard red spring and durum wheat, and a maritime subsidy designed to keep U.S. shipping competitive with other shipping costs.
Finally, the devaluation of the dollar made the deal even more favorable financially to the Soviet Union.
But, of as much concern as the overly favorable terms of the sale for the Soviets is the effect which it had on the American consumer.
As a report of the General Accounting Office issued in July of this year noted–
On the negative side, domestic wheat prices rose from $1.80 a bushel in July 1972 to $3 in May 1973.
On September 5, wheat was $4.77 per bushel on the Chicago market.
Consumer costs attributed to the sales included higher prices for bread and flour-based products, increased prices for beef, pork, poultry, eggs and dairy products resulting from higher costs for feed grains, and a severe disruption of transportation facilities with attendant higher costs and
shortages or delays in delivering certain supplies.
Thus, the American taxpayer/consumer who has already paid handsomely for the Soviet grain sale may now be seeing the Soviet Union profit from the further sale of the wheat which it purchased from the United States at low prices during the summer of 1972.
I am, consequently, requesting the Department of Agriculture and the General Accounting Office, which has already conducted such a fine investigation of this matter, to look into the recent reports from Italy to determine what further developments have taken place with respect to the Soviet grain sale.
If this grain is being resold at a much higher price, as has been suggested, then that part of the story, too, belongs in the chronicle of the Soviet grain deal.
That aspect, too, must be evaluated and included in any final conclusions reached about the advisability of the entire deal.
For it could well be another indication that Soviet traders knew more about world conditions than we did and took advantage of our negotiations not only to supply their own needs but to reap huge profits on the world market – all subsidized by the American taxpayers and consumers.
In a matter of months, our Nation has gone from a food surplus one to one in which there are high prices for meats and other products dependent on feed grains and for flour products, to name only those products most closely related to the grain sale.
In the same period, our Nation has been forced to change from one which was pressuring trading partners, such as the European Community and Japan, to buy more of our grains and agricultural products to one in which export controls and embargoes have been necessary.
I am aware of the fact that there have been various unanticipated and uncontrollable natural developments, which have contributed to the food shortage not only in our own Nation but also throughout the world.
But part of our duty and responsibility is to anticipate the possibility of such developments and be prepared for various possible alternatives.
In a rush to unload surplus and Government-owned commodities, and, perhaps at times, to try to hold down food prices, future needs and probable demands were ignored.
Many agricultural policies in our Nation, from the Soviet grain sale, through the freeze which stemmed prices but not demand through the development of a situation which required export controls, indicate that we were highly unprepared for the situations which developed.
Hindsight is, of course, a great deal better than foresight.
There are various actions and policies which were utilized in the past year that in September of 1973 now appear unwise.
Rather than bemoan these miscalculations, however, I believe that we must learn from them.
For that reason, the Soviet grain deal, while unwise in retrospect, can provide a valuable lesson.
We would, of course, be in a better position today if we had the grain sold to the Soviet Union and if we could not only meet additional domestic requirements but also supply more grains to those areas of the world where they are now needed.
Thus, I hope that from these unfortunate miscalculations we will become aware of the need for better information, better planning, and closer attention to developments not only in our own agricultural supply and demand situation, but also in that throughout the world.
Mr. MUSKIE. Mr. President, first of all, I should like to compliment the distinguished Senator from Kentucky for what I think is a masterly analysis of the developments of last year and this year which have led to high prices, shortages of supply, and the need to review our national policies with respect to sales of our foods at home and abroad, which he has just made.
I intend to study the facts which he has presented to the Senate and the country in order that I may more effectively explain to my constituents why it is they have to pay more than they can afford for food, and why it is that too often they cannot get what they are accustomed to getting on the shelves of their grocery stores.