US embargo hits grain-shy Moscow just the way Carter hoped it would
Soviet officials have confirmed that the Russian grain harvest will be drastically below target. This year's poor harvest comes as no surprise to agricultural experts, East and West. But it may strengthen President Carter's arguments in favor of a halt in grain sales to the Soviet Union following the Afghanistan invasion.
Mr. Carter has insisted from the start that his Jan. 4 embargo on new grain sales to the soiet Union would be effective -- that it would force the USSR to pay dearly for its "belligerent behavior" in Afghanistan.
Ronald Reagan long ago joined with farm- state voices charging that the embargo was hurting America far more than it was hurting the Soviets.
Western experts last July predicted a poor Soviet grain crop. these same experts now estimate a Soviet harvest of 190 million metric tons. that is far short of the 235 million tons needed to carry through on ambitious soviet plans to feed more cattle and increase meat supplies to soothe impatient consumers. (The US Department of Agriculture still forecasts a Soviet grain crop of 205 million metric tons -- which compares with a total US grain crop of 256 million, of which 115 million will be exported.)
Confirmation that there will be a significant Soviet shortfall in grain for feeding cattle was quickly followed by a new twist of the Russian bear's tail: Australia announced that its drought may force it to cut back on contracted grain sales to the Soviets.
Below average crops in other grain producing countries, led by Argentina and Canada, are contributing to what is expected to be a very tight grain supply situation worldwide over the coming year.
Despite these short supplies, neither US government officials nor grain traders expect any Soviet moves this year to purchase more than the 8 million tons of US grain they are entitled to under current long-term contract agreements. Instead, the Soviets are paying premium prices on the world grain market -- which indirectly has helped create greater demand and higher prices for US grain producers.
Long-term developments, however, may bring Soviet policy shifts. The Carter administration insists that the US cannot draw up new grain supply contracts with the USSr or resume business-as-usual as long as Soviet troops remain in Afghanistan. This US position was blamed for poor grain prices earlier this year. Farmers and their congressmen warned that the Carter grain embargo would undermine overseas confidence in the United States as a dependable supplier and drive customers away.
Instead, grain prices are up, US farmers are happier, and the liens of foreign customers waiting for US harvests have lengthened.
US farm exports shold top $40 billion for fiscal 1980, up from $32 billion for the previous year. Higher prices account for some of the increase, but export volume is up 19 percent due mainly to new world demand for US grain.
Perhaps the most significant change -- one one sure to be closely watched in Moscow -- is that major purchasers of US agricultural products are multiplying. Last year five countries -- Japan, the Netherlands, West Germany, the Soviet Union, and South Korea - brought at least $1 billin in US farm products.
This year the list reads: Japan ($4.3 billion), the Netherlands ($2.7 billion), West Germany ($1.45 billion), the Soviet Union ($1.4 billion), China ( billion).
Just last week work leaked out that the US is close to announcing a long-term agreement to supply China with up to 9 million tons of US grain annually. Other multiyear contracts are being discussed with Japan, Mexico, and Israel. All are modeled after the current five-year agreement with Moscow.
Potentially, China could become the largest market for US farmers. This potential, grain trade experts say, could upset the Soviets. To meet their own domestic goals, the Soviets may find it essential to return to the United States as the only supplier large enough and dependable enough to tide them over their frequent poor harvests.
Currently there is concern that the Soviets announced their poor grain harvest unusually early in order to tempt Western nations to break with the US grain embargo. Except for Argentina, the major suppliers are refusing to increase their grain sales above their "historical levels."
In the longer term, the Soviet may have no alternative to returning to the US fold. This could mean adjusting Soviet policies sufficiently so that new long-term supply contracts can be drawn up. Without such contracts in the years when supplies are short, the Soviets could find US grain already committed under contract to China, Japan, Mexico, and Israel.
US dominance as a supplier is shown in the fact that the US share of world agricultural exports jumped from 14.3 percent in 1970 to 18.2 percent in 1978. During this period, the value of these exports quadrupled from $7.4 billion to $ 30.8 billion and should top $40 billion this year.
This dominant US position in the grain market, combined with the poor Soviet harvests of 1979 and 1980, could prove that the Carter administration was right to say the grain embargo would be the most effective way "short of US military intervention" to respond to Soviet aggression in Afghanistan.