US Farmers Wonder What Grain Needs Will Be in New Soviet Union
FALLOUT from last month's coup attempt in Moscow will settle soon on United States agriculture. Farmers hope it will take the form of higher commodity export volumes and prices, but they worry that the effect will be just the opposite."There's so much that's unknown," says Karen Fegley of the National Association of Wheat Growers. "We're trying to learn as many things as we can about what's going on." The abortive coup turned the once-immobile Soviet system into a political kaleidoscope, raising a host of doubts and questions: Will the current regime be in power a month from now? How much grain must the Soviets import to make it through the winter? Will they be able to pay for what they buy? When will they want it delivered? Should sellers be dealing with the central government or with individual republics? And what should the US be doing? "That's all up in the air," says Ron Trussel, chief of the US Department of Agriculture's commodity and trade analysis branch. With the approach of winter, people like former Foreign Minister Eduard Schevardnadze are predicting food riots resulting from shortages as political upheaval diminishes Soviet food production and distribution. Earlier this month, President Bush dispatched Undersecretary for International Affairs and Commodity Programs Richard Crowder to areas of the Soviet Union likely to face shortages in order to assess the winter food requirement. In October, Secretary of Agriculture Edward Madigan will lead a team to the Soviet Union to look for ways that free-market mechanisms can alleviate food distribution problems. A similar visit by Mr. Crowder last May found that the Soviet Union actually produces enough food to feed itself but that one-third of its grain and half of its fruit and vegetable production perish before reaching the market. Observers are also wondering just how much grain the rest of the world will have available to sell to the Soviets. In August the USDA forecast that the grain harvest through June 1 would decline by 4 percent, "which on a worldwide basis is a fair amount," Mr. Trussel says. An updated forecast will be released this afternoon. The lower harvest will cause stocks to be drawn down to a 60-day supply, says John Schnittker, a food consultant and former USDA official. That borders on dangerous, he says. If next year's harvest were to be 5 percent lower than normal, the stockpile would drop sharply. That would "lead to unstable and significantly increased commodity and food prices," Mr. Schnittker says. Madigan has already increased the amount of acreage that US farmers can plant in wheat under federal farm programs. This month he must make the same decision for corn, which the USDA forecast in August would decline in the US by 6 percent, to 7.42 billion bushels. "If our forecast [that comes out today] is less than 7.25 billion bushels, then Madigan ought to encourage more corn planting," Schnittker says. But he gets sharp disagreement from Larry Mitchell of the American Agriculture Movement. Representing farmers in 35 states and Canada, the AAM lobbies for higher farm prices. "As far as some of the talk going on now on [of] increasing plantings for next year so that we can supply the Soviets with what they need - first off, we have adequate supplies on hand now," Mr. Mitchell says. "There are certainly enough bushels of corn and bushels of wheat to fill any request they may have." Pointing to the numerous political and financial unknowns, Mitchell adds, "It's not very good management to jump out here and plant a bunch more acres, hoping they're going to buy more grain." Suppose, he suggests, that the Soviet Union frees farmers to produce more. In that case, the current political ferment could cause demand for imports to fall, not rise. During Crowder's May visit to the Soviet Union, the one change most frequently wished for was an end to interference by the Communist Party in agriculture. Since then, the failure of the coup by Communist hard-liners has made that possible. Allen Terhaar, executive director of the US Feed Grains Council, believes demand will rise for a year or two, then fall as Soviet farmers become more productive, but eventually rise again as increasingly prosperous Soviet consumers buy more meat. The USFGC promotes the export of corn, sorghum, and barley, grains that are used to feed poultry and cattle. "If we get to next year's harvest, and we've got all these increased acres and no customers, we've got more surplus, which means lower prices," Mitchell says. "Ask any corn grower why his prices are so low this year, and he'll tell you that the bins are full." Mitchell says that the National Corn Growers Association wants to maintain corn acreage at this year's level of 7.5 percent less than the base in the federal program. The Oklahoma wheat growers, he adds, had sought to have wheat acreage cut by 20 percent. "Prices are often too low for the farmer," Mr. Terhaar observes. "It's always a balance between having an adequate income to the farmer so that farmers in the United States can survive, and what it takes to remain competitive on the world market. We have to make sure that we continue to be a low-cost producer." Terhaar would like to see the US program that guarantees credit for foreign purchasers of US grain made more flexible for the Soviets. Acknowledging that the only way the Soviets - once a cash customer - now will buy grain is on credit, Ms. Fegley nonetheless has reservations. The default level on such guarantees is "pretty small." Political decisions to bring in countries regardless of creditworthiness are ones that cause losses, she says. "We as wheat growers sell a lot of product under that program, so we'd hate to see the whole thing go bust for one customer," Fegley says. "But at the same time it's a big customer, so you can imagine our dilemma."