1973 United States–Soviet Union wheat deal explained

In July 1973, the Soviet Union purchased 10e6short ton of grain (mainly wheat and corn) from the United States at subsidized prices, which caused global grain prices to soar. Crop shortfalls in 1971 and 1972 forced the Soviet Union to look abroad for grain. Hoping to prevent famine or other crisis, Soviet negotiators worked out a deal to buy grain on credit, but quickly exceeded their credit limit. American negotiators did not realize that both the Soviets and the world grain market had suffered shortfalls, and thus subsidized the purchase, leading it to be dubbed the "Great Grain Robbery". The strategy backfired and intensified the crisis: global food prices rose at least 30 percent, and grain stockpiles were decimated.

Background

Because of the Soviet agricultural system, the cold climate, and frequent irregular droughts, crop failure was common in the Soviet Union.[1] [2] The problem was heightened by the fact that climate problems prevented much of the arable land in the USSR from being farmed,[3] so only some of the land in the black earth belt was suitable for agriculture.[4] [5]

In 1972, there was a drought across Europe.[6] Additionally, the USSR had suffered an extremely hot summer with temperature comparable to the heat experienced during 2010 Northern Hemisphere heat waves.[7] This caused the Soviet Union to look to the global market to meet their grain needs.[8] [9]

Event

The main negotiations for the deal took place on June 20, 1972, at The Madison hotel in Washington, D.C., with two Soviet teams, one led by foreign trade minister Nikolai Patolichev and the second led by Nicolai Belousov. On the American side were multiple representatives of American grain businesses and officials representing the U.S. government.[10] This included Michel Fribourg, the CEO of grain trading firm ContiGroup Companies (formerly Continental Grain), and Carroll Brunthaver, the U.S. Under Secretary of Agriculture for Farm and Foreign Agricultural Services.[11] In early July 1972, the U.S. government negotiated an arrangement that allowed the Soviets to buy up to $750 million of American grain on credit, over a three-year timespan.[12] However, the Soviets quickly exceeded their credit limit, spending the $750 million in only one month.[13] By September 1972, the Soviets are thought to have spent up to US$1 billion on grain from companies in the United States, and more from other countries such as France, Canada, and Australia.[14]

The U.S. government spent $300 million subsidizing the grain purchases, still unaware that the Soviets had suffered massive crop shortfalls in 1971 and 1972. One reason the government did not realize the impact the deal would have is that many officials, such as Earl Butz, were convinced that the Soviets were purchasing the grain only to feed their livestock.[15] By not realizing that global wheat stocks were low, and discounting reports of Soviet crop failure, the United States inadvertently contributed to domestic food prices rising, using public funds to do so.[16]

Aftermath and international consequences

Weeks after the grain deal was announced, the Earth-observing satellite Landsat 1 achieved orbit. If the satellite had launched a few months earlier, the deal may have been reconsidered or never have happened at all, because American negotiators could have realized the scale of Soviet crop failures.[17] The event helped lead the U.S. government to seek more information about global agricultural output via infrared satellite intelligence. After the deal, many Americans were concerned about businesses having advantages in similar situations due to their early access to information.[18]

In a ten-month span in 1973, global food prices rose by at least 30 percent and some sources claim up to 50 percent.[19] [20] [21] In some British markets there was a reported 87 percent increase on the price of an 800g loaf of bread.[22] Global wheat stocks decreased exponentially; Australia was hit the hardest with a 93 percent decrease by 1974 from 1971.[23] Not all nations were equally hit; some, such as Canada, benefited from the deal. Canadian farmers had sold their wheat to the Canadian Wheat Board, which were able to pool stocks and sell as a collective.[24]

Contemporary U.S. media referred to the event as "The Russian Wheat Deal" or "The Soviet Wheat Deal".[25] The term Great Grain Robbery is a pun referring to the 1963 Great Train Robbery and it is generally accepted that it was coined by Senator Henry M. Jackson.[26]

Further reading

Notes and References

  1. Web site: Geography Droughts and Food Problems in Russia (1900–2000). Golubev. Genady. Dronin. Nikolai. February 2004. Center for Environmental Systems Research. live. https://web.archive.org/web/20191011143744/https://www2.cesr.de/component/easyfolderlistingpro/?view=download&format=raw&data=eNpFT20OwiAMvUsv4KbJ1HoYgqPbMIwSytwS492FfcRf0Nf3VY11jR_BBqFjZyjCQ_CGYHj2jrUpY2bAJBQ3gqwQQnWs-okk_cVXBKVWbLcqUq9HKmOFUJ5mQ222t1htokgu6DSU9R3hFFwiv6hNspt01tFhcs5sE3nqhyRKe6M6ZqOsV3ESsbpQLgi0pP0XTLcXoyXYSHKk1rmOTkm3w0g-s58rmtNDpLeleTsol-2Ze5ezvz-OIGHM. October 11, 2019. 29 January 2020.
  2. Web site: The Great Grain Robbery: Lessons Learned from Earth Imaging's Early History . 2011-05-18 . Earth Imaging Journal: Remote Sensing, Satellite Images, Satellite Imagery . en-US . 2020-01-29 . https://web.archive.org/web/20171110215909/http://eijournal.com/print/column/defense-watch/the-great-grain-robbery-lessons-learned-from-earth-imaging%E2%80%99s-early-history . November 10, 2017 . live .
  3. Book: Miller, Jack. Life in Russia Today. B. T. Batsford. 1969. 9780713415544. 52–53.
  4. Web site: Black Earth . novaonline.nvcc.edu . 2020-01-29 . https://web.archive.org/web/20180227174105/http://novaonline.nvcc.edu/eli/evans/his241/notes/geography/BlackEarth.html . February 27, 2018 . live .
  5. Web site: What Is The Central Black Earth Region Famous For?. WorldAtlas. September 18, 2017 . en. 2020-03-26.
  6. Web site: Northern Eurasian Heat Waves and Droughts. Schubert. Siegfried. Wang. Hailan. 23 December 2013. NASA. 13 March 2020. Koster. Randal. Suarez. Max. Groisman. Pavel.
  7. Grumm. Richard H.. October 2011. The Central European and Russian Heat Event of July–August 2010. Bulletin of the American Meteorological Society. en. 92. 10. 1285–1296. 10.1175/2011BAMS3174.1. 2011BAMS...92.1285G . 0003-0007. free.
  8. Web site: Drought of 1972 . www.geo.uio.no . 2020-01-29 . https://web.archive.org/web/20200129135808/http://www.geo.uio.no/edc/droughtdb/edr/DroughtEvents/_1972_Event.php . January 29, 2020 . live .
  9. Web site: Russia's Wheat Problem Could Be Just The Beginning Of A Global Food Crisis. 8 August 2010. Business Insider. live. https://web.archive.org/web/20200129142532/https://www.businessinsider.com/russia-wheat-food-crisis-2010-8. January 29, 2020. 2020-01-29.
  10. Web site: The Big Soviet Wheat Deal . Fialka . John . 29 October 1972 . CIA . dead . https://web.archive.org/web/20170123160330/https://www.cia.gov/library/readingroom/docs/CIA-RDP80-01601R000300340010-4.pdf . January 23, 2017 . 21 January 2020 .
  11. News: Albright. Joseph. The full story of how Amepиka got burned and the Russians got bread. 1973-11-25. The New York Times. 2020-01-22. live. https://web.archive.org/web/20190330192823/https://www.nytimes.com/1973/11/25/archives/some-deal-the-full-story-of-how-amepnka-got-burned-and-the-russians.html. March 30, 2019. 36. en-US. 0362-4331.
  12. News: Times. Philip Shabecoff Special to The New York. 1972-07-09. Moscow Agrees to Buy U.s. Grain for $750-Million. en-US. 1. The New York Times. 2020-05-22. 0362-4331.
  13. Web site: America Gets the Shaft. The Harvard Crimson. live. https://web.archive.org/web/20161201071632/http://www.thecrimson.com/article/1973/11/16/america-gets-the-shaft-pthe-1972/. December 1, 2016. 2020-01-21.
  14. News: Jensen. Michael C.. Soviet Grain Deal Is Called a Coup. 1972-09-29. The New York Times. 2020-01-17. live. https://web.archive.org/web/20190712162539/https://www.nytimes.com/1972/09/29/archives/soviet-grain-deal-is-called-a-coup-capitalistic-skill-surprised.html. July 12, 2019. 1. en-US. 0362-4331.
  15. Destler . I. M. . 1978 . United States food policy 1972–1976: reconciling domestic and international objectives . International Organization . en . 32 . 3 . 617–653 . 10.1017/S002081830003188X . 154693901 . 1531-5088.
  16. Web site: The 'Great Grain Robbery' of 1972 . Powers . Rachel Chenven . 2015-10-29 . Earthzine . en-US . 2020-01-17.
  17. Web site: I Spy Thy Rye. Satellites can help gauge crop yields and predict famine, by Dave Levitan. June 1, 2013. Spectrum.IEEE.org. June 10, 2019.
  18. Web site: About the Export Sales Reporting Program USDA Foreign Agricultural Service. www.fas.usda.gov. live. https://web.archive.org/web/20170226173828/https://www.fas.usda.gov/programs/export-sales-reporting-program/about-export-sales-reporting-program. February 26, 2017. 2020-01-24.
  19. Book: Trager, James . The Great Grain Robbery . 1975 . Ballantine . New York . 0345241509 . 233.
  20. Web site: What Causes Food Prices To Rise? What Can Be Done About It?. 8 September 1976. U.S. Government of Accountability Office. live. https://web.archive.org/web/20190419062018/https://www.gao.gov/products/CED-78-170. 19 April 2019. 26 March 2020.
  21. News: Food Price Rise at '73 Rate Seen. 1974-02-15. The New York Times. 2020-01-17. 30. en-US. 0362-4331.
  22. News: Global wheat crisis recalls Moscow's 'great grain robbery' . Smith . Alex Duval . 2010-08-07 . The Observer . 2020-01-21 . live . https://web.archive.org/web/20190611105101/https://www.theguardian.com/world/2010/aug/08/russia-wheat-prices-bread . June 11, 2019 . en-GB . 0029-7712.
  23. Web site: USDA ERS – Agricultural Commodity Price Spikes in the 1970s and 1990s: Valuable Lessons for Today . www.ers.usda.gov . live . https://web.archive.org/web/20191208082149/https://www.ers.usda.gov/amber-waves/2009/march/agricultural-commodity-price-spikes-in-the-1970s-and-1990s-valuable-lessons-for-today/ . December 8, 2019 . 2020-01-17.
  24. Web site: Repurposing the Great Grain Robbery in Canada . Larsen . Laura . 2012-08-01 . University of Saskatchewan . 2020-01-17.
  25. News: Alexander . Holmes . Who was the real villain in Russian wheat deal? . Rome News-Tribune . September 6, 1974 . July 26, 2011 . https://web.archive.org/web/20160424032127/https://news.google.com/newspapers?nid=348&dat=19740906&id=XbEFAAAAIBAJ&sjid=LjMDAAAAIBAJ&pg=5222,714560 . April 24, 2016 . live. Google News.
  26. News: The Shadowy World of Grain Trade . Morgan . Dan . 10 June 1979 . Washington Post . 24 January 2020.

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