NEWS ANALYSIS : U.S. Farmers to Reap Benefits From Aid to Soviets

When Soviet agricultural envoys arrive Sunday in Washington to divvy up $1.5 billion in loan guarantees from U.S. taxpayers, the hallways will be lined with wheat, corn, soybean and even California almond growers hoping for a piece of the action.

The credit guarantees announced last week by President Bush are viewed as a foreign policy measure, designed to nurture the struggling regime of Soviet President Mikhail S. Gorbachev.

But they are equally important to the U.S. Farm Belt.

The credits are only the latest manifestation of the mutual dependence between Soviet and U.S. farm interests that has taken hold over the last two decades.

The ties flowered during the Cold War. And with subsequent events--the Gorbachev reform era, the collapse of the Soviet economy and one of the worst grain export markets for U.S. farmers in a decade--the grain trade has gained both urgency and respectability.

Indeed, U.S. farmers have come to rely on Soviet buyers for as much as 23% of U.S. grain exports. So if the politics of their Soviet bedfellows ever made farmers uncomfortable, it was a fleeting sensation.

Explains corn farmer Richard Kaiser of Jonesburg, Mo.: “I always had the philosophy that if a man’s belly is full, he’s less likely to get mean.”

Rather than worrying about the Soviets’ ideology, American farmers mostly question their reliability: The Soviets have become the biggest wild card in world grain markets--other than the weather.

“There was always the admonition about not being able to trust the Russians,” says John Ferris, professor of agricultural economics at Michigan State University. “But farmers were much more resentful when the Soviets didn’t buy as much grain as the obligations called for.”

Historically able to feed itself and a good share of the rest of the world, the Soviet Union unexpectedly began buying other nations’ grain in 1972. That triggered a big run-up in world prices and drastically changed the farm marketplace, touching off competition among the world’s grain exporters for Soviet business.

Soviet needs have since become so integral to U.S. farm production plans that the U.S.S.R’s failure to buy as much grain as expected would send farm prices tumbling and ravage the federal budget by driving up U.S. farm support payments.

“When they don’t buy, it has a tremendous impact on real prices,” says Carol Brookins, president of World Perspectives Inc., a Washington grain-trade consulting firm.

U.S. foreign policy has added to the uncertainty at times. Starting in 1974, Congress limited grain sales to pressure the Soviets to allow the emigration of Jews. In 1980, then-President Jimmy Carter halted grain sales to retaliate for the Soviet invasion of Afghanistan.

Since 1983, the roller coaster has been partially smoothed out by long-term agreements placing a floor under the volumes of U.S. farm products purchased by the Soviet each year. But their usual practice of paying cash has been undermined by the current economic crisis, threatening the Soviets’ ability to meet those minimum commitments.

With their credit-worthiness roughly equivalent to that of junk bonds, the Soviets slashed grain imports last year by an estimated 38%. Given that Soviet needs account for about one-third of all world grain trade, the cutbacks have wreaked havoc in export markets--this at a time when U.S. grain farmers are raising a bumper crop.

“This is the slowest export pace in corn since 1978,” says Daniel Basse, market research director at AgResource Co. of Chicago. “And with this crop the best since ‘81, we have a surplus of commodities.”

Meanwhile, because other exporters--including Canada, Australia and European nations--were providing government credits to enable the Soviets to buy their grain, most of the 14-million-metric-ton decline in Soviet imports was absorbed by U.S. producers.

“If we don’t supply credits, other countries will,” Brookins says. “You’ve got some very aggressive credit competition.”

Hence the White House decision--after intense lobbying by farm-state lawmakers, led by the otherwise hard-line Senate Republican leader, Bob Dole of Kansas--to grant $1 billion in loan guarantees in December. That money already used up, the President approved another $1.5 billion in credits Tuesday, to be made available in three installments between now and February.

The $1.5 billion could buy perhaps 10 million metric tons of wheat, feed grains and other products, analysts estimate. That is equivalent to the Soviets’ long-term commitment to U.S. purchases for this year.

Commodity markets yawned at the White House action, despite an assumption by some that the guarantees would boost prices. Analysts say grain prices already reflected the expected U.S. decision and would have fallen if the deal hadn’t gone through.

Dole says that if the Soviets don’t meet their U.S. commitments on wheat alone, taxpayers would have to shell out up to $1 billion to bolster various agricultural support programs.

Soviet and U.S. Agriculture Department negotiators are to meet next week to figure out how the first $600-million installment of the latest credits should be spent. The funds will come from private U.S. lenders that would be made whole by Uncle Sam if the Soviets default.

The Soviets have signaled an urgent need for wheat as well as feed grains--such as corn or soybean meal--for livestock. Feed shortages have forced Soviet farmers to slaughter vast numbers of cattle.

U.S. farm interests eager to sell their products are likely to oppose Soviet requests that part of the money go toward emergency transportation so that shipments can be made more quickly.

“There’s no question that all the commodity guys are going to want part of the action,” a Dole aide says.

Corn growers are expected to be big winners, a prospect forthrightly endorsed Friday by the National Corn Growers Assn.

Almond farmers are apparently lower on the priority list.

Once enjoying $500 million in annual export sales to the Soviet Union, the California almond industry hasn’t made a single shipment this year, an apparent victim of the Soviet credit crisis. Nor do almond growers expect to benefit from the latest loan guarantees.

“There’s been no indication from anybody in Washington that we’re going to get anything,” says Susan Brauner, a spokesman for Blue Diamond Growers, the almond growers’ cooperative, in Sacramento. “I think we’d be the first to know.”

The U.S.- Soviet Grain Trade

The Soviet Union has been the American farmer’s most unpredictable customer for wheat and feed grain over the last decade. International politics, erratic domestic production and the U.S.S.R.’s deteriorating economy all have injected uncertainty into Soviet grain purchases.