1973 United States–Soviet Union wheat deal

The 1973 United States–Soviet Union wheat deal was a series of large Soviet purchases of American wheat and other grains negotiated with private U.S. exporters during July and August 1972, with deliveries scheduled through August 1973.[1] The Soviets contracted for about 440 million bushels of wheat (roughly US$700 million) along with additional grain purchases, tightening world supplies and contributing to sharp rises in grain and food prices in 1972–1973.[2]

The sales were facilitated by a July 1972 U.S. government credit agreement making up to US$750 million available over three years for Soviet purchases of U.S. grains, and by export-subsidy mechanisms that supported contracting at fixed export “target” prices despite rising domestic market prices.[1] In the United States the episode became widely known as the “Great Grain Robbery” (or “Great Russian Grain Robbery”), and Congress subsequently mandated an export sales reporting system in 1973 to improve transparency around large agricultural export transactions.[3]

Background

Soviet grain output was highly variable and, by the early 1970s, the USSR was increasingly supplementing domestic supplies with imports.[4] Analysts attributed this dependence to a combination of climatic risk - much of the Soviet grain area lay in regions where precipitation and growing seasons were only marginally adequate for reliable grain production, and structural weaknesses in Soviet agriculture such as poor management, weak incentives and significant waste in the farm system.[4]

In 1972 the USSR suffered heavy winterkill of winter grains following severe frosts with little or no snow cover, followed by a drought and unusually hot conditions over much of the European USSR during the growing season; in some areas east of the Urals, wet conditions also complicated harvesting.[5] The USSR's reported gross output of grain and pulses in 1972 was about 168 million tonnes (bunker weight), down from 181.2 million tonnes in 1971.[5] As crop prospects deteriorated, the Soviet government purchased roughly 28 million tonnes of grain abroad for delivery in 1972–73, including about 18 million tonnes from the United States.[5] Contemporary analyses of the 1972–73 price spike treated the Soviet shortfall as a major factor tightening world grain markets.[6]

Later meteorological analyses comparing major events in the region noted that the summer of 1972 produced heat extremes in parts of Eastern Europe comparable to those seen in 2010, although 2010 set new records in many station series.[7]

Event

Soviet Minister of Foreign Trade Nikolai Patolichev
U.S. Secretary of Agriculture Earl Butz

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.[8] 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.[9] 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.[10] However, the Soviets quickly exceeded their credit limit, spending the $750 million in only one month.[11] 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.[12]

The U.S. government spent $300 million subsidizing the grain purchases,[13] 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.[14] 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.[13]

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.[15] 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.[16]

In a ten-month span in 1973, global food prices rose by at least 30 percent and some sources claim up to 50 percent.[17][18][19][20] In some British markets there was a reported 87 percent increase on the price of an 800 grams (28 oz) loaf of bread.[21] Global wheat stocks decreased exponentially; Australia was hit the hardest with a 93 percent decrease by 1974 from 1971.[22] 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.[23]

Contemporary U.S. media referred to the event as "The Russian Wheat Deal" or "The Soviet Wheat Deal".[24][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]

References

  1. ^ a b Staats, Elmer B. (March 8, 1973). Statement of Elmer B. Staats, Comptroller General of the United States, before the Senate Committee on Agriculture and Forestry: The Russian Wheat Sales and Agriculture's Role in Expanding U.S. Wheat Exports (PDF) (Report). U.S. General Accounting Office. Retrieved December 25, 2025.
  2. ^ Luttrell, Clifton B. (October 1973). "The Russian Wheat Deal—Hindsight vs. Foresight" (PDF). Review. Federal Reserve Bank of St. Louis: 2–9. Retrieved December 25, 2025.
  3. ^ FACT SHEET: USDA's Export Sales Reporting Program (PDF) (Report). U.S. Department of Agriculture, Foreign Agricultural Service. Retrieved December 25, 2025.
  4. ^ a b Butler, Nick (September–October 1982). "Soviet Agriculture and US-Soviet Grain Agreement" (PDF). Intereconomics. 17 (5): 211–214. Retrieved 25 December 2025.
  5. ^ a b c The Agricultural Situation in Communist Areas: Review of 1972 and Outlook for 1973 (PDF) (Report). ERS-Foreign 350. U.S. Department of Agriculture, Economic Research Service. 11 April 1973. Retrieved 25 December 2025.
  6. ^ Schnittker, John A. (1973). "The 1972–73 Food Price Spiral" (PDF). Brookings Papers on Economic Activity (2). Retrieved 25 December 2025.
  7. ^ Friedrich, Karsten; Bissolli, Peter (24 January 2011). Analysis of Temperatures and Precipitation recorded at stations in Eastern Europe during the heat wave in summer 2010 (PDF) (Report). Deutscher Wetterdienst (DWD), Business Area Climate and Environment. Retrieved 25 December 2025.
  8. ^ Fialka, John (29 October 1972). "The Big Soviet Wheat Deal" (PDF). CIA. Archived from the original (PDF) on January 23, 2017. Retrieved 21 January 2020.
  9. ^ Albright, Joseph (1973-11-25). "The full story of how Amepиka got burned and the Russians got bread". The New York Times. p. 36. ISSN 0362-4331. Archived from the original on March 30, 2019. Retrieved 2020-01-22.
  10. ^ Times, Philip Shabecoff Special to The New York (1972-07-09). "Moscow Agrees to Buy U.s. Grain for $750-Million". The New York Times. p. 1. ISSN 0362-4331. Retrieved 2020-05-22.
  11. ^ "America Gets the Shaft". The Harvard Crimson. Archived from the original on December 1, 2016. Retrieved 2020-01-21.
  12. ^ Jensen, Michael C. (1972-09-29). "Soviet Grain Deal Is Called a Coup". The New York Times. p. 1. ISSN 0362-4331. Archived from the original on July 12, 2019. Retrieved 2020-01-17.
  13. ^ a b Powers, Rachel Chenven (2015-10-29). "The 'Great Grain Robbery' of 1972". Earthzine. Retrieved 2020-01-17.
  14. ^ Destler, I. M. (1978). "United States food policy 1972–1976: reconciling domestic and international objectives". International Organization. 32 (3): 617–653. doi:10.1017/S002081830003188X. ISSN 1531-5088. S2CID 154693901.
  15. ^ "I Spy Thy Rye. Satellites can help gauge crop yields and predict famine, by Dave Levitan". Spectrum.IEEE.org. June 1, 2013. Retrieved June 10, 2019.
  16. ^ "About the Export Sales Reporting Program | USDA Foreign Agricultural Service". www.fas.usda.gov. Archived from the original on February 26, 2017. Retrieved 2020-01-24.
  17. ^ "Russia's Wheat Problem Could Be Just The Beginning Of A Global Food Crisis". Business Insider. 8 August 2010. Archived from the original on January 29, 2020. Retrieved 2020-01-29.
  18. ^ Trager, James (1975). The Great Grain Robbery. New York: Ballantine. p. 233. ISBN 0345241509.
  19. ^ "What Causes Food Prices To Rise? What Can Be Done About It?". U.S. Government of Accountability Office. 8 September 1976. Archived from the original on 19 April 2019. Retrieved 26 March 2020.
  20. ^ "Food Price Rise at '73 Rate Seen". The New York Times. 1974-02-15. p. 30. ISSN 0362-4331. Retrieved 2020-01-17.
  21. ^ Smith, Alex Duval (2010-08-07). "Global wheat crisis recalls Moscow's 'great grain robbery'". The Observer. ISSN 0029-7712. Archived from the original on June 11, 2019. Retrieved 2020-01-21.
  22. ^ "USDA ERS – Agricultural Commodity Price Spikes in the 1970s and 1990s: Valuable Lessons for Today". www.ers.usda.gov. Archived from the original on December 8, 2019. Retrieved 2020-01-17.
  23. ^ Larsen, Laura (2012-08-01). "Repurposing the Great Grain Robbery in Canada" (PDF). University of Saskatchewan. Retrieved 2020-01-17.
  24. ^ Luttrell, Clifton B. (October 1973), The Russian Wheat Deal – Hindsight vs. Foresight, Reprint No. 81 (PDF), Federal Reserve Bank of St. Louis, archived (PDF) from the original on July 28, 2011, retrieved July 26, 2011
  25. ^ Alexander, Holmes (September 6, 1974). "Who was the real villain in Russian wheat deal?". Rome News-Tribune. Archived from the original on April 24, 2016. Retrieved July 26, 2011 – via Google News.
  26. ^ Morgan, Dan (10 June 1979). "The Shadowy World of Grain Trade". Washington Post. Retrieved 24 January 2020.

Further reading

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