Highlights, Great Grain Robbery, Rain Days Update 7/10/22
Great Grain Robbery
Twenty years after China went Communist (in 1949), its relationship with the Soviet Union (the mother of communism) had turned sour. China had backed the Communist North Koreans in the Korean War (1950 to 1953) and the Soviet Union did not like that. The Soviet Union backed North Vietnam against the French, then South Vietnam, then the USA and the Chinese Communists (ChiComs) did not like that. Both Communist regimes were struggling to survive and poor crop production made for a lot of hungry people.
Meanwhile, down on the farm in the Midwest, the USDA was guaranteeing farmers a profit on corn and wheat (soybeans were a hay crop in those days). Naturally, farmers grew much more corn and wheat than the market needed, so Uncle Sam bought all the excess and stored it in bins all across the Corn Belt.
President Richard Nixon and Secretary of Agriculture, Earl Butz (of Purdue), knew something had to be done before the US government went broke storing grain. So, in 1970, Nixon began sweet talking the ChiComms. After all, they had more than one billion people and most of them were hungry every day of their lives. Nixon also knew the Soviets would not like China getting sweet with the USA and they would become more agreeable on every issue on the table.
The whole world was astounded, in late 1971, when it was announced Nixon was going to China in February 1972 to begin the process of establishing diplomatic relations with the ChiComms, something the ChiComms desperately wanted.
It was big news worldwide when Nixon was greeted with an honor guard, toured the ancient cities, the Chinese capital city and walked on the Great Wall of China. Low and behold, and unexpected by the world, the last thing Nixon did before he left was sign a deal to sell massive amounts of wheat to China.
The week after Nixon returned to The White House, the Soviet ambassador paid Nixon a visit to invite him to travel to Moscow to meet Communist Party Chairman Leonid Brezhnev in early May (very short notice for heads of state to meet). Nixon smiled from ear to ear. Everything was going even better than he had planned.
The CIA was not into crop production in those days (they are now!) and satellite technology to evaluate crop quality was still four months away, so no one outside the USSR knew that the Soviet Union had a disastrous crop in 1971 and the spring of 1972 looked worse than ’71. Brezhnev wanted grain and a lot of it. He knew the USA had to get rid of a lot of grain and he knew China was already dipping into those excess supplies. Brezhnev was not about to let China get a “leg-up” on the Soviet Union with the USA without a battle and he was going to get some of that grain from the USA.
At the time, there was a fear the world’s two major Communist powers, that they would turn on each other with nuclear weapons and end every bodies’ problems.
Brezhnev and Nixon inked a deal to buy US corn and wheat. Ships were loaded with US grain as fast it could be moved to the ports.
The first loads arrived in the Soviet Union in late June. Brezhnev made sure the corn was distributed to the livestock people and wheat was milled and flour was spread across all eleven time zones of the Soviet Union. Brezhnev was a national hero and he liked it.
By late June, Brezhnev knew 1972 would be another disaster crop year. He immediately negotiated a deal to buy a huge amount of US corn and wheat, but money was tight. The USDA always had a liberal lending policy for countries who wanted to buy US farm products.
The Soviets wanted to make a three year deal on credit. They presented a shopping list for $1.1 billion worth of corn and wheat. They asked for $750 million in credit and $300 million worth of grain gifted to them because that would be the savings to the US government to not store the grain. Corn was $1 a bushel and wheat was $2 a bushel and the USA only grew about 4.5 billion bushels of corn each year. $1.1 billion bought a lot of bushels. It was agreed the purchases would be spread out over three years.
The Soviets had free rein to make the deals direct with any and all grain companies handling US grain. There were no weekly export inspections or sales reports in those days. The Soviets showed Cargill, Continental Grain, ADM, Central Soya, Ferruzzi, Dreyfus, Bunge, and hundreds of smaller grain exporters their $1.1 billion line of credit from Uncle Sam for corn and wheat and pointed to a ship and said, “Load it.” For a grain exporter, life cannot get any better than that.
The Soviet Union buyers bought all the grain scheduled for the three year deal and used all the credit and grant money in just 35 to 45 days!
They bought one-fourth of the entire US wheat crop in a matter of weeks. Annual corn and wheat exports doubled and by far more exports than ever before. Food prices in the USA jumped 30% almost overnight and then another 10%. Within a few months, world food prices had increased 30%. People were not happy. Although no grain was actually stolen, the deal became known as the Great Grain Robbery, coined after Great Britain’s Great Train Robbery in 1963.
The Great Grain Robbery deal was signed 50 years ago this week, July 8th to be exact.
Highlights
The Buenos Aires Grain Exchange lowered its wheat planted acreage estimate for 2022-23 due to unfavorable weather – the 4th cut to planted area since May.
A "test" vessel with Ukrainian grain will sail from the port of Odessa to Turkey this coming week... supposedly.
Romania has reopened a Soviet era rail link connecting its Danube River port of Galati to Ukraine a month earlier than planned.
The rainfall amounts for the 24 hours ending Saturday morning:
Rain Days Update
The Western Corn Belt has 3 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 8 more rain daysthan yesterday.
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days
Every day, every place in the world has a ten day weather forecast issued many weather services.
By a "place", we mean a Findlay, Ohio; Arcadia, Minnesota; Atlantic, Iowa; Fullerton, Nebraska; Cordoba, Argentina; Craig, Colorado, Saratov, Russia and ten million localities we have never heard of.
The ten day forecast predicts the high and low temperature for each day as well as whether or not rain is predicted for each of the ten days, likewise cloudy, partly cloudy, sunny, etc.
We look at the ten-day forecast and if we see rain is predicted for 4 of the next 10 days, we record a "4" for that location on the chart for the today. It does not matter whether it is one-hundredth of an inch or 5 inches. We realize about half the days expected to receive rain never get rain that day, but we must be consistent in what we report each day and every day because rain makes grain a few key weeks of the growing season. Of course, we scan the temperatures and the amounts of rain just to see if anything is getting way out of the norm.
Comments