Great grain robbery

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Great Grain Robbery
State Emblem of the Soviet Union.svg
Soviet coat of arms, with prominent wheat bunches
Date1972
LocationThe Madison
Also known asRussian Wheat Deal
TypeWheat trade
ThemeAgriculture
CauseRussian purchases of grain
MotiveLack of grain in USSR
ParticipantsUnited States and USSR
OutcomeInflation of global grain prices

The great grain robbery was the July 1972 purchase of 10 million tons of grain (mainly wheat and corn) from the United States by the Soviet Union 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 crisis. Soviet negotiators worked out a deal to buy grain on credit, but quickly exceeded their credit limit. The American negotiators did not realize that both the Soviets and the world grain market had suffered shortfalls, and thus chose to subsidize the purchase. The strategy backfired and intensified the crisis with global food prices rose at least 30%, and grain stockpiles were decimated.

Background[edit]

Multistory building
The Madison hotel, in Washington, D.C., where negotiations took place

Due to the Soviet agricultural system, the cold climate, and frequent droughts, crop failure was not uncommon in the Soviet Union.[1][2] Such policies had led to disaster before, chiefly the 1932 Holodomor, in which at least 5 million died of disease and starvation.[3] The problem was heightened by the fact that only a small fraction of the Soviet Union was able to be farmed, which was known as the black earth belt.[4][5] In 1972 there was a drought across Europe and Soviet mismanagement of the situation led to catastrophic wheat crop failure.[6] Additionally the Soviets had suffered an extremely hot summer with similar temperature to the heat experienced during 2010 Northern Hemisphere heat waves.[7] This caused the Union to look to the global market to meet their grain needs.[8][9]

Event[edit]

A person
Soviet negotiator Nikolai Patolichev
A person
American USDA official Earl Butz

The main negotiations for the deal took place at The Madison in Washington, D.C. between two Russian teams, one led by Nikolai Patolichev and the second led by Nicolai Belousov.[10] Multiple businessman and government officials negotiated on the American side, such Michel Fribourg the CEO of the grain trading firm ContiGroup Companies, and Carroll Brunthaver, the Under Secretary of Agriculture for Farm and Foreign Agricultural Services.[11] The U.S. government negotiated a three-year deal that allowed the Russians to buy U.S. grain on credit. However, the Soviets quickly exceeded their credit limit, causing an economic crisis.[12] The Soviets are thought to have spent up to USD$1 billion on grain from companies in the United States and more from other countries such as France, Canada, and Australia.[13]

The U.S. government spent $300 million subsidizing the Russian purchases,[14] still unaware that the Soviets had suffered massive shortfalls in crops in 1971 and 1972. American negotiators didn't realize the full scope of the problem. Part of the reason for the American ignorance of the Russian situation is that many officials, such as Earl Butz, were convinced that the Soviets were only purchasing the grain to feed their animals.[15] By not realizing that global wheat stocks were low, and discounting reports of Soviet crop failure, the United States inadvertently rose food prices domestically, and lost significant revenue by choosing to subsidize the purchase instead of offering it at market price.[16]

Just weeks after this 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 might never even have happened at all, because American negotiators would have realized the scale of crop failures.[17][18] This event helped lead the U.S. government to seek more information about global agricultural output via infrared satellite intelligence.[16] After the deal, many Americans were concerned about businesses having advantages in similar situations due to their early access to information.[19]

Global effects and legacy[edit]

In a Ten-month span in 1973, global food prices rose by at least 30 percent.[20][21][22][23][9] According to one Londoner, there was an 87% increase on the price of an 800 gram loaf of bread in British markets.[24] Global wheat ending stocks decreased exponentially, Australia being hit the hardest with a 93% decrease by 1974 from 1971.[25] Not all nations were equally hit; some, such as Canada, benefited from the Great Grain Robbery. Canadian farmers had sold their wheat to the Canadian Wheat Board, which helped them as it used a system called pooling.[26]

This event was referred to in U.S. media of the time as "The Russian Wheat Deal" or "The Soviet Wheat Deal".[27][28] The term Great Grain Robbery is a pun referring to the "Great Train Robbery". Author Martha Hamilton introduced the term as the title of Chapter VII of her book The Great American Grain Robbery & Other Stories, as part of an allegation that the U.S. government was robbing American taxpayers in order to support grain trading companies.[20] Other sources claim that it was coined by senator Henry M. Jackson.[29]


References[edit]

  1. ^ Golubev, Genady; Dronin, Nikolai (February 2004). "Geography Droughts and Food Problems in Russia (1900-2000)". Center for Environmental Systems Research. Archived from the original on October 11, 2019. Retrieved January 29, 2020.
  2. ^ "The Great Grain Robbery: Lessons Learned from Earth Imaging's Early History". Earth Imaging Journal: Remote Sensing, Satellite Images, Satellite Imagery. May 18, 2011. Archived from the original on November 10, 2017. Retrieved January 29, 2020.
  3. ^ Applebaum, Anne (October 13, 2017). "How Stalin Hid Ukraine's Famine From the World". The Atlantic. Archived from the original on December 14, 2019. Retrieved January 29, 2020.
  4. ^ "Black Earth". novaonline.nvcc.edu. Archived from the original on February 27, 2018. Retrieved January 29, 2020.
  5. ^ "What Is The Central Black Earth Region Famous For?". WorldAtlas. Retrieved March 26, 2020.
  6. ^ Schubert, Siegfried; Wang, Hailan; Koster, Randal; Suarez, Max; Groisman, Pavel (December 23, 2013). "Northern Eurasian Heat Waves and Droughts" (PDF). NASA. Retrieved March 13, 2020.
  7. ^ Grumm, Richard H. (October 2011). "The Central European and Russian Heat Event of July–August 2010". Bulletin of the American Meteorological Society. 92 (10): 1285–1296. doi:10.1175/2011BAMS3174.1. ISSN 0003-0007.
  8. ^ "Drought of 1972". www.geo.uio.no. Archived from the original on January 29, 2020. Retrieved January 29, 2020.
  9. ^ a b "Russia's Wheat Problem Could Be Just The Beginning Of A Global Food Crisis". Business Insider. August 8, 2010. Archived from the original on January 29, 2020. Retrieved January 29, 2020.
  10. ^ Fialka, John (October 29, 1972). "The Big Soviet Wheat Deal" (PDF). CIA. Archived (PDF) from the original on January 23, 2017. Retrieved January 21, 2020.
  11. ^ Albright, Joseph (November 25, 1973). "The full story of how Amepиka got burned and the Russians got bread". The New York Times. ISSN 0362-4331. Archived from the original on March 30, 2019. Retrieved January 22, 2020.
  12. ^ "America Gets the Shaft | News | The Harvard Crimson". www.thecrimson.com. Archived from the original on December 1, 2016. Retrieved January 21, 2020.
  13. ^ Jensen, Michael C. (September 29, 1972). "Soviet Grain Deal Is Called a Coup". The New York Times. ISSN 0362-4331. Archived from the original on July 12, 2019. Retrieved January 17, 2020.
  14. ^ Powers, Rachel Chenven (October 29, 2015). "The 'Great Grain Robbery' of 1972". Earthzine. Retrieved January 17, 2020.
  15. ^ 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.
  16. ^ a b "The 'Great Grain Robbery' of 1972". October 28, 2015. Archived from the original on November 1, 2015. Retrieved July 11, 2016.
  17. ^ "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.
  18. ^ Levitan, Dave (June 2013). "I spy the rye". IEEE Spectrum. pp. 46–47.
  19. ^ "About the Export Sales Reporting Program | USDA Foreign Agricultural Service". www.fas.usda.gov. Archived from the original on February 26, 2017. Retrieved January 24, 2020.
  20. ^ a b Hamilton, Martha M. (1972). The Great American Grain Robbery & Other Stories. Washington, D.C.: Agribusiness Accountability Project. p. 313.
  21. ^ Trager, James (1975). The Great Grain Robbery. New York: Ballantine. p. 233. ISBN 0345241509.
  22. ^ "What Causes Food Prices To Rise? What Can Be Done About It?". U.S. Government of Accountability Office. September 8, 1976. Archived from the original on March 26, 2020. Retrieved March 26, 2020.
  23. ^ "Food Price Rise at '73 Rate Seen". The New York Times. February 15, 1974. ISSN 0362-4331. Retrieved January 17, 2020.
  24. ^ Smith, Alex Duval (August 7, 2010). "Global wheat crisis recalls Moscow's 'great grain robbery'". The Observer. ISSN 0029-7712. Archived from the original on June 11, 2019. Retrieved January 21, 2020.
  25. ^ "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 January 17, 2020.
  26. ^ Larsen, Laura (August 1, 2012). "Repurposing the Great Grain Robbery in Canada" (PDF). University of Saskatchewan. Retrieved January 17, 2020.
  27. ^ 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
  28. ^ 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.
  29. ^ Morgan, Dan (June 10, 1979). "The Shadowy World of Grain Trade". Washington Post. Retrieved January 24, 2020.

Further reading[edit]