Ultimate Weapon in
(BusinessWeek, 15 December 1975)
Earl L. Butz,
the peripatetic Secretary of Agriculture, just back from a tour of eight
countries, tells a story to show how America is waking up to the use of its food power as a diplomatic tool.
"When I visit a foreign capital," Butz
says, "the reaction of the U.S. ambassador there is likely to be, 'I
wonder how long I'll have to put up with this agriculture cluck.?'" that
is, Butz explains, until the ambassador sees presidents
and premiers perking up at the chance of talking with an influential U.S. food
official. Then, says Butz, the reaction turns to
"Gee, this guy can open doors for me."
The deployment of American food power is the focus of a serious
policy debate now under way in Washington. Nearly everyone agrees that in a world of hunger and
overpopulation, the U.S. can apply its tremendous agricultural capacity as a
lever of foreign countries to adopt as a lever on foreign countries to adopt
policies beneficial to this nation. "We have the food, and the hell with
the rest of the world," snaps one high-level State Dept. official.
The controversial question is
how much to exploit food power
to advance U.S. national interests. Some government officials
question the merits of an aggressive policy on the grounds of both morality and
Recent world trends in grain
stocks underscore the extent of the nation's food power. While supplies outside
the U.S. are steadily declining -- the current total is about
69 million tons -- U.S. grain stocks are rising sharply; they now amount to
more than 31 million tons and are approaching half the world's supply.
Even as the policy debate
goes on, the Ford Administration is slowly, even awkwardly, starting to wield
food power in the diplomatic arena. For the first time, the U.S. has established a national grains export policy. In
place of the free rein allowed commercial grain exporters in the past, Washington has shown itself ready to set up precise quid pro quo
conditions for delivering American food.
The new policy was employed
in the Russian grain agreement negotiated recently in Moscow. For the Russians, the price was to stop disruptive,
inflationary raids on the U.S. grain market. they were also
asked to ante up some oil on favorable terms, which have yet to be spelled out.
And there is strong evidence that, as another condition for the grain sale, the
Russians were persuaded to keep their hands off during Secretary of State Henry
A. Kissinger's negotiations on the Egyptian-Israeli accord.
Food power discreetly figures
in the multilateral trade negotiations getting under way in Geneva, aimed at reducing tariffs. U.S. officials privately concede that it will be exploited
to try to reduce trade barriers in countries that buy large quantities of food
here. Japan is an obvious case in point.
Japan and Poland both typify how eager foreign countries are to nail
down U.S. grain supplies. Both have informal purchase
agreements, but says one State Dept. official, "they now want something
formal like the Russians have." As in the Russian case, both would have to
commit themselves at least to buying fixed volumes of U.S. grain in orderly fashion. In fact, says a top-level
Agriculture Dept. official, "The word here is that any country that wants
to buy substantially more than its normal amounts of grain will be faced with a
Russian-type situation." In Poland's case, Washington would use food power to help loosen that country's
economic links to the Soviet bloc.
Ever since the Arab oil-producing
nations began to wield petroleum as a geopolitical tool in 1973, the world has
recognized that the U.S. has a comparable weapon in food, since much of the
world nourishes itself on U.S. grains.
But there are crucial
distinctions between food power and petropower. The
most obvious is the moral consideration. "Can you imagine the
repercussions of the U.S. trying to play God with food?" asks a White
House official. Beyond that are practical limitations that do
not apply to oil.
Industrial nations dependent
on imported oil are highly vulnerable to a cutoff of supplies. While they can
dispense with some discretionary uses in an emergency, they need a certain
amount to run their plants and basic transportation. The threat of an embargo,
shutting down national economies, is a potent weapon that can be used as a
Not so in the case of a food
embargo. People in developed countries, ranging from well fed to overfed, can
always pull in their belts a few notches if necessary. In developing countries,
where people are on subsistence diets or less, the U.S. ability to apply
political pressure with the overt or implicit threat t withhold food supplies
is even more limited. Such action would probably be counterproductive, since
the nation would be severely condemned on moral grounds.
Moreover, curtailing food
sales for foreign policy reasons would have an immediate and adverse impact on
several million U.S. farmers who have considerable political clout.In
short, the U.S. has less room for maneuver -- economically and
politically -- in wielding food power than the oil producers have with petropower.
Despite these limitations, U.S. food power does exist. It is just one of several
kinds of economic power that the nation possesses -- financial resources,
technology, managerial knowhow, and the bargaining
strength in trade relations that comes from having the world's biggest domestic
There is a growing consensus
that the U.S. should be as tough in using food power to achieve
national objectives as it is in employing its other economic capabilities. But
food stirs up strong emotions because it is associated with the most primary
human need. So there is also a growing realization that food power must be
handled with particular skill and sensitivity.
American food power grows out
of an incredible capacity for agricultural production at a time when rising
population and affluence are increasing global demand for more and better food.
Butz describes this capacity floridly: "the U.S. has the largest contiguous land mass of fertile soil,
good growing climate, and adequate rainfall of any place on earth." After
they finish feeding their own countrymen, American farmers have left over for
export nearly 60% of their wheat and rice, nearly half of their soybeans,
one-fourth of their gain sorghum, and more than one-fifth of their corn.
What Russian needs
The U.S. already provides nearly three-fourths of the world's
net grain exports. In a recent report on world population and food production,
the Central Intelligence Agency predicts: "Over the next several decades,
the world's increasing dependence on U.S. surpluses portends an increase in U.S. power and influence, especially vis-a-vis
the food-deficit poor countries. Indeed, in times of shortage, the U.S. will face difficult choices about how to allocate its
surplus between affluent purchasers and the hungry world."
Few nations are so fortunate,
and the Soviet Union is a significant example. While most of the best
growing land in the U.S. lies south of the 45th parallel, most of the Soviet Union's lies above it. As Reid Bryson, a University of Wisconsin climatologist, describes it: "The best
land in Russia has a climate something like north Dakota -- and from there on it gets worse." In the
eastern virgin lands, weather, rainfall, and yields are uncertain. This year
the Agriculture Dept. has been scaling down its estimate of total Soviet grain
production from an initial 215 million tons to perhaps 160 million tons or
less. As a minimum, the Soviets need about 210 million tons of grain.
The deplorable grain crop
confronted Soviet leaders with a tough political decision. Several years ago
they committed themselves to feeding more livestock in order to put more meat
in the Soviet diet. Would they now disappoint consumer aspirations and
slaughter their herds, or would they buy feed on the world market -- most of it
from the U.S.? The answer was "buy,"
and this summer the Soviets began chartering ships for what could be the
biggest movement of grain in world history.
Japan is another nation with food problems. With nearly
every square foot of its islands under cultivation, it depends on food imports,
particularly U.S. soybeans and feed grians.
Like the Russians, the Japanese are eating more beef. And when the Soviets
began buying up U.S. grain this summer, the Japanese wondered if they would be left out.
"You could see the shock waves coming through," says a U.S. diplomat who was conducting food talks in Tokyo at the time. The Japanese were reassured with an
informal agreement promising them 14 million tons of grain a year for three
The gain deal negotiated in Moscow by Under Secretary of State Charles W. Robinson was a
beginning in the new, calculated use of U.S. food power to achieve specific goals. For a decade,
the Soviets have been upsetting the world grain trade with sporadic, sometimes
secretive purchases. The 19 million tons they bought here in 1972 triggered a
14% increase in food prices over the next two years. Whn
massive Soviet purchases were resumed this past summer, labor unions and
consumers began protesting. The Ford Administration decided to nail down the
Russian business, but on regulated terms: a commitment from Russia to buy 6 million tons of U.S. wheat and corn a year for five years starting on Oct. 1, 1976 -- plus more if the Soviets need it and U.S. production will allow it -- but all on an orderly
To the surprise of many, the
Administration tied the grain deal to oil. The Robinson agreement includes a
letter of intent under which the Soviet Union may supply the U.S. with 64
million bbl. of oil a year -- a mere trickle, but in the words of a White House
aide, "a diversification of the sources of U.S. oil imports."
The Soviet oil shipments
could rise eventually to 192 million or 256 million bbl. annually, one State
Dept. official conjectures, at a price "below the competition,"
meaning below the price established by the Organization of PEtroleum
Exporting Countries. Creating even a fissure in the OPEC price front would be a
coup for the Administration, but as yet not a drop of Soviet oil has been
agreed upon formally.
The Robinson grain-oil
agreement has come under fire. Traditionally Republican midwestern
farmers are furious at President Ford for tampering with the international
grain trade and for essentially stabilizing prices. Says Charles Drew, a Garden
City (Kan.) wheat farmer: "We think the government is
trying to manipulate the price of wheat because of political pressures from
[AFL-CIO President] George Meany and the
consumers." An Administration official explains how things have changed:
"The Agriculture Dept. has a constituency of farmers, and it ran the grain
export policy in a way to support that constituency. It was necessary to use
[grain exports] in the national interest. This matter can no longer be left up
to the Agriculture dept."
The latest Russian agreement
is also being questioned by skeptics who doubt whether Moscow would overtly undercut OPEC's oil price. The
likeliest device, according to Washington sources, would be concealing a discount in some
favorable shipping arrangement. skeptics also worry
that the Soviets, with their hangup on secrecy, will
not provide the crop forecast data Washington needs to formulate a rational grains policy.
The Administration's position
In a world of growing
scarcity, it remains to be seen how far the U.S. will go in linking food resources with industrial
commodity needs. Many links could be established. In the case of 21 important
minerals, the U.S. is 60% to 100% dependent on foreign suppliers -- some of which are
large importers of U.S. food. India, for example, is a major supplier of titanium, the Soviet Union of chromium. In oil the U.S. would have little leverage; the only major producer
that buys much food here is Iran.
President Ford is clearly a
believer in food power. He told the Russians the price for grain was market
stability and possibly some oil. And although Kissinger laid out a grand plan
for food cooperation rather than confrontation at the U.N. food conference in rome last year, one of his deputies stresses: "He
sees the power our food position gives him."
As the negotiator of the
Soviet grain deal, robinson,
who was formerly president of Marcona corp., a San
Francisco-based mining and transportation company, is one of the most obvious
food power advocates. Thomas O. Enders, Assistant Secretary of State for
economic and business affairs, is one of the most prominent skeptics. He
believes that food power will not work short of a state grain monopoly, export
controls, or membership in an international food cartel -- all devices that are
unattractive in the I.S.
Nevertheless, says a high
State Dept. official: "Agripower is there. The
Soviet grain deal was significant. That really signified throughout the world
that it exists. It's a perception of that power that will bring about a change
in attitudes, and clearly the U.S. than any OPEC nation has in petroleum."
This official already sees
the impact of U.S. grain power in Eastern
livestock herds and concurrently supplying large amounts of grain to Eastern Europe is proving too much for Soviet agriculture.
"They committed themselves to making available amounts of grain that are
not sustainable," he says, pointing out that this year "the Soviets
are practically out of this." The East Europeans are turning more to the
U.S. Poland, a nation that has experienced food riots, would normally have
gotten 2 million tons of grain from Russia. This year it will probably get once from Russia. This week Butz announced
that the informal agreement with the Poles calls for shipments of at least 2.5
million tons of U.S. grain annually for five years.
EVen some State Dept. officials who decry the use of food
power recognize that it has potential. One of them argues initially:
"Grain power is power over people who are hungry -- people we donht want to push around anyway." He says wryly that
the Russian grain deal might "get us as much oil as the Finns use."
Still, he concededs that "we could make OPEC
look sick if we were just to use what our agriculture gives us."
Even though the State Dept.
has usurped some of his power, Butz is the
Administration's most outspoken proponent of food power. He sees two contesting
commodity powers in the world -- agripower and petropower. "In the long run," says Butz, "agripower has to be
more important than petropower. The single most
important way we have of communicating with two-thirds of the people in the
world is food."
Butz gives two examples of how, as he says, "food talks."
Referring to Kissinger's Mideast peacemaking efforts, Butz
says: "The Russians could have blocked that agreement between Egypt and Israel when Henry was shuttling back and forth." The
reason they did not, the Secretary contends, is that they needed millions of
tons of U.S. grains, and "they knew it was no time to be
fooling around." Asked if there was such a link between the Mideast peace agreement and the Soviet grain deal, a high
State Dept. official conversant with both negotiations concurs in one word:
The Agriculture Secretary
also credits much of the warm-up in U.S.-Egyptian relations to food. When the
visited Egypt a year ago, he says symbolically, "I had a
little wheat in my pocket" -- in fact, 200,000 tons worth $37 million. According
to Butz, President Anwar Sadat told him that if he could improve Egypt's infrastructure, it would increase political
stability and turn and country's mind away from war with Israel. On the spot, Butz signed
an agreement that allowed Sadat to sell the wheat in Egypt and use the proceeds for such things as road
construction. "That's agripower and the tool is
food," Butz says with satisfaction.
One of the bluntest
assessments of U.S. food power comes from Presidential aspirant John Connally,
the former Treasury Secretary, who told BUSINESS WEEK recently that the nation
is too soft with other countries, acting "as if our needs had to bearing
on their needs." Connally poses the question:
"When the Soviets want 9 or 10 million tons of wheat, what's wrong with
saying, 'That's fine, well sell you wheat but we want
oil.' What's wrong with that?"
Impact on Geneva
Lester Brown, a former
Agriculture Dept. official who is now president of worldwatch
Institute, a research organization that focuses on food and related problems,
says: "The issue is not whether food represents power, but how that power
will be used." Most countries, Brown notes, depend on Canada and the U.S. for a part of their food supplies. Thus the two
should allot their food exports liberally to countries doing a good job of
increasing their food supplies and give sparingly or not at all to
food-production laggards. "Agricultural mismanagement, wherever it occurs,
has become a luxury which the world can ill afford," Brown says.
One benign application of U.S. food power would be a proposal by Senator Adlai
Stevenson III (D-Ill.) to ration U.S. grain exports in times of short-age. Stevenson, who
breeds Simmenthal cattle on his 1,000-acre Illinois farm, says he has trouble talking about food power because
"you begin to sound as if you want an OPEC for corn." In fact, his
idea does have some OPEC overtones. The crux is his belief that, when
short-ages occur, "America can control the world price and supply of
grains" without turning to embargoes, as it has done with wheat and
soybeans in the past three years. Under Stevenson's plan, exports fees would be
imposed. "Fees would recapture for the U.S. the price premium which arises when exports are
limited," he says. "Price would then distribute supplies abroad."
The fees -- "agridollars" -- would be
distributed in turn to poor nations to help them pay their food bills.
Because of its formidable
capability to prouce food, British historian Geoffrey
Barraclough, who is teaching at Brandeis University in Waltham, Mass., contends that the U.S. is now regaining the diplomatic clout it lost during
the Vietnam war. The intense demand for grains,
particularly from affluent nations such as Russia and Japan, pushes world grain
prices up, Barraclough says, but as the major grain
exporter, the U.S. benefits by earning billions to pay its oil bill. Meanwhile,
major industrial competitors of the U.S. are getting hit not only with big oil import bills
but also with big food imports bills. The trade result, says Barraclough, is more competitive price tags on U.S. exports.
Many officials are
uncomfortable grappling with the implications of U.S. food power. For example, Nebraska farmer Clayton K. YEutter,
a former Assistant Secretary of Agriculture who is the deputy special trade
representative at the Geneva trade talks, insists that the U.S. would win more enemies than friends if it tried to
use food as a weapon. Still, he is unable to avoid its role as a trade lever in
what he calls "supply-access" situations -- "you but food from
us and we get access to your market."
An associate tells how Yeutter is already making shrewd use of food power at Geneva. When a foreign delegate turned to him and asked,
"You are not going to embargo soybeans, are you?" Yeutter,
who is completely opposed to embargoes, commiserated solemnly, then responded:
"Well, we certainly hope we won't have to."
Some food experts see
limitations on how effectively the U.S. can flex its agricultural muscle. The moral arguments
that Washington has made against petropower
also seem valid for food power, says Don Paarlberg,
the AGriculture Dept.'s chief economist. He disagrees
with his boss, Secretary Butz, over the issue of food
power politics. "I mistrust the use of food as an instrument of coercion
in international affairs," Paarlberg says. But
more significantly, he doubts that the U.S. has that much leverage in the world as he envisages
an increase in Agricultural productivity in other nations.
"Using food as a tool
requires an extremely tight demand situation," says Patrick O'Brien of Paarlberg's staff."If you
happen to be sitting on a large supply in one short year, you're in good
shape." But over the longer haul, he contends, you create a backlash:
"You encourage every little producer to step up and do his duty." As
an example, he cites the surging production of corn and grain sorghum in Thailand.
position is amplified by economist Fred H. Sanderson, a senior fellow of the
Brookings Institution. "Window dressing," Sanderson calls the Soviet
grain agreement."The tie with oil is completely
meaningless, but the Administration can go to the public and say. 'We are doing
something for you.'" Sanderson calls the food production potential of the
developing nations "tremendous."
The Arab oil-exporting
countries, in particular, are placing placing a high
priority on expanding their region's agricultural output. Says a veteran Mideast representative for an American company: "The
feeling I always get is that the Arabs know that if the West ever starts to
have other sources of crude, we are going to get even in the next decade with
food. They are terrified of this and are pouring money into Sudan." An Agriculture Dept. specialist on Africa,
Charles Treakle, says of the Arab intentions:
"they look on the Sudan as a possible breadbasket."
At 967,000 sq. mi., the predominatly Moslen republic of Sudan
is the biggest country in Africa, substantially larger than Alaska and Texas combined. Only 11 million of its 200 million arable
acres have come under the plow. So far Saudi Arabia, Kuwait, and Abu Dhabi have provided several hundred million dollars for
irrigation projects and paved roads. One of the latter ter
minates on the Red Sea at Port
could become the main port for food exports to the Middlle
Eastern oilproducing countries.
Not surprisingly, the most bitter criticism of U.S. food power politics comes from foreign sources. Says Holland's Addeke H. Boerma, the outgoing director general of the Food &
Agriculture Organization: "the world will judge nations on their
willingness to give food to nations in need much more than it will judge those
nations who might withhold oil."
Trading food for copper
"It is absolutely
unacceptable that a human need as basic as food should be manipulated for political
ends," argues a European community officials, apparently overlooking his
own organization's highly politicized common agricultural policy. the EC's commissioner for agriculture, Pierre Lardinois, recognizes the growing sensitivity of food and
claims that nations are accepting the concept that "grain is not just the
same thing in world trade as sewing machines."
Some Europeans think agripower just cannot be exploited. Franz-Josef Speck, head
of foreign policy for Germany's agriculture ministry, says the EC can only give
away a million tons of surplus skimmed-milk powder that developing countries
need "because there's no buying power on the other side." Speck says:
"to use food as a club to wield power simply isn't in the cards." His
countryman, Herbert Hruhl, a Christian Democratic
member of the German parliament, does not agree. Hruhl
says: "In a few years, money will not be playing much of a role in these
transactions. If Zaire or some other country needs a million tons of wheat, it will have to pay
with copper, for example."
The Japanese, who must import
80% or more of crucial commodities such as wheat, barley, soybeans, an sugar,
are particularly bitter that a politicizing of food could put them under even
more pressure. "Japan lived on rice once and could live on rice
again," declares Morihisa Emori,
a commodities expert for Mitsubishi Research Institute Inc. Anyway, Emori rationalizes, "The U.S. must sell because it has
grain surpluses and needs overseas sales for its balance of payments."
In economic terms, the
possession of food power is proving a mixed blessing for the U.S. the trade benefits have been overwhelmingly positive
since 1970. At the time, the trade balance of nonfarm
products began to show heavy deficits while the balance of agricultural exports
and imports began to zoom upward as world food Supplies grew shorter and a
depreciating dollar made U.S. farm foods a bargain. through
last year, the increase in the positive food-export balance was elevenfold, counting both commercial and government concessional food exports. Taken alone, the commercial food
balance increased more than a hundredfold. Each year agricultural exports have
set a new record. In 1975-76, farm exports are expected to total $22 billion,
up from $21.6 billion last year. The U.S. farm sector will account for a positive agricultural
trade balance of $12.7 billion, according to current estimates. This will cover
about half a year's oil imports.
It is a different story on
the domestic price front. the 14% food-price inflation
that aroused consumers in both 1973 and 1974 is attributed in large part to the
U.S.'s assuming its expanded role of major food purveyor
to an increasingly hungry world. In particular, the massive Russian grain
purchases of 1972 and 1973 are blamed because they emptied the U.S. granary.
Economics professor George E.
Brandow of Pennsylvania State University calculates
that selling the Russians 20 millions tons of grain in the next 12 months would
raise retail food prices an additional 2.4%, adding some $4.5 billion to the
national food bill. (Actually, the Russians are expected to buy a few million
Certainly massive foreign
grain sales have been a two-edged sword for farmers, depending on whether they
produce cattle or grains. Garden city, Kan., provides an unusual focus on grain and cattle
production today. Outside the town, grain fields that flow to the horizon are
spotted here and there by large feedlots, where pen riders -- the Kansas cowboys -- shuttle fat steers from pen to pen.
Sitting in the Garden City
cooperative Grain Terminal, Ralph "Pete" Beckett, a tall, calm wheat
farmer of 57, says easily, "I've kind of struck it rich." Becket
raises wheat, corn, sorghum, and hay on 1,700 acres of land he owns or leases.
"Detente was the big watershed," he explains. "My income
practically doubled in 1973 [after the first Russian grain sale.] In 1974 it
was good, and it will be good this year." Ten years earlier, Beckett was
raising cattle. "That's what saved my bacon -- when I got out of
that," he says with relief. However, Beckett says he does not really feel
rich when he considers the way costs are rising for
fuel, fertilizer, tractors, and machinery. "We've got to have $4.50 or $4
for wheat to come out," he says. (This week, wheat was bringing about
$3.51 a bushel in Chicago.)
Down the street in the Wheat
Lands Motor Inn, where Garden City's now-affluent farmers congregate to talk
business and eat the inn's celebrated hotcakes, wheat farmer Charles Drew was
complaining about the Russian grain deal. "One thing that disgusts
me," Drew protested, "was for us to raise this record 2.1-billion-bu.
wheat crop after they said "plant fence row to fence row,' and then they
turn around and impose export controls on grain sales to Russia and Poland."
Clyde Mercer, a grain farmer
held in awe because he raised some 226 bu. an acre of
irrigated corn (average in his country last year: 108 bu.
an acre) conceded that he could really raise wheat for $1.72 a bu., but only because 10 years ago he bought nearly half of
the 2,000 acres he farms for $94 an acre. The world demand for U.S. grains has done something to the price. "The
other day I was offered $1,180 an acre for it," Mercer reported. Like
Drew, Mercer considers Under Secretary Robinson's grain deal to be meddling,
although he is aware that consumers were demanding something to offset the
inflationary impact of big grain sales. Recently, he and his wife took an
autumn bus tour of New England. "I was the only farmer on
that bus, and I never met such hostility in my life," Mercer recounts.
On the edge of town at the Brookover feed lots, a huge sign stands astride four
towering feed tanks. It reads: "Eat beef. Keep slim." It is the idea
of owner Earl C. Brookover, himself a tall, hearvy-set man who has made money in irrigation and natural
gas and made and lost some in cattle-feeding. His lots handle more than 100,000
cattle a year. Brookover is a survivor of what Kansas
cattlemen call "the wreck" of 1973, when feeders were holding record
numbers of cattle, the 1972 Russian grain sales doubled feeding costs, meat
prices were frozen, and housewives were boycotting beef.
"We went into a
tailspin," Brookover says. "We lost money
for 20 consecutive months." Now profits have caught up with costs, and Brookover concedes that "we are making some money this
year." He figures he can live with the russian grain agreement if it stabilizes prices, even
at a high level.
But what bothers Brookover is that the State Dept., which he thinks does not
have the best interests of farmers at heart, seems to be taking over
agricultural policy. If this is the case, Brookover
and other farmers worry whether all the big thinking about food power will be
tempered by the down-to-earth fact that U.S. farmers, processors, dealers --
the whole agribusiness complex -- are in the business of growing and selling
food to the rest of the world.They want to sell the
most they can for the highest price they can get. And they are going to be very
unhappy, like any other businessmen, if too much of their freedom to do
business is sacrificed to other national objectives.
GRAPHICs: Picture 1,
no caption; Graph 1, Why the U.S. wields so much food power, Mario De Vincentis-BW; Graphs 2 and 3, a surge in farm products
pulls the U.S. balance of trade into the black, Mario De Vincentis-BW;
Graph 4, the haves and have-nots in the world grain trade, Mario De vincentis-BW; Picture 2, FAO's Boerma: 'The world will judge nations on their willingness
to give food to nations in need'; Picture 3, Agriculture Secretary Butz: 'In the long run, agripower
has to be more important than petropewer', UPI