U.S. Grain Arsenal, Chapter 1: Food Exports



            The United States in 1975 controlled 75% of the world’s net grain resources. The journal is intended to focus on the ways in which the US uses this power to further its own economic hegemony and to exploit people at home and abroad. This particular article discusses the processes by which the United States, in response to a growing trade crisis, sought to expand its own agricultural exports while simultaneously causing a global and unprecedented increase in food prices.

            The food crises of the ‘60s and ‘70s were not the results of overpopulation and underproduction. Rather they stem directly from a larger crisis of distribution. Behind this lies the growing trend toward the integration of the world’s capitalist economies. In real world terms this means that any sort of ripple in the system (basically anything slightly affected by the ups and downs of the market mechanism) causes massive waves in the rest of the world. On the home front this growing internationalization of capitalist production has resulted in higher food prices and a lower standard-of-living as multinationals have become less dependent on the wallets of American consumers, and in turn American workers. The article is written in 1975 and is predominantly written from the economic history of the decades previous and how they have culminated in the massive expansion of agricultural exports, which had become the foundation of Washington’s economic policy. It is argued that this agricultural boom can be traced back to strategies devised in the early ‘70s to pull the US out of an economic crisis and reestablish itself as the dominant empire.


US Capitalism’s Crisis

            In the 1970’s the US found itself in the midst of an economic crisis that threatened its ability to maintain and protect its overseas empire. The Commission on International Trade and Investment Policy was created under Nixon to lay the foundation for the administration’s response to the crisis. Members of the commission included some academics, a few labor reps here and there, and most importantly two men with major ties to agribusiness. William Pearce was the vice president for Cargill, INC, the world’s largest grain company. Edmund Littlefield sat on the board of Del Monte Corporation, amongst other things. Not surprisingly the commission’s report found that agricultural exports were pivotal to overcoming the US trade deficit. The report went on to play a major role in Nixon’s “New Economic Policy.”  According to the report there were two areas of exports where the US still maintained a competitive advantage: high technology manufactured goods (such as capital goods), and in agricultural commodities. The bulk of the information, as written by Pearce, was aimed at massive expansion of agricultural exports as a remedy to pull the US out of the red. This conclusion was justified using the idea of comparative advantage, specifically that the US had a natural advantage in grain production due to favorable soil and weather conditions, and that other countries should therefore remove their barriers to trade and eliminate local subsidies for farmers. This type of thinking was eventually thoroughly incorporated into Nixon’s economic policy.


A New Agricultural Policy

            Nixon’s new head of the Agriculture Department was Earl Butz; a man whose appointment was very heavily pushed by the grain companies themselves. Furthermore people working under Butz also had countless ties to major agribusiness companies, so it’s no wonder that every step taken by the administration fell in perfect time with the interests of the grain companies. This meant a drastic shift from policies of prior decades that had been designed as support structures for US farmers.

            In 1933 legislation was passed that created the CCC, Commodity Credit Corporation, designed to support farm incomes and help control farm production. As a consequence of guaranteed high prices production boomed and the CCC was left with huge accumulations of grain reserves. In response to the excess congress passed PL 480 in 1954, a public law that offered concessional credits to countries that would import US food, essentially becoming a dumping ground for US surpluses. Though these export sales were a benefit to grain companies, the existence of such support structures did not. Grain companies would be more favored in a market of wild ups and downs where firms could merely play the margins and take advantage of vast swings. Government programs did the opposite and stabilized the market. Another effect implicit to Nixon’s strategies was an increase in food prices at home and abroad, a consequence to be expected when agriculture exports are increased thus leaving a strain on domestic resources. All they had to do was implement their export drive.


The International Front

            A series of devaluations were the initial steps to creating the flow of exports. Two separate devaluations of the dollar each led to rapid jumps in grain shipments to foreign markets, especially to Japan and Europe, two markets that the US was fiercely pursuing. In third world countries however the effect was opposite. The world market was left with shortages after the affluent countries had rushed to buy their cheap American food. As a consequence the prices increased and the import ability of poorer countries diminished further. The third world was faced with rising prices in a market of policy-created scarcity and at the same time hit with the devaluation of the dollar they had used to set their own currencies. This however was of no consequence to the US whose only goal was to expand exports in wealthier markets. The Assistant Secretary of Agriculture said,

“Our primary concern is commercial exports . . . We can’t subordinate our commercial exports to needy people.”


Soviet Wheat Deal

            Prices again skyrocketed after a secretly negotiated deal took place in which the Soviet Union purchased $1 billion worth of grain, including one fourth of the US wheat crop. In the short range the move depleted US reserves, boosted the balance of payments, and increased the world food prices. But the US had gained a long-term strategy with new access to a vast market. Though some of the increase was due to bad weather in the USSR that year, evidence indicated that the administration had made the decision to sell to the Soviets long before. Changes in policy included the removal of restrictions on shipping that had been intended to protect the maritime union and had thus put US shipping prices above the world price. The other move was to discuss a CCC credit line to finance the purchase. When all was said and done the US claimed that it was unaware in the beginning of the eventual size of the Soviet sale. But evidence suggests that the US in fact new in detail the extent to which the Soviet crop had been damaged, as well as knowledge of Soviet intent to expand its grain-fed cattle market by 25% over five years. This coupled with the deal made between the two countries whereby the USSR would continue making purchases from the US annually while simultaneously making available oil reserves for US purchase. The intent is clear; the administration was seeking and had found an outlet for a steady agricultural market, a way to increase the US balance of payments, and a steady flow of oil.


The Assault on the Common Market

            When another round of GATT negotiations took place in the early 1970’s the target of the resulting Flannigan Report was the Common Agricultural Policy (CAP) of the Common Market countries. The emphasis in the Flannigan Report was placed on the success the US could see if it would push toward removing barriers to trade in Japan and Europe. One such barrier was the CAP, a protective tariff system that effectively prevented US grain exporters from competing in European markets. The US also demanded the removal of domestic farm support policy that had been created to protect that farmer and build surpluses that could then be exported out of Europe with the help of government subsidies. Competition from these subsidized exports out of Europe had resulted in a decline in the US share of the world market in the 1960s. The Flannigan Report suggested enacting protective measures against industrial imports from Europe at which point US negotiators could trade off concessions to get US imports into the European market in exchange for exports into the US from Europe.


US Policies Take Effect

            As a result of Nixon’s policies US agricultural exports soared through the roof, and with it the world’s food prices. The administration was able to create the “free market” it desired wherein any small change in market forces would result in huge price swings throughout the world. For farmers in the US this trend means the gradual elimination of the family farm, as resources are concentrated into massive capitalist efforts and corporate takeovers. There is a large impact on other workers in the US as well. The export drive contributed to 20% inflation in the price of food in the 1973. But policymakers responded by saying that Americans can no longer take cheap food for granted and that we may have to accept a lower standard of living. In third world countries that effect is far greater and millions more will just be pushed closer to the brink of starvation.


Summary by Christopher Brent Sapstead