Lack of funding halts U.S. grain sales to Soviets

September 15, 1991|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Sun Staff Correspondent

YORKVILLE, Ill. -- Farmer Rick Doetschman looks over the field of corn he is harvesting and hopes his grain will help feed hungry Soviets this winter.

Grain broker Victor K. Lespinasse looks at the commodity board in Chicago's Board of Trade and would like to see it pushed higher by more U.S.-Soviet grain sales.

But banker Paul M. McGonagle looks at the chaotic situation in the Soviet Union and is not prepared to lend the Soviets the money they need to buy the grain.

The Bush administration has pledged to cover 98 percent of any agricultural loans that banks make to the Soviets, as well as 4.5 percent of the interest payments. But, according to Mr. McGonagle, not a single U.S. bank has taken up the program. Bankers have safer things to do with depositors' money right here.

This is why, with lots of supplies, lots of available credit and lots of good will, little U.S. grain is currently moving to the Soviet Union -- despite the increasingly desperate demand.

"There is very little action because of this problem of funding the coverage. The banks think the government should take more of the risk. The government thinks the banks should take the risk," says Norman Hay, vice president of marketing in the Geneva trade office of one of the Soviet Union's biggest grain suppliers, Cargill Inc.

Last week, the Soviets bought $94 million worth of U.S. corn and protein meal. But the financing came from Europe and represented the outstanding balance of a prior trade commitment, not a positive response to the U.S. credit guarantee program.

The Soviets still have $220.6 million in available U.S. guarantees for which they have been unable to find funding. Another $585 million is in the credit guarantee pipeline.

Meanwhile, U.S. officials are determining how much help the Soviet Union needs. A Department of Agriculture estimate made last week puts the Soviet grain harvest at 191 million tons -- 45 million tons below last year. Undersecretary for Agriculture Richard T. Crowder is currently in the Soviet Union and will file his crisis report to President Bush when he returns Tuesday.

The farmer

The corn is golden and ripe on Rick Doetschman's 240-acre farm outside this rural town in grain-growing Kendall County, west of Chicago.

But times are tough.

His yield per acre of corn and soybeans has been halved by prolonged drought this year. His hay is not worth cutting. He will, he says, be lucky to cover his outlays.

There will be no boom for him from any U.S. grain shipments to the Soviet Union this winter -- even if they do drive up prices.

To survive the winter, he will have to sell for cash as soon as his harvest is in.

Still, he favors Uncle Sam lending a hand to his old adversary.

"I don't know why we need to hang back," he says.

"The Soviet Union is a big country. It has lots of natural resources. We have been trying to improve relations with them for a long, long time. Here is a golden opportunity . . .

"I think the American farmer is not as afraid of the Soviet Union because they have paid their bills in the past. I don't see a big threat in doing business with them."

His views are typical of the reactions that Dan Reedy, Kendall County Farm Bureau manager, has picked up on his rounds of the local countryside.

"The farmers realize what is happening and they want to help, but they need something for the product, too. There may be a rainbow out there, but can we get through to the rainbow?"

The broker

Arms jab the air, voices outshout each other, paper flies like confetti. These are anxious, hopeful days on the floor of the Chicago Board of Trade, where up to 1 billion bushels of grain can change hands in a day.

Victor D. Lespinasse follows events around the world with the same intensity that he watches the numbers change on the big, black commodity board.

XTC "Before the Soviet coup, all eyes were on the weather because we had some problems with that, and the weather over the summer is critical in determining crop size. Since the coup, we have been watching the situation over there very, very closely," he says.

The grain market has been up and down like a yo-yo this summer.

The market was up in anticipation of Soviet economic reforms and down after the coup. When the coup was announced, the grain market quickly hit the floor of its permitted daily decline: 10 cents a bushel down for corn, 20 cents for wheat, 30 cents for soybeans.

But the market moved up again when the coup failed. It was up when the Bush administration announced new agricultural credit guarantees for the Soviets, down when it became clear the banks were not lending, and up when Secretary of State James A. Baker moved toward granting direct aid this week.

Mr. Lespinasse observes: "Policy influences the market. They are talking about direct aid, and more and more of it. The more we give, the more that reduces our supplies.

"The more our supplies are reduced, the higher the price for the commodities.

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