The Fake Grain Robbery
JOHNS WORLD 01/23/21
Recently I read a curious article from a respected market analyst that referenced the Great Grain Robbery in the early 70’s and compared it to the recent soy purchases by China. For you of tender years, a short history. The Soviet government realized in 1971 that their “black earth belt” was in drought and began negotiations with the US to buy wheat. Eager to unload US surpluses negotiators from our government and private traders discounted reports of production problems and agreed to sell grain on credit and subsidized to the Soviet Union. When the global grain shortage became obvious, wheat prices skyrocketed, raising food prices. However colorful this label, it is inaccurate. No guns were pointed. In fact, US farmers were pleased with the sale, and the USSR largely fulfilled their part. The complaint that the Soviets withheld information is laughable coming from caveat emptor capitalists. The characterization of this event as a robbery is clearly whining by farmers and merchants who sold before the price surge. Sounds familiar right now. The article noted that while the US publishes grain production and inventory numbers, China does less, so they enjoy an unfair advantage. The idea that such detailed information even exists there is questionable. Only about ? of Chinese grain deals are by government entities, the rest by the same merchandisers like ADM and Bunge as we deal with. Talking about “China” buying and selling commodities is misleading at best. It’s the sum of separate deals by many buyers and sellers. Besides, haven’t we been griping about China not buying all their Phase One commitments? Maybe we need to pick a side!
Nobody made me sell my beans at $10 last fall. In fact, I celebrated. The idea that if US farmers had more Chinese ag data, they would make more money is debatable. Criminy, we don’t believe our own USDA numbers when they disagree with our market plan. The article hints that this information asymmetry means we should have policy to prevent the US from running out of supplies. Which can’t happen, of course. Such a market intervention sounds like an embargo – a terrible idea that’s never worked. There are users with money all over the globe who need more than we are currently supplying. The fairest way to allocate those temporarily scarce resources is to protect individual freedom to buy and sell. The bottom line on this sellers’ remorse is unless the settlement check bounced nobody got robbed by anybody. In 1972 or 2020.