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Honored Advisor

Alan Guebert on Carter Grain Embargo

Here`s part of Alan`s column, you can click on the story, it`s INterResting.

 

https://www.pantagraph.com/business/farming/guebert-remember-the-carter-embargo/article_03bfe99e-e5e...

 

 

A timely example is the 1980 U.S. grain embargo President Jimmy Carter imposed on the-then Soviet Union as a partial response to that nation’s invasion of Afghanistan. Many rural graybeards remember a swift, anti-Carter response from American farm groups. Most also pin the ensuing, devastating 1980s farm crisis on the “Carter Embargo.”

Both memories, however, are wrong.

American farm groups strongly supported the embargo, noted Robert Paarlberg, a political scientist from Wellesley College, in the fall 1980 issue of Foreign Affairs. It was American longshoremen — the dockworkers who foresaw 17 million metric tons of grain not being loaded at U.S. ports — who were the loudest bellyachers.

 

Farmers held their tongues, explained Paarlberg, because the U.S. Department of Agriculture (USDA) used its powerful “Commodity Credit Corporation [CCC] to assume contractual obligations of exporters for undelivered embargoed grain. By midsummer, the CCC managed to ‘retender’ most of the grain back into market channels.”

Somehow, that fact often gets lost in the fog of time.

Embargo support “began to falter,” though, when commodity prices began to slide after the tight-fisted Carter White House “insisted there be no paid ‘acreage’ (diversion) program for either wheat or corn in 1980” despite the embargo.

The White House penny-pinchers did, however, raise “government ‘loan prices’” — remember them? — “for corn and wheat,” increased the Farmer Owned Reserve (FOR) levels, raised the FOR release prices, and boosted payments for stored grain.

But those ag-directed actions had little effect on the broader, decade-in-the-making inflationary dam that crumbled later that year. Interest rates, already high, ballooned to 17 percent by 1981. The sky-high rates pushed the dollar’s value even higher to undermine U.S. ag exports far more than the Soviet embargo.

American farmers and their global export customers were staggered. “Demand for U.S. crops was pulled down by an inflated dollar as well as by high interest rates and low economic growth that precipitated a debt crisis and recession in importing countries,” noted a 1986 USDA report commissioned by Congress to examine the root causes of the calamitous 1980s farm crisis.

In the end, the report concluded, “Effects of export embargoes on the U.S. agricultural economy have been minor compared with the effects of changes in the global economic environment.”

But those facts couldn’t compete with farmers’ memories even then, noted the UPI newswire service in its Nov. 13, 1986, report on the USDA study. “The Carter Administration’s benefits to farmers and grain companies right after the embargo more than compensated farmers for losses caused by the embargo, the study said.”

 

Indeed, USDA explained, Carter’s swift actions raised farm income by $2.2 billion over the following four years.

Most farmers don’t remember it that way — even though Carter was one of them, a farmer.

History, however, doesn’t forget. That’s important as U.S. farmers face another trade-slamming White House action this summer, the Trump-imposed tariffs on America’s biggest farm and food customers, such as Canada, Mexico, China, and the European Union.

The muted reaction by farmers thus far — despite the June market smash-up in soybeans, corn, and live hogs — eerily mirrors farmers’ reactions that Paarlberg witnessed after the 1980 Carter Embargo. And, like he noted then, USDA is now readying CCC billions to prop up farm income.

History shows that farm trade standoffs are short-term arguments that can be handled. Their real and lasting problem, however, is when they become matches to ignite global economic fires. If that happens, everyone gets burned.

Even those who don’t study history.

 
 

Alan Guebert lives in Delavan. The Farm and Food File is published weekly through the U.S. and Canada. Past columns, events and contact information are posted at www.farmandfoodfile.com.

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18 Replies
Veteran Contributor

Re: Alan Guebert on Carter Grain Embargo

How is USDA readying CCC billions this time?
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Veteran Advisor

Re: Alan Guebert on Carter Grain Embargo

I do remember the embargo being talked about for a couple of years preceding the actual embargo, and at least the farmers I knew didn't want it to happen. I don't remember much of what Carter administration did to help the farmers' situation, but I do know interest rates pre-embargo were much higher than now, and continued rising, the embargo was on the heels of being encouraged to plant "fencerow to fencerow", the embargo didn't help our farmers any (it was all about punishing Russia and/or the politics of punishing Russia, using grain exports as a weapon), problems were compounded by 1980 drought in some areas, etc., etc.  Because of other major influences to the farm problems of the 1980s, it is easy to say that the embargo was not the primary source of the problem; however, that should not diminish the impact of the embargo on US farmers.

 

So, for the current situation with tariffs and potential embargoes, I guess we'll see.  Personally, I am not in favor of the actions on tariffs, and would not be in favor of an embargo, regardless of how much the government promises to help us.  When our government puts out their fistfuls of dollars, it is always the way they see fit, it is always targeted to suit their perspectives of farm-social-political engineering (and/or biased by how their wheels get greased), there are always more strings attached, it is generally too little too late to help the most-affected farmers, it generally takes years to recover from market, financial, or other economic disasters, etc.

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Advisor

Re: Perhaps it's Freedom to Farm time

Again...say $100k per farmer for each of 2 years strait?

 

no sense in farmers being left off uncles dole. Lol

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Honored Advisor

Re: Perhaps it's Freedom to Farm time

Those that get hurt during a "trade readjustment", I think that is what the tariff money exactly used for that.  The pink flamingos at Walmart become 2 bucks higher, well a portion of that 2 bucks should go to the farmer that`s a "pawn" in the negotiation.    Poetic justice!

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Honored Advisor

Re: Alan Guebert on Carter Grain Embargo

I started farming in the early 80`s, I lived through what was known as the "fam crisis".  I had no debt as the early years I was basically building my "FFA project" and being Dad`s hired hand. 

 

We fed all the corn we raised and seldom raised beans, occasionally having to buy corn.  What got the farmer in trouble was the mentality of "buying and paying off with cheaper dollars" that worked splendidly during the 1970`s, but a disaster during the 80`s and Paul Volker`s zero tolerance for inflation and 20% interest rates.  

 

I`m a Republican as some of you may have heard, so any shade I can throw on Democrats I will.   However I think Carter got a bum rap on the embargo fallout.  As a guy that had to purchase corn during the 80`s, it wasn`t exactly a bargain.  I bought a lot of $2.35 corn (don`t know what that would translate into 2018 dollars, but price wasn`t the corn farmers real problem then) I fed $2.35 corn to $45-$50 hogs and made all kinds of money and look back at those years as the good times. 

 

The Soviets were our enemy and I have a hard time wrapping my head around "feeding one`s enemy", Perhaps Jimmy Carter and his grain embargo was as instrumental in the downfall of the Soviets as Reagan`s "Star Wars" military spending?   It wasn`t as thought the Soviets became self sufficient in food production as they had before communism.  I recall a great uncle that lived in Norway when the Tsar controlled Russia and Norway imported Russian wheat pre1917...that wasn`t seen during the 70 plus years of communism.  

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Honored Advisor

Re: Alan Guebert on Carter Grain Embargo

The tariff money collected on Walmart junk will be there, but if we sit here examining our bellybutton lint and not ASK for it, then I guarantee we won`t get it.   Smiley Happy

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Honored Advisor

Re: Alan Guebert on Carter Grain Embargo

Thanks for the history review,BA.  

So much of what we think is history is actually political labeling...... People who broadcast, write, and publish are satisfied with sources rather than analysis.  And sources are usually trying to manipulate the message rather than be accurate.

 

We are so gullible and open to it........and yet shocked that anyone would manipulate us..... The joke is what we are.

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Honored Advisor

Re: Alan Guebert on Carter Grain Embargo

Hey SW, I would favor some sort of farm trade disruption payment to send a message to China that we are "attaching bayonets" and in this for the long haul.   And that payment to farmers would be funded from tariffs on Walmart junk, just to rub salt in their wounds.  Smiley Happy

 

But, I`m no fan of Jimmy Carter but I question how much the embargo did damage to grain prices.  I think the problem in the 80`s was the Paul Volker (Whip Inflation Now) 20% interest rates, there`s very little you can legally do and pay 20% interest rates.   But, to blame interest rates then it would mean admitting and blaming one`s self for borrowing the damned money in the first place  Smiley Happy  so much easier to blame Jimmy Carter and the Russian grain embargo.  

Veteran Advisor

Re: Alan Guebert on Carter Grain Embargo

SW   -   good post  on  salesmanship  - - -

 

Although   Alan G   has  brought  out  some  Ex.  points ,  a  bit  touch'y  for  the  expert's  at  times  - MAYBE ?

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