47. Memorandum From Robert Hormats of the National Security Council Staff to Secretary of State Kissinger 1
SUBJECT
- Immediate Action Needed to Cancel Soviet Grain Purchase
—The Soviets today signed a contract with Continental to purchase 1,000,000 tons of corn. They have also indicated to Continental that they wish to purchase 2,000,000 tons of wheat, and to Cargill that they wish to purchase 500,000 tons of wheat.
—Drought and now frost have reduced the US corn crop to the point that we will find it difficult to meet domestic and traditional export demand at politically tolerable prices. Wheat is less of a problem, but the market is still tight.
—EC and Japan have been asked, and have agreed, to reduce demand this year in order to avoid higher prices and consequent pressure for export controls in the US.
—Similar representations have been made to the Soviets. The Soviet response was to ask us what we believed would be a reasonable export figure. State and Agriculture agree, and were prepared to respond officially to the Soviets next week, that we could eventually sell 500,000 tons of corn, but that the Soviets should not make any purchases for the next 6–8 weeks; we would then know what the crop looked like and how much we could spare. State and Agriculture also agreed that it would be inadvisable for the Soviets to make any wheat purchases for a [Page 138] couple of months. Butz has privately told Dobrynin that it would be disruptive for the Soviets to make any grain purchases in the US at this time.
—In view of the poisonous residue of the 1972 Soviet purchase, news of this purchase would almost certainly result in immediate Congressional action to prohibit exports to the USSR, if not to all foreign markets. (FYI: It would also kill any food aid program in corn, wheat, and soy.)
—The Soviet crop is the second largest in its history, although somewhat below mid-summer estimates. The Soviets do not need to make these purchases at this time. Like the US, the Soviets can draw down stocks and slaughter cattle if they wish to reduce demand for feed. Resort to imports avoids this course of action, but only by making an already bad situation in the US much worse, and as the result further complicating political relationships. (The fact that this is so close to our Congressional election will also put the Administration in an extremely embarrassing position).
—It is extremely important for the Soviets to cancel the contract signed with Continental and refrain from any grain purchase for the next 6–8 weeks. At that time, we will know what availabilities are and would be willing to discuss with the Soviets what might constitute a reasonable purchase in the US market.
- Source: Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, 1974–1977, Box 17, USSR (3). No classification marking. Sent for action.↩