U.S.: Going With The Grain

Secretary of Agriculture John R. Block recently announced a major wheat deal with Egypt providing for the commercial sale and delivery of one million metric tons of subsidized U.S. wheat flour, some of it from U.S. government stocks, over the next year.

Secretary Block said the sale would nearly double American flour exports and would recapture most of the lucrative Egyptian market, which imports 1.6 million metric tons of flour a year.

The deal with Egypt represents the first sale of U.S. flour there in ten years and marks the first time since then that the U.S. Department of Agriculture (U.S.D.A.) has used subsidies for grain sales. In the past, flour has been provided to Egypt with what amount the government grants under the Agency for International Development's PL 480 program. Secretary Block said export subsidies have enabled other exporters to sell wheat to Egypt at a price which is $100 or more a ton below the U.S. price.

By deciding to subsidize a major U.S. farm export to Egypt, the Reagan Administration has tried to ease the plight of U.S. farmers and has fired what is being described as a "warning shot" to get European competitors to reduce their export subsidies. Common Market officials in Brussels said that they were taken completely by surprise and one official called the sale to Egypt "a brutal takeover of one of our major markets." The U.S. has countered that European subsidies have been cutting into American farm sales at a time when they are most needed by U.S. farmers.

A group of Democratic and Republican Senators is planning to reintroduce legislation that would facilitate export sales similar to the Egyptian flour deal using other government-owned stocks of agricultural products. The U.S. would then be able to sell the products overseas at discounted prices, and the Middle East is a prime market for such sales. The proposed legislation sailed through the Senate Agricultural Committee last year but the Congressional session ended before Congress had time to act on the bill.

U.S. agricultural products are being sold under U.S. credit guarantees to many other Middle East markets. Recently, U.S. officials announced that Iraq has agreed to purchase 822,000 tons of grain from U.S. suppliers. Iraq has been granted a total of $210 million in credit guarantees under the U.S. government's export credit program. This deal will provide Iraq with $120 million for wheat, $80 million for rice and $10 million for barley, all of which must be shipped to Iraq by September, 1983. Under this arrangement, the loans are made by private banks and repayment is guaranteed by the U.S. government.

Before the U.S. government agreed to grant food credits to Iraq, the Iraqis had been purchasing U.S. commodities aided with financing from Saudi Arabia and Kuwait. These and other moderate Arab countries have urged the U.S. to help with financing in other Middle Eastern countries which are feeling the pinch of a drop in oil revenues.

Another credit program for grain sales to Morocco, Algeria and Tunisia has resulted in the end of France's traditional domination of that market. Algeria has become a major importer of wheat after a prolonged drought caused the country's wheat production to slump by 20 percent in the last year. The U.S.D.A. predicts that Algeria will import almost 3 million tons of wheat in 1983.