Why Leave It to Earl?

...So long as the U. S. food market remains so far beyond public planning and monitoring, however, such pledges at Rome will be scarcely more than diplomatic rhetoric...

...Least of all is there any awareness of the problem or any impulse for change within government...

...In 1972 the CEA cut its staff as the volume of trade on the market was increasing more than 70 per cent and the value doubling over 1971 levels...

...The important fact about these developments as far as the subsequent U. S. decisions are concerned, is that each of the crop failures was reported by U. S. embassies to the Departments of State and Agriculture, and some-like the Soviet winter wheat calamity -were predicted early in the year...

...Those sessions revealed that the U. S. officials lacked hard information on the most basic aspects of the problem, including data on crop-growing areas, transportation patterns, and reliable supply and demand estimates...

...The upshot is that the oil producers and the U. S., along with other food suppliers, have been exporting inflation in food and fertilizer prices to the people who can least afford it...

...The U. S. is the world’s main supplier of soybeans, currently producing 75 per cent of the total crop and accounting for over 95 per cent of the international trade in the commodity...

...The financial stakes in this food market are as enormous as the human consequences at home and abroad...

...The prospect is that the U. S. delegation in Rome, even with Kissinger’s fleeting presence for appearances, will float, perhaps in new dress, essentially the same old formulas for restoring food reserves and concentrating on agricultural technology in development programs...

...In June the Chicago Board of Trade suspended nearly all trading in soybeans...

...But dominated and manipulated by concentrations of economic power, it is neither free nor publicly accountable...

...Commodity Ex change Authority officials act on the policy that the exchanges are self-regulating...

...All of us suffer the abuses of the present system...

...It is as if AT&T decided how much telephone service would be provided or electric companies how much power to supply on the basis of day-to-day fluctuations on the New York Stock Exchange...

...The computer system was so efficient that it spotted more violations than the decreased staff could adequately investigate...

...The embargo on soybean exports was imposed on June 27, 1973, and two days later the Commerce Department’s Office of Export Administration began, with Agriculture, a series of public conferences with representatives of the grain trade...

...For the developed countries, said the study, the prospective trade deficit in oil, large though it is, represents only a very small percentage of their total GNP, and no more than two per cent for the U. S., even taking into account the increased costs in food, fertilizer, and manufactured goods from increases in petroleum prices...

...The Nod Squad The agent of public control over this extraordinary system, the agricultural equivalent to the Securities and Exchange Commission is the Corn modities Exchange Commission, composed of the Secretary of Agriculture, the Secretary of Commerce, and the At tomey General...

...Even CEA officials acknowledge that major trade practice investigations by the CEA are the only means to insure against such practices, but it is precisely these types of investigations that the Authority is unable to conduct because of its inadequate staff...

...A 1965 congressional investigation of the Commodities Exchange Authority, in the wake of a major futures scandal, concluded that CEA’s regulatory activity was “inadequate to disclose or even discourage abusive trade practices...

...When it was over, the grain buying orgy had raised .U...

...Rather it is caused by deliberate decisions to restrict production and maintain an artificial price level ” -Secretary of State Henry A. Kissinger, 1974...

...President Ford’s 1 1 th-hour intervention in October to stop another massive Russian wheat deal from sneaking through and the subsequent congressional investigation may begin to get at the tangled economics and politics of food...

...And seldom has a connection in policy and politics been so misunderstood or disregarded...

...The enormous sales to the Russians produced an immediate shock on the world grain market...

...But the subsidies were removed in September, and frantic buying continued in an attempt to get what wheat, corn, or soybeans were left...

...A 1974 UNCTAD study warns that the consequences of world inflation are gravest for the “largest and poorest” developing countries, threatening “a serious deterioration in levels of food consumption...

...The Commission has no staff of its own and, according to officials, “rarely meets more than once a year...

...His policies, foreign and domestic, mirror the impersonal corporate interest in profit...

...As one GAO official put it, “Most of these decisions are backed into rather than structured and analyzed.’’ The GAO findings would make fascinating background reading for the delegations to the Rome Food Conference as they prepare to hear the U. S. representatives, including both Kissinger and Butz, explain the present crisis and the American response to it...

...The GAO investigators also found that while the volume and value of trading had soared to record highs, the level of CEA regulation had actually declined...

...But here the laws of bureaucracy took over...

...1972 was undeniably a bad crop year...

...Instead, it conducts what the GAO called “very narrow scope” investigations of single transactions or of those trades where a complaint had been received...

...The price of wheat was suddenly 15 per cent lower in yen, Japanese orders surged, eventually to total some 17 million tons worldwide, most of it purchased from the U.S...

...But this increase meant high meat and poultry prices for American consumers as well as crippling inflation and new deprivation for the poor countries...

...Although the soybean scarcity which developed in mid-1973 had been predicted by Agriculture’s Economic Research Service as early as September 1972, nothing was done until the situation was completely unmanageable...

...The GAO also faulted Agriculture for its lack of a comprehensive reserve system coupled with “unresponsive and inflexible” export policies...

...Butz and his advisers adamantly opposed controls, ostensibly on the basis that curtailing exports would drive foreign buyers to alternate suppliers...

...One of the few consolations about soaring food prices-one of the two major causes of our present inflation-has been the sense of their inevitability...

...In fiscal 1973, trading activity totaled almost $400 billion or more than 200 per cent higher than the previous year...

...In a 1973 Supreme Court decision it was reprimanded for its “failure to regulate.’’ Moreover, the Commission’s operating agency, the Commodity Exchange Authority , which is charged with monitoring the market, has in large part turned this authority over to the professional traders themselves...

...Meanwhile, the United States, which has been providing about 75 per cent of world food aid, has had to cut back assistance from $1.1 billion in 1972 to $863 million in 1973...

...by Roger Morris and Hal Sheets “Good U. S. economic policy is good U. S. foreign policy...

...The details of the Department’s methods are confusing, and often bizarre: who would have suspected that one $35,000 computer would affect the price we pay for bread...

...If that growth rate continues, and there is every indication that it will, 1974 trading will be valued at nearly $800 billion...

...For U. S. exporters, the profits of this venture were immense...

...All Foods Lead to Rome The problems facing the Rome conference are staggering...

...There had been a “policy failure,” said the GAO, because of the government’s inadequate control over the futures market and its grossly inaccurate reporting system on exports...

...But as Kissinger and the American delegation depart for the World Food Conference in Rome this month, armed with dramatic pledges of U. S. assistance to stem international famine, they leave behind them a policy mess in food that stands to make a mockery of the best-intentioned diplomacy...

...The officials in agriculture see their constituency, as they have for 20 years, as the agribusiness complex...

...The staff cut was presumably to offset the cost of a $35,000 computer monitoring system designed to spot trade violations...

...It was simply ignored...

...Wheat prices climbed 300 per cent, from less than $60 a ton to more than $180 a ton, in a year’s time...

...We can blame the unions for rising wages and blame the Arabs and the oil companies for the price of oil, but only God can take the rap for crop failure, drought, and early frost...

...Then in July and August, following negotiations by Kissinger in Moscow, the Soviet Union purchased for $1.1 billion 18 million tons of American grain...

...It is a commentary on our times that U. S. food policy, perhaps the most urgent problem facing us, has been left hostage to economic practices out of the 19th century and to minds that would be ill-equipped for any era...

...But by then it was too late for farmers to plant more wheat...

...But prospective international buyers soon discovered that in the 2&million-ton Soviet grain purchase were nearly seven million tons of non-wheat grains, notably soybeans...

...Beginning in August and continuing into late 1972, orders poured in from Europe and Japan...

...In a subsequent investigation of how Agriculture handled the 1972-1973 soybean exports, the General Accounting Office concluded that most of the difficulties could have been avoided if the Department had acted more decisively at an earlier date...

...It was only in December 1973 that the Exchange Authority itself adopted a regulation which required each exchange to enforce its own trading rules, and then, only one of the Authority’s regional offices specified a time limit for compliance with the rule...

...A recent price manipulation scheme reportedly went undetected for months because blocs of traders worked together to keep purchases below reporting limits...

...An independent investigation by the GAO of one exchange during a single three-month period, however, discovered 50 cases where traders had probably violated the Act...

...Hungry children in Bangladesh could benefit from the restoration of truly free competition in American agriculture no less than inflation-plagued housewives in Ohio or New York...

...In the poor countries, where people spend 70 to 80 per cent of their income for food, prices have gone up as much as 30 per cent...

...The recent “increase” in “amounts” for food aid, announced with apparent fanfare by President Ford at the UN, was rhetorical fast figuring which only matches the dollar cost of the aid in 1972, with 20 per cent less in quantity . Looking the Other Way ~~ Some experts believe that a billion people could face starvation before the crisis can be eased...

...There is no other explanation for the Department of Agriculture’s decision in 1972 to withhold from production some 62 million acres of farmland-about equal to the total farmland in the United Kingdom...

...Perhaps the most significant fact about the lengthy hearings is that no outside views were invited...

...The initial buyers benefited from the Agriculture Department’s artificially stabilized world price of $60 a ton...

...The events and figures recounted in this article are in the public domain, but they rarely, if ever, appear in the increasingly fashionable dialogue on the food crisis...

...In 1971 and 1972 the various commodity exchanges did business valued at $189 billion, an increase of more than 300 per cent over the level of ten years before...

...Demand rose in February, after the devaluation of the dollar, and by May the price of soybeans had risen over 350 per cent and soy meal 300 per cent...

...Payments to farmers during 1972 and 1973-as overseas food aid was being severely cut-amounted to some $6 billion, more than the total international economic assistance given by the U. S. during roughly the same period...

...Soybean exports were $2.7 billion by the close of 1973, more than three times the volume in 1969...

...When Agriculture finally acted, it did so with a heavy hand...

...In an interim report on the Exchange Authority submitted to Congress in early May 1974, the GAO concluded that “these deficiencies continue...

...Kissinger, who sizes up his Cabinet rivals with meticulous care, cannot be unaware of what Butz stands for...

...With few exceptionsSenators Humphrey and McGovern, reporter Clark Mollenhoffneither the press nor Congress seem interested in the dreary, confusing details that lie at the heart of agricultural policy...

...But where Agriculture and U. S. agribusiness, corporations have met over the last two years in managing rising prices and profits, there is the impression that both sides understand one another-and the effects of their actions-very well indeed...

...Like wheat, soybeans are in heavy demand abroad both as livestock feed and for direct consumption by hundreds of millions of Asians...

...As the prices rocketed and the dimensions of the Soviet purchases became apparent, panic seized the grain-purchasing nations...

...The six largest American grain companies, which together account for more than 90 per cent of all the grain shipped in the world, are largely beyond the scrutiny of those government agencies charged with controlling corporate activity...

...This was a strange rationale, given the fact that the U. S. is the source of virtually all of the soybeans traded on the international market...

...And why, in September 1972, when the magnitude of the Soviet grain purchases was finally clear and its impact felt worldwide, did Secretary of Agriculture Earl Butz order still another five million acres of wheat land idled...

...If there is an apt comparison for U.S...

...What about the “natural causes” explanation of the world food problem...

...When the Peruvian anchovy catch failed early in the year, the demand for soybeans soared...

...The evidence was on hand...

...As one Agriculture official put it afterward, “Butz didn’t want to be known as a cheap food man in an election year...

...For such a castastrophe, the oil prices and neglect of agriculture in countries like India will bear some responsibility...

...In its nearly 40 years of operation, the Exchange Authority has issued less than 230 formal complaints against violators of the Commodity Exchange law...

...Yet the Secretary of State appears supremely uninterested...

...A recent study of the world food problem by the Federation of American Scientists described U. S. food policy and its management by the Department of Agriculture as “disingenuous...

...Decisions in the Department of Agriculture were also producing similar results in soybeans...

...That is what Henry Kissinger meant in the quotation above: we must be patient as we pay our penance at the supermarket, and the hungry people of the world must realize that next year’s famines simply could not be prevented...

...With the presidential election less than two months away, Butz ignored the recommendations of the Cost of Living Council staff and its director George Shultz to put more land into production...

...The prospects are bleak for constructive reform of the crucial U. s. role in world food...

...Incredible as it seems, in a very real sense the United States goes to the Rome Food Conference as a captive of the staffing patterns and the regulatory practices of the Commodity Exchange Authority...

...But rather than seek additional staff or even investigate the most flagrant cases with the existing staff, the CEA administrator simply abandoned the computer system as “unneeded and unworkable...

...The final touch was that soybeans had been one of the commodities American farmers had been paid not to grow in election year 1972...

...Agriculture officials admit that many, if not most, farmers decide what and how much they will plant by watching the price of futures...

...In 1974, the GAO reported of the CEA, in characteristic understatement, that “the lack of adequate staff has been a basic management problem...

...The only people involved were precisely those who were responsible for the mistakes...

...It is in the nation’s commodity exchangeswhere future crops of grain are sold, where livestock still on the farm is bought and sold, and where fortunes may be won or lost in an instant-that the “free market” resides...

...As a high-protein vegetable, soybeans have become an important substitute for dwindling supplies of fish protein...

...The Food Barons The GAO reports pointed only to one dimension of the scandal in U.S...

...Yet, agricultural scientists and officials have known since the early 1960s that soybean yields do not respond to applications of fertilizer and can be increased only by planting more acreage...

...Finally, in midFebruary 1973 came another predictable event: when American stockpiles were nearly exhausted, the dollar was devalued...

...Of all these events, the 1972 run on soybeans illustrates most vividly the government’s inability to conduct any sort of food policy besides a simple sales promotion for agribusiness...

...In more critical commodities such as wheat, corn, soybeans, and other basic grains, a small number of major companies-Cargill, Continental, Ralst on-Purina, Bunge, Peavey-exert practically total control...

...At the center of the complex array of domestic food markets and the beginning of all the United States’ international food sales and aid programs are the commodity exchanges in Chicago, Kansas City, New York, Minneapolis, and a score of other key shipping and port cities...

...Secretary Butz is a direct representative of that complex...

...But, again, events in 1972 showed little planning or concern in Washington for the scarcity of a vital food resource...

...That, at least, is the official wisdom...

...Finally, on June 27 the Department of Commerce slapped on a soybean export embargo...

...All of this affects, of course, the price, supply, quality, and shipment of critically needed U. S. food in the world market...

...In the incalculable effects of those trends on human lives, let alone the possible political results of the imaginable calamity, the making of a new food policy seems a task worthy of the best efforts, not just of a President and a Secretary of State but of all the rest of us who can no longer leave it up to the Butzes of the world...

...spokesmen to draw between oil arld food, it is that the food industry today resembles nothing so much as the petroleum “robber barons” of nearly a century ago...

...While the steady growth of population and the generally miserable growing seasons of the last few years give it a germ of truth, it leaves out a crucial element: the U. S. Department of Agriculture, which in its cupidity and its ignorance has done as much to hurt our food supply as any angry God imaginable...

...But the food decisions of 1972 and the general perversities of its food policy give the United States an ample share in the common disaster...

...But more than five years after the Commodity Exchange Act was amended to require self-regulation, none of the exchanges had enforcement programs which conformed to the provisions of the law...

...Why had the Administration failed to heed the numerous indicators of tight food supply, which argued for close scrutiny of the course and size of the Soviet purchases...

...Powder Puff Control Examples of the abuses in food markets are almost too numerous to cite, ranging from price-rigging in egg, wheat, and meat futures, to manipulation of buying margins by traders to shift profits and losses between the accounts of customers and the trader...

...In the sense that the government simply has no authentic policy on food, the charge is appropriate...

...On the domestic market, four companies sell 90 per cent of all breakfast foods, three sell 85 per cent of all the bananas, one sells 60 per cent of all baby food consumed, and one 90 per cent of all the soup...

...S. agricultural exports by nearly $5 billion, more than 60 per cent over 1971, but this cost to American taxpayers (since the U. S. government subsidized one third of the purchase) was enormous, and the cost in higher grocery store prices is probably incalculable...

...The nearly $4 billion paid to farmers to idle that land was almost double the previous annual payment...

...For the poor countries, the Soviet purchase meant drastically reduced shipments of food in humanitarian assistance programs, the size of which are determined by U. S. food surpluses...

...Shultz finally prevailed in 1973...

...The total Soviet grain purchase worldwide was 28 million tons...

...When corn bined with the portentous new trends bearing on international grain supplies-drops in the grain resemes of the principal exporting countries, mounting pressure from burgeoning population growth and rising worldwide affluence, Russia’s change from a net exporter of grain to a net importer, the decline in the world fish catch, and finally, the all too clear prospect of mass famines in West Africa and Bangladesh, all of which, in addition to the low crop, were known within the U. S. government in 1972-the evidence pointed to one clear conclusion: there would be unprecedented demands, much of them humanitarian, on the U. S. grain supply, with consequences reaching far into the future for both the domestic and international economies...

...By 1980, the UN has projected, food needs in the world will increase by almost 50 per cent, and world protein supplies will fall short by one third...

...In 1971 an internal audit by the Agriculture Department reported essentially the same failures...

...Selling Agribiz <The wheat and soybean fiascos expose two things: the planning failure of American food policy, and the government’s lack of understanding of the momentous market forces it was unleashing when it promoted agricultural sales abroad...

...It is that market-more than Kissinger’s or Butz’ speeches-that still largely determines American food policy toward a hungry world and an angry American public...

...Food prices are at historic highs...

...The liberal critics of the Nixon Administration, and most notably the economists, have Iong tended to treat agriculture as a subject beneath their sophistication, the province of sunburned bureaucrats and dull commodity markets...

...Secretary of Agriculture Earl L. Butz, 1974 “Unlike food prices, the high cost of oil is not the result of economic factors, of an actual shortage of capacity, or of the free play of supply and demand...

...Yes, We have No Soybeans The Russian wheat deal together with the massive election-year idling of acreage were only the most conspicuous examples of “unnatural” forces at work on food in 1972...

...Of the 16 such narrow investigations begun during 1973, however, only six had been completed by the end of the year...

...Roger Morris and Hal Sheets are co-authors of Disaster in the Desert- This article ws written without any institutional sponsorship...

...Beyond Washington’s official neglect of situations, beyond the uninformed decision-making, beyond the absence of a policy to deal with devastating scarcities, there is the shadow of the vast, unpoliced food market in the U. S., where a pliant Agriculture Department seldom dares venture...

...food policy...

...The futures market determines not only the price of food, but in a major way how much food will be available in any given year...

...Moreover, a later U. S. soybean harvest could not be moved because boxcars were tied up moving the Russian grain...

...A winter kill followed by a dry summer in Russia, droughts in Argentina and Australia, typhoons in the Philippines, an inadequate monsoon in India-all combined to reduce world grain production by more than three per cent during 1972...

...Seldom has an aspect of our foreign policy been so entwined with domestic politics and so central to the welfare of both the American consumer and millions abroad...