596 



Thus, the United States was in a monopoly position, apparently 

 selling to a buyer with inelastic demand (quantity not sensitive to 

 price) , and there was little historical evidence that the purchases could 

 be tied to future, continual sales. The 1972-73 situation was probably 

 an ideal one for extracting high profits. Instead, U.S. grain ex- 

 porters provided a consumer's or purchaser's surplus to the U.S.S.R. 

 A reassessment of the exchange may give insights into the criteria to 

 be employed in future U.S.-Soviet commercial transactions involving 

 high-technology products. 



Grain exporters and Agriculture Department officials claimed that 

 Soviet buyers were offered low prices because no one knew the extent 

 of Soviet needs. Soviet agents kept their buying intentions a closely 

 guarded secret. It is interesting to note that the 1963 U.S.-Soviet grain 

 sale was also criticized because Soviet agents, by dealing secretly, were 

 able to buy at low prices. Certainly, a seller can never know precisely 

 the shape of the buyer's demand curve, i.e., the quantity demanded at 

 different price levels. However, he should try to improve his knowledge 

 of the buyer's situation and of world supply and demand conditions. 

 He should also attempt to maximize his return from the sale or, if not. 

 carefully weigh the benefits of a non-profit-maximizing policy. 



The grain sales point up the need for the Government's active and 

 impartial participation in trade with centrally planned economies. The 

 role of Government agencies in East- West commercial transactions 

 should be to safeguard the interests of U.S. producers, consumers, and 

 taxpayers. From the standpoint of some exporters and producers, the 

 1972-73 grain deal may have provided maximum benefits. However, its 

 impact on some farmers, on the U.S. consumer, and on the Federal 

 budget was certainly less than maximally beneficial. Soviet purchases 

 contributed to a sharp rise in U.S. domestic food prices and resulted in 

 high Government subsidy payments to exporters and shippers. Some 

 U.S. farmers, who sold their grain before Soviet needs became known, 

 suffered substantial losses of income. A study conducted by the General 

 Accounting Office faulted the Department of Agriculture for some of 

 these problems. 115 The study found that the Department had not prop- 

 erly used and disseminated available information on Soviet needs for 

 U.S. grain. 



Despite these shortcomings, grain exporters and Government officials 

 rightfully claimed that the 1972-73 grain sales brought considerable 

 benefits to the U.S. economy. The balance-of -payments benefits were 

 estimated to exceed $700 million. 116 Many farmers benefited from 

 higher prices and increased sales, and employment and earnings in 

 transportation industries and agribusinesses were stimulated. More- 

 over. Government expenditures for farm subsidies and grain storage 

 were greatly reduced. Finally, American grain exporters may have 

 established close commercial ties with Soviet importers which could 

 facilitate future sales. 



The outcome of the grain sales suggests that the United States can 

 benefit economically by trading with the Soviet Union. However, some 



«* Elmer R Staats, "The Russian Wheat Sales and Agriculture's Role In Expanding U.S. 

 Wheat Exports," in Remarks of Hubert H. Humphrey, Congreaaional Record, vol. 119, 

 Mar. 8, 1973, S4124-S4127. 



"« Ibid., S4124. 



