The Wheat Agreement

In 1949, under the leadership of the U.S., the world's biggest wheat exporter, 46 nations signed the first International Wheat Agreement. A big world surplus was keeping wheat prices low, and it seemed both good international policy and smart business to set fixed prices for world wheat sales. Roughly, the agreement protected importing nations by giving them the right to buy fixed quotas of wheat at a ceiling price of $1.80 a bushel. Exporters were protected by a floor of $1.50 a bushel (later reduced to $1.20). Everybody seemed taken care of.

But the signers of the agreement turned out to be poor guessers. The war in Korea sent prices skyrocketing far above the $1.80-a-bushel ceiling. To fulfill its commitments, the Federal Government had to pay U.S. wheat exporters a subsidy averaging 62-c- a bushel--the difference between the export price and the U.S. market price. The agreement, when it expires next July, will have cost the U.S. almost $600 million in subsidies, which are now running at the rate of $130 million annually.

Last week In Washington, the U.S. again took the lead in agreeing to a new wheat pact, which will guarantee it exports of 270 million bushels. For Agriculture Secretary Ezra Benson, who believes that international price-fixing is fundamentally wrong, it was a distasteful assignment. But withdrawal by the U.S. would have been taken as a sign of repudiation of U.S. pledges of world economic cooperation, and would have provided Russia with a potent propaganda weapon sure to be used.

In the new agreement, the U.S. tried to get the ceiling lifted to $2.50 a bushel and the floor price to $1.90. After months of bargaining, most of the member nations agreed to a compromise of a $2.05 maximum and a $1.55 minimum. But Britain, as the biggest wheat importer, insisted that it could not go higher than $2 a bushel, and refused to sign. Perhaps it thought it could strike a better bargain with Argentina, which has a wheat surplus and has never joined the pact.

But the agreement could still go into effect without Britain, and there was a good chance that it would. Wheat prices are again falling, after the biggest bread-grain crop in world history last year. The U.S. is also facing a glut at home. Last week the Agriculture Department upped its forecast for the winter wheat crop 17%. It looked as though 1953-5 crop, though no record, would be big enough to force Benson to impose acreage allotments and marketing quotas in 1954.

Under the new terms, U.S. subsidies will be cut to 31-c- a bushel--still painful enough to raise howls in the Senate, which must ratify the pact. But finding a market for the U.S. wheat surplus might well be even more costly without any agreement, since other countries might dump wheat at prices far below the proposed floor prices.

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