The Soviet Union helped produce the boom of the 70s when they bought huge loads of grain. They also helped produce the bust of the 80s when they invaded Afghanistan and President Jimmy Carter cut off any more shipments of grain to Russia in 1980.
Before the Soviet Union broke up in 1991, their southern border abutted Afghanistan. In 1979, the Soviets became alarmed at the rise of militant Islamic political forces in Afghanistan. On December 27, 1979, they invaded with 80,000 soldiers and 1,800 tanks.
Reaction in Washington was swift. President Jimmy Carter was already under fire for what was perceived as a weak response when Islamic students in neighboring Iran had taken 53 American hostages at the U.S. Embassy in November. “Because of the way that I’ve handled Iran,” Carter told an aide, “they think I don’t have the guts to do anything. You’re going to be amazed at how tough I’m going to be.”
Carter told a group of Congressmen that the Soviet attack was “the greatest threat to peace since the second World War.”
Ironically, the primary weapon that peanut-farmer Jimmy Carter chose to use was agriculture.
Earlier that year, the Soviet Union had continued buying huge quantities of American wheat, corn and soybeans to prop up their weak agricultural output. In October, they contracted to buy 25 million tons of wheat and corn over the next year. By the invasion, they had purchased only 8 million tons.
Those huge grain purchases had begun in 1972 and had helped fuel the farming boom of the 70s.
Carter decided to embargo or cancel the remaining Soviet grain purchases, estimated to be worth around $2.6 billion. In addition, the administration stopped the sale of high-tech equipment (like computers and oil drilling bits), cut the amount of fish the Russian trawlers could catch off American waters, and eventually boycotted the 1980 Olympics held in Moscow.
The grain embargo was the highest profile sanction, and the repercussions were swift and severe.
- Washington suspended all trading in grain futures for two days after the boycott announcement for the first time in peacetime. Yet when the markets re-opened, grain prices plummeted as much as the daily limit allowed. Over the next few years, grain prices dropped by half.
- Farmers aligned with the Farm Strike movement circled their tractors around USDA offices in several states, effectively blockading government offices for a day or two. One angry protest leader, Paul Wilson, said, “We planted fence post to fence post like they wanted, and now this is what happens.”
- Representatives of the big grain trading companies descended on Washington demanding to know where they should put the embargoed grain. They pointed out that grain storage facilities were already full.
- In response, the administration announced that they would buy all the grain held by the exporters at an estimated cost of $2.25 billion.
Carter’s political rivals were quick to attack the embargo. Senator Ted Kennedy was running against Carter for the Democratic nomination, and said, “A grain embargo won’t work. The soviet troops won’t leave Afghanistan, and the American farmer will pay the price for an ineffective foreign policy.” On the Republican side, Ronald Reagan denounced the policy, as well, and vowed to end the embargo if elected. He was elected, and he did end the embargo in April, 1981.
Dave Vetter (left) is an organic farmer and businessman outside of Aurora Nebraska and says that he has problems using food as a weapon. “As farmers, you know you’re the primary producers of real new product in the economy every year.” Dave says it makes no sense to destroy the value of farm goods by banning exports for political reasons. “There seems to be a direct relationship to our economy’s performance overall, related to the value of what we produce.”
But Todd Sneller (right) points out that President Carter tried to offset the affects of the embargo by promoting ethanol as an alternative market for grain. “I’m convinced that the ethanol industry has helped to stabilize that industry (agriculture),” Todd says. “It certainly has been an important part of why we see a little more stable period in agriculture today versus the 70s and 80s.
In the end, the embargo did not force the Soviets out of Afghanistan. The Afghan mujahideen fighters, supplied with American money and weapons, did. After slogging through almost a decade of fierce guerrilla fighting, the Russians withdrew in 1989.
The boycott also did not create as much disruption in the U.S. farming economy as many feared, but it was a symbolic cause of the farm crisis of the 80s.
At the beginning of the boycott, Carter’s own Secretary of Agriculture, Bob Bergland, predicted that it would cost farmers $3.5 billion in lost export revenues. According to eminent agricultural historian R. Douglas Hurt, “the United States sold much of the grain initially reserved for the Soviets to other nations that would have purchased from countries now trading with the Russians. As a result, total U.S. grain exports rose during the embargo. In other words, while grain farmers complained, federal policy in effect simply redirected grain flows while maintaining price levels to the farmers’ advantage.”
In addition, the Carter administration significantly increased agricultural loan prices and storage fees to ease the financial impact on farmers.
But the psychological impact had already happened, and many farmers, bankers and consumers had begun to pull back their spending. The farm crisis of the 80s deepened.