THE BIG WHEAT DEAL-2

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-01601R000300340009-6
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: December 9, 2016
• Document Release Date: January 8, 2001
• Sequence Number: 9
• Publication Date: October 30, 1972
• Content Type: NSPR

YASfEISTON STARSTATINT
Approved For Release 2001/03M MIAAbP80-0160
By JOHN FIALKA
Star-hews Staff writer
By the middle of July, as a Russian
buying team quietly snapped up huge
quantities of U.S. wheat and as a "spy"
prepared to break the news to the
world, Secretary of Agriculture Earl L.
Butz was tantalizing U.S. farmers with
visions of massive corn sales to the
Soviets.
On July 11, in a speech before a
farm group iat Baton Rou7e, La., Butz
spoke of the recent $750 million credit
arrangement with the Russians.
Ile speculated that if Russia took
'the entire 5750 million in cor.n, "which
we don't expect them to do," it would
be "1.0 percent of our record 1971 corn
crop."
On July 18, Butz gave the same
speech in Oshkosh, Wis., and again the
inference was. that the bulk of the Rus-
sian sale would be in corn. It might be
for more than the $200 million minimum
credit purchase that the Russians had.
agreed to take in one year, he added.
Three days later, the Russian buy-
ing team, headed by Nicolai Belousov, a
shrewd trader with. intimate knowledge
of the U.S. marketing system, flew from
New York to Moscow. During July, they
had purchased roughly one-sixth of the
U.S. wheat crop for about $500 million,
mostly in cash contracts.
ALTIloUGII BUTZ told a subcom-
mittee later that he also believed the
Russians might eventually buy some
wheat, he said he did not know in what
quantity. In early July, he explained,
nobody was talking:
"Nobody knew then-neither the
Department of Agriculture nor the trade
-just how much the Russians would
buy. The export traders were not telling
each other.. . The exporters did not
tell the Department of Agriculture. Nor
were the Russians talking."
13ecause of the secrecy that sur-
rounded the team's negotiations with
six U.S. grain trading companies, even
close observres of the U.S. v;heat Inar-
ket in July would have had little inkling
that the largest wheat sale in history
was underway.
Between July 11 and 27, the key ex-
port price, the price of wheat loaded
on board a vessel at a Gulf port, hov-
ered around $1.76 a bushel. Some days
it was a penny or two higher, some days
a con tor two lower.
Meanwhile, the U.S. traders who
sold to the Russians quietly walked a
tightrope. None of them, according to
testimony and interviews, was sure how
t,-much the Russians may have purchased
'from competitor's.
wheat than they owned, a position called
`short on wheat," were playing a cau-
tious hand, hoping not to jar the fragile
structure of the market while phasing
buying schedules gradually upward.
Meanwhile, farmers in the southern
part of the U.S. wheat belt were harvest-
ing and selling their wheat, often for
prices around $1.29 a bushel. Routine
USDA wheat reports mailed to farmers
predicted a large supply of wheat would
be. on hand.
THERE WAS, however, at least one
man who was trying to explode the
tranquility of the marketplace. Ile called
,himself John Smith and, on July 15, he
made the first of a long series of phone
calls to the Milling &13aking News, a
;Kansas City trade publication.
Although it sells only about 6,000
.copies of a weekly magazine and issues
about 1,000 copies of a supplemental
daily grain report, the Milling & Baking
'News is considered by many to be the
"Bible" of the grain trading business,
Several hundred copies go overseas.
John Smtih spoke with a crisp
British accent. In his conversations with
.the magazine's editor, Morton I. Sos-
land, Smith said he was an editor of
,London's "Financial Times."
"I have a scoop for you," he repeat-
edly told Sosland. The scoop was that
the Russians had bought 5 million tons of
wheat from U.S. traders.
Sosland remembers "sitting down
hard" and wiping his brow. He couldn't
believe it. "At a time when no one had
even said in the press, or even hinted in
markets, that the USSR was going to
buy any significant amount of wheat ...
5 million tons was an unthinkable, stag-
gering total," he explained. later.
In a wide-ranging, half-hour conver-
sation with Smith, Sosland came to the
conclusion that Smith had a depth of
knowledge about the U.S. grain market
"that is not found very often in the
American grain industry, much less in
Europe."
Nevertheless. Sosland decided he
would "sit" on the story until he could
confirm it with. U.S. industry sources. In
the days that followed, while Sosland's
staff made fruitless attempts to confirm
the sales, Smith sometimes called sev-
eral times a day with the news that Fi-
nancial Times was about to print the
story.
OFTEN, Smith's phone calls lasted
tip to a half-hour. Ile talked about
.severe setbacks in the Russian wheat
harvest and said the sales would send'
U.S. market prices up over $2.00 a bu-
shel. Sosland began to wonder whether
lie really was a reporter or an editor.
"He knew too much to be either," he
decided.
On _r,,lv 31 grnifh lnt Snclanr1 in nn
approaching 71 million tons and the
Russians were back to'buy still more be-
cause they had learned the Chinese were
entering the market for U.S. wheat, he
added.
? Toward the end of July, perhaps on
the same day, a man who called himself
John Smith and spoke in a crisp British
accent called Reuters' Washington news
bureau and asked for Reginald Watts,
the bureau's commodity reporter.
.. ? Told that Watts was on leave, Smith
identified h i in s e I f as one of Watts'
sources and said added that he knew that
the Russians had bought at least 25
million tons of U.S. wheat. Ile urged
that Reuters put the story on the news
wires before other wire services learned
about it,
- The bureau called Watts at home
and Watts attempted to call Smith at a
number he had left with the bureau.
"It was a phony number, some
Puerto Rican family in the Bronx who
knew nothing of any wheat business,"
Watts recalled.
While he was wondering who Smith
was, Smith called. the bureau again,
anxious to know whether Reuters had
run the story. Smith warned an editor
that "Reggie Watts would be flaming
mad" when he learned they hadn't.
THE BUREAU called Watts and
gave him another number that Smith
had left. It turned out to be another
wrong number in the Bron .
Smith, whoever he was, was right
about the Russians' return. It is not yet
clear why the buying team cane back.
Some agricultural experts believe that
the true extent of the damage to the
Russian winter wheat crop from drought
was not known until harvest in late July.
Watts, who eventually helped break
the story of the Russian sale after check-
ing with trading sources, later forgot
about the Smith call, until he read the
Sosland story.
"It was just another of those cranky
things, I thought," he added.
Smith, whoever he was, was right
about the Russians' return. It is not
yet clear why the Russians returned,
some agricultural experts believe that
it was not known until late July, when
the Russian winter crop was being liar-
vested, how severely adverse weather
conditions had impaired its quality.
At 9 a.m. on the 31st, the phone
rang in Cargill's Minneapolis headquar-
ters. It was Leonid Kalitenko, Belousov's
assistant. C o u l d Cargill's negotiators
come to the Now York Hilton as soon
as possible?
Cargill's vice president, W. B. Saun-
ders and other company officials ar-
rived in Manhattan that afternoon. By
the next morning, Cargill had sold an-
other million tons.
Rumors of the Russians' return buzz-
cc
eh4I le l .~ .1k6AP A16O1mon. A me grain
0rmuef `the Cargill
the marl dL.'"P okits depended on se- eb
crecy. Companies that had sold far more
IC
The total Russian purchase was now C G4" AnUCt~