(Bloomberg Businessweek) — When the International Trade Fair descended on Zagreb in 1957, the surprise hit wasn’t the helicopter rides or machinery displays, but a life-size, functioning replica of a US supermarket. Constructed as the centerpiece of the US pavilion, the aisle-by-aisle re-creation overflowed with fresh fruits, vegetables and meats that had some visitors in what was then Yugoslavia staring in wonder.
Spotlighting America’s agricultural abundance as Cold War tensions rose was no fluke. Who needs propaganda campaigns on the evils of communism? Just show consumers behind the Iron Curtain that, in a capitalist economy like the US’s, you didn’t have to line up for hours to shop at stores with empty shelves.
Washington had discovered that food could be a tool of statecraft during World War I, when cargoes of US wheat became almost as important in supporting the cause of European allies battling the Germans as shipments of arms and ammunition.
Over the course of successive administrations, the US developed a breadbasket diplomacy, wielding the nation’s agricultural bounty as a carrot and also a stick. Sending surplus American crops overseas—as aid or exports—became a low-risk way to secure relationships. Barring food sales to enemy powers proved a persuasive tool of foreign policy, too. “With proper use,” remarked Arkansas Representative Lawrence Brooks Hays in 1954 before Congress, America’s agricultural “surpluses can be made a far more potential means of combating the spread of communism than the hydrogen bomb.”
Earl Lauer Butz, who served as secretary of the US Department of Agriculture under Presidents Richard Nixon and Gerald Ford, was even more blunt about what he termed America’s “agripower.” Speaking to Business Week in 1975, soon after wrapping up a tour of eight countries that included a meeting with Egyptian President Anwar Sadat, Butz said that when he came “calling with wheat in my pocket, they pay attention.”
Today the source of America’s agripower is rapidly dwindling. The world’s top exporter of corn, soy and wheat for much of the past seven decades, the US is now facing a future of persistent agricultural trade deficits. The shortfall for the fiscal year ending Sept. 30 is estimated at $19 billion and is expected to balloon to almost $28 billion in fiscal 2024, according to Agriculture Department forecasts.
This is an historic reversal: Since 1974 the only other annual deficits were in 2019 and 2020, during President Donald Trump’s trade war with China. The trend is driven in part by a shift in Americans’ eating habits—for instance, households today consume more imported produce, such as Mexican avocados and Indian mangoes—but stagnating grain and oilseed exports are also a factor.
What does a country lose when it stops being the world’s leading food supplier? A bit of its identity: For decades, Archer-Daniels-Midland Co. (ADM), the Chicago-based commodities-trading powerhouse, advertised itself as the “supermarket to the world.” But also global influence: Foreign governments and enterprises reliant on US commodity crops were motivated to play nice to keep the foodstuffs flowing. Yet gradually, as America’s grip on vital agricultural supply chains has slipped, nations with different agendas and alliances have emerged to take its place. “It has diminished US soft power around the world,” says Scott Reynolds Nelson, a history professor at the University of Georgia and author of Oceans of Grain: How American Wheat Remade the World.
The US now accounts for less than one-third of global soybean exports, moving half the volume of Brazil. On wheat it’s in fourth place, far behind Russia, which is at No. 1. “Look at where Russia exports its grain to, and then look at the people who didn’t sign the UN resolution against Russia. It’s basically the same list,” says Nelson, referring to a meeting held on March 2 of last year in which five countries voted against condemning Russia for its invasion of Ukraine, with 35 nations—including China, India and South Africa—abstaining.
It’s a strange twist of fate considering that, through much of the Cold War, the US used food aid and also trade in grains as part of its Soviet containment strategy. “Except for nuclear war, world hunger is the world’s biggest threat to peace,” Dwayne Andreas said in a commencement speech in 1982. Dubbed the “Soybean King,” Andreas was at the helm of ADM for more than two decades and cultivated a relationship with Mikhail Gorbachev, the leader of the Soviet Union. According to a biography of Andreas, his son once described him as a man with a sense of responsibility for national interests who “thinks that if we just keep feeding the Russians instead of embargoing them, they won’t be over here dropping bombs.”
When the Soviet Union suffered a disastrous wheat crop in 1963, President John F. Kennedy authorized the first American grain sales to Russia since 1917. The deal showed that his “Food for Peace” initiative could also reap profits for American crop traders, such as Cargill Inc. and Continental Grain Co.
Almost a decade later, in 1972, the Soviets quietly bought about one-fourth of the entire US wheat harvest, after a harsh winter led to a big drop in the bloc’s output. The US was caught off guard by the purchases: Domestic prices tripled, fueling inflation across America. This episode became known as the “Great Grain Robbery.”
US presidents’ attempts to leverage foreign countries’ reliance on American foodstuffs has sometimes backfired. Jimmy Carter suspended grain sales to the Soviet Union in 1980 as punishment for Russia’s decision to invade Afghanistan. Ronald Reagan lifted the embargo in 1981, but the episode tarnished the US’s reputation as a reliable trade partner. It also nudged the Russians in the direction of becoming more self-sufficient.
Similarly, Trump’s trade war with China accelerated its efforts to reduce its reliance on American supplies of grains and other foodstuffs. US products accounted for 18% of China’s total agricultural imports in 2022, down from 27% in 2009. “The US reminds me of the frog being slowly boiled,” says Ann Berg, an independent consultant and veteran trader who started her career at Louis Dreyfus Co. in 1974. “It’s lost its dominance, but it took 40 years.”
By and large, America’s loss has been Brazil’s gain. The South American nation already had the prerequisites for becoming an agricultural superpower in the form of plentiful arable land and a good climate. After a decade’s worth of investments in export infrastructure—including railways, port terminals and barge fleets, some led by Chinese companies, others by global trading houses—it now costs roughly the same to ship a ton of soybeans to China from Mato Grosso state as it does from Iowa.
The trade war “helped Brazil, creating tensions and animosity that discouraged China from buying American products,” says Frederico Humberg, chief executive officer of Agribrasil, one of the country’s largest local corn and soybean exporters. “There’s always going to be suspicion toward America.”
Brazil’s combined exports of soybean, corn and cotton more than doubled over the past decade, to an estimated 149 million metric tons in the 2022‑23 season, according to government data. So it should come as little surprise that President Luiz Inácio Lula da Silva is seeking a bigger role for the South American country in geopolitics. He’s trying to rally nations across the global south to band together as a counterweight against US influence, most recently in August, at the summit of BRIC countries in South Africa. (Brazil is the “B” in the acronym for a grouping that started with Russia, India and China but is adding new members.)
So where does that leave the US? Well, its influence isn’t fully tapped out. It remains the largest donor to the United Nations World Food Programme, and global prices for grains and oilseeds are still set via contracts traded on the Chicago Board of Trade. Also, while US shipments of bulk commodities have declined, its exports of more valuable processed foods are still growing.
More important, the US has ample stores of another kind of commodity that many nations want. About a month after Russian tanks rolled into Ukraine in February 2022, the Biden administration and the European Union announced a plan to steer more American liquefied natural gas exports to Europe to replace gas piped in from Russia—a move that recalled, in a smaller way, the effort to feed allies during World War I.
Goodbye, breadbasket diplomacy. Hello, geopolitics of gas.
Story by: Isis Almeida, Gerson Freitas Jr and Michael Hirtzer
Source: www.msn.com/en-us/money/markets
