SHULTZ USSR TRIP FUELS TALK OF EEP WHEAT OFFER
Speculation the United States will
offer subsidized wheat to the Soviet Union appears to have
reached a new level of intensity in the run-up to Secretary of
State George Shultz' visit later this month to Moscow.
    Rumors of an impending deal have coursed through wheat
markets since officials from the two countries held their
customary, semi-annual grain talks in February. Moscow's
decision at that time to reenter the U.S. corn market
strengthened the perception of warming farm trade prospects.
    Shultz is set to arrive in Moscow April 13.
    Shultz' statement two weeks ago that he would not stand in
the way of a wheat subsidy offer under the Export Enhancement
Program, EEP, coupled with the announcement of his visit to
Moscow, was interpreted by many grain trade representatives
here as a clear signal that the Reagan administration was
preparing an offer.
    Administration officials -- in and out of the U.S.
Agriculture Department -- have been extremely tight-lipped
about the prospects of a subsidy offer.
    But USDA officials for the most part have abandoned the
contention the proposal is dormant, suggesting that an offer,
while not a "done deal," is a live possibility.
    Prominent U.S. grain trade representatives -- many of whom
asked not to be identified -- continue to maintain that an
offer to subsidize four mln tonnes of wheat is imminent.
    Others, who one month ago claimed a deal was not possible,
are saying they would not rule one out.
    Rep. Pat Roberts, R-Kan., yesterday went so far as to
predict a subsidy offer would be made within the next ten days
to two weeks.
    Aides to Roberts said he had spoken to Republican leaders
who had been in contact with administration officials.
    Richard Fritz, director of international marketing at U.S.
Wheat Associates, said he was confident an export enhancement
offer would be made by the middle of this month.
    Fritz also said he thought the value of the bonus would end
up being close to the offer Washington made Peking earlier this
year when USDA approved subsidies to China of around 36 dlrs
per tonne on one mln tonnes of wheat.
    Some grain trade representatives say a four-mln-tonne wheat
subsidy offer might help stimulate more Soviet purchases of
U.S. corn and open the door to U.S. sales of soybeans.
    As ever, one of the crucial sticking points in a wheat deal
would appear to be price.
    Last summer the administration took the controversial step
of offering the Soviets subsidized wheat -- but were
embarrassed when Moscow spurned the proposal on the grounds
that the 15-dlr-per-tonne subsidy still left U.S. wheat prices
far above world market prices.
    The administration's decision to set the subsidy level up
front instead of accepting bids from exporters appeared to be a
means of controlling the price while attempting to dampen
criticism, grain trade sources said.
    Nonetheless, the pricing procedure did not prevent Shultz
from saying the Soviets were "chortling" because Washington was
offering Soviet housewives cheaper grain than that available to
U.S. housewives.
    The conventional wisdom among grain trade representatives
here is that a general warming of relations between the two
countries since last summer, combined with continued hard times
in the U.S. grain belt, would favor a subsidy offer.
    In addition, the USSR has made it clear it would consider
buying U.S. wheat if it were priced more competitively.
    However, observers have not forgotten the circumstances
surrounding the administration's announcement of the wheat
subsidy offer last summer.
    Up until the time of the announcment, congressional and
industry leaders were led to believe the White House had
decided to expand the Export Enhancement Program to include not
only the Soviets, but also a much broader list of countries.
    Instead, the administration scaled back the offer to
include only the Soviets.
    That last-minute change of heart adds a measure of
uncertainty even to the predictions of those most convinced
that the administration will not now pass up the opportunity to
sell four mln tonnes of wheat to the Soviet Union.
 Reuter
