MEMORANDUM TO: Paul Wrotenbery FROM: Ward goessling SUBJECT: The President's Grain Embargo 4exi On January 7, 1980, President Carter announced that he would embargo the sale of grain to the U.S.S.R. in excess of the 8 million metric tons previously arranged between the two countries. In his message President Carter indicated that he would have the embargoed grain purchased from the exporter by the Commodity Credit Corporation for storage and release at some later time. The President also indicated that he would take advantage of this opportunity to bolster several other programs by distributing some of the surplus to nations in need and to supply distilleries making fuel alcohol. About ninety percent of the wheat and corn and fifty percent of the soy beans grown in Texas are exported. Therefore, we can expect that any impact of this embargo will be felt throughout the agro-business community of the State. It is not clear at this time whether or not the impact will be acceptable, Certainly, the gasahol proposal is not a valid one since there is not enough distillery capacity to handle this much feedstock. Purchasing the embargoed grain from the exporter provides for a normal flow of commerce. There can be a few logistic problems due to where the grain is at the time of purchase and where it is to be stored. Having this much grain in storage should stabilize or slightly depress the market price for such grains. We should expect the Administration to try to protect the farmer by not introducing an excess of grain to the market. This may be counterproductive to the efforts of Texas farmers who have been holding back grain hoping to create a shortage which would drive prices up. This all says we should expect the "status quo" plus or minus a few percent. In summary-- 1. No one is hurt yet. 2. We need more information before making any more definitive judgements. M. 0eCiOvva". 1,/t1
