New life for embargo?; Reagan must decide if US will use 'the grain weapon' against Soviets

With the stroke of a pen on Jan. 20, the day he is sworn in as president, Ronald Reagan could lift the year-old grain embargo against the Soviet Union. But rising food prices at home and Soviet troops poised to pounce on an errant Poland will likely mean no early redemption of Mr. Reagan's campaign pledge to US farmers.

Linkage of the grain export ban to Reagan's need to control inflation and discourage the Soviet Union from taking direct action against Poland Disappoints farmers. But a flip-flop on the promise to end the grain embargo would stem from the realization that the regime in Moscow is more vulnerable than expected on the matter of food supply.

The Soviets need all the grain they can get," states Howard W. Hjort, the director of economics at the US Department of Agriculture (USDA). "Use of the grain weapon can be considerable in 1981."

TWo years of bad crops, caused by too-dry weather in 1979 and too-wet weather in 1980, means the Soviet Union will need to import roughly 47 million tons of grain next year.

Yet, points out Mr. Hjort, they can obtain and transport only about 30 million tons, partly because of the US-led embargo which began Jan. 4 and partly due to inadequate port facilities.

This grain shortfall will also be compounded by an expected world crop harvest below requirements in 1981, says the USDA official.

In short, the Soviet people will be shy of feed grain for livestock at least 13 percent.

"The Soviets are now second-guessing their invasion of Afghanistan," suggests Hjort, and may be holding back any action against Poland to avoid further grain import bans.

Even if the embargo were ended, the Reagan administration could quietly block new grain sales. US farm groups point out that this gives the US more leverage in negotiating a new long-term agreement with the Soviets.

Under a five-year pact which ends in September 1981, the Soviets can buy 8 million tons of grain a year in the US -- which they quickly did in October to help shore up food supplies this year.

The feed grain sales embargoed by President Carter were in addition to this agreement. A lifting of the embargo would boost food prices in the US, say many obervers, interfering with Reagan's attempt to fill a major campaign pledge to halt inflation.

This argument is contested by farm groups, including the National Association of Wheat Growers.

"Farmers are expecting the embargo to be terminated, and we don't see its impact on inflation as a valid concern," says association spokesman Carl Schwensen.

A Chase Econometrics study released Nov. 20 by the wheat growers association shows that higher wheat exports would boost the consumer price index (CPI) by 0. 2 percent and the food portion of the CPI by 0.8 percent.

But a resulting increase in farm jobs and the gross national product, and an improved US trade balance, would help offset the inflationary impact, says Mr. Schwensen. Two-thirds of US wheat already goes overseas, he points out.