Then and now

By Fred Evans – January 17, 2017   

How often have we heard “those who don’t learn from history are doomed to repeat it” and “the future is a repetition of the past”?  I mention these quotations to highlight the similarities of an event that occurred nearly forty years ago and which now could again be possible.

I am referring to the embargo Pres. Jimmy Carter placed on grain sales to the Soviet Union in January 1980.  The immediate results were devastating to the grain futures markets and thus to North American grain producers.  But to fully appreciate why the devastation was so immediate we have to examine the events that preceded 1980 and how the U.S. had become so fixated on Russia.

In 1973 Russia surreptitiously purchased U.S. origin grain from numerous international export companies.  Back then there was no requirement for the exporter to immediately report the sale to the USDA, as there is today.  One by one the exporters made their sales, selling short the grain they hoped to buy later.  Trouble was that they all had the same idea and they all went to the market at the same time to cover.  Within five months prices shot higher on the CBOT: Soys rallied from $4.20 to $9.30, Meal from $160 to $450 per ton, Dec wheat from $2.00 to $5.40 and Dec corn from $1.50 to $3.30.  These were huge price advances, even by today’s standards.  Farmers were thrilled but the prices did not remain at the lofty levels and eventually drifted back down.  Nevertheless, the stage had been set and a new wave of optimism blanketed the U.S. Midwest.

From that point forward, for the next five years, it seemed that every bit of fundamental news hitting the grain markets focused upon the insatiable demand that Russia had for grain.  Weekly research reports highlighted news about Russia’s livestock numbers or weather outlooks, always painting a price positive picture.  The U.S. government got into the act utilising Bill PL480 which was a program that had been designed in the 1950’s to provide money to promote food security for developing countries.  The government now wanted to assure that Russia would continue to buy U.S. grain.  All were focused on “feeding the Bear” as Russia was then known.  That is why President Carter’s actions in 1980 had such an impact on grain prices.

President Carter decided to use food to punish Russia for its invasion of Afghanistan.  The fallout was immediate.  Trading at the CBOT was halted for two days and when it did re-open markets fell and locked down the limit for the next two days.  The third day opened limit down but prices eventually started to trade.  No longer would researchers focus solely on Russian demand.

Now, fast forward to the present and switch China for Russia.  For nearly twenty years, it seems, we have been reading about the insatiable demand for commodities, especially soybeans, China has. Increases in soybean productivity, be it in North or South America, has eventually been consumed by China.  Will this trend continue?

This week Donald Trump becomes the 45th President of the United States. He has threatened to change/cancel trade agreements and he has not gone out of his way to endear himself to China.

I leave you with the question: are there similarities between then and now?


Fred Evans spent about 40 years in the futures and grain trading business. He now provides services as an analyst and commodity market researcher on a part-time basis for DePutter Publishing Ltd.


Editor’s note: I trust that you found Fred’s commentary to be entertaining and thought-provoking, as I did.

While an embargo by the US on agricultural exports to China does not currently seem likely, it’s certainly not out of the realm of possibility.

We’ll be tracking developments on key trade relationships – and lots more – in our publications. To sign up for free, no-risk trials go to

Ranulf Glanville, VP, DePutter Publishing Ltd.