82 CHAPTER 4 Causes of the 1972–74 Crisis


If the profiles of the two crises are similar, is it also possible that the crises had common causes? To answer this question we need to revisit the 1972–74 food crisis. Figure 4.1 depicts a timeline of events leading up to and follow- ing this event, and the following discussion explores these factors in more detail.


As with the current crisis, the causes seem to fall into three categories: rising oil prices, a variety of market shocks on both the supply and demand sides, and longer term pressures on international food commodity markets. Like today, many of the causes of the 1972–74 crisis relate to U.S. produc- tion and trade conditions, especially with respect to wheat and other coarse grains. In the 1930s North America exported a mere 5 million tons of grain, and of all the other regions of the world, only Europe was a net importer (Figure 4.2). By 1966, however, North American grain exports had increased twelvefold to reach nearly 60 million tons, the Communist countries went from a 5 million ton surplus to a 4 million ton deficit, and Asia moved from a 2 million ton surplus to a deficit of 34 million tons. North America had become the global epicenter of the grains trade, meaning that changes in North American trade and production had the potential to significantly impact international prices and global food security. This is still true today. In this regard, the earliest contributing factor to the crisis was probably U.S. policies regarding wheat production (Johnson 1975; Destler 1978). The market condition saw chronic surpluses and depressed prices, and the “farm problem” was seen to be overproduction. By the 1960s the U.S. Commodity Credit Corporation had already accumulated large amounts of grain stocks as a result of policies that supported prices well above market-clearing levels. In effect the United States was the world’s residual supplier of grains, through both cheap exports and food aid. Domestically, however, these large grain stocks raised political concerns over the high costs of storing the grain, which could not be disposed of at the prevailing support levels. Therefore, the U.S. government—as well as the Australian and Canadian governments, who also stored large stocks of wheat—took steps to drastically reduce the production of wheat by one-third from mid-1970 to mid-1972, reducing their global share of world grain production from 15 percent to about 10 percent (Johnson 1975). Even after this huge decrease in wheat production the three major grain exporters continued to further reduce their stocks (Johnson 1975). These policies contributed to a radically different international wheat market in the 1970s (Johnson 1975; Destler 1978). The existence of large grain reserves during the 1950s and 1960s had meant that major fluctuations in production only prompted minor changes in prices, because the United States, Canada, and Australia could use their large reserves to buffer price


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