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84 CHAPTER 4


Figure 4.2 Changing patterns in the grain trade, 1930s–1970s Net exports of grains (million metric tons)


100 75 50 25 0 25 50 1936 1950 Source: USDA as cited in Ward (1974).


shifts. For the crop years 1960–71 wheat prices were held within a range of US$59–65 per ton in 11 of the 12 years, and maize prices were similarly stable. But by the 1970s these reserves had been depleted, largely as a delib- erate policy, so that even relatively mild shocks to demand and supply could cause extreme fluctuations in prices (Hopkins and Puchala 1978). In fact, a high degree of price stability was achieved during the 1960s even though the absolute shortfall of world grain production below trend during 1961/62– 1965/66 was greater than during 1971/72–1974/75 (72 million tons compared to 36 million tons). Despite this significant change in grain markets, only India responded to the shift by increasing its own stocks as an offset to the declines of North American and Australian stocks.


During this increasingly fragile grains trade regime, several reasonably significant shocks ensued in the early 1970s. The most important of these, however, was effectively a demand rather than a supply shock.2 In June 1971 the Nixon administration liberalized exports to the China, Eastern Europe,


2 Although Communist countries’ demand for U.S. wheat was itself precipitated by production shocks (especially in the USSR) and poor agricultural policies, the sudden entry of the Commu- nist bloc into world grains trade amounted to a demand shock.


1960 1966 1973


North America Latin America Western Europe


Eastern Europe and USSR


Africa Asia


Australia and New Zealand


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