A greater than anticipated need,competitive prices and political motivations could be sparking
Soviet interest in U.S. corn, industry and government officials
said.
    As rumors circulated through grain markets today that the
Soviet Union has purchased an additional 1.5 mln tonnes of U.S.
corn, industry and government sources noted a number of factors
that make Soviet buying of U.S. corn likely.
    First, there are supply concerns. Some trade sources said
recent speculation has been that last year's Soviet grain crop
be revised to only 190 mln tonnes, rather than the 210 mln
announced, therby increasing the Soviet need for grain.
    A drop in Argentine corn crop prospects could also affect
Soviet corn buying, an Agriculture Department source said.
    Dry weather in Argentina -- a major corn supplier to the
USSR -- and reported crop problems prompted USDA to lower its
Argentine 1986/87 corn crop estimate this week to 11.0 mln
tonnes, down from 11.5 mln. Argentina corn exports were also
cut by 500,000 tonnes to 6.8 mln tonnes.
    Argentina has already committed four mln tonnes of this
year's corn for export, a USDA official said, with two mln
tonnes of that booked for April-June delivery to the USSR.
    "Significant downside potential" still exists for the
Argentine crop, the official said, which will decrease the
amount of additional corn that country can sell to Moscow.
    "If the Soviet needs are greater than we have been
thinking, then they might need more than what Argentina can
provide during the April to June period," he said.
    Current competitive prices for U.S. corn have also sparked
Soviet buying.
    U.S. corn was reported to be selling on the world market
earlier this week for around 71 dlrs per tonne, Argentine corn
for 67 dlrs -- a very competitive price spread, U.S. and Soviet
sources said.
    "This price difference makes American corn competitive,"
Albert Melnikov, commercial counselor for the Soviet Union,
told Reuters.
    Impending crop problems in Argentina will likely cause
those prices to rise, and with the recently strong U.S. corn
futures prices, the Soviets might feel corn prices have
bottomed and that this is a good time to buy, sources said.
    Finally, some industry sources said that by buying the
minimum amount of corn guaranteed under the U.S./USSR grains
agreement (four mln tonnes), the Soviet Union may be hoping to
convince the USDA to offer Moscow a subsidy on wheat.
    In an inteview with Reuters this week, USDA secretary
Richard Lyng said that no decision had been made on a wheat
subsidy offer, but that such an offer had not been ruled out.
 Reuter
