The Carter administration yesterday moved dramatically to shore up grain prices, promising that it would not sell in this country, or would sell only above certain prices, any of the grain that was to have gone to the Soviet Union.
"The crops will be isolated from the market, and there is no reason why they should become a market depressant," said Howard Hjort, the Articulture Department's principal economist, at a news conference.
Wheat and corn prices already had fallen the limit allowed by futures market rules when Hjort made his announcement. They recovered a little afterward, and finished the day down, but not down as far as they could have been.
President Carter announced last Friday that he was embargoing about 17 million tons of grain exports to the Soviet Union in retaliation for the Soviet invasion of Afhganistan. Monday, having shut the grain markets to give them time to adjust, the administration said it intended to buy up the embargoed grain to keep prices from collapsing.
But traders remained uncertain what the government would do with the grain. Hjort promised them yesterday that none of the brought-up wheat would be sold in this country -- it presumably will be given to needy foreign nations. Also, the corn will not be sold for less than $3.15 a bushel, well above yesterday's price of $2.65. Corn makes up the bulk of the grain that had been destined for the Soviets. Some of it will supposedly be used in a gasohol program the administration plans to announce today.
Some of the grain the Soviets were to have purchased may now be sold instead to China, grain trade sources said yesterday, but no new large sales to the Chinese are expected.
Several of the same big grain companies whose contracts with the Soviets were canceled have also been dealing with the Chinese. China had been expected to import about 6 million tons of corn and wheat from the United States between October 1979 and October 1980, but so far has brought only a part of that.
"New sales, especially for quick delivery, would help relieve, the pressure on the grain markets," said John Schnittker, a former top USDA official who is now a private agriculture economist in Washington.
The grain companies, he said, have port facilities bulging with millions of bushels of corn and wheat that were bushels of corn and wheat that were bound for the Soviet Union until the president clamped on his embargo. Because of that backup, corn sales are at a standstill throughout the Mid-west.
If the Chinese were to buy the Soviet grain, it would clear out the terminals, help get sales going again, and probably keep prices from falling further.
The Carter administration offered yesterday's additional assurances that it would prop up prices, partly because earlier price support actions it announced will not help most of the nations's corn farmers and many who grow wheat.
The administration Monday said it was raising so-called loan rates, amounts farmers can borrow against their grain and put it in storage awaiting higher prices.
But these loans are only available to farmers who, at the start of each season, agree to keep part of their land out of production.
Last year farmers who grow 79 percent of the corn and 45 percent of the wheat refused to participate in the "set-aside" program. They figured -- correctly, it turned out -- they could make more money by planting all their land and selling their crops for the market price.
Hjort insisted yesterday that all the steps taken by the administration will mean farm prices this year will be just as high as if the big Soviet sales had gone through.
All the 4 million metric tons of wheat the Soviets were to buy will be taken over by the government and used for international food aid, he pledged. Later in the day it was announced that nearly 16,000 tons of wheat will be shipped to Pakistan to help feed refugees fleeing from the Soviet invasion of Afghanistan.
The government may not buy all the 20 million tons [TEXT OMITTED FROM SOURCE] were to take.
In some cases, it intends instead to resell the corn without taking possession of it. That will be done only at prices above current levels, Hjort said.
Grain trading in Chicago opened with prices down by the limit permitted under exchange rules: 10 cents a bushel for corn and 20 cents a bushel for wheat.
At first the pits of the Chicago Board of Trade were as quite as on Wednesday when prices dropped the limit and there were still few buyers.
By mid morning traders began placing orders for corn and wheat to be delivered six months or more from now, and when prices in those contracts inched ahead by a penny or two, other prices followed. By the end of the day prices were 1 to 3 cents up from the opening but still 7 to 9 cents below the day before.