about a U.S. government farm program that worked as it was supposed to work and then became so successful that it has come back to haunt farmers it was intended to help.
It is about Public Law 480, the Food for Peace program, and how it converted India, the world's largest vegetable-oil importer, into a lucrative market for American soybean oil, a nutritive product of the bean.
But the big Indian soy oil market, created by U.S. dollars to feed Indians and make money for U.S. farmers and processors, is no longer an exclusive American preserve. Competing nations are taking away the U.S. dominance that brought $250 million back to this country yearly.
The loss of the Indian soybean market mirrors a larger development in world trade -- the erosion of American agricultural export supremacy and the growing political pressures in the United States to fight unfair trading practices.
The strong dollar, world recession, growing competition, trade subsidies have caused the U.S. share of the world export market has dropped by about 25 percent in the last five years, according to Agriculture Secretary John R. Block. U.S. farm exports, which peaked in 1981 at $44 billion, are expected to fall to $33.5 billion this year.
But identifying the real bogyman and then making the right move to grab back the U.S. share of markets often is no easy matter. Each case seems caught up in ironies, contradictions and conundrums.
For instance, in the soybean oil case, the United States provided its competitors with technical aid through other programs. An Agency for International Development program even financed programs to spur soybean production in other countries, while U.S. agricultural research is readily available to foreign farmers.
The Food for Peace program was created at a time of huge American crop surpluses in the 1950s. It had two purposes -- to improve developing countries' economies and dispose of surplus U.S. foodstuffs.
A number of nations have become regular commercial customers of the United States after beginning with the low-interest, long-term credits made available through PL 480. India, for example, began buying U.S. soybean oil under PL 480 and graduated to full-scale commercial cash purchases.
But the United States, after having stimulated an Indian predilection for soybean oil, finds itself on the losing end. Brazil and Argentina, with governmental policies that allow their soybean oil to be sold for far less than the U.S. product, have gradually taken over the market.
"If those governments got rid of their subsidies, we would be playing on a level field and we would be competitive with them most of the year," said Jack Reed, a vice president of Archer Daniels Midland (ADM) Co. in Decatur, Ill., the country's leading processor of soy products. ". . . That would benefit the American and European soybean oil crushers, and we could pay more to our farmers for the raw product."
Not that governmental subsidies in Argentina or Brazil are the whole problem. The strength of the dollar, Secretary Block and others agree, is perhaps the first major element that puts U.S. farmers on the defensive.
For an importer such as India, the dollar's strength means that the price of U.S. soybean oil starts off roughly 30 percent higher than comparable product from Argentina or Brazil. Additional governmental export incentives in those countries widen the competitive gap.
One of the ironies is that export-subsidy breaks for processors have put Argentina and Brazil at each other's throats in the Indian market. Argentine processors, who get a sweeter tax break than their Brazilian counterparts, are able to sell for less.
The ultimate beneficiary, of course, is India, which can buy soybean oil from South America at about $100 per ton less than the roughly $720 it would cost to buy comparable oil, delivered, from the United States.
A third key competitor for the Indian vegetable oil market is Malaysia, which sells large amounts of palm oil, a substitute for the soy product. Malaysia's government also provides a subsidy to palm-oil refiners to help them get a larger market share abroad -- another thorn in the side of U.S. farmers.
The United States has complained to Argentina and Malaysia about their oil-export subsidy policies, but to little avail. U.S. soybean processors filed a formal complaint in 1983 that has languished in the forums of the General Agreement on Tariffs and Trade (GATT).
Although the type of assistance varies, Brazil and Argentina provide to domestic soybean processors tax advantages that promote the export of oil rather than raw soybeans, which also would be competitive with the raw American product.
Both countries, eager for foreign exchange to help pay off large external debts, tax agricultural export products. To encourage development of a domestic soybean processing industry, the tax on oil and soy meal is lower than the tax on the raw bean.
Attempts to elicit comment from Brazilian and Argentine agricultural officials here were unsuccessful, but in the past their governments have argued that the export-differential taxes are no more a subsidy than export-credit programs operated by the United States.
The American Soybean Association's John Baize contended that Brazil and Argentina have encouraged oil development to the detriment of their own farmers. In a recent report to ASA members, Baize said that the effect of the higher tax on soybeans is to lower the internal price to farmers, giving processors beans "priced well below their value on the world market."
As a result, South American soy oil and meal can be sold to buyers such as India for substantially less than the U.S. product. The net losers, Baize said, are Argentine, Brazilian and U.S. farmers.
Although the United States sends vastly more raw soybeans into world trade than any other country, the oil and meal picture has changed dramatically since 1980. The United States now ranks second to Brazil in meal and oil exports, while Argentina's oil and meal exports are growing about 100 percent annually.
But the ASA and other American farm-commodity organizations tend not to place all of the blame for declining U.S. exports on countries such as Brazil and Argentina.
They say that several U.S. agricultural embargoes in the 1970s and the limit on sales to the Soviet Union in 1980 undermined world confidence in the United States as a supplier. After each trade move, Brazilian and Argentine plantings expanded and exports to traditional U.S. markets increased.
The soybean story abounds with other ironies.
South American growers use the best U.S. seed varieties and adopt the best agricultural technology developed here. Many of the top growers are ASA members.
The irony that may hurt the most, in the view of the ASA, is the research being financed by the State Department's Agency for International Development to spur soybean production in countries competing with the United States.
Baize noted that AID soybean research is targeted for Brazil, Burma and Guyana. The University of Illinois, in the heart of U.S. soybean country, has a $6 million AID grant for work on tropical soybean varieties, he said.
"When we were touring near Brasilia in March, all they were talking about was Illinois," Baize said. "AID is giving them the money to come up with varieties that will make them more competitive."