THE GOVERNMENT: Selling Down to Rio

Frank Theis worked for the AAA in the days when ploughing crops under was the New Deal’s only way of fighting surpluses. After the Supreme Court ploughed that first AAA under in 1936, Frank Theis sold wheat in Kansas City, Mo., and the Government began fighting surpluses by stimulating distribution rather than just limiting production. Last week, Frank Theis and the U. S. Government were back together again—on the front pages of Rio de Janeiro newspapers.

In the paper O Globo appeared a sharp protest from Argentina, No. 1 South American wheat country, against Mr. Theis’s announced plan to sell 15,000,000 bushels of wheat in Brazil under the U. S. aegis. Right beside the protest was a careful explanation of the Theis thesis: Although he was going to Brazil to dump wheat (he used the more polite word “sell”), he was just a plain businessman, not a U. S. Government agent.

The distinction was nice. Under the policy of subsidizing crop surplus exports, announced by Secretary Wallace in August, private dealers may negotiate sales abroad at the best price they can get, which tends to be considerably below the U. S. domestic price. If the Government approves the transaction, Federal Surplus Commodities Corp. compensates the exporter for the difference between the prevailing domestic figure and his foreign price.

Thus, while Frank Theis was out to do business for the firm of which he is president (Simonds, Shields & Lonsdale), he was also furthering the Government’s efforts to cut down the huge U. S. wheat surplus—estimated for 1938 at 190,000,000 bushels. He consulted FSCC before announcing his plan.

Argentina’s protest made no dent on the U. S. Department of Agriculture despite the U. S. “good neighbor” policy. Argentina, world’s sixth wheat producer, has been a noncooperating, in & out member of the International Wheat Advisory Committee, has been the principal impediment to world stabilization of wheat ‘prices. Mr. Theis’s desire to sell wheat to Brazil, a fat Argentine wheat market, was calculated to joggle Argentina one step nearer to cooperation with the international group.

As Frank Theis prepared to sail for Rio, rumor circulated that he was going to trade U. S. wheat for Brazilian coffee. The U. S. has heard a lot lately about European, particularly German, barter with South America and Mexico (machinery for oil and crops); so it seemed reasonable for U. S. traders to defend themselves with similar tactics. But last week the Brazilian Government emphatically denied the rumor. President Getulio Vargas announced that the Government’s new coffee policy (like the —U. S., Brazil found crop limitation a failure, now ruthlessly dumps its coffee surplusabroad) had been so successful that he did not anticipate a surplus from the next crop.