(FORTUNE Magazine) – ''This is a happy hour for American agriculture,'' glowed John R. Block, then Ronald Reagan's Secretary of Agriculture, when he announced the famous five- year deal that guaranteed Soviet purchases of good old U.S. grain. John's initial glow occurred in July 1983, and by August, when he got to Moscow for the signing, he was incandescing at the 200-watt level. He reported at the ceremony that the grain deal was a ''building block'' that would cause a ''more stable and constructive relationship'' between us and them. Meanwhile, the Washington Post reported, Senator Robert J. Dole of Kansas was ''nearly ecstatic'' over the building block. What Dole especially liked about the deal was that it would lead the Russians to have confidence in us. It marked ''the end of a long quest to restore the unquestioned reliability of the United States as a supplier of agricultural exports.'' Three funny things have happened to the grain deal since then. The first was that the Russians flagrantly violated it a year ago. The second was that almost nobody paid any attention to the violation. The third was more recent: When it became apparent this summer that the Russians would probably violate the deal once again, the Reagan Administration rewarded them for this behavior by lowering the price of our wheat. Under the astonishing deal pushed through the other day, Soviet consumers will get American wheat at prices below what Americans pay (and below what the Russians could get from other major suppliers). The five-year grain deal has a number of complicated wrinkles but is built around two simple requirements: Each year the Russians commit to buy at least four million metric tons of corn and also of wheat, and to do so ''at the market price prevailing for these products . . .'' In the year that ended last September 30 they bought a great deal more corn than was required but never got beyond 2.9 million tons of wheat -- clearly a violation of the agreement. This year still has a couple of months to run, but as of early summer the Russians were looking as though they would come up even shorter on wheat. (The total for the year's first ten months: only around 150,000 tons.) They refused to promise that they would make up the difference by September 30 and for some reason did not meekly apologize; instead they complained that they weren't getting the subsidized price offered certain other countries (Turkey and Algeria, for example) under the U.S. Export Enhancement Program. The record does not show that any American official was tactless enough to remind them of the provision requiring purchases at the market price. The Administration's deal has numerous awful side effects, one of which is to invite retaliation from Canadian and Australian competitors in the grain markets. Still another effect is to make the Reagan Administration seem totally directionless. It came into office, you will recall, somewhat divided about selling grain to the Russians. On one side were hard-line anti- Communists who didn't want to give them any help. On the other side were economic conservatives who didn't want to mess up free markets. The Administration has now managed to turn its back on both positions. And it's not clear that its concessions are over yet. Dole, for example, believes that America still has not done enough for its farmers. The Senator's current position is that the wheat deal is great but will unfortunately reduce demand for competing commodities. So guess what: We must offer the Russians subsidized corn too, in case they're still not convinced about our reliability.