Tighter world grain markets, increased price variability, and the growing importance of the state trading agencies of developing and centrally planned countries have been major forces increasing the use of bilateral trade agreements. The terms of these agreements are examined and current trends in the pattern of trade under bilateral arrangements are identified. A theoretical trade model is developed and shows that the major impact of bilateral agreements is an increase in price and trade variability. The model is used to define a maximum limit to U.S. bilateral trade commitments for a given level of risk.