THE SOVIET GRAIN PROBLEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004200090003-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 21, 2016
• Document Release Date: October 10, 2008
• Sequence Number: 3
• Publication Date: November 1, 1963
• Content Type: REPORT

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1 November
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CUR RE INT INTELLIGENCE
GROUP I .Excluded from ou+omatic
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The USSR's large purchases of wheat this year
result from a real need to compensate for a very
poor crop following some five years of stagnation
in agricultural production. They do not appear
to have been motivated by an intention to prevent
purchases by Communist China, and such large pur-
chases are not likely to be repeated in the future.
The return of normal weather would permit a sharp
recovery in 1964. Thereafter the expected in-
creasing supplies of fertilizer and machinery and
expansion of irrigation will probably bring sub-
stantial, although expensive, increases in agri-
cultural output.
Stagnation of Agriculture
The growth of net agri-
cultural production in the USSR
from 1950 to 1954 merely kept
pace with the growth in pop-
ulation. In the next four
years, however, production in-
creased rapidly, and the Soviet
consumer, long neglected by
Stalin, realized a marked im-
provement in his diet. The
"New Lands" program, the corn
program, increased investment
in agriculture, increased in-
centives for farmers, and ex-
ceptionally good weather condi-
tions in 1958 all contributed
to this growth.
of meat and milk during the
period 1957-59, and the quality
of the Soviet diet reached a
peak in 1958-59. There has
been little change in net agri-
cultural production since 1958,
and the per capita availability
of many food products has either
declined or failed to increase.
Shortages of livestock prod-
ucts and lack of profitability in
the livestock sector prompted the
regime to raise the state purchase
prices for livestock and some live-
stock products in June 1962. This
markup was passed on to the con-
sumer--a move that helped bring
about at least one major civil dis-
turbance in 1962.
During this period the
Soviet consumer was conditioned
to expect continued improvement.
In 1957, for example, Khrushchev
boasted that the USSR would
catch up with the US in the per
capita production of milk by
1958 and in per capita produc-
tion of meat by 1960 or 1961.
These promises were completely
unrealistic, but there was a
significant gain in production
During the winter of 1962-
63 food and feed were in short
supply in a number of important
regions in the USSR. The 1962
potato crop was the smallest
since the early postwar years.
The shortages had the greatest
impact in the northern European
USSR, where potatoes are
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1955-56
Corn program.
TOTAL POPULATION OF THE USSR
1950 =100
1958
Machine-tractor
stations abolished.
1957-58
Program to "catch up" with
US in meat and milk output.
Preliminary Estimate
1963-?
Peril I izer program.
1
1963
Wheat purchases.
1962-63
Program to plow up and
plant fallow lands.
1962
Livestock product
prices raised.
1961-62
Administrative
reorganizations.
1954-56
New Lands program.
1953-55
Procurement prices raised.
01 1 1 1 1 1 1
1950 1951 1952 1953 1954 1955 1956
631021 2A
particularly important as a
source of food and feed. Short-
ages of feed also reduced the
yields of milk and caused dis-
tress slaughtering of livestock
in this area. In Kazakhstan,
350,000 sheep died during the
period November 1962 through
January 1963, and official in-
spections disclosed large num-
bers of emaciated sheep.
For the fifth consecutive
year, Soviet production of
grain as well as a number of
other crops in 1963 will fall
below that of 1958--the base
year of the Seven Year Plan.
Despite an increase in the area
sown to grains, production of
I I I I I 1 1
1957 1958 1959 1960 1961 1962 1963
grain in 1963 will probably
not exceed 105 million metric
tons--well below the mediocre
harvest of 1962 and much below
1958. The wheat crop, in par-
ticular, was hard hit by weather
and is estimated to be the low-
est since 1954.
Poor growing conditions
also reduced the harvest of
other crops. Yields of sun-
flowers and sugar beets are
estimated to have been about
10 to 20 percent below average.
Production of potatoes will
also be below average, but above
the very poor harvest of 1962.
Production of cotton, which is
grown under irrigation, is
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estimated to have increased
slightly over that in 1962.
The production of feed crops,
including hay and silage, is
estimated to have been below
average, and there are already
indications that measures are
being taken to reduce livestock
herds because of the tight
feed supply.
Wheat in the Soviet Diet
Bread and other grain prod-
ucts provide about 50 percent
of the calories in the Soviet
diet, and these have been in
relatively plentiful supply.
This year, however, the wheat
crop--which alone provides
about three fifths of these
calories--was so poor as to
leave the Soviets some 10-15
million tons short of wheat
for domestic requirements for
food, seed, and industrial use
and for export commitments.
The regime for some weeks has
been conducting a campaign to
discourage the use of bread as
livestock feed, to cut down on
the waste of bread in restau-
rants, and to enforce more
rigidly existing limitations
on the amounts of bread that
can be purchased.
Unless the regime can
keep bread cheap and reason-
ably plentiful, it may face
civil repercussions. Last
year's price rise on meat and
butter (30 percent) was taken
by consumers as a breach of
faith on the part of the re-
gime; at least one major riot
is known to have occurred
(Rostov Oblast), and others
may have taken place. The So-
viet regime has already shown
signs of being apprehensive
that problems stemming from the
poor harvest will bring new
adverse reactions from the pop-
ulation; the US Embassy in Mos-
cow has reported that the Krem-
lin leadership has begun to
prepare the Soviet people for
unpleasant eventualities. Meet-
ings have been called recently
in plants, offices and apart-
ment houses to hear statements
from the party central committee
describing difficulties with
the harvest, urging conserva-
tion of grain, and assuring the
people of regime efforts to
buy extra grain abroad.
The USSR's Grain Trade
During the period 1955-
62, the Soviet Union was a net
exporter of an average of about
5 million tons of grain annually,
varying from 2.1 million tons
in 1956 to 7.5 million tons in
1962. Since 1955, net exports
of wheat have ranged from a
SOVIET GRAIN PRODUCTION
WHEAT ALONE
Soviet Official US Estimate Soviet Official US Estimate
1958 141 125 77
1959 126 100
1960- 134 100
1961
1962.. 148 115 71 57
1963
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low of 1 million tons in 1956
to a high of almost 6 million
tons in 1959.
Grain exports to nonbloc
countries have been increasing,
but the USSR's principal market
is still the European satellites.
In 1962, for example, they took
4.:L million tons of Soviet
grain--nearly 75 percent of
their grain import requirements.
In September 1963, the
Soviet Union, for the first
time, entered the free world
grain market as a large-scale
buyer, with the purchases of
about 6.5 million tons of wheat
and flour from Canada and 1.6 -
1.7 million tons of wheat from
Australia. Currently, Soviet
trade officials are negotiating
with US grain exporters for ad-
ditional grain, perhaps involv-
ing 3-4 million tons of wheat.
Because of a relatively
poor crop in the European sat-
el:Lites in 1963, their imports
of grain may reach a postwar
high in 1964. Rumania is the
only one where production of
grain in 1963 may exceed that
in 1962.
statements by satellite offi-
cials, implies that only Poland,
East Germany, and Czechoslovakia
should expect to import grain
from the USSR in 1964. Soviet
grain export commitments to
these satellites are estimated
to total approximately 4 mil-
lion tons. Satellite purchases
and requests for purchase of
grain in the free world now to-
tal nearly another 4 million tons.
The actual amounts purchased,
however, may be influenced by the
ability of the satellites to ob-
tain favorable credit arrange-
ments. A very large share of
this grain (perhaps 2.8 million
tons) will probably be purchased
from the US. Poland has requested
1.3 million tons of grain from the
US under PL-480.
Russian exports of wheat
and other grains to the nonbloc
countries (including Cuba) in
1963-64 probably will not ex-
ceed 1.5 million tons. In 1962
the USSR exported 2.35 million
metric tons of grain, including
1.6 million tons of wheat and
0.25 million tons of wheat
:flour, to these markets. Grain
export commitments with Cuba,
Brazil, and other nonbloc coun-
tries totaling slightly over
:1 million tons--mostly wheat---
probably will be honored. Severe
reductions from the 1.4 million
tons of grain, including 0.8 mil-
lion tons of wheat, which the
USSR exported to the UK, Western
Europe, and the Scandinavian
countries in 1962,can be ex-
pected. The Soviets have in- 25X1
formed Finland that they cannot
fulfill their remaining 1963 ex-
port commitment for wheat and
that the exports to Finland will
be further reduced in 1964.
The Soviet purchases of
wheat from Canada and Australia
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reflect a real need and thus it
is not necessary to attribute
these purchases to a Soviet
desire to deny grain to Commu-
nist China. However, China will
probably find that wheat now
costs more and is harder to ob-
tain, particularly for delivery
in the first half of 1964. Al-
though the food situation in
Communist China has improved
over the low point of 1960-61,
it is likely to need imports
of grain in 1964 at approximately
the level of the 5.3 million
tons average of the past three
years.
China's grain imports have
been made up almost entirely of
wheat. Although grain has been
purchased from a number of
sources, Australia and Canada
have been the largest suppliers,
providing 43 percent and 35
percent respectively of China's
grain imports during the period
1961-63.
There is no evidence that
Australia has committed any
grain to Communist China for
1964. The Australians have an-
nounced that they will carry over
into 1964 only between 1 and 1. 5
million tons of uncommitted
grain, less than half the amount
they sold China in 1963.
The current Chinese agree-
ment with Canada provides for
the purchase of 3 to 5 million
tons of wheat over a three-year-
period, beginning 1 August 1963.
Of this, 508,000 tons are to be
delivered by January 1964. Nego-
tiations for additional wheat
deliveries in 1964 under this
agreement apparently have not
started.
A poor 1963 wheat crop
in France, China's third most
important source of wheat, re-
portedly has precluded ful-
fillment of the remainder of
France's contract in 1963 as
well as its contract to supply
roughly 300,000 tons of wheat
to China in 1964. However,
there is a possibility that
France may fulfill this con-
tract by substituting barley
or flour for wheat.
Priority of Agriculture
in Soviet Planning
In January 1961, Khrushchev
pledged additional financial
support to agriculture, but
this support developed as an
indecisive, piecemeal process.
Prices for livestock and live-
stock products purchased by
the state were increased in
1962 to spur the lagging animal
husbandry sector, which had
been operating at huge losses
on most farms. Investment in
agriculture increased a moder-
ate 9 percent in 1962. In the
main, however, the Soviet lead-
ership pinned its hopes for
1962 and 1963 on administrative
reorganizations and a stopgap
program to reduce the fallow
area, plow up sown grassland,
and shift these acreages to
more productive crops.
Some progress was made
in 1961-63 in increasing the
deliveries of equipment to
agriculture. The value of the
production of agricultural
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machinery (excluding tractors
and trucks), which had declined
during 1958-60, reached a record
high in 1962 and continued to
grow in the first six months
of 1963. Khrushchev in March
12,62 announced the optimum in-
ventories required of certain
of the major types of equipment
used by agriculture. The short-
ages revealed by the inventory
lists were large and suggested
that deliveries of equipment
in, the future would appreciably
exceed those of the peak levels
of the past. No deadline was
announced for the attainment
of the planned inventories, but
it was said that every effort
should be made to secure the
greatest possible progress with-
in the next few years.
In recent years the So-
viets have shown increased
interest in the expansion of
irrigation. Khrushchev in re-
cent speeches has indicated
quite clearly that he is very
much concerned with expanding
the irrigated area, but his
statements do not indicate
any hasty program to bring
about a rapid expansion of the
irrigation network. Rather,
he cautioned, "Let us consider
all plans carefully and make
our calculations."
Since the early part of
1962, the Soviet Government
has become increasingly con-
cerned with the lag in con-
struction of new capacity in
the fertilizer industry. Abun-
dant information suggests that
a decision has been made to
provide resources to assure a
sharp rise in the production
of fertilizers over the next
five to seven years. However,
fulfillment of the original
Seven-Year Plan goal for the
production of 35 million tons
of fertilizer in 1965 is by
no means assured and will re-
quire a tremendous effort in
the next two years.
Beyond 1965, the goals
are as yet apparently tenta-
tive. Goals for 1970 and 1980,
adopted in 1961, called for
production to reach 77 million
and 125-135 million tons, re-
spectively. Khrushchev, in a
speech at Volgograd on 17 Sep-
tember 1963 and subsequently,
has stressed the major contri-
bution which fertilizers could
make to the development of So-
viet agriculture, and has stated
that it was planned to bring
production of fertilizers to
approximately 100 million tons
by 1970. The Soviet goal for
production of fertilizers in
1.963 is 20 million tons.
Outlook
The year-to-year fluctua-
tions in the production of grain
in the Soviet Union are caused
primarily by variations in
weather. The 1963 crop developed
under abnormally poor weather
conditions, and there is no
reason to expect that this par-
ticular weather pattern will be
repeated in 1.964. Grain pro-
duction may benefit from in-
creased rates of fertilization
in 1964. Khrushchev stated in
a recent speech that 10 million
tons of mineral fertilizers
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would be allocated to the better
wheat-growing areas. Normal
weather could be expected to
raise grain yields per acre
to a level not far short of
the 1954-58 average, and if
the Soviets seed an acreage
of grain equal to the record
area of 1963, grain production
might increase by about one
fourth. However, spring wheat
acreage in 1964 could decline
sharply if the Soviets are
forced to adopt a realistic
system of fallowing in the New
Lands area.
The continuous cropping of
the New Lands for 7-8 years has
resulted in a deterioration in
the structure of the soil, a
decline in fertility, and an
increase in weed infestation.
As a result, yields have been
declining and wind erosion is
becoming an increasingly seri-
ous problem.
A rotation which leaves a
large share of the crop land
in fallow each year appears to
be the best solution to these
problems. Canadian experience
in a similar area has shown
that, with proper techniques
to conserve soil moisture and
prevent soil erosion, relatively
stable yields can be achieved.
While Soviet agriculturalists
have acknowledged the need for
proper farming practices, the
regime has not followed through,
thus jeopardizing the future of
crop production in these areas.
The increases in agricul-
tural production attributable
to an expansion of the irrigated
area and to increases in the
production of mineral fertil-
izers probably will be modest
over the next several years.
The expansion of the irrigated
area will be a time-consuming
and costly undertaking, and
apparently is to be given a
secondary priority relative
to fertilizers. Waste and
inefficiencies in the use of
mineral fertilizers will sharply
limit the crop production re-
sponse to the additional fer-
tilizer produced, at least in
the short run.
However, the Soviets def-
initely need more fertilizer--
even to maintain present levels
of crop yields. This is par-
ticularly true because of de-
clining yields in the New Lands
and because of the soil-deplet-
ing effects of the plowing-up
of sown grasses and the reduc-
tion of fallow. It is estimated
that by 1965 the amount of
mineral fertilizer allocated
to Soviet agriculture will be
about half again as much as in
1963.
Organizational, ideological,
and climatological factors have
kept the Soviets from achieving
high levels of efficiency in
the. use of resources in agricul-
ture. Current problems in the
distribution and use of mineral
fertilizers in the Soviet Union
can be expected to increase as
the production of fertilizer
is expanded rapidly in the years
ahead. Wastage of fertilizer
has been heavy at railroad
sidings, and inadequate storage
has caused huge losses of
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nutrients. The Soviets have
admitted that about one fourth
of the fertilizer is lost be-
fore reaching the fields. The
efficient use of fertilizer
requires a high level of tech-
nical and managerial skill,
and incorrect use can actually
reduce crop yields. An arti-
cle in a Soviet journal on ways
of improving use of mineral
fertilizer claimed that one
third of the mineral fertilizer
applied in the country as a
whole did not significantly
benefit the crops. Other sur-
veys have confirmed great in-
efficiency in the use of fer-
tilizer.
Even if the Soviets in
time should overcome their or-
ganizational problems in the
distribution and use of mineral.
fertilizers, natural condi-
tions will limit the crop pro-
duction response to the very
high rates of fertilization
planned for the future. The
Soviet Union has no large areas
climatically analogous to the
southeastern United States or
the Corn Belt, where moisture
is abundant and soils are highly
responsive to fertilization.
A much larger part of the Soviet
Union's cropland is in subhumid
areas like the American Great
Plains and the prairie prov-
inces of Canada, where crop
yield potentials from fertil-
ization are less than in more
humid areas.
It is planned that the
use of mineral fertilizers on
grain crops in the Soviet Union
will increase sharply. In
1960 less than 20 percent (2.2
million metric tons) of the
mineral fertilizer used on
crops was applied on grain.
If the Soviets do achieve
their production goal of 100
million tons of fertilizer in
1970 or shortly thereafter,
perhaps about 35 million tons
of this total would be applied
to grain.
the Soviets expect
a response of about 1.5 - 2.0
tons of grain per ton of fer-
tilizer applied. Preliminary
analysis suggests that this re-
sponse rate may be possible some-
time in the future provided that
the fertilizer is efficiently
used. Thus 35 million tons of
fertilizer applied annually to
grain might produce an additional
55-70 million tons of grain--
but this achievement will be
difficult and expensive. F
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