SOVIET GRAIN PROSPECTS AND THE US-SOVIET LONG-TERM GRAIN AGREEMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84B00049R001800190003-5
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 6
• Document Creation Date: December 20, 2016
• Document Release Date: June 27, 2007
• Sequence Number: 3
• Publication Date: June 30, 1982
• Content Type: REPORT

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Contents
Tab A Responses to Carlucci and Olmer Points re
Gas Alternatives
Tab B Reactions to Sanctions
Tab C Implications of Soviet-produced Turbines
Tab D Iranian Pipeline t bid A-I4ernc,?4 j , 1 O er
Tab E Japanese Issues
Tab F Soviet Grain Agreements C-4, C-CynL LA1 Y)
Tab G Other Issues
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3f) June 198?
Soviet Orain PrnspeCtS and t a Its-Soviet
agreement for one year. I
o Extend the agreerrent for two or more yea s while amending it to
provide higher minimum purchase requir n nts.
o Negotiate a totally new 11s-UUSSR grain aq 'eertrent,
Crop prospects and Impart Rogui rFments
Q Extend the
/a6
A Cabinet Affairs Staffing M['mi[-ranrlttm prop es four npio
115 USSR Train Agreement, which will expire an 3(1 Septermb&r19R2 regarding
o Allow the agreement to expire an 30 Sept mber 1982.
Poor weather in recent weeks has all but ruined chances for a good Soviet
~gr~in harvest in 198?.
I
o Soviet planners had Called for a 238-million-ton grain crop, hutt the
best crop possible appears to ha About 1F5 million tons,
o The harvest Could be much worse; if the 4ot, dry weather in the Soviet
spring grain area persists. a crap near he size of last year's
reported 158-million-iron harvest might b possible,
To save its livestock program and rehuild badly depleted grain stocks,
Moscow will need to import as ~ritth grain as pass hle. Imports, however. will
he limited by the amount its ports and rail syst can handle, about 50
million tons. With a 185-mi)1inn-ton grain cropland imports of 50 million
tons, we estimate that the t1SSR would be able to again muddle through.
a Distress slaughtering could he avoided.
o Meat prndirrtion could increase marginally above the 1981 reported
level of 15.2 million tons.
o The Soviets would have to purchase about million tons of
world market. as they did in 1981, to malhtain per capita meats in the
consumption.
On the down side. if the crop were worse--
Soviets would face a critical feed shortage, Sa, 160 million tons--the
o Some distress slaughtering, primarily of 1169n, would he likely,
o Even with the additional meat available h cause Of the Unplanned
slaughtering, meat production probably wa Id still fall below 15
million tons.
CONFItlENT1AL
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p o Record neat imparts (1 million tons) wou Ji
not revert per cagiyear~at
consumption from droppi nq by about 3 p
o moreover, distress would
the livestock sector
the next few years.
sources of Craifi Im arts.
ort requirements, under norm4l market cortditiorls the USSR
t its im
t
p
p
To mee
will rely on the Major drain exporters.
o r4osc0W may have already 1i ned up 17 mill on tons under long teat
agreements and other purchases from Cana, a, Argentina, Eastern Europe,
Thailand. and Brazil ,
o ilependinq on the size of this year's crops, non-US grail? exporters
probably will provide an additional 15 Sri 11ian tons.
o To acquire much more than 32 million tons while obtaining the mix of
feedtlraifs that it desires, the USSR wo ld probably seek to buy US
grain, especially corn. tAoscOw would like to have more corn b cause
it is on averarle the most efficient and Imost economical complement for
dr nestical ly-produced feedgra1r'5: .'i
o Although grain prices have fallen snmewr-at recently, imports of 50
million tons would cost $6 to 56.5 bill I nn.
should US (train be denied, 1'1oscOW could still satisfy much--ard perhaps
all-of its overall import
tolhe willinq suppliersi.
fo0r much of the
hOHVer, the USSR
feedgraif it needs.
uncommitted grain (mainly wheat) availap r.
The major exporters will likely have sore in to 11: million tons of
1
Apother R to 7 million tons would he aviailaahle
ad were
agfressivety tapped smaller suppliers *-
to divert grain from traditional channtls.
v Even with such premiums, the Soviet
would not much exceed $1 billion,
if the Soviets
willing to pay premiums
grain hill for marketing year 083
i i4 marketing
The probable net effect of a US embargo
decline in US grain exports.
year 1983 would be a
o in contrast to the last embargo, oppnr unities for the US to Offset
reduced Soviet purchases by penetratinlt other exporters' markets are
linlitPd- A1on-Soviet im1~~'s of gr8insa~eng-ctd reaterntitanslastayearand the
world's exportable 5UPp i
o The initial impact of an embargo 'wouldl be an increase in US stocks of
grain, particularly coarse grains.
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paying for Imports
The USSR will have a problem paying for its Purchases.
o Prices for oil and gold-.-two major hard currency earners--wf11
probably rentbin weak throughout Igfi2.
t
o Consequently, Moscow will probably contin6a to rely on short term
credits. Soviet traders are presently seeking new, lnnger..tem
credits with 27t1- to 360=day maturities aid are attempting to roll
over previously 'acquired credits now comiPng due.
o In addition, Moscow will probably again have to reduce imports of non-
agricultural commodities, which fell by hnut In percent last year.
Western suppliers could help ease the USSR' financial burden.
o Moscow might defer almost $4 billion in Hard currency payments that
would otherwise come due during 3982-84 ff it were able to obtain
liberal three.-year financing from the tIS'and other suppliers rather
than the terms that are likely to be available..
o The USC would probably have to provide t!i bankers with some guarantees
and interest rate subsidies to elicit the more liberal terms. Other
major exporters would have to follow suii or see their market shares
erode. ##
o In the process, the US might well expandl its share of Soviet imports.
At the other extreme,, the United States could even more actively than at
present discourage foreign governments from offeinq any form of credits
through official channels.
o if the 11S could convince other governments not to underwrite Soviet
grain purchases, Moscow would have to relly solely on ccxmnerci al
financial institutions for grain credit.
o in these circumstances bankers, who takd their cue from government
policy, would he reluctant to extend sutjh credits and would demand
high Interest rates--at least some percdntage points over the London
Inter-Rank Offered Rate (LIBOR) which id currently around 15
percent. Rankers would also not he lik4ly to offer maturities much in
excess of six months.
n As a result, the costs to the Soviets of their grain purchases would
be increased by almost $2 billion compa~ed with outlays tinder market-
deteroined conditions. _'
The LTA Options }
The existing LTA provides advantages to bosh Washington and Moscow.
n for the US, the agreement guarantees salles of 6-8 million tons of U.
grain regardless of Soviet demand; it oa fers US farmers the prospect
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Of Substantially greater sales in time of 1 relatively low soviet
dernnand. (In 1971, for example, 5 mi11ion"tons of the 10,5 million
tons the ti SR imported cage from the 1i. )! Finally, by providing the
prospect of a more stable anti assured for~1gn market it eliminates
some of the uncertainty of domestic production decisions.
o for the USSR. the agreement continues to provide access to the world's
largest and most stable grain producer anti the exporter best able to
meet Soviet needs for feeiigrains. Even sb, the US5R continues to
consider the US as a market of last resOrb, preferrinq to buy the bulk
of its grain from other major exporters,
Moscow will not be able to raise grain prndu :tion rapidly enough in the
1980s to avoid continuing larch imports.
o With average weather--and assuming no tecrunnlogical breakthr?ourlhs--
grain production through the told-1980s is' likely to average only about
215 million tons.
o An average crap of this size would fall a least 30 million tons belt
the total needed each year to sustain Soviet meat and livestock
programs.
Soviet purchases froth the 11S will likely conHinue even If the LTA lapses.
o Moreover, by allowintl the agreement to la se, the (IS would be giving
additional notice to the tISSR that US-Sov et relations cannot b
business as-usual until proraress 1 made n Afghanistan and Poland,
0 Without an agreement and in the absence o an embargo, however, the
USG would he uninvolved in determininq th amount of UIS grain the
Soviets purchased each year.
A new LTA or an extension would offer the opportunity to increase the
minimum purchase level and maintain or even increase the !IS share of Soviet
grain purchases.
o The USSR also has an incentive to raise t}1e upper limit above 8
million tons while pushing for guaranteed- del f very of purchased
grain, The United States. being the largest and most consistent world
grain exporter, could provide the USSR with a cushion against the
volatility of production in other grain e~porting countries.
o It would also consider our willingness to!negotiate a new agreement as
a move toward business-as-usual in commer'ial relations,
o But Western Europe and Japan would find t~e continuation of sanctions
on energy equipment combined with US-Soviet negotiations on a new LTA
Incongruous. j
-4-
CONFTDENTIAL
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