AN UPDATE ON SOVIET GRAIN PURCHASE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000507420001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: December 2, 2009
• Sequence Number: 1
• Publication Date: March 11, 1985
• Content Type: REPORT

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Central intelligence Agency
Directorate of Intelligence
11 March 1985
An Update on Soviet Grain Purchases
Summary
Based on our 1984 grain crop estimate of 180 million metric tons, we
projected late last summer that the USSR would be short some 45-50 million
tons of the grain required to maintain seed, food, and industrial use at
recent levels; to achieve planned 1984 output targets for meat, milk, and
eggs; and to continue expanding output of livestock products into 1985. The
USSR began lining up grain imports early in the July 1984-June 1985 marketing
year. We believe that Soviet purchases for the marketing year are now
approaching a new high of 50 million tons. The Soviet port and rail systems
appear to be coping with record nbnthly shipments of grain. Congestion
appears to be moderate.
This winter's unusually cold weather, however, apparently increased
livestock feed requirements. Grain, which is more easily transported than
roughages, is in particular demand. The tSSR still has the option of boosting
grain purchases and shipments to 55 million tons or even higher if purchases
begin soon. At present, Nbscow does not appear to be moving in this
direction. If, as we believe likely, exports to the iISSR came to about 50
million tons in the current marketing year, the cost will be an estimated $7
billion.
Even with no additional purchases, the late 1984 slowdown in output of
livestock products will be offset, at least partially, later this year as new
feed supplies from domestic production become available. Although the 1985
meat production target--18.2 million tons, 1.5 million tons more than was
produced in 1984--is probably out of reach, an increase of several hundred
thousand tons can be achieved if the grain and roughage crops are average or
better.
This memorandum was prepared by
Economy Division, SOYA, with contrib
Division, SOYA, Econani
tions fran
es Division, OGI, and
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Soviet Economy
Geography Division, OGI. Convents and queries are welcome and may be directed
to Chief, Soviet Economy Division
ON FILE Department of Agriculture RELEASE
INSTRUCTIONS APPLY
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Grain Trade Activity
To date--two-thirds of the way through the 1984/85 marketing
year--we have confirmation that Moscow has bought at leerst 40
million tons of grain, and Soviet
commitments may actually be approaching 50 million tons (see
table 1).
The United States. Soviet purchases of US grain now total
19.7 million tons for the marketing year--nearly double last
year's purchases.
Canada. Canadian sales stand at 6 million tons. Under the
long-term agreement (LTA) the USSR is committed to buying an
additional 1 million tons by the end of July.
Argentina. In addition to reported sales of 3 million tons
of new-crop wheat, Argentine grain traders reportedly have
sold 1.5 million tons of wheat since late January and 4
million tons of new-crop coarse grains for delivery from
April through June.' Problems in shipping such large
quantities of grain from its ports, however, probably will
prevent Argentina from fully meeting these commitments by
the end of the marketing year.
European Community. Sales of EC grain to the USSR now
reportedly stand at 5-6 million tons, up at least 30 percent
from last year's level.
September under the agreement for calendar 1984.
1 In addition, 1.4 million tons of coarse grains were shipped during July-
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USSR: Grain Purchases for Delivery During the July-June
Marketing Year
(million metric tons)
1983/84 1984/851
Total 32.0 40.3-49.4
United States 10.4 19.7
Canada 6.3 6.0-7.0
Argentina 6.9 4.4-9.9
European Community 3.8 5.0-6.0
Australia 1.7 2.1
Eastern Europe 2.0 0.4-2.0
Other 0.9 2.7
1 The lower figure represents confirmed grain purchases; the
higher number reflects probably commitments.
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Australia. The USSR bought 750,000 tons of wheat early in
the marketing year and recently purchased 950,000 tons of
wheat and 400,000 tons of barley.2
Eastern Europe. Although the only confirmed Soviet
transaction is for 400,000 tons of Polish rye, East European
countries, mainly Hungary and Romania, have traditionally
supplied about 2 million tons of grain to the USSR.3
Other. Moscow also has sought grain from several smaller
suppliers--Thailand, Sweden, and Austria--and from non-
traditional sources such as China and India. Total
purchases from these sources stand at about 3 million
tons.
Coping With Heavy Imports
According to USDA estimates, grain shipments to the USSR
were close to 5 million tons per month during September through
November, resulting in record monthly deliveries of grain to the
USSR during the period October-December.4 Soviet grain ports
apparently have been offloading and clearing grain inland at
higher rates than during the same months in the 1981/82 marketing
year, when exports to the USSR reached 45 million tons.
the average stay
(turnaround time) for ships that were departing Soviet grain
2 Same of the barley may be of New Zealand origin.
3 The Polish rye is in exchange for Soviet wheat to supplement lagging Soviet
rye production.
4 We assume an average travel time of one month between exporting countries
and Soviet ports.
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ports in early February was 28 to 35 days. An average stay
slightly longer than this was recorded in December 1981, when
monthly grain deliveries at the country's ports and rail border
crossings hit a December record of 3.7 million tons.
As in previous periods of high grain imports, the Soviets
are transshipping some of their grain through major West European
ports such as Hamburg and Antwerp. Cargoes delivered there are
picked up by shallow-draft Soviet vessels that take the grain to
facilities in secondary ports--such as Kaliningrad on the Baltic
and Kherson on the Black Sea. These secondary ports cannot
handle the 60,000-ton bulk carriers that carry the grain across
the Atlantic. After ice has cleared from Soviet inland waterways
in March and April, the grain can be transshipped in small
vessels from West European ports directly to destinations in the
USSR's interior.
Severe ice conditions by early February, however, were
inhibiting operations in Baltic ports. The Soviets are therefore
sending a higher than usual proportion of grain ships to the
Black Sea. Consequently, the tonnage of grain that can be
offloaded and moved inland probably will be reduced during
February and March, the two months in which grain operations are
most seriously constrained by weather and other seasonal
factors. In addition, as a result of problems moving the grain
inland, port congestion is expected to increase during the
period. Although USDA is currently estimating exports to the
USSR for January and February (for arrival at Soviet ports during
February and March) at an average of 4.7 million tons per month,
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we believe exports will be closer to 4 million tons a month since
actual shipments generally are somewhat less than anticipated.
This would still be a hectic pace for this time of year-and 25
percent higher than during the corresponding months in the
1981/82 marketing year. The volume of grain actually reaching
the USSR in February and March could even be somewhat less,
because a larger share of imported grain is coming from Argentina
or is being transhipped into the USSR through Western Europe,
thus increasing the travel time to Soviet ports to more than one
month.
Except for an initial shortage of freight cars at the ports
in October, the Soviet rail system apparently has so far not had
great difficulty in moving the grain inland. Improvements in the
transport system's capability to move both domestic and imported
agricultural products during the past five years undoubtedly have
eased some of the bottlenecks that curtailed grain shipments
previously.
Nonetheless, unusually cold weather during December and
heavy snows in January have taken their toll on the Soviet rail
system. In January, the rail system handled 20 million tons of
freight less than planned, a shortfall of more than 5 percent.
Thus, it is uncertain whether the Soviets can move imported grain
inland at the rate demonstrated earlier this marketing year. The
northern ports are becoming ice-locked, southern ports are
experiencing increased congestion, and the railways-are straining
to meet schedules despite slowdowns caused by freezing cargoes
and drifting snow.
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Factors Affecting Domestic Grain Demand
Any major transport problems--either at the ports Qr moving
grain inland--could affect livestock product output this year.
Although meat, milk, and egg production reached new records in
1984, meat output did not reach plan (see tabulation). Feed
apparently was in shorter supply in late 1984 than it was in late
1983.
1983
1984
Plan
Actual Difference
Plan
Actual Difference
Meat 16.2
(million tons)
Milk
16.4
+0.2
16.8
16.7
-0.1
(million tons) 94.0
96.4
+2.4
97.1
97.6
+0.5
Eggs
(billions) 71.3
74.7
+3.4
74.7
76.0
+1.3
During January-November, production of meat on state and
collective farms--which acount for two-thirds of the total--was
running five percent ahead of the comparable period in 1983.
Prospects for meeting, perhaps even exceeding, planned output
goals for meat, milk, and eggs appeared good. The less-than-
anticipated gains in livestock product output, however, may have
not resulted only from weather-related problems in December.
Production of meat by the private sector, which accounts for
about 30 percent of the total, could have dropped absolutely as a
result of (1) individuals choosing to produce more meat under
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contract to farms in exchange for feed and other assistance--the
individual sales--or (2) individuals choosing not to produce at
all, indicating a lack of success in the government campaign to
encourage private meat production and ensure the availability of
livestock feed. Private farmers reportedly were having serious
difficulty obtaining feed during November and December.
At the same time, the unusually cold weather this winter--
especially in December when temperatures averaged 70 C
below normal--increased feed requirements substantially.
Soviet authorities report that under normal weather conditions
feed consumption per unit of output is 45 to 50 percent higher
during December-March than during April-November. In more severe
weather, the difference can be as much as 70 percent. The severe
cold last December raised the demand for feed supplies and
probably reduced animal productivity--weight gain per animal and
milk yield--more sharply than usual. In contrast to the current
situation, milder-than-normal winters in 1982/83 and 1983/84
reduced feed requirements. Indeed, the mild 1983/84 winter
(combined with the excellent 1983 forage harvest) enabled animal
productivity to increase instead of registering the usual winter
decline.
End-year 1984 statistics also revealed the slowest growth in
livestock inventories since 1980, perhaps in part a response to
the additional need for feed. The number of cattle was up by
only 1.2 million, half of the increase registered during 1983;
hog numbers were down by almost 1 million, the first reduction in
three years and nearly double the combined cuts that occurred in
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1980 and 1981; and sheep and goat numbers dropped back to the
1982 level. Because hog rations consist largely of grain and
other concentrated feeds, this reduction in inventories offset in
part the additional need for concentrates generated by the
cold.
Although temperatures moderated in January, most areas of
the USSR were 20 to 3? C below normal until late in the month.
Soviet officials were clearly worried. Meeting at the end of the
month, the RSFSR Council of Ministers pointed to falling animal
productivity while criticizing the incorrect use of feed, the
failure of feed mills to operate adequately, and the disruption
in fuel and oil deliveries to farms.
Outlook
The additional requirements for grain and other feeds
arising from the severe cold cannot be estimated with any
precision as yet. Because grain can be used in place of
roughages, which are bulky relative to weight and seldom moved
long distances, grain requirements will be increased as roughage
supplies--which generally cannot be replenished until new growth
begins in spring--are depleted. The intense cold so far,
however, could have raised grain requirements by as much as 5
million tons over our original projection of 45-50 million
tons. The original projection is based on a grain crop estimated
at 180 million tons. Recently a propaganda lecturer in Leningrad
claimed the 1984 grain crop was 186 million tons. If his
statement proves true, our projections of grain needs may be too
high and Moscow may be using some imported grain to add to
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stocks. The US Department of Agriculture, on the other hand,
estimates the USSR's 1984 grain crop at 170 million tons and
imports at 50 million tons, implying a stock drawdown.
Farms, however, are coping reasonably well. Preliminary
statistics on state and collective farm activity in January
indicate that growth in meat production for the month reached the
8 percent rate of January 1984. Some increase in slaughter of
hogs and poultry, combined with newly authorized latitude for
farms in selected areas to cull barren cows, not only reduced
pressure on available feed supplies but maintained the movement
of meat and poultry to processing plants.5
Moscow still has the option of boosting imports to the
maximum level its port and rail systems can handle. Shipments at
an average rate of 5 million tons ,a month during March-June--a
level that appears feasible given the transport sector's recent
performance--would permit exports to the USSR for the current
marketing year to reach 55 million tons. Competing needs for
railcars, particularly this summer when the last of these
shipments would be arriving, are likely to deter Moscow from
sustaining such a level into June, however. Traditionally, the
pace of grain exports to the USSR slows in June (for July
arrival) so that grain cars can be made available to support the
current year grain harvest.
5 Until recently all farms were required to have seven separate off-farm
authorizations before sending a cull-cow to slaughter. Last year several
regions, including the Tatar ASSR, authorized farms to carry out culling
independently, with beneficial results.
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If Moscow is to move in this direction, however, purchasing
would have to revive soon. 25X1
the USSR is expected to reenter the US market shortly for 25X1
2 million tons of corn for shipment in April and May. Although
such purchases could reflect an increased need for grain
supplies, Moscow may be anticipating that Argentine shipping
facilities will be unable to fully meet a Soviet demand for
coarse grain shipments of 4 million tons during April-June.
an Eksportkhleb official
indicated that his organization wishes to avoid the excessive
handling costs that occurred last year due to congestion at
Argentine ports. We therefore believe it likely that exports to
the USSR for the 1984/85 marketing year will be about 50 million
tons (see figure 1).
Grain purchases of 50 million tons will cost Moscow
approximately $7 billion, about $2 billion more than in the
1983/84 marketing year. The cost would have been higher if
trends in the price and mix of grain imports had not worked in
Moscow's favor. While wheat prices have remained relatively
constant over the last few years, the USSR is buying coarse grain
at lower prices than in the last marketing year due to a bumper
US crop in 1984 and prospects for a good Argentine crop this
spring. The USSR has also reduced its costs this year by
increasing the share of coarse grains--generally less expensive
than wheat--in its total purchases.
Even if Soviet grain purchases do not rise above the level
that we currently estimate, the late 1984 slowdown in production
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of meat, milk, and eggs will be offset at least partially this
spring and summer as pasture becomes usable and feed from
domestic grain and roughage crops becomes available. In
addition, because animals in general went into the winter in good
condition, former productivity levels should be regained quickly
with warmer weather. Although the planned 1985 meat production
target--18.2 million tons, 1.5 million tons more than was
produced in 1984--is probably out of reach, an increase of
several hundred thousand tons can be achieved if the grain and
roughage crops reach the 1976-80 average level or better.
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