USSR: GOOD GRAIN CROP CUTS IMPORT NEEDS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97R00694R000500310001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 22, 2016
• Document Release Date: January 4, 2011
• Sequence Number: 1
• Publication Date: October 1, 1985
• Content Type: REPORT

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Intelligence
USSR:
Good Grain Crop
Cuts Import Needs
Secret
Secret
G/ 85-10267
SOV 85-10181
October 1985
copy 3 0 7
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USSR:
Good Grain Crop
Cuts Import Needs
This paper was prepared by
Office of Global Issues, and
Office of Soviet
Analysis
OG I
Comments and queries are welcome and may be
directed to the Chief, Strategic Resources Division,
Secret
G185-10267
SOV 85-1018/
October 1985
,,.~?"~E~;, Directorate of
f^
r _.,. u:,.,...,.,.
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USSR:
Good Grain Crop
Cuts Import Needs
Key Judgments With the 1985 crop season in the USSR now coming to a close, it appears
rri(ormation available likely that Moscow will produce some 200 million tons of grain, 20 million
as ~ i octobe, i98s tons above last year's estimated output and the best grain harvest since the
was used in this report.
1978 record of 237 million tons. Prospects are also good that the
production of foragesa major livestock feed-will reach an alltime high,
providing the basis for further growth in livestock production. As a result,
we believe that total agricultural output in 1985 will set a new record.
This favorable outlook means that Moscow would need to import only
about 25-30 million tons of grain during the marketing year that began on
1 July-far short of the record 53 million tons imported last year to meet
its estimated domestic grain requirements. Having already lined up about
12-13 million tons by the end of September, the USSR should face few, if
any, financial or logistic constraints covering the balance of the deficit.
Because of the many variables determining Soviet grain-buying policy,
however, we cannot yet rule out larger purchases. Moscow could take
advantage of a buyers' market to import above-minimum levels and
thereby expand meat production beyond plan or add grain to stocks.
The USSR's potentially best overall agricultural year ever carries with it
some favorable implications for General Secretary Gorbachev. The drop in
per capita food supplies that occurred in 1984 should be remedied this
year, giving new momentum to the Food Program. More quality food on
Soviet tables almost certainly would boost worker morale and productivity,
providing an immediate growth dividend to the overall economy. In
addition, the possibility of a cutback in grain imports of up to 50 percent
from last year means that Moscow could save as much as $2.5-3 billion in
hard currency outlays, thereby easing the negative repercussions from an
expected downturn in hard currency earnings this year. For example,
Moscow should now be in a position to make fewer cuts in imports of badly
needed high-technology goods than otherwise would have been necessary.
The prospect of a sizable drop in Soviet grain imports this marketing year
also suggests that US sales to the USSR may plunge by more than 50 per-
cent from last year's record of some 22 million tons. Indeed, Moscow has
iii Secret
GI 85-! 0267
SOV 85-10181
October (985
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purchased only 2.7 million tons of US corn, in contrast to last year at this
time when it had already lined up more than 12 million tons of both wheat
and corn. While some additional corn purchases are likely in the near term,
the Soviets could remain out of the US wheat market for several more
months given the global exportable surplus of wheat. Such action, however,
could cause US wheat prices f.o.b. Gulf ports-already at their lowest level
in seven years-to decline even further.
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[ ntroduction
Grain Crop Developments
Remaining Uncertainties
Mixed Prospects for Other Crops
The Need for Grain
Slack Grain Buying Activity
USSR: 1985 Prospects for Major Nongrain Crops
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Figure l
Estimated Soviet Grain Yields, Late September 1985
Estimated yields
I~ Above average
Average
Below average
^ Photo location
- Economic region boundary
bents
ea
rn, u.n.a sr.r,. co....m.m n,..or .,ooo.~:ee
m, m~?v?,non or e.ro.~., ~.r.~., ,.e ^mwow
Imo m, sos+u.~on. om? nwoe..y .,p...,menon
Soviet Union
NORTH ~ ,
Caucasus ~
~--~'" KAZAKHSTAN
,?3jor r~t'z1tr;-grcausriracy royctn
~~
~~ .al
r' l ?sed,~
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Secret
USSR:
Good Grain Crop
Cuts Import Needs
Introduction
Following a record year in 1983, total Soviet agricul-
tural production declined slightly in 1984 but was still
the second-best performance ever. A key factor in the
downturn was our estimate of an 8-percent drop in the
grain harvest (about 15 percent of the value of overall
agricultural output) to 180 million tons. On the
positive side, the production of meat, milk, eggs, and
vegetables reached new highs, while forage output
was second only to the previous year's record. In
addition, the sugar beet and potato harvests posted
their best showings since 1978 and 1979, respectively.
Last year's good agricultural performance notwith-
standing, Moscow lost ground on two key goals of the
Food Program-improving food supplies while reduc-
ing hard currency expenditures for imports of West-
ern farm products. We estimate per capita availability
of all farm products in 1984 fell by 2 percent while
meat availability was about flat. This occurred largely
because production growth was not sufficient to com-
pensate for both the increase in the Soviet population
and a decline in meat imports. As for hard currency
outlays, the bill for imported farm products last year
jumped 4 percent to $6.6 billion, reflecting record
grain purchases.
Based on the performance of the agricultural sector
thus far, we believe that total 1985 output will surpass
the previous record set in 1983.' This year's expected
growth of some 4 percent is predicated on our esti-
mate of continued growth in the livestock sector
arising from a grain crop of 200 million tons and
prospects for a record forage harvest-a major live-
stock feed. Livestock accounts for more than half the
total value of agricultural output.
Soviet agricultural policy under the new leadership of
Mikhail Gorbachev appears to be basically in keeping
with that of his three predecessors. The General
Secretary's public statements indicate that he contin-
ues to endorse the Food Program-which he played a
key role in formulating-and strongly supports:
? Reorganization of farm labor into small, semiauton-
omous units that operate on the basis of contracts
with state and collective farms and that are paid
according to what they produce.
?Self-financing-a system whereby farms finance
operations out of earnings-as a means of improv-
ing managerial accountability and initiative and
farm productivity.
? Private agriculture, recognizing that this sector
provides substantial quantities of quality foods, such
as meat, vegetables, and fruit-albeit with the help
of state resources.
Gorbachev's one major departure from past policy is
his push to shift resources away from direct invest-
ment in farms, such as the construction of large-scale
livestock complexes, toward development of the rural
infrastructure (storage, transportation, and housing)
and supporting industries, particularly agricultural
machine building. Recognizing that better storage
facilities and transportation could reduce considerably
the enormous waste and spoilage of Soviet agricultur-
al products, Gorbachev has made it clear that some
shifting of investment funds will be included in the
forthcoming five-year plan for the 1986-90 period.
Although by no means assured, implementation of
these measures, combined with what we anticipate
will be increasing imports of Western farm technology
and equipment, could markedly improve the USSR's
crop and livestock production and thus bring more
' Estimates of the value of total agricultural production are derived
from the gross output of crops and livestock products, less feed,
seed, and waste, using 1970 average realized prices.0
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Table 1
USSR: Grain Production a
1976-80
Average
Estimated n
1981 1
982
1983 1
984
1985
Total
205.0
158.0 1
80.0
195.0 1
- -
79.0
- -
199.0
By republic
RSFSR
113.9
78.0
99.5
112.0
94.5
112.0
Ukraine
43.1
--
38.2
-
42.0
39.0
44.5
43.0
Kazakhstan
27.5
23.8
19.5
-- _
-
25.0
-
17.5
- -
21.0
Other
20.5
__
18.0
_-
19.0
19.0
-
22.5
-
23.0
By crop
-- --
-
Wheat
--
99.7
-
81.0
-
90.0
- -
-
80.0
-
77.0
-
88.0
-
Coarse ~
95.1
68.0
80.0
102.0
92.0
-
99.0
Other d
10.2
9.0
10.0
13.0
10.0
12.0
a Measured in bunker weight, that is, gross output from the
combine, which includes excess moisture, unripe and damaged
kernels, weed seeds, and other trash. For comparison with US or
other countries' grain output, an average discount of 11 percent
should be applied.
n The USSR has not published overall grain production or yield
statistics since 1980. Total grain production in 1981 was unofficial-
ly reported at 158 million tons. Data for Kazakhstan for 1981 and
1982 are official. All other figures represent our estimates.
Coarse grain comprises rye, barley, oats, corn, and millet.
~ Other grains include pulses, buckwheat, and rice.
food to Soviet tables. The potential gains, however,
would be several years in the making and would be
dampened by more fundamental problems plaguing
Soviet agriculture. For example, farms will continue
to face chronic shortages of agrochemicals and equip-
ment, low labor productivity, and high production
costs for the foreseeable future.
Grain Crop Developments
With the crop season in the USSR now entering the
final stages, we believe that Moscow is headed for its
best grain harvest in six years. Prospects for well-
above-average grain yields have been partly offset,
however, by the fact that the area sown to grain this
year is the smallest in more than a decade. As a
result, given normal weather for the rest of the season,
the 1985 Soviet grain crop is likely to be about 200
million tons, 20 million tons larger than both last
year's estimated output and the estimated average for
1980-84, but well below the 1978 record of 237
million tons.2 The US Department of Agriculture
currently forecasts the crop at 190 million tons.
Estimates by other Western grain analysts range from
180 million to 200 million tons.
The 1985 crop season got off to a good start last fall.
According to data released by the USSR's Central
Statistical Administration (CSA), the area sown to
winter grains was up slightly from the previous year.
' The 200-million-ton figure is our best estimate of the 1985 Soviet
grain crop, but one that is subject to error. On the basis of our
analysis of best and worst case scenarios, there is a 90-percent
probability that the crop will come in between 190 million and 210
million tons, and a 75-percent chance that it will range between 195
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Meteorological data and satellite imagery indicated
that prewinter crop development was good everywhere
except in the southern Volga Valley and in areas
adjacent to the Black Sea, where dry soil conditions
caused poor germination. Despite severe tempera-
tures, we believe that a protective snowcover kept
winterkill below average. Winter grains-sown mostly
in the European USSR in the fall for harvest the
following summer-normally account for about one-
third of total Soviet grain production.
Overall crop prospects have remained bright this
spring and summer. Despite initial delays of two to
three weeks, planting of spring grains-sown in April
and May, and harvested in late summer and fall-was
completed largely on time, according to CSA data.
Crop vigor during the critical flowering period, as
viewed on Landsat imagery, was generally good to
excellent across the majority of the Soviet grain belt.'
In the southern European USSR, namely the
Ukraine, North Caucasus, and parts of the Volga,
Central Black Earth, and Central regions, this favor-
able outlook was confirmed by reports from the US
agricultural attache, who traveled there extensively
this year. Analysis of the amount of postharvest straw
residue corrob-
orates evidence from earlier Lan sat lmagery that
grain yields may well reach record levels in the
western Ukraine and parts of the Central and Volga
Vyatka regions. In addition, production of chemical
fertilizers during January-May was up 3 percent over
the corresponding period last year. Given adequate
moisture, properly applied fertilizer is the single most
important factor in raising Soviet grain yields.
There have been some developments, however, which
we believe cut the potential size of this year's grain
crop by some 25 million tons. Most damaging were
several bouts of adverse weather, but continuation of
the downward trend in total grain hectarage-begun
in the late 1970s-also contributed:
? In the Volga Valley and North Caucasus, below-
normal precipitation from last fall through this
spring coupled with drought conditions in May
caused estimated losses of about ] 0 million tons. A
small part of this damage was recouped in June,
when rainfall in the affected areas reached record
levels.
? We believe that hot, dry weather during the first
half of May in the central Ukraine cut output of
winter grains-then nearing the flowering stage-
by more than a million tons.
? An estimated 6 million tons of grain were lost in
Kazakhstan following intermittent sukhovey condi-
tions (hot, dry winds) from mid-June through early
July.
? Analysis of late August Landsat imagery indicates
that this year's corn crop probably was reduced by
about 1.5 million tons (1 1 percent) after being hit by
two sukhoveys earlier in the month, when many
plants were in the vulnerable pollination stage.
? Based on Soviet midyear economic data, we esti-
mate that the final harvested grain area will total
only 119 million hectares, the smallest since 1972
and 4 million hectares less than the average of the
past five years.' Assuming average yields, such a
decrease in hectarage produces a loss of some 6
million tons of potential grain production.
We estimate that, since the record grain harvest in
1978, the combination of adverse weather and declin-
ing grain hectarage has cost Moscow an average of
roughly 55 million tons of potential grain output
annually.
Remaining Uncertainties
Although all available evidence thus far suggests that
the 1985 Soviet grain crop will be the largest since the
record year of 1978, there remains some uncertainty
regarding its exact size. In the unlikely event that
? The cutback in grain area appears to be a consequence of
Moscow's policy to greatly expand the amount of arable land put
into fallow. Between 1977 and 1984, the harvested grain area of the
USSR declined steadily from a record high of 130.4 million
hectares to 119.6 million, while fallow increased from 11.7 million
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Figure 2
USSR: Contrasting Crop Conditions,
Volga Vyatka Region and Kazakstan
Muhispecird L;mdsat ima~,ery taken durinE the critical IlowerinK period shows that crop
prospects v,y rv markedly within the USSR this year. The hriEM red color of ~ruin(ields
in Gurkov Oblast i+ typical of healthy crops with high-yield potential. In ron trash. the
luck ul red color (rum lields in Kustan;ry Oblast indica les that crops there arc cu~ferin~
Ih~m secrrc nwisma? stress. As a result (final Krain yield. m this urea arc likely to be
well-below acerape.
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excessive rainfall occurs during the final few weeks of
the harvest campaign, combining operations could be
seriously hampered, leading to losses in both grain
quantity and quality. Moreover, because the harvest is
running about one week late, slightly more grain than
normal would be lost if an early snowfall precluded its
completion. The latest Soviet harvest progress report
indicates that a maximum of some 10 million tons of
grain are at risk.
Other factors could boost this year's grain production
above 200 million tons, perhaps by as much as 10
million tons. We estimate that the amount of grain
growing on land that was previously fallow increased
again this year, continuing the upward trend begun in
the late 1970s. Although fallowing sacrifices produc-
tion in the year in which the land is idled, it usually
results in higher, more stable yields in subsequent
years as long as the fallowed hectarage is maintained
in the crop rotation schedule.
In addition, Moscow almost certainly will realize
some benefit from alarge-scale program in intensive
wheat cultivation that is being undertaken on some 17
million hectares-nearly 15 percent of the area sown
to grain. According to
Soviet press reports, Moscow has purchased large
amounts of Western insecticides, herbicides, and fun-
gicides in an attempt to raise average wheat yields by
I ton per hectare on the intensively cultivated area in
the RSFSR, Kazakhstan, and the Ukraine. Because
of the experimental nature of the program, we have
been very conservative in incorporating potential
gains into our 200-million-ton figure. We believe that
problems with deliveries of the chemicals to farms and
with field applications will hold this year's results well
below the planned increase of 16-18 million tons. But
even so, we judge that sizable gains of 5 million tons
or more are possible because many of the test areas
experienced favorable growing conditions this year.
Mixed Prospects for Other Crops
Current prospects for the major nongrain crops in the
Soviet Union-sunflowers, sugar beets, vegetables,
potatoes, and cotton are mixed. We estimate above-
average harvests of sugar beets, vegetables, and pota-
toes this year. Output of sunflowers and cotton should
Table 2
USSR: Nongrain Crops
Area
(million
hectares)
Yield
(quintals
per hectare)
Production
(million
metric tons)
Sunflowers
1980-84 average
4.3
11.5
4.8
____
1983
4.3
12.5
5.1
1984
4.3
1 L8
4.5
1985 estimate
4.1
11.5
4.7
Sugar beets
1980-84 average
3.6
214.0
76.1
1983
3.5
234.0
81.8
1984
_-
3.5
246.0
85.3
1985 estimate
3.5
242.0
84.0
Vegetables
__
1980-84 average
1.8
]59.0
29.1
1983
1.8
161.0
29.5
1984
1.8
170.0
31.5
1985 estimate
1.8
167.0
29.5
Potatoes
1980-84 average
6.9
112.0
77.1
1983
6.9
120.0
82.9
1984
6.9
125.0
85.5
1985 estimate
6.9
122.0
84.0
Cotton
1980-84 average
3.2
29.2
9.3
1983
3.2
28.9
9.2
1984
3.2
25.8
8.6
1985 estimate
3.4
27.5
9.3
rebound from poor showings in 1984, but the sunflow-
er crop is still likely to be below the average of the
past five years, and only average cotton production is
expected.`
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The Soviet "Intensive Technology"FJjort
The USSR has undertaken a massive experimental
program in intensive wheat production this year.
Intensive technology as defined by the Soviets in-
cludes manylarm management practices performed
routinely in the West. These include using high-yield,
lodge resistant varieties; proper placement of hearty,
clean seed; integrated pest management; planting
where possiblelollowinglallow; working out el~cient
transportation routes and schedules; and the use of
agrochemicals, includinglertilizers, plant growth reg-
ulators, and pesticides. The program commenced in
1984 on selected test sites in the Ukraine, North
Caucasus, and Central Chernozem region. This year,
according to Soviet press reports, it was expanded
geographically to include Kazakhstan and West Sibe-
ria, and the technology was applied to 6.4 million
hectares of winter wheat and 10.5 million hectares of
spring wheat. Preliminary results have been impres-
sive, with intensively cultivatedlields reportedly
yielding as much as one and one-half to two times
more grain than those grown by traditional Soviet
methods. ~
Despite the potential benefits of the program-as
outlined in numerous training seminars conducted
recently.for Soviet.farmers-the transition to this
high input form of grain production has not been
smooth. Manylarm managers, unconvinced of the
By comparison, the outlook for selected forages-hay,
haylage, silage, and grassmeal-is excellent. Accord-
ing to CSA data, forage procurements as of late
September were running 5 percent ahead of the
record 1983 pace, overcoming a gap of nearly 30
percent that existed in early July. Given this perform-
ance, we believe that, unless the weather deteriorates
markedly in the coming weeks, forage production will
set a new record this year. Since harvested forages in
the USSR comprise slightly more than one-half of the
nutrient content of the livestock ration, the outlook for
feed supplies is very good.
merits of intensification, have stonewalled its imple-
mentation, according to Soviet press reports. Even ~
this problem is overcome, it is not yet clear whether
the Soviets will be able to manage the inputs ejli-
ciently enough to assure a large net gain over the long
term. Soviet technical journals indicate that much of
the equipment in use is not designed to apply the
agrochemicals properly, and perennial transportation
problems have either prevented delivery of materials
altogether, or delayed their arrival past the time of
optimal application.
Nevertheless, the Soviet leadership, including Gener-
al Secretary Gorbachev, has endorsed the intens~ca-
tion effort and plans a sizable expansion of the
program over the next few years. In a recent speech
given at an economic conference in Tselinograd Ob-
last, Gorbachev stated that some 35 million hectares
o,1'grain crops, including 4 million hectares of corn
and the remainder mostly wheat, will be cultivated in
1986 with the use of "intensive technological proces-
ses. " He also said that these processes would em-
brace no less than 60 million hectares "in the very
nearfuture."Although Moscow has serious problems
to overcome if the program is ever to approach itslull
potential, Soviet grain production undoubtedly will
benejit.from such expansion.
Soviet Grain Requirements and Imports
The Needlor Grain. Amuch-improved grain crop this
year, coupled with Moscow's apparent success in
restraining growth in the use of grain for livestock
feed and prospects for a record forage crop, means
that Soviet grain import needs during the marketing
year (MY) that began on 1 July will be down sharply
from a year ago. During MY 1984/85 (1 July 1984-
30 June 1985), the USSR imported roughly 53 million
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Fi~!urc 3
USSR: Cumulative Procurements of
Selected Harvested Forages, 1980-85`~
., A, ,~f '3 Scpiunbcr.
^Unc AJuer.nn nl Iced unit. amruim the nwneni eon~en
tons of grain, a new record. Assuming a 200-million-
ton grain harvest this year, Moscow would be only
some 25-30 million tons short of the quantity of grain
we believe necessary to maintain recent levels of seed,
food, and industrial use, and to sustain growth in meat
and dairy products.b This figure could be somewhat
less if livestock feeding efficiencies continue to im-
prove, as we believe likely.
The USSR's need for grain imports is determined
largely by the size of the domestic grain and forage
crops and decisions regarding the output of livestock
? Because the USSR measures grain production from the field
before cleaning and drying, our bunker-weight estimate of output
must be reduced by an average of 11 percent to be comparable with
the international standard weight measure for seed, food, imports,
and other items. The discount varies according to moisture condi-
tions before and during harvest and according to crop size and thus
can become either larger or smaller than average as the season
advances. Our current estimates indicate astandard-weight crop of
roughly 180 million tons (given abunker-weight crop of 200 million
Figure 4
Grain Exports to the USSR, 1976/77-1984/85
1976/77 81/82 82/83 83/84 8485
1980%81
Eun>~can
Community
products. Soviet data published earlier this year con-
firmed that, while continued growth was expected, the
original ambitious 1985 targets for meat and milk
production were revised downward, thereby cutting
Moscow's estimated grain requirements by some 4-5
million tons.'
Moscow's policy regarding domestic grain stockpiles
can also affect the amounts of grain it imports
annually. Our estimates of the 1984 grain crop and of
MY 1984/85 grain imports and usage indicate that
some 5-10 million tons of grain probably were added
to stocks last year. The last major addition to grain
stocks occurred following the record grain crop in
' Soviet meat production this year is now targeted at 17 million
tons, down from the 18.2-million-ton figure outlined in the Food
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Estimating Soviet Grain
Requirements
Just as our estimate of Soviet grain production is
subject to uncertainty at this point in the crop season,
so is our estimate of Soviet grain requirements,
especially the amount of grain needed for livestock
feed. Our estimates of grain quantities required for
seed, food, industrial purposes, and export have been
fairly reliable. Estimates ojgrain for feed are based
on Soviet literature defining the amounts of grain and
roughages needed to produce planned levels of meat
and other livestock products, as well as to support
to hold down imports of grain. The leadership, how-
ever, is not likely to let the forward momentum
generated over the past few years in the livestock
sector slow. Gorbachev clearly recognizes the need for
increased labor productivity throughout the economy
and sees improved food supplies as an important
factor in achieving that goal. Thus, we believe that
Soviet grain imports during MY 1985/86 will not fall
Slack Grain Buying Activity. Soviet grain purchases
thus far in MY 1985/86 are running well behind last
year's record pace. By the end of September, Moscow
had lined up only some 12-13 million tons of grain for
growth in livestock herds. Such estimates assume
therefore, that the mix ojfeed does not change.
hipment during the current marketing year, com-
pared with about 24 million tons a year ago. More-
Our understanding of the linkages between feed in-
puts and livestock output, however, is constrained
significantly by the paucity of published data for the
current year. Moreover, because Soviet feed rations
are deficient in protein and other important nutrients,
Western practices cannot be used to estimate feed
requirements.
We know that the mix of feed also changed somewhat
during 1980-84. The leadership's campaign to cut the
inefficient use of costly grain and to increase produc-
tion of harvested forages succeeded in lowering the
share of grain in the total feed ration from about 30
percent in 1980 to about 28 percent in 1984. This in
turn led to a more efficient use of feed as well as
improved animal productivity-more meat and milk
per animal. Should this trend continue-a possible
scenario given the excellent outlook for forage pro-
duction-our calculation of the amount of grain
needed for feed this crop year would be too high,
perhaps by several million tons.
1978. Our calculations suggest that most of those
reserves were withdrawn during the 1979-82 period.
At the same time, one of the chief aims of the Food
Program-launched by Brezhnev in 1982 and strong-
ly supported by Gorbachev-is to reduce imports of
Western farm products, and this can serve as a force
over, the USSR reportedly has bought only 2.7 mil-
lion tons of US corn, in marked contrast to last year
at this time when total purchases from the United
States already stood at more than 12 million tons of
both wheat and corn. Moscow's abstention from the
US wheat market comes despite high-level Soviet
assurances given to Agriculture Secretary Block in
late August that it would buy the remaining 1.1
million tons of wheat called for under the US-USSR
grain agreement before 1 October. As a result, Mos-
cow is now no longer in strict compliance with the
terms of the second year of the accord.
The USSR's reduced grain-buying activity probably
reflects more than just lower import requirements.
World grain markets are soft-prices are at their
lowest level in several years, and exporters are anxious
to sell off burdensome stocks-thus putting Moscow
in a good bargaining position. Moscow's ability to
play the market is somewhat limited, however, by
various Long-Term Grain Agreements (LTA) and
protocols with the United States, Canada, Argentina,
France, Brazil, and Eastern Europe that commit the
USSR to buy some 20-23 million tons of grain in MY
1985/86.6
a Recent actions indicate that Moscow may be readjusting its
thinking on LTAs in light of the growing competitiveness of world
grain markets and its own long-term hard currency outlook. For
example, in negotiations with Argentina, which is competing for a
larger share of the Soviet market, Moscow has resisted pressure to
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The slow buying to date does not necessarily mean
that total Soviet grain imports during MY 198586
will fall to the 25- to 30-million-ton minimum implied
by estimated domestic needs. Purchases of this magni-
tude are already virtually assured because of LTAs
and recent trading patterns that suggest the Soviets
probably will buy another 6 million tons of grain
outside LTA obligations from countries such as Ar-
gentina, Australia, France, India, and China. Howev-
er, given the favorable market situation for grain
buyers, Moscow could choose to import even larger
amounts of grain and thereby expand the livestock
sector beyond plan or add more grain to stocks. Even
so, estimates of up to 41 million tons by grain traders,
who generally see a somewhat smaller Soviet grain
crop, appear, in our view, to be on the high side at this
time.
The USSR should encounter few constraints-either
financial or logistic-importing the amount of grain it
needs this marketing year. Although hard currency
earnings probably will be down about 10 percent as a
result of lower oil and gas revenues, Moscow may be
able to offset part of these losses through increased
exports of gold, diamonds, and platinum. In addition,
world grain prices are soft, Western credits and loans
are readily available, and grain imports from India
and China-perhaps 2-3 million tons- are largely on
a barter basis.9 As for logistics, the massive grain
import program in MY 1984/85 proved that the
Soviets have greatly reduced the transportation bot-
tlenecks that previously curtailed grain shipments to
the USSR.
Implications
The prospect of a sizable drop in Soviet grain imports
during the current marketing year means that US
sales to the USSR will fall well below the record 22.3
million tons exported in MY 1984/85. While some
additional Soviet purchases of US corn are likely in
the near term, Moscow could remain out of the US
wheat market for several more months given the large
global supplies of exportable wheat. If so, US wheat
prices f.o.b. Gulf ports-already at their lowest level
The USSR is trying to expand its soft currency or barter grain
trade with these two countries, but neither can presently guarantee
long-term availability of exportable grain0
since 1978 in nominal terms (not adjusted for infla-
tion) and since the early 1930s when adjusted for
inflation-could decline further. Moreover, total US
corn exports during the marketing year could be
adversely affected should Moscow begin substituting
low-priced wheat-from the United States or other
exporters-for corn.
On the Soviet domestic front, the USSR's potentially
best agricultural year ever means that the drop in per
capita food supplies that occurred in 1984 should be
remedied this year. Performance of the livestock
sector through August indicates that the revised 1985
targets for livestock production may well be exceeded
because of the better-than-expected feed situation.
Output of both milk and eggs is running 2 percent
ahead of last year. Moreover, domestic meat produc-
tion-stimulated in part by the good grain and forage
crops-could reach a record 17.3 million tons this
year, and Soviet meat-purchasing activity to date
suggests that imports may equal the 1983 high of
nearly a million tons. Under these circumstances, per
capita meat availability would go up about 2 percent.
The good showing of the agricultural sector also
carries with it some favorable political and economic
implications for General Secretary Gorbachev. This
year's good crop performance will give new momen-
tum to the Food Program, thereby restoring credibil-
ity to the leadership's commitment to improving the
consumer's diet. More quality food on Soviet tables
almost certainly would boost worker morale and
productivity, providing an immediate growth dividend
to the overall economy. Sizable benefits over the long
term, however, will depend partly on continued suc-
cess in the farm sector, a situation that is by no means
certain. Meanwhile, the potential for a cutback in
grain imports of up to SO percent from a year ago
means that the USSR could save as much as $2.5-3
billion in hard currency outlays. Such savings would
help ease the negative repercussions from the expect-
ed downturn in hard currency earnings this year. For
example, Moscow should now be in a position to make
fewer cuts in imports of badly needed high-technology
goods than otherwise would have been necessary.
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Appendix
USSR: 1985 Prospects for
Major Nongrain Crops
Prospects for the major nongrain crops in the Soviet
Union sunflowers, sugar beets, potatoes, vegetables,
and cotton-are mixed as of early September. We
estimate that production of sugar beets, vegetables,
and potatoes will be above the average of the past five
years. The sunflower and cotton crops should fare
somewhat better than last year's poor harvests, but we
expect sunflower production to be slightly below
average, and cotton output probably will rebound only
to average levels.
Sunflowers
We estimate the 1985 sunflower harvest in the USSR
at 4.7 million tons, a slight improvement over last
year's output of 4.5 million tons but below the 1980-
84 average of 4.8 million tons. Increased plantings of
improved varieties coupled with better cultivation
techniques should boost output despite some problems
caused by adverse weather and a decrease in total
sown area. Cool summer temperatures and above-
normal precipitation in the Ukraine were conducive to
plant disease, while sukhovey conditions in early and
mid-August cut yields in the North Caucasus. The
Soviets, however, increased the area of sunflowers
cultivated under industrial technology and tripled to
1.5 million hectares the area occupied by disease-
resistant hybrids, according to Soviet press reports.
Sugar Beets
Sugar beet production this year in the Soviet Union is
likely to be about 84 million tons, near the
85-million-ton crop harvested in 1984, and considera-
bly above the average of the past five years of about
76 million tons. Adequate precipitation, the absence
of extreme temperatures, and more extensive applica-
tion of improved cultivation techniques favor good
yields in most areas.
The Ukraine normally
output.
Potatoes
We anticipate a good potato harvest this year of some
84 million tons, well above the 77-million-ton average
for 1980-84 but below last year's output of about 86
million tons. The weather has been generally favor-
able in the European USSR-the principal potato-
growing region of the country-with mild tempera-
tures and sufficient rains. Nevertheless, excessively
wet soil conditions during June and July in parts of
Belorussia, the Central Black Earth and Volga Vyat-
ka regions, and the Ukraine almost certainly reduced
potential yields somewhat.
Vegetables
Because of good precipitation and generally mild
summer temperatures in the key producing areas of
the Ukraine and the RSFSR, we estimate 1985
vegetable production in the USSR to be 29.5 million
tons. A crop of this size would be slightly above
average but would fall short of the 1984 record of
31.5 million tons. Preliminary harvest reports collect-
ed by the US agricultural attache in Moscow also
suggest a downturn in production from a year ago.
Cotton
We believe that 1985 production of raw cotton will
total 9.3 million tons, significantly larger than last
year's 8.6 million tons, but still only equal to the
1980-84 average. We attribute the expected growth in
output to both better yield prospects as well as a
record sown area-estimated to be 3.4 million hect-
ares. According to Soviet press reports, planted area
was increased in Uzbekistan and Turkmenistan-the
two largest producers. Sowing this year was delayed
25X1
25X1
25X1
25X1
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slightly by a late spring, but favorable weather subse-
quently promoted good crop germination and develop-
ment. The absence of extremely hot temperatures
during the critical stage of boll formation-the main
cause of last year's poor harvest-augurs well for
higher yields. Even so, increasing salinity levels in the
soil, resulting from poor irrigation practices, are likely
to hold down yields.
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