WORLD GRAIN; SOVIET PURCHASES AND THE SANCTIONS ISSUE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83M00914R002700090019-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 9
• Document Creation Date: December 20, 2016
• Document Release Date: March 21, 2007
• Sequence Number: 19
• Publication Date: January 1, 1982
• Content Type: REPORT

Approved F 0 ~L1a &e. 2L 3/21: CIA-RDP83M00914ROO270000019-8 25X1
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
World Grain: Soviet Purchases and the Sanctions Issue
Summary
,he international grain market has remained quiet since 13 December 1981
when Poland declared martial law. Although Moscow and Warsaw are relying
heavily on imports of Western grain to cover domestic production shortfalls,
they have already arranged for at least 85 percent of their requirements
through June 1982. That coupled with great reluctance on the part of other
grain exporters to abrogate commitments suggests that chances of an effective
embargo on grain to the Soviet Union are remote. 25X1
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
CONFIDENTIAL
World Grain: Soviet Purchases and the Sanctions Issue
The international grain market has greeted calmly the possibility of an
embargo of grain sales against the USSR and Poland. Grain prices have changed
little during the past.few weeks, and no unusual buying activity by the
international grain companies has been detected. The tranquility results from
a consensus that no embargo is imminent and that the chances of an eventual
embargo are remote. Non-US exporters hold sufficient grain to cover short-
term Soviet needs in the event of an unilateral US embargo. Only very heavy-
handed Soviet involvement 'n land would unite other exporters into an
effective embargo.
25X1
I
Soviet and Polish Grain Purchases
Both Moscow and Warsaw are using Western grain to cover domestic
production shortfalls. Indeed, Poland and the USSR have already arranged for
at least 85 percent of their combined expected import re uirements for the
grain marketing year (MY) ending 30 June 1982.1 25X1
The Soviet Union experienced an unprecedented third consecutive harvest
failure in 1981. Although no official announcement has yet been made, the
grain crop is expected to be only about 170 million tons--65 million tons
below plan. In response, we estimate the Soviets will import a record 45
million tons of grain--the maximum amount their ports can handle--during the
current marketing year. They have already lined-up through purchases and
cammitments 39 million tons of grain from all sources (see Table). During
July-December 1981, the USSR lifted almost 22 million tons, with shipments in
September surpassing 4 million tons. This record rate has significantly added
to port congestion. Since November, ship offloading times at Baltic Sea ports
have increased by 5 to 10 days to an average 30 to 40 day wait. Moscow has
taken delivery of about half of the 12.5 million tons of ought so
far, with the remainder to be shipped before April. 25X1
Poland's grain harvest last fall rebounded after two disastrous years,
reaching an estimated 20.5 million tons. Large increases in domestic
production of potatoes and sugar beets-important sources of livestock
fodder--further reduced the need for imported feed grains. Poland is expected
to cut back grain imports by roughly 20 percent from last year's record level
to about 6 million tons. Despite difficult times at home, the Soviet Union
has promised to deliver 100,000 tons of grain to Poland. France, Austria, and
Canada have provided Poland with credits for the purchase of about 2.5 million
tons of grain. In addition, the EC has approved the sale of 458,000 tons of
qrain to Poland at subsidized prices, some of which probably will be financed
by the French loans. During July - December 1981, Warsaw imported one million
tons of US grain. The US suspension of export credits after the imposition of
martial law will prevent from receiving another 1.6 million tons of
grain it had requested. 25X1
COIF Lk
.25X1
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
25X1
25X1
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
CONFIDENTIAL
USSR and, POLAND: Net Grain Imports;
~~?"?~51~??~ ~4eV
+~ ~?"" ~~~~k~1+"4"~%0"5"
O~
CONFIDENTIAL
25X1
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
CONFIDENTIAL
USSR.' Grain Imports, by Source
MILLION TONS
? Other
G7 Argentina
Australia
= Canada
M United states
a Preliminary
b Estimates.
CONFIIIENTIAt
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
CONFIDENTIAL
Embargo Prospects
Since Warsaw declared martial law on 13 December, grain prices generally
have drifted lower, following the trend of the last year and reflecting the
abundance of grain in the international market.* There has been virtually no
enthusiasm for an embargo against the Soviet Union or Poland among the
governments or private producer groups of grain-exporting countries. indeed,
most statements to date reflect a wait and see attitude; meanwhile, business
as usual is the order of the day. The US decision to delay negotiations
scheduled for February on the US-USSR Long Term Grain Agreement provoked
little re current agreement is still in force until 30 25X1
September.
The market sentiment is based on the recognition that Soviet and Polish
import requirements for the current marketing year largely have been met
through purchases and commitments. Thus an embargo on future Soviet and
Polish purchases might affect only some 8 million tons. Should the United
States refuse to ship the roughly 6 million tons of US grain bought by the
USSR but not yet delivered, some 14 million tons might initially by denied to
the USSR and Poland. In either case, a portion of the US grain thus denied
would be made up from other sources, assuming that the United States acted
unilaterally to impose such an embargo. Indeed with expectations of a
possible record world grain harvest in MY 1981/82 and facing falling prices,
many of rs would be anxious to increase sales to the USSR and
Poland. 25X1
It is widely understood that implementing an effective embargo would
depend on the cooperation of all major exporters. This was not achieved
during the last embargo, and it probably would be even more difficult now.
Termination of the US grain embargo on 24 April 1981 prompted major grain
exporters to strengthen their commercial interests with the USSR. The EC
eliminated restrictions on grain sales to the USSR and announced that in June
1981 it would resume the normal practice of offering price subsidies on grain
sales. The Canadians, who had been trying to exploit the IS embargo to get
better terms on sales to the USSR, signed a five-year long-term agreement
(LTA) with Moscow (see attachment). Buenos Aires, which already had a LTA
began to press Moscow harder to purchase additional grain, and Australia,
which had a "customer understanding" to sell qrain to the USSR Publically
announced that it, too, hoped to step up its sales of fort. 25 1
Moreover, the major exporters have indicated an unwillingness to abrogate
commitments already made:
* Prices were little affected by the embargo declared in January 1980 but
only because of the announcement that the US government would compensate US
exporters. II 25X1
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
CONFIDENTIAL
25 1
instituting economic sanctions. During the 1980 embargo Buenos Aires
was the only major grain exporter which did not pledge its support of
the United States and instead moved quickly to sign a five-year accord
with Moscow guaranteeing the delivery of 4.5 million tons of grain and
soybeans annually. Last year, Argentina replaced the United States as
the single largest supplier of grain. to the USSR--accounting for
almost 40 percent of Soviet imports. With its crop reduced from last
year's record level, Argentina will not be in a position to play as
large a role in Soviet grain trade in 1981/82. Sales and commitments
of Argentine grain to the USSR now total 12.5 million tons.
? Canada: External Affairs Minister Macguigan announced that Canada
will not cancel its long-term concessional grain sales to Poland. The
Canadian Wheat Board has responded negatively,.however, to a Polish
request for accelerated delivery and price reductions. The Canadians
have also sold about 8 million tons of grain to the USSR to be
delivered by 30 September--4 million tons of which are covered by
their Long Term Agreement. While Canada may agree to curtail
additional sales, it would not likely cancel any current contracts.
? EC: No unified position has yet emerged. Chancellor Schmidt has
i r3icated that it is too early to say whether Germany will join
sanctions against the USSR and Poland.
Australia: No stance has been taken, but the Australian Wheat Board
plans to discuss its policy on grain sales to the Soviet Union at its
Farmer Board meeting in Melbourne on 14 January. However, Australia
formally declined to follow the US call for increased trade sanctions
against Moscow after martial law was declared in Poland, citing
existing sanctions left in place since the Soviet invasion of
Afghanistan. The Wheat Board has already sold 1 million tons of wheat
to the USSR fran the crop now being harvested. 25X1
Aware of the problems involved, Moscow is not concerned about a US
embargo. Indeed, Soviet officials last week threatened to suspend purchases
of US corn, but this appears to be only a hollow gesture. Even without such
purchases from the United States, Moscow likely will import a record 42 to 43
million tons of grain in the marketing year ending 30 June 1982. With Soviet
ports clogged with ships. waiting to unload and ample stocks at low prices
awaiting buyers the USSR was expected to delay additional large purchases
until Spring. 25X1
Future Soviet Grain
Soviet import requirements during the next few years suggest a continuing
need for access to US grain supplies. Total Soviet grain import requirements
will be at least 30 to 40 million tons per year during the early 1980's. They
could obtain most of these needs fran non-US sources if they chose--but
probably not in the mix of wheat and coarse grains they have preferred in the
past. In recent years, coarse grains have accounted for roughly 60 percent of
Soviet grain imports vesus 40 percent for wheat. These relative shares likely
will be maintained so long as the Soviet leadership pursues efforts to
increase livestock numbers.
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
CONFIDE T'A.
The United States accounts for roughly two-thirds of world coarse grain
exports in a typical year. This coupled with unsurpassed flexibility in
scheduling of grain shipments, makes US grain very important to Soviet
planning in a period as short as five years.- US coarse grain output is both
much larger than that of any other producer and more reliable. It is also
predominately corn--the grain of choice for livestock feeding in a typical
year. 0 25X1
Unless Moscow decides to feed more wheat and barley to livestock, the
Soviets will have difficulty avoiding US grain through 1985. In a typical
year, the Soviets might be able to obtain the following amounts of corn:
Argentina 7.0
Brazil 1.0
Thailand 0.5
Eastern Europe 0.5
TO
This compares with the 18 to 24 million tons of coarse grain they need '
annually. Argentina offers the greatest possibility as an alternative to US
supplies, but the Soviets have not increased their commitment which obligates
them to buy 4 million tons of coarse grain per year. Moscow has also agreed
to purchase, if available, 500,000 tons of corn from Brazil beginning in
1983. These tonnages surely help to underscore for Moscow the importance of a
US corn crop. r -1 25X1
Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
 Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8
Appendix
USSR: Existing Non-US Grain Agreements
Argentina (1 January 1980 to 31 December 1985)
-- Authorizes the USSR to purchase from private camnercial firms 4 million
tons of corn and sorghum and 500,000 tons of soybeans.
-- Purchases in excess of these quantities will be authorized only after
consultation.
I
-- Purchases and/or sales will be made at prevailing market prices.
Quantities stipulated in .the agreement and additional amounts agreed upon
by both parties will not be affected by any embargo on amounts over and
above those contracted for..
Canada (1 August 1981 to 31 July 1986)
-- Authorizes the USSR to purchase fran the Candian Wheat Board a minimum of
4 million tons of wheat, barley and oats in 1981/82. The minimum
canmitment will increase half a million tons per year to reach 6 million
tons in the fifth and last year of the agreement.
-- Quantities stipulated in agreement will include grain shipments to Cuba on
Soviet account.
-- Prices covering transactions will be negotiated every 6 months.
Quantities stipulated in the agreement will not be affected by any
restrictions imposed by the Canadian government. Unlike the Argentine
agreement, additional amounts agreed to by both parties may be subject to
embargo.
Brazil (1 January 1982 to 31 December 1986)
Authorizes the USSR to purchase from private firms and cooperatives a
minimum of 500,000 tons of soybeans and 400,000 of soybean meal.
Beginning in 1983, approximately 500,000 tons of corn will be exported to
the USSR annually.
-- Prices will be negotiated rather than at current market levels.
CONF1O NT
CON!"- Mai
CO
Approved For Release 2007/03/21 : CIA-RDP83M00914R002700090019-8