USSR: A GOOD GRAIN CROP NEEDED IN 1982

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00231R000200090002-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 19, 2016
• Document Release Date: February 14, 2007
• Sequence Number: 2
• Publication Date: May 1, 1982
• Content Type: REPORT

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Directorate of ecre
Intelligence
An Intelligence Assessment
Secret
GI 82-10102
May 1982
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Directorate of
Intelligence
USSR: A Good Grain Crop
Needed in 1982
Information available as of 10 May 1982
has been used in the preparation of this report.
This paper was prepared in the Agriculture
Assessment Branch and the Agriculture Trade
Branch, Office of Global Issues. It was coordinated
with the National Intelligence Council. Comments
and queries are welcome and may bt directed to
the Chief, Resources Division, OGI
Secret
GI 82-10102
May 1982
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USSR: A Good Grain Cro
Needed in 1982
Key Judgments Moscow badly needs a good grain crop this year to avoid further
deterioration in the Soviet diet. Although the 1982 crop season has
benefited from good initial weather conditions, the odds are slim that the
Soviets will achieve anything like their grain crop target of 238 million
tons. Indeed, inasmuch as production during the last three years averaged
only 175 million tons, Moscow would probably consider a crop of even 220
million tons outstanding. 25
Even with a bumper 1982 crop, Moscow will probably import 30-40 million
tons of grain during the next marketing year (July 1982-June 1983). Long-
term grain purchasing agreements with Argentina, Canada, and Hungary
guarantee the Soviets roughly 10 million tons, and perhaps an additional
20 million tons can be bought from non-US sources. 25
The Soviets recognize, however, that to get the mix of feedgrains they
prefer or to import much over 30 million tons, they must buy from the
United States. Because their hard currency shortage shows no sign of
easing, they will probably rely heavily on short-term Western bank credits
to finance grain imports over the next few months. The Soviets are eager to
begin negotiating a new Long Term Agreement with the United States,
and they probably would agree to purchase larger amounts of grain than
are covered in the existing accord if the United States is willing to
guarantee delivery of such purchases. F77 1 25
iii Secret
GI 82-10102
May 1982
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Secret
Uncertain Prospects for the 1982 Grain Crop
Outlook for Crop Production and the US Interest
USSR: Total Grain Production
USSR: Production of Major Nongrain Crops
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1 1 25
in Crop
USSR: A Good Gr
a
Soviet grain production declined sharply during the
past three years after more than a decade of steady
growth. Following a record crop of 237 million tons in
1978, the harvest fell to 179 million tons in 1979, 189
in 1980, and reportedly 158 in 1981, nearly a third
below target. To avoid massive shortages, the Soviets
have imported more than 100 million tons of grain
since June 1979. During the marketing year ending
this June, we expect Moscow to import a record 45
million tons. Moreover, last year's crop shortfall was
not confined to grain. The output of sugar beets,
sunflowers, and potatoes was among the worst of the
past two decades.
The hard currency bill for all agricultural commod-
ities-including grain, other feedstuffs, meat, sugar,
and vegetable oil-will probably reach some $12
billion, up about $1 billion from last year and a sharp
increase from the roughly $8 billion spent in 1980.'
Altogether, food imports now account for roughly 40
percent of total Soviet hard currency purchases. These
expenditures come when total Soviet hard currency
earnings are likely to decline by as much as 5 percent.
Prices for oil and gold-two major hard currency
earners-fell in 1981 and will probably remain weak
throughout 1982
stretches hard currency supplies but interest charges
add substantially to the cost of imported food. With
financial pressures persisting, Moscow will face a
constant problem of rolling over debt.2
Even with massive imports of grain, Moscow contin-
ues to fall further behind in its effort to deal with
serious and persistent food shortages. Informal ration-
ing has spread to most parts of the country, and
nearly 20 cities have formal coupon-rationing systems
for at least some foods. Limits on purchases of many
other foodstuffs have also been imposed. The succes-
sion of poor grain harvests has had a major impact on
the livestock sector by curtailing feed supplies. Al-
though the Soviets can now claim more cattle and
poultry than ever before, the average slaughter weight
for cattle has fallen off. Total meat production, which
had risen to 15.5 million tons in 1979, fell to the 15-
million-ton level in 1980 and 1981. The outlook for
dairy products is even gloomier. Despite an increase of
some 600,000 cows since 1 January 1979, total milk
production has declined almost 7 percent. Butter
production has fallen 14 percent since 1978.
Over the short term, the supply of quality foods will
probably worsen or at best stay about the same. Meat
supplies will increase only if there is substantial
distress slaughtering, and the resulting improvement
would be only temporary. Kremlin officials have been
reluctant to order Soviet farmers to reduce herd sizes
because rebuilding them would take years. Feeding
these herds from domestic sources, however, appears
to be well beyond the ability of the current regime.
Because of these constraints, the Soviets are turning
to short-term borrowing to cover the costs of their
grain purchases. Financing charges alone on these
credits have added roughly $100 million to the Soviet
grain import bill. To facilitate sales, large grain
trading firms have actively been helping the Soviets to
secure credits. The Soviets probably will continue to
rely heavily on short-term Western bank credits to
finance additional grain imports-which may cost as
much as $1.5 billion-over the next five months.
Financing grain purchases in this manner confronts
Soviet policymakers with difficult choices. Borrowing
25
Uncertain Prospects for the 1982 Grain Crop
The 1982 crop season in the Soviet Union has begun
well. As of late April the outlook for winter grains,
which normally account for one-third of total Soviet
0
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1971-75
Average
1976-80
Average
1979
1980
1981
1982
Sown (million hectares)
34.4
36.9
33.5
38.0
35.0
36.5
Harvested (million hectares)
28.4
29.5
26.5
32.6
29.3
Winterkill b (percent)
17
20
21
14
16
Production (million tons)
55.6
64.6
49.6
63.1
55.0 c
60-70
a Winter wheat, rye, and winter barley.
b Includes some acreage used for forage.
c Estimated.
grain output, was generally good. The favorable pros-
pects result mainly from last fall's successful sowing
campaign and subsequent milder-than-normal weath-
er. Total planted area is up slightly from a year ago,
good snow cover through late February probably
prevented significant winter dams a and crop devel-
opment is good to
excellent. The yield of winter grains will depend, as
usual, on weather conditions this spring, but if condi-
tions are normal we expect the harvest to be average
or a little better-in the 60- to 70-million-ton range.
Even so, it will be months before a reliable forecast of
the 1982 Soviet grain harvest can be made. Potential
grain yields can be affected at almost any time during
the crop season:
? In April and May during planting.
? In June and July, when winter and spring grains
reach a crucial stage in development.
? In August and September as the grain crop is
harvested.
Spring Seeding. Weather conditions during the
spring seeding campaign-only recently under way-
will play a key role in determining the size of the 1982
grain crop. A late spring delays planting, increasing
chances that plants will reach a crucial stage of
development during the summer's hottest weather.
Late planting can also delay plant maturity, increas-
ing the crop's vulnerability to an early frost. Success-
ful planting and germination of the spring grains
boost prospects for the total grain harvest. However,
because the plarfting campaign usually runs about two
months, an assessment of its success or shortcom-
ings-and the impact on grain production potential-
is generally not possible until early June.
Soviet farmers were well prepared to begin seeding
this spring. About 117 million hectares were plowed
last fall for winter fallow, some 9 million hectares
more than the average for recent years. Moreover,
unseasonably mild weather in March enabled farmers
to begin work in the fields earlier than normal in
many areas. Rains in recent weeks have slowed the
pace of spring seeding, but better weather this month
would allow planting to be completed on schedule.[
Crop Development. The central factor determining
the outcome of the 1982 Soviet harvest will be
growing conditions from plant emergence to midsea-
son. During the latter half of this 50-day period, both
winter and spring grains are most vulnerable to
damage from severe weather. The maximum potential
yield of the grain plant is determined at flowering;
unusually hot, dry weather at that time often causes
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plant sterility and reduced yields. In the European
USSR, flowering occurs in early-to-mid-June, while
in the grain regions east of the Volga River, flowering
occurs as late as mid-July. Last year the crop was
devastated by a prolonged heat wave that started in
late May and lasted more than two months. In the
heart of the European grain belt-from Moscow to
the middle Volga Valley-yields were cut by more
than 50 percent on many farms.)
Harvesting. Yields for both winter and spring grains
can also be reduced by problems during harvest,
which begins in earnest in mid-July in the southern
European USSR and normally ends in late September
in Western Siberia. Wet weather slows the pace of the
harvest, increasing chances that an early frost will
interfere with crop maturation. If the weather is
extremely poor, as in 1979 and 1980, the normal
means of harvesting often cannot be used, forcing
farmers at times to resort to hand harvesting methods.
Should early snows cause farmers to abandon the
fields altogether, losses can be significant. The 1981
harvest was finished ahead of schedule but for reasons
and with results that were less than welcome. Ex-
tremely high temperatures accelerated plant ripening
on about two-thirds of the total grain area, forcing
farmers to collect the smaller yielding crop earlier
than usual.
Outlook for Crop Production and the US Interest
The Soviets need a crop of at least 220 million tons, a
level exceeded on only three occasions. Indeed, from
1979 through 1981 grain production averaged only
about 175 million tons. With a bumper crop, livestock
productivity would improve, albeit modestly, and
there would be a corresponding improvement in over-
all food supplies. On the other hand, if grain produc-
tion is much below the 220-million-ton level, recovery
could well take years. In any event, the grain and
meat goals the Soviets set for 1985 and 1990 are now
virtually out of reach.
Even with a strong recovery in domestic grain produc-
tion, the USSR will continue to import large amounts
of grain. Since last July it has purchased some 44
million tons, much of which has been delivered.
During the next marketing year (July 1982-June
Little is known in the West about Soviet decision-
making on grain imports. In part the lack of knowl-
edge stems from the veil of secrecy with which
Moscow shrouds all aspects of its economy. In part
Moscow keeps grain import matters hidden because
this gives it an advantage in dealing with the inter-
national market. The highly centralized decision-
making process helps to maintain secrecy and facili-
tates implementing policy decisions. For example, in
1972 Moscow was able to keep news of the purchase
of unprecedented amounts of grain out of the press
until after the purchases were made.
Who decides grain import policy and the size and
timing of purchases is not known. Because grain
imports are critical in meeting food requirements and
are enormously expensive-currently running over $6
billion, one-fifth of all hard currency imports-we
believe the major decisions are made in the Politbu-
ro. These senior officials probably decide the magni-
tude of imports each year, leaving it to the Soviet
grain buying agency, Eksportkhleb, headed by Viktor
Persin since 1974, to implement the policy. Ek-
sportkhleb maintains contacts with the international
grain trading companies and agricultural officials in
exporting countries. The Soviets are invariably close-
mouthed about the size, timing, and origin of pur-
chases and are especially secretive about the size of
the Soviet grain crop.
The timing of grain purchases is particularly difficult
to predict. Inasmuch as the bulk of the Soviet grain
harvest occurs from late summer through early fall,
Soviet officials usually cannot know with certainty
until late summer their grain import needs. Because
of Moscow's growing importance in grain trade-its
imports will constitute 22 percent of worldwide grain
imports in the marketing year ending in June-Soviet
buyers time purchases to avoid price runups. This
year an added factor has been the squeeze on hard
currency holdings, which has forced the Soviets to
consider financing when making purchases.
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1983), the Soviets will probably import 30-40 million
tons of grain, in part to rebuild stocks depleted by the
last three years of poor harvests. We expect Moscow
to order about 11 million tons of grain for delivery
during July-September 1982, with the level of subse-
quent purchases dependent on:
? The size of the Soviet grain crop.
? Availability of Western grain. The outlook is for
record production and continuing low prices.
? Hard currency constraints.
? Continuing availability of short-term credits from
Western banks.
? Port capacity. The Soviets can handle roughly 48
million tons of grain imports per year
Much of next year's imports could be obtained from
exporters other than the United States
On the basis o current world
crop prospects, t ese and other exporters will be able
to ship substantially more grain to the USSR. How-
ever, for grain imports to much exceed 30 million tons
next year or for there to be a substantial increase in
the amount of corn imported, the Soviets would have
to turn to the United States.I
25X
25X
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Appendix A
The 1981 Crop Year Revisited
The Soviet Union sustained a third consecutive grain
shortfall in 1981. Widespread, heavy rain delayed
spring planting and was followed by a prolonged
drought that eventually encompassed about two-
thirds of the total crop area. Yields of both winter and
spring grains were cut severely.
Poor weather affected the production of other crops as
well. Potato output was well below average for the
second year in a row, and production of sugar beets
and sunflower seed was the lowest in nearly 20 years.
The cotton harvest continued to be the one bright
spot, with last year's crop second only to the 1980
record
Moscow has not concealed its disappointment over the
1981 crop but has made no official announcement of
its size. Unofficial statements by Soviet economic
lecturers in Leningrad and Murmansk in late March
were the first indications that the crop may have
fallen below 160 million tons. One lecturer put the
size at 158 million tons; the other cited a range from
150 to 165 million tons. Such lecturers were among
the first spokesmen to provide accurate figures for the
poor grain harvests in 1975 and 1979.
million tons to about 13 million tons.
1971-75
Average
1976-80
Average
1978
1979
1980
1981
181.6
205.1
237.4
179.2
189.1
158-
88.9
99.7
120.9
90.2
98.2
NA
82.7
95.2
105.6
81.4
80.7
NA
10.0
10.2
10.9
7.6
10.2
NA
102.9
113.9
136.5
91.8
105.1
NA
Ukraine
40.0
43.1
50.6
34.0
38.1
NA
Kazaklistan
21.7
27.5
27.9
34.5
27.5
NA
a Although numerous grain estimates are currently available in
Moscow, the USSR Central Statistical Administration has not
released an official production figure for last year's total Soviet grain
output. In late March, Soviet economic lecturers made an unofficial
forecast predicting that the 1981 grain harvest would be roughly 158
million tons.
The Soviet Union will greatly expand grain imports
during the marketing year that ends on 30 June (MY
1982). In all, a record 45 million tons of grain will be
shipped to the USSR, a sizable increase from the
previous record of over 34 million tons shipped in MY
1981. The US share of these imports is expected to be
roughly 16 million tons-double the amount shipped
during the previous marketing year, when shipments
were restricted by the US embargo. Total exports
from Argentina will rise from slightly more than 11
b Coarse grains include corn, barley, oats, millet, rye, miscellaneous.
c Other grains include rice, pulses, buckwheat.
25)
25
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Potatoes
Sugar beets
Sunflowers
Vegetables
Cotton
1971-75
Average
1976-80
Average
1978
1979
1980
1981
89.8
82.6
86.1
91.0
67.0
72.0
76.0
88.4
93.5
76.2
79.6
60.6
6.0
5.3
5.3
5.4
4.7
4.6
23.0
26.0
27.9
27.2
25.9
25.6
7.7
8.9
8.5
9.2
10.0
9.6
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Appendix B
Soviet Financing
of Grain Purchases
Hard currency problems are forcing Moscow to turn
to costly short-term financing to pay for Western
grain. The financial pinch is especially tight because
of the fall in gold and oil prices and the continuing
need to import grain at a record pace. During the last
eight months, the Soviets have raised more than $1
billion in short-term credits to finance grain pur-
chases. Financing charges have added approximately
$100 million to their grain import bill. Moscow's
continued use of short-term credit will depend in large
measure on the policy stance of grain exporting
countries and the willingness of major grain trading
firms to provide direct and indirect lines of credit.
The USSR's Need for Grain
To help offset last year's harvest disaster, the Soviets
have already bought about 44 million tons of the 45
million tons of grain we expect them to import in the
marketing year ending 30 June. Almost 29 million
tons of grain were shipped by the end of February.
Soviet trade officials have announced plans to acceler-
ate the pace of deliveries this spring. Remaining
purchases-about a million tons-will come mostl
from the United States.
The USSR is benefiting from a buyer's market. A
record world grain crop forced wheat and corn prices
in March to their lowest level in almost two years.
Indeed, with non-Soviet import demand weak, Mos-
cow has considerable negotiating leverage with ex-
porters who are hard-pressed to move existing sur-
pluses before this year's summer crops are harvested.
Financing Grain Imports
Unlike in the past, the Soviets have been forced to
seek credit from the international banking community
for grain purchases. Falling prices of oil and gold have
reduced the amount of hard currency available to pay
for grain purchases, which may exceed $6 billion in
the current marketing year.
Three major sources of credit are open to Moscow:
? International grain trading companies are able to
provide financing because of their longstanding
credit relations with major banks. By extending
short-term credit to purchasers, using the firm's
own line of credit, a trader can profit from both the
sale and the credit arrangement. The companies can
also help arrange direct credit between bank and
grain buyer.
? Commercial banks independently will provide
short-term, unsecured loans to grain-buying coun-
tries that are deemed creditworthy. Interest on loans 25
is pegged to the US prime rate and the London
Interbank Offered Rate (LIBOR) on most US-
financed grain. These rates have exceeded 15 per-
cent for most of the past year.
? Government financial assistance is available from
some exporters to promote grain sales. Support can
take a variety of forms, from providing direct credit
to guaranteeing private loans. Canada and Austra-
lia are able to offer government-guaranteed loans.
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Outlook
The USSR will probably order an additional 11
million tons of grain worth about $1.5 billion-
virtually all from the United States, Canada, and
Argentina-for delivery during July-September. Be-
cause its hard currency shortage shows no sign of
easing, the USSR is likely to continue to rely heavily
on short-term Western bank credits to finance its
grain imports over the next few months. To the degree
that Moscow relies on credit, its vulnerability to
Western financial sanctions will mount. As long as
the world grain market remains in surplus-and
Soviet creditworthiness is strong-the potential pres-
sures on Moscow should be manageable.
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