SOVIET AGRICULTURE IN THE 1980S

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00313R000300020005-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 34
• Document Creation Date: December 21, 2016
• Document Release Date: February 23, 2009
• Sequence Number: 5
• Publication Date: September 1, 1984
• Content Type: REPORT

Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Directorate of Confidential
Intelligence
Soviet Agriculture
in the 1980s
A Research Paper
Confidential
SOV 84-10154
September 1984
Copy 4 51
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Directorate of Confidential
Soviet Agriculture
in the 1980s
1 Intelligence
A Research Paper
Economy Division, SOYA,
are welcome and may be directed to the Chief, Soviet
Confidential
SOV 84-10154
September 1984
Office of Soviet Analysis, with contributions from
This paper was prepared by
SOYA. Comments and queries
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
25X1
25X1
25X1
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Soviet Agriculture
in the 1980s F
Key Judgments As the new Soviet regime surveys the USSR's food production prospects
Information available for the balance of the 1980s, the legacy of poor performance and increasing
as of 1 June 1984 resource burden of the late 1970s and early 1980s must weigh heavily in
was used in this report.
policy discussions and resource allocation planning. Speeches by Soviet
leaders indicate their awareness that the slowing growth in farm output
since 1975 is not entirely due to less favorable weather. They know that ag-
riculturally related activity is beset by inefficiency and annually requires
about one-third of total investment, one-fourth of hard currency earnings,
and growing subsidies to maintain stable retail food prices. Although
Moscow plans to change its approach to food production, we see little
chance of its avoiding a continued rise in the resource burden in the next
few years.
General Secretary Chernenko, and Andropov before him, have supported
Brezhnev's Food Program for the 1980s. The program reorganizes food
production, revises incentives, reorders investment priorities, and promises
more industrial goods to enterprises and organizations involved in food
production. The Soviets are also improving feed rations for livestock,
increasing use of summer fallow, and improving crop varieties and animal
breeds to raise the quantity and quality of farm output. Using this
blueprint for increasing domestic food production, the leadership hopes to
simultaneously provide a steady improvement in diet for the Soviet
consumer and reduce the USSR's dependence on imports of Western grain
and other foodstuffs.
Development of the Soviet farm sector in the 1980s will depend strongly on
weather trends and how the leadership implements the Food Program. Our
three illustrative farm output scenarios incorporate different assumptions
about weather, support from industry, and implementation of the Food
Program. Our baseline projection of average annual growth in net farm
output of 2.0 to 2.5 percent in the 1980s assumes weather conditions
approximating the 1960-83 average and some implementation of proposed
changes. Production growth could be as low as 0 to 0.5 percent per year if
support from industry during 1976-80 and the much less favorable weather
experienced after 1978 are repeated.,At best, with above-average weather
and more-than-likely success in implementing the Food Program, produc-
tion growth might average 2.5 to 3.0 percent per year in the 1980s.
Confidential
SOV 84-10154
September 1984
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
The per capita consumption gains provided by our baseline projection of
growth in farm output probably would be considered adequate by the
regime, especially if Chernenko adopts Andropov's view that major
improvements in consumption are not an urgent necessity. Massive imports
of grain and other food products from the West probably would not occur
in years of average weather as long as the regime maintains what we
consider to be its present belief that minimizing dependence on food
imports from the West is more important than rapid growth in per capita
food consumption. If, however, the priority of improving the diet rises, the
leadership probably would be willing to increase imports of grain from the
West as well as meat and vegetables from other Communist countries to
the extent that the latter countries could supply them.
Regardless of which of the three farm output scenarios is close to the mark,
Soviet agriculture will continue to experience difficulty in realizing
potential benefits from planned improvements in management and new
technologies. New programs do not substantially improve incentives for
farms to carry out agricultural operations on a timely, efficient basis. Lack
of these incentives probably will continue to be the most important cause of
low product quality and high levels of waste in harvesting, transportation,
storage, and processing of farm products. Moreover, a number of factors,
individually troublesome, combine to sap the productivity of the farm
sector's increasing stock of plant and equipment.
First, farm production will be plagued by high costs and low productivity
until the leadership:
? Eliminates centrally determined quotas for output of farm products and
for goods and services used in production.
? Stops interference by party officials and bureaucrats in day-to-day farm
operations.
? Sufficiently overhauls the inappropriate price structure, both for goods
and services sold to farms and for farm products.
? Replaces gross farm production as the most important determinant of
success with an indicator that takes into account product quality and
production cost.
Second, unless planners give the Food Program very high and continuing
priority, the slow pace of industrial growth that we project for the 1980s
will hold down growth in industrial support to producers of farm machin-
ery, to farms, and to food-processing enterprises. Although Soviet trade
officials have recently expressed interest in a wide range of Western
equipment and technology for food production, such imports-if they
occur-are likely to play only a minor role in food production in the 1980s.
Many of the general problems the Soviets face with assimilation of foreign
technology would be especially severe for the widely dispersed farm sector.
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Third, because of inadequate incentives and poor support from industry,
technical progress in food production will occur slowly. Thus, it will be
difficult to substantially improve returns to new investment and to other
important inputs, such as livestock feed and fertilizer, in the 1980s.
Finally, shortages of younger, skilled workers will persist in many regions
until there are major improvements in rural living conditions and there is
an upturn in annual increments to the general labor force.
If the weather is poor or if Soviet leaders decide that under current
resource programs and decisionmaking arrangements the cost of likely
gains is too high, additional changes in the management of*food production
might be considered. We do not believe, however, that in the 1980s Soviet
leaders will move very far toward decentralizing management of agricul-
ture as was done in Hungary and China. In these countries:
? Centrally determined procurement plans have been reduced or abolished.
? Farm managers and private producers appropriately make production
decisions.
? The government controls the mix of farm products indirectly by manipu-
lating procurement prices.
In debating the advantages of less centralized management, Soviet writers
have noted undesirable side effects of the Chinese reforms, such as rural in-
flation, and often have rejected Hungarian and other East European
experiments on the justifiable notion that solutions appropriate for the
small countries of Eastern Europe are not suitable for a country the size of
the USSR.
More important, however, Soviet leaders have a firm belief in their own
system. Movement toward market-oriented systems appears to be unac-
ceptable on ideological grounds. The leadership perhaps considers raising
efficiency and lowering costs less important than avoiding the political
risks of weakening central control over economic activity in the important
farm sector. Furthermore, Soviet officials for the most part do not share
the confidence of Chinese and Hungarian leaders in the ability of local
farm managers and private producers to make the "correct" production
decisions. For example, local Soviet party officials continue to interfere in
day-to-day farm operations despite the fact that Khrushchev, Brezhnev,
Andropov, and current agriculture secretary Mikhail Gorbachev all have
condemned this practice, recognizing that it reduces farm efficiency
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Contents
Key Judgments
Lagging Deliveries of Goods and Services to Farms
5
Declining Efficiency in the Use of Available Resources
5
Increasing Complexity of Producing and Marketing Farm Products
6
Failure To Adjust Investment Policy Appropriately
8
Other Options
11
Coping With Demand for Other Industrial Goods
13
Resource-Producing and Food-Processing Industries
13
Changing. Agr
icultural Organization and Incentives
16
The Food Program
16
Problems in Implementing the Food Program
18
Revising Incentives on Farms
19
Soviet Percept
ions of Reform
21
Goods and Services Used in Farm Production
Increased Efficiency in the Use of Resources
23
Projections of Growth in Net Farm Output for the 1980s
24
Impact on Per Capita Consumption
25
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
USSR, to appear in the next few months.
This report assesses the impact of economic factors on Soviet agricultural
production through 1990. It focuses on the allocation and use of resources
as these reflect current policies for managing the food production process.
Changes in the internal political situation that may affect agriculture will
be analyzed in a more general report on resource-allocation policy in the
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
Confidential
Soviet Agriculture
in the 1980s
The Soviet farm sector absorbs about 20 percent of
the labor force and 20 percent of the USSR's stock of
fixed capital (excluding housing and services), but it
has been unable to provide the population with a diet
comparable to that in other industrialized countries in
terms of quality and nutritional balance. Thus, during
the 1970s, the regime relied heavily on imports of
foreign agricultural products just to maintain previous
levels of food consumption. In the 1980s, Soviet
policymakers are committed to steady dietary im-
provement with fewer food imports, especially from
the West. To achieve this goal, the regime must devise
a strategy that will promote (1) more rapid growth in
output of farm products, (2) reduction in the very
large losses that now occur in the transportation,
processing, and distribution of farm products, and (3)
more efficient use of resources invested in food pro-
duction.'
This report analyzes the causes of the slowdown in
growth of farm production, reviews steps taken by the
regime to speed growth, and assesses the options open
to Soviet leaders for investment in and management
of the food production chain. Finally, we assess the
Figure 1
USSR: Average Annual Rates of Growth
in Farm Output, Selected Periods e
? Net output ? Net grain
I Nongrain crops ED Net livestock products
likely outcome of these options.
During the 1970s, average annual rates of growth in
Soviet farm output fell below rates achieved in the
United States, Canada, and in all of the East Europe-
an countries-a reversal of the situation in the late
1960s, when growth of Soviet agricultural production
exceeded that of the United States, Canada, and
' This report defines "food production" to include all aspects of
producing, processing, and marketing food and nonfood farm
products, such as tobacco and natural fiber. The term also includes
activities of industries supplying such goods as machinery, fertiliz-
er, and feed additives to farms, as well as industries supplying
machinery for food processing. In Soviet parlance, this highly
aggregative view of agriculturally related activity is termed "agro-
k17
a Because of wide swings in annual output due to weather,
growth rates are calculated from three-year moving averages for the
terminal year and the base year of a five-year period.
Eastern Europe. Although, by the late 1970s, Soviet
farmers had made impressive gains in crop yields and
in output of livestock products (table 1) and net farm
output was about 50 percent above that in 1961-65,
nearly all of this increase had occurred by 1975. As a
result, since the mid-1970s, growth in farm output has
failed to match the rapid growth in demand for food,
especially livestock products (figure 1). Although the
0
Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Table I
USSR: Output Indicators of Major Farm Products
Actual
Projected From
Actual as a
1961-75
Share of
Trend
Projected
(percent)
Crop yields
(average annual,
metric tons per hectare)
9.40
11.76
12.76
92
2.06
2.93
3.15
93
1.12
1.18
1.46
81
0.26
0.34
0.44
77
Livestock products
(average annual,
million tons)
Meat
9.3
14.8
15.9
93
Milk
64.7
92.6
103.4
90
Eggs (billion)
28.7
63.1
65.3
97
regime emphasized the need to increase output of
livestock products and imported record quantities of
grain to boost feed supplies, meat production in 1980
was less than 1 percent over 1975 levels. Milk produc-
tion declined steadily during 1978-80
At the same time, production costs on Soviet farms
rose sharply because of increases in wages and rising
prices of machinery, fertilizer, and other goods and
services. Prices paid by the state for agricultural
products did not keep pace, and profitability fell-
especially for livestock products. As profits declined,
farms relied increasingly on bank loans to cover
current costs. According to Soviet statistics, net in-
come of collective farms from the sale of farm
products exceeded production costs by only 7 percent
during the period 1979-80, compared with 18 percent
during 1976-77 and 24 percent during 1971-75. On
state farms, profits during 1976-80 were half of those
realized during 1971-75. Although a large, unsatisfied
demand for livestock products was apparent, the
structure of existing procurement prices encouraged
farms to divert resources into crop production. Figure
2 compares production costs and profits during the
period 1979-80 with a representative period in the
1960s.2
Moscow responded to the deteriorating performance
in agriculture by increasing hard currency outlays on
farm products. In the late 1960s and early 1970s, the
USSR had been a net exporter of grain and meat. By
crop year 1981/82, grain imports reached 46 million
tons, and, with meat imports of nearly 1 million tons,
' In the USSR there is only a weak link between profits and
managerial decisionmaking. All the evidence suggests that, regard-
less of relative profit rates for farm products, farms make only very
marginal shifts in patterns of product output. Moreover, with the
exception of a low rate of depreciation, Soviet cost measures
exclude returns to capital and therefore understate the true costs of
producing farm products. Because cost measures also exclude
returns to land, costs of crop production probably are understated
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Figure 2
USSR: Production Cost and Procurement Prices on
Collective Farms, Selected Products, 1966-69, 1979-80
Average cost
of production
Grain
1966-69
Potatoes
Sunflower
seeds
79-80
Excess of price Excess of cost
over cost over price
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200
the USSR was the world's largest grain and meat in per capita availability of farm products during
importer.' During 1978-82, Moscow spent $26 billion 1976-80 was attributable to a tripling of net agricul-
on imports of farm products, more than one-fifth of its tural imports (figure 3).
total hard currency import bill. Nearly all of the boost -
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Figure 3
USSR: Per Capita Availability of
Farm Products
Net domestic output - - - Net domestic farm
plus imports output
300 1970 75 80 83
The near stagnation of farm output in the last half of
the 1970s and early 1980s is related partly to a
deterioration of weather conditions. Climate data
suggest that unusually favorable weather was a major
source of growth in output of farm products from
1964 to 1974.` The weather experienced in the 1979-
82 period was on average much less favorable than
that of 1964-74 and was also less favorable than long-
term average weather conditions. Nevertheless, in
Production in the Soviet Union," Soviet Economy in the 1980s:
Problems and Prospects, Joint Economic Committee, Congress_of
US and USSR:
Comparison of Crop Yields
and Productivity
Yields for most major crops in the USSR are below
those in climatically similar areas of the United
States. The following tabulation compares average
annual Soviet yields in tons per hectare during 1976-
80 for selected crops with yields in regions of the
United States with similar soil and climate
conditions:
USSR
(metric tons
per hectare)
United States
(metric tons
per hectare)
USSR as a
Percent
of United
States
in 1976-80
1.46
1.78
Potatoes
11.76
17.34
68
Sunflower seed
1.18
1.36
87
Hay
1.78
4.00
44.
In these comparisons Soviet wheat yields have been
discounted by 11 percent to eliminate the excess
moisture and extraneous material that is included in
official yield statistics. The comparison of hay yields
includes all hay for the United States and hay from
annual and perennial grasses for the USSR.
Western scholars, furthermore, have estimated that
the combined productivity of land, other productive
assets, and labor in Soviet agriculture is about one-
half to two-thirds of that in comparable areas of
North America.a While productivity of goods and
services used in farm production in the USSR de-
clined in the 1970s, productivity increases were being
achieved in the United States
a D. Gale Johnson and Karen McConnell Brooks, Prospects for
Soviet Agriculture in the 1980s, Indiana University Press, 1983,
recent speeches, Soviet leaders have indicated that
yields should have been higher despite the weather.
Indeed, the experience of countries with similar cli-
matic conditions suggests that the USSR has the
potential for higher and more stable yields than are
being realized (see inset).
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Inefficiency, poor management, and other factors
unrelated to climate have contributed to the slowdown
in production growth. In general, these factors can be
summarized as:
? Failure to maintain previous. rates of growth in
goods and services used in farm production.
? A decline in the productivity with which these
inputs are used.
? Increasing dependence of agriculture on the rest of
the economy for inputs and the distribution of its
production in an efficient manner
Fnilure to ;id* ment policy appropriately.
?
Lagging Deliveries of Goods
and Services to Farms
Growth in all major inputs to farm production-
labor, land, fixed capital, energy, fertilizer, and live-
stock herds-slowed in 1976-80. Total combined in-
puts grew at an average annual rate of 1.7 percent,
compared with 2.5 percent in 1971-75. Deliveries of
trucks, tractors, and fertilizer, as well as gross addi-
tions of irrigated and drained land were further below
plan targets in 1976-80 than in 1971-75. At the same
time, the number of tractors and grain combines grew
faster than the. number of qualified operators, contrib-
uting to downtime of farm machinery ? (figure 4)~
Declining Efficiency in the Use of Available Resources
The slowdown in the growth of goods and services
used by farms could have been mostly offset if
available resources had been utilized as efficiently as
they were in the 1960s. A comparison of trends in
output and inputs shows that overall factor productivi-
ty increased on average by 1.3 percent per year for the
1960s followed by a decline of 1.2 percent per year in
the 1970s 6 (table 2). If the productivity increases of
the 1960s had been maintained, the average annual
rate of growth in output in the 1970s would have been
nearly 3.5 percent instead of the 1 percent realized.
'To help fill this gap, truckdrivers and mechanics are sent to farms
temporarily from industry and the military. Because of their
inexperience in the use of power machinery in cultivation and
harvesting, they are, on average, less efficient than the farm's
Figure 4
USSR: Stocks of Tractors and Grain
Combines and Number of Operators, 1966-82
Stocks of tractors - - - Number of tractor
and combines, drivers and combine
1 January operators, 1 April
2.0 1966
The type of problems that caused the decline in
productivity include:
? An increase in downtime of agricultural machinery,
which, according to Soviet sources, was not attribut-
able to weather conditions. At the beginning of the
present five-year plan period (1981-85), for example,
20 to 25 percent of available tractors were not being
used in production.
6 Growth in factor productivity measures the increase in production
not explained by increased use of capital, land, labor, and other
inputs. Gains in factor productivity stem from new technology,
qualitative improvement in management, health and education of
workers, and anything else not accounted for by increases in the
quantity of conventional inputs
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Table 2
USSR and United States:
Changing Productivity in
Agriculture
Average annual percent
rates of growth
USSR
5.3
3.0
1.6
0.3
United States
2.1
1.1
2.4
1.4
Goods and services used in production b
USSR
2.7
1.7
2.5
1.7
United States
0.1
NEGL
0.5
1.2
Factor productivity
USSR
2.5
1.3
-1.0
-1.4
United States
1.9
1.1
1.9
0.2
a Calculated from a three-year moving average for the base and
terminal year in each period. Net output is the value of gross
agricultural production minus the value of farm products consumed
in the production process.
b Includes labor, fixed capital (buildings, structures, machinery, and
equipment), materials purchased from outside agriculture (fuels and
lubricants, electric power, fertilizer, some processed feeds, and
Figure 5
USSR: Productivity of Livestock Feed,
Socialized Sector
Gross value of livestock output
per unit of feed a
97
herds. The several inputs are aggregated into a geometric produc-
tion function of the Cobb-Douglas type in which each input is
weighted with its relative contribution to total output in the period.
? A fall in the daily hectarage worked by grain
combines and other harvesting machinery, accord-
ing to Soviet statistics. During 1978-79, less area
was worked than during the late 1960s, despite
increases in the size and speed of machinery.
? Low payoff from increased use of fertilizer. We
estimate that, during 1976-80, average annual fer-
tilizer applications per hectare of cropland were 30
percent above the average for 1971-75. Between
these two periods, average annual crop yields rose
by only 7.5 percent.'
? A sharp fall in the growth rate of gross value of
livestock output from each feed unit on state and
collective farms after .1970, according to our calcu-
lations. Expansion of livestock herds more rapidly
than feed supplies contributed to this decline as did
a deterioration in the structure of rations (figure 5).
' An index of overall crop yields is calculated by (1) weighting yields
of 17 major crops, including hay and corn for silage, according to
their relative importance in the value of crop production in 1970
and (2) calculating an index of the weighted crop yields.~
I I I 1
91 1966 70
75
80 81
a The index is calculated from a three-year moving average. Total
livestock feed in terms of "feed units" is derived by aggregating
quantities of various livestock feeds using a set of weights that
measures their feed value relative to that of oat grain.
? Largely ineffective policies to stimulate better use of
resources. For example, in the mid-1960s, collective
farmers were guaranteed basic wage payments re-
gardless of crop yields, crop quality, or costs. As a
result, urban-rural income differences narrowed,
but farmers were left with little incentive to main-
tain or increase efficiency to minimize the effects of
the poor weather and materials shortfalls that oc-
curred more frequently in the 1970s.
Increasing Complexity of Producing
and Marketing Farm Products
During the 1970s, economic interaction between agri-
culture and other sectors of the economy increased.
Deliveries of goods and services by industry comprised
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Figure 6
USSR: Sources of Goods and Services in,
Agricultural Output, 1959 and 1977
Inputs of labor and Agriculture
capital services
? Industry and Other
Figure 7
USSR: Allocation of Output of Agriculture,
1959 and 1977
? Industry and Other
Direct sales to consumption
and net exports
a On-farm use of agricultural products consists largely of
self-produced feed for livestock. Also included are crops used for
seed purposes and hatching eggs.
a growing share of the gross value of farm products.
The share of farm production going to industry for
processing also increased (figures 6 and 7).8 The
increases in these shares indicate that the web of
' Soviet statistics on interindustry transactions (only available for
benchmark years) show that the share of gross agricultural output
being supplied to industry as raw materials increased from 40
percent in 1959 to an estimated 55 percent in 1977. A recent Soviet
journal article noted that this share reached 60 percent in 1980.
(According to US statistics on interindustry transactions, 66 per-
cent of US farm output was transferred to industrial sectors for
processing in 1972.) At the same time, delivery of goods and
services to agriculture in the USSR has increased. In 1959 about 12
percent of the gross value of agricultural output was accounted for
by goods and services purchased from industry and other nonagri-
cultural sectors. We estimate that this share reached 21 percent in
interdependence between agriculture and other sec-
tors expanded in the 1970s. Synchronizing these
transactions to ensure timely delivery to farms of
materials such as fertilizer and feed ingredients and
prompt processing of farm products became increas-
ingly difficult. Until implementation of the Food
Program in 1982, there was little effort to coordinate
activities of farms, industrial enterprises, and service
organizations all managed by different ministries and
departments .9
25X1
2 Al
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
As a result of increasing friction and delay in coordi-
nating food-related production, even with the rise in
"off-farm" provision of inputs, farms have allocated
an increasing share of their own resources for activi-
ties that are supposed to be provided by specialized
service organizations over which the farms have no
direct control." The ruble value of industrial, con-
struction, and transportation operations carried out
directly by farms doubled from 1970 to 1979, partly
because service organizations charge high prices and
provide inadequate response to farm needs." Soviet
writers complain that this "despecialization" is caus-
ing unnecessary duplication of facilities, thus divert-
ing farm resources, including labor, from crop raising
and animal husbandry, as well as increasing produc-
tion costs.12
Another related problem involves transportation
losses, which have increased largely because of-
? A grossly inadequate farm-to-market road network.
? Lack of modern transportation equipment.
? A rate structure that sets prices for transport serv-
ices below costs.
? A gradual increase in the average length of haul for
farm products.
? Inadequate incentives for procurement agencies and
transportation organizations to prevent damage and
spoilage in transportation."
10 The three major service organizations are the State Committee
for the Supply of Production Equipment for Agriculture (Sel'khoz-
tekhnika), the All-Union Scientific Production Association for
Agro-Chemical Service to Agriculture (Se!'khozkhimiya), and the
Ministry of Land Reclamation and Water Resources. The majority
of Soviet farms are subordinate to the Ministry of Agriculture,
which has no authority over the service organizations or their
parent ministries and state committees.
11 In the RSFSR, for example, from 1975 to 1982 the price charged
to farms by Sel'khozkhimiya for applying lime to 1 hectare more
than doubled. Over the same period, costs for current repair of
tractors and grain combines by Sel'khoztekhnika went up by 27
percent and 35 percent, respectively
" From 1970 to 1979, the value of construction, transportation, and
industrial activity on farms increased from 20 to 25 percent of total
farm operations. Statistics on the total value of farm operations are
rarely published. In preparing the annually published figures on the
gross value of farm production and the occasionally published
input-output tables, Soviet planners count the value of these
nonagricultural activities carried out by farms in industry, con-
struction, and so forth. At the same time, agricultural activity
carried out by industrial enterprises on their subsidiary farms is
counted in official statistics on the farm sector. The shares of
production shown in figures 6 and 7 are based on input-output
statistics and do not include nonagricultural activity.
" The increase in the average length of haul is related to the closing
of small food-processing enterprises and peripheral procurement
points as the capacity of large, centrally located food-processing
As a result, according to Soviet sources, transporta-
tion organizations have not kept pace with the grow-
ing requirements for delivering industrial goods to
farms and for shipping farm products to processors.
Failure To Adjust Investment Policy Appropriately
Since the late 1960s, investment in agriculture and its
supporting industries (here termed food production)
has amounted to one-third of total investments in the
Soviet economy." Cumulative investments in food
production in the 1970s grew by 125 percent over
cumulative levels of the 1960s, compared with an
increase of 80 percent for the balance of the economy.
Despite this generous support, growth in agricultural
production diminished rapidly in the 1970s." Several
investment decisions are partly responsible for the
present slow growth in food production.
First, planners reduced the share of investment going
to industries supporting agriculture. Because of insuf-
ficient investment in machine-producing plant and
equipment, for example, much of the agricultural
equipment currently produced in the USSR is obso-
lete and of low quality. Only half of the specified
types of machinery needed by agriculture are, to date,
in series production. Even while in series production,
there frequently is an insufficient supply. For exam-
ple, the new, larger tractors are being utilized at only
50 to 60 percent of capacity because only half of the
necessary attachments are being produced. The short-
age of specialized equipment to carry out technically
advanced farm operations, such as the application of
liquid fertilizer, is especially critical. Moreover, there
is insufficient machinery adapted to specific farming
conditions in various regions of the country.
" In addition to direct investment in farm machinery, equipment,
and construction, this measure of "agricultural investment" in-
cludes allocations to ministries providing goods and services to
agriculture, such as fertilizer, pesticides, machinery, mixed feed,
repair services, roads, storage, and transportation facilities; the
Ministry of Procurement; and ministries managing off-farm food-
processing enterprises.
" From 1970 to 1980, the stock of equipment, buildings, and
structures for use in farm operations more than doubled, while
output of crops and livestock products increased by less than 10
percent (based on three-year moving average). During 1976-80, on
average it took additional capital stock worth 13.3 rubles to
generate an additional ruble's worth of farm output. These capital
requirements per unit of additional output are seven times those of
1966-70 and almost three times those of 1971-7
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
Confidential
Second, excess emphasis was placed on construction
of livestock facilities. The misplaced priority given
livestock facilities, together with increasing construc-
tion costs and the rising retirement rates for farm
machinery, has resulted in an increase in the share of
buildings and structures on state and collective farms
from 48 percent of capital stock in 1965 to 63 percent
in 1980. One Soviet writer claims that plant and
equipment for animal husbandry is now five times the
1960 level, and livestock output has increased by only
1.5 times. Production of livestock products has not
increased proportionately, because new capacity has
been allowed to stand idle and because the quantity
and quality of feed supplies have been insufficient."
Finally, during 1971-75 the share of investment going
to rural housing and infrastructure was cut. Accord-
ing to Soviet press reports, primitive living conditions
in rural areas contribute heavily to outmigration and
to the present shortage of younger, skilled workers.F-
Options for Investment in the 1980s
The Current Plan
Investment policy for the 1980s is largely intended to
compensate for perceived misallocations of the past.
Although growth in investment allocations will be
slow in the 1980s, compared with the 1970s, food
production will continue to receive about one-third of
investment resources. During the 1980s, a larger
share of farm-sector investment resources is to be
allocated to improving rural infrastructure and to
increasing capacity in food-processing and in farm
machinery production. Investment in large livestock
complexes is being reduced. Soviet policymakers be-
lieve that higher priority for storage, processing, and
distribution facilities will cut losses and increase the
quality and quantity of farm products delivered to the
consumer.
According to Soviet plan documents, investment allo-
cations to food production in 1981-85 will be only
about 9 percent above 1976-80 levels. However, in-
vestment both in agriculture and elsewhere in the
economy grew at above-plan rates during 1981-83. In
1986-90, investment growth is planned to pick up
slightly but is to remain below rates of the 1970s
(table 3).
Resource-Producing and Food-Processing Industries.
To build up the "weak links" in the food production
chain, resource-producing and food-processing indus-
tries will receive a larger share of total investment in
food production. In 1981-85, investment in the farm
machinery industries is slated to rise 50 percent over
1976-80 levels, compared with a 23-percent increase
for industry as a whole. Soviet planners reinforced the
priority by issuing a special decree in April 1983
calling for an additional boost in production of agri-
cultural machinery in 1983-90. As a result, press
reports and comments by a.Soviet official suggest that
further increases in investment in the relevant ma-
chinery will be made in the last half of the 1980s.
Despite this generous support, substantial improve-
ments in the quality and assortment of machinery
available to farms probably will not occur until after
1990, because the process of designing, testing, and
producing new machinery in the USSR is still very
slow
According to Soviet plan documents, the main in-
creases in investment in the food-processing industry
will not occur until 1986-90. We believe that present
increases in such allocations are being spent on food-
processing facilities to reduce postharvest losses. Ad-
ditional support for the food-processing industry is to
come from imports. We estimate that by 1986-90
imports of food-processing equipment, mainly from
Eastern Europe, could be as much as double those of
1976-80.
The Farm Sector. Investment in state and collective
farms and agricultural service organizations will in-
crease by about 11 percent in 1981-85 over the period
1976-80. The machinery portion of investment is to
rise by about 13 percent, compared with 8 percent for
total construction, including rural housing and infra-
structure. Growth in both components of investment is
to accelerate slightly in 1986-90. Major investment
priorities for farms are detailed below.
Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Table 3
USSR: Agriculturally Related Investment
Billion Percent Billion
1973 of Total 1973
Rubles Rubles
1971-75 1976-80 1981-85 1986-90
Percent Billion Percent Billion Percent Billion Percent
of Total 1973 of Total 1973 of Total 1973 of Total
Rubles Rubles Rubles
106.3
100.0
165.0
100.0
213.0
100.0
233.0
100.0
265.0 a
100.0
Farm sector
81.5
76.7
131.1
79.5
171.0
80.3
189.6
81.4
213
80.4
State and collective farms
74.1
69.7
118.4
71.8
155.2
72.9
172.5
74.0
NA
NA
Machinery and nonresidential structures
used in agricultural production
59.7
56.2
99.2
60.1
128.4
60.3
134.6
57.8
NA
NA
Rural housing, roads, and communal
services
14.4
13.5
Agricultural service organizations b
7.4
7.0
12.7
7.7
15.9
7.5
17.1
7.3
NA
NA
Production of goods used in farm operations and
food processing c
Other d
24.8
23.3
29.2
13.7
33.0
14.2
40
15.1
a Estimated on the basis of (1) Mikhail Gorbachev's statement that
investment in the 1980s would total about 500 billion rubles and (2)
the 1981-85 plan for investment.
b Includes outlays on various enterprises related to agricultural
production such as machinery repair shops, research institutes,
processing enterprises, enterprises producing agricultural building
materials, and the like.
c Resource-producing industries include machine building for agri-
culture and the food industry, production of fertilizers and livestock
feed additives. Food-processing industries include the food industry,
milling industry, and meat and milk industry.
d Includes fishing, specialized transportation, and enterprises of
trade and consumer cooperatives.
Rural Infrastructure. The most apparent shift in
investment in the 1980s is to result from growth in
allocations for rural housing, schools, and roads.
These annual allocations are to increase faster in the
1980s than in 1976-80 and are to amount to more
than 20 percent of total investment in food production
in 1986-90. Although Soviet policymakers consider
improving rural living standards a very important
element in reducing out-migration of the better quali-
fied workers, major improvements will not occur
quickly. Moreover, we believe that this program
would be one of the first to be cut if Moscow is forced
to raise the priority of other investment projects either
on farms or in other sectors of the economy.
Investment in paved roads is needed badly to reduce
high transportation costs and reduce losses in market-
ing of farm products." Soviet sources claim that only
" Costs of transportation rose by one-fourth in the 1970s and are as
high as 30 percent of total costs for some products. In the United
States, for example, rail and truck transportation costs amount to
20 percent of the farm roads used to move workers to
jobs, feed to livestock, and machinery to fields are
paved. More paved farm roads would increase the
productivity of farm machinery, reduce fuel use,
lessen the need for farm machinery repair, and in-
crease the attractiveness of living in rural areas. The
inadequate network of interfarm and market roads,
furthermore, limits marketing of farm products as
well as deliveries of goods used in farm production.
One Soviet writer claims that the lack of roads is
responsible for losses of 10 percent of farm produc-
tion. Even if plans for road construction are met,
paved roads will be available to less than two-fifths of
farms by 1990. Without adequate roads, some of the
benefits of planned increases in storage capacity for
perishable products would be lost.
Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
25X1
25X1
 Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
Confidential
On-Farm Construction. Most of the increase in allo-
cations for construction will go for rural housing.
Moscow is planning to hold 1981-85 allocations for
nonresidential buildings and structures at about 1976-
80 levels. Construction of new storage facilities for
vegetables, fruits, potatoes, forage crops, and industri-
ally produced commodities such as fertilizer are to be
the highest priority construction projects. At the
beginning of the 11th Five-Year Plan, on-farm stor-
age was sufficient for only 65 percent of the potato
harvest, 30 percent of the fruit harvest, and 15
percent of the vegetable harvest.1e Less than 20
percent of hay and feed-root crops are adequately
stored. In addition to more storage capacity, better
incentives for workers and managers throughout the
production process and substantial increases in ma-
chinery, equipment, and transportation and handling
facilities are needed to reduce losses and maintain
product quality.
During the 1980s, the costs of increased capacity for
livestock production will fall as renovation and expan-
sion of existing facilities replace new construction as
the primary form of new investment. On state and
collective farms of the RSFSR, for example, invest-
ment in animal husbandry, excluding feed production,
is to fall from one-half to one-third of productive
investment in 1981-85, compared with 1976-80.F__
Farm Machinery. Soviet policy toward investment in
farm machinery emphasizes expanding the assort-
ment and improving the quality and reliability of farm
machinery stocks. Planners are counting on increased
stocks of farm machinery to offset the effects of the
continuing decline in the agricultural labor force.
Growth in stocks of basic machinery such as tractors
and grain combines is to be accomplished by holding
deliveries at or slightly above those targeted for 1976-
80 and, at the same time, reducing retirement rates.
Even if plans for the delivery of agricultural machin-
ery are fulfilled, the 1985 goals for stocks of tractors
and grain combines will not be met by the end of the
decade if retirement rates remain at 1976-80 levels.
Excludes private-sector production of potatoes, vegetables, and
fruits on small household plots. These shares would be more than
adequate for a market economy. In the USSR, the inefficient
system for procurement and processing requires that very large
To reduce retirement rates Moscow must:
? Improve incentives on farms to use and maintain
machinery properly.
? Increase the number of trained machinery operators
relative to the number of tractors, grain combines,
and other harvesting machines.
? Make repair organizations responsive to farm needs.
? Improve incentives for industry to respond to farm
needs and to provide a wider assortment of better
quality machinery
So far in the 1981-85 plan period, retirement rates for
tractors, grain combines, and for several types of
harvesting and irrigation machinery have been re-
duced somewhat. In 1981-82, however, deliveries of
this equipment were below plan and, in some cases,
even below 1980 levels
Land Reclamation. Moscow plans to increase invest-
ment in irrigated and drained land in the 1980s
despite recent criticism by Gorbachev and others of
the poor maintenance and low payoff of many recla-
mation projects. We expect land reclamation to con-
tinue to absorb about 22 percent of investment in state
and collective farms in the 1980s. It is possible,
however, that in the future these funds will be
concentrated on improving and making better use of
land already reclaimed instead of making large addi- 25X1
tions to stocks of reclaimed land. Although the pro-
gram is expensive and is moving slowly, it has the
potential to help stabilize crop yields and improve
regional self-sufficiency in crop production."
Other Options
In view of the intense competition for investment
goods among the various sectors of the economy,
Moscow may decide, under certain conditions, to trim
the share going to food production in the late 1980s.
Returns to aggregate investment would be larger if
investment were shifted away from farms, because
farms require larger additions to capital to obtain
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
 Confidential Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
additional production than most other sectors of the
economy.20 We believe that investment cuts affecting
agriculture are more likely if the weather is better
than average over the next few years and farm output
increases at rates judged acceptable by the leadership.
With poor weather and stagnating production, Mos-
cow is unlikely to reduce investment in agriculture,
despite demand in other sectors and agriculture's
relatively inefficient use of capital.
If investment in food production now planned for
1986-90 is trimmed, we expect selective cuts to come
in the traditional low-priority areas of rural housing
and food processing. Farm production is likely to
maintain its priority as is the production of agricultur-
al machinery.
Soviet planners may also consider increasing imports
of Western food production equipment to relieve
pressure on domestic machinery industries. Indeed,
Soviet trade officials have recently expressed height-
ened interest in a wide range of Western equipment
and technology for food production." During 1981-83,
orders of Western machinery and equipment for food
production and processing increased slightly as a
share of total orders of machinery and equipment
from the West. Within the category of orders support-
ing food production, recent emphasis has been on
equipment for food processing (figure 8). We expect
m Agriculture's relatively high capital requirements are partly the
result of past misdirection of investment resources in agriculture.
During 1976-80, to increase the value of production by 1 ruble, the
machine-building industry required only 2.5 rubles' worth of new
capital stock compared with 13.3 rubles for Soviet farms. Compara-
ble capital requirements for other sectors are 5 for the chemical
industry, 5.5 for food processing, and 6 for fuels and power. Capital
stock is a complement as well as a substitute for labor services.
Because of the stringency in labor supplies during the 1980s, these
output/capital relationships would not be the only criterion used.
For example, increased capital is expensive but of particular benefit
to agriculture, where opportunities for labor-saving investment are
greater and planners are anticipating a long-term decline in the
number of workers and an increase in the average age of the
" In the past, imports of Western technology for food production
have had low priority. Of the $18 billion in machinery and
technology ordered from the West in 1976-80, only 3 percent was
devoted to agriculture and food processing. These orders, further-
more, were very small, compared with the $250 billion equivalent
invested by the USSR in the farm sector and in food-processing
industries during 1976-80. (Expressed in 1976 dollars. Soviet
investment in rubles is converted to dollars using the geometric
mean of US and Soviet weighted purchasing-power parities for
farm and food-processing machinery.
Figure 8
USSR: Structure of Imports of Western
Equipment and Technology for
Food Production
Percent
Food processing
1976-80
303604 9-84
this emphasis to continue, although orders of food-
related machinery and equipment probably will not
exceed 5 percent of all orders of machinery and
equipment from the West. Soviet trade officials have
indicated that foreign technology will supplement
domestic development of farm machinery. The Soviets
intend to import technology and complete factories for
producing machinery rather than importing large
numbers of individual machines. Many of the general
problems the Soviets face with Western technology
Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
(such as inadequate maintenance and spare parts,
shortages of skilled labor, and underuse of capacity),
however, would be especially severe for the widely
dispersed farm sector. Food-processing plants and
machinery producers, which have a larger payoff than
farms, might make better use of imported technology,
provided that raw-materials shortages did not inter-
fere.
by shortages of packaging and food preservatives. If
deliveries continue to fall far short of plan, returns to
Moscow's main strategy for dealing with these short-
ages has been to saddle producers with new plan tasks
and instructions to raise the priority of deliveries to
enterprises involved in food production. In some cases,
such as the paper industry, orders to step up deliveries
of packaging material have been accompanied by
commissionings of new production capacity, enhanc-
Soviet plans indicate that farm-sector purchases of
industrial goods (fertilizer, energy, feed ingredients,
spare parts, and so forth) are to increase on average at
about 3.5 percent per year in the 1980s. During 1981-
83, these deliveries grew at the above-plan rate of 4.1
percent per year. We estimate, however, that average
industrial growth in the 1980s may be too slow to
sustain current or even planned growth in deliveries to
farms unless planners give very high, continuing
priority to supporting the Food Program. During the
1960s and 1970s, purchases by agriculture from
industry grew faster than industrial production, but
the gap between the growth rates was much smaller
than that projected for the 1980s.22 Industry will be
further burdened by plans for the 1980s that call for
increases in industrial goods to food-processing plants
and to producers of fertilizer and machinery. Many
branches of industry probably will be under pressure
to economize on raw materials and energy and are
likely to face failure of their own suppliers to deliver
high-quality inputs
Resource-Producing and Food-Processing Industries
The payoff from new production facilities in the
industries that produce machinery and process food-
stuffs will be small without support from other
branches of industry. Machinery producers need more_
reliable, higher quality deliveries of tires, rubber,
plastic components, and rolled metal, in addition to
new production facilities. Producers of agricultural
chemicals need a more regular supply of high-quality
raw materials and packaging for herbicides, insecti-
cides, seed-treatment chemicals, and livestock feed
additives. Food processing has long been constrained
II During 1961-70, purchases grew at an average annual rate of 6.8
percent, and industrial production grew by 6.4 percent. The
comparable figures for 1971-80 are 4.9 percent for purchases and
ing the chances of success.
Farms
Chemical Fertilizer. Soviet agriculture needs an ad-
ditional 19 million tons of fertilizer nutrients annually
to increase applications to "recommended" levels for
all crops.23 Plans, however, call for an increment in
deliveries of only 12.2 million tons by 1990, which will
bring the total .to 65 percent more than in 1980.
Almost the entire increase in fertilizer deliveries will
be needed for grain and forage crops (annual and
perennial grasses, pasture, and corn for silage)."' The
Soviets plan to double applications of fertilizer on
grain. Given the current returns to fertilizer, this
increase would raise grain yields by 0.2 to 0.3 tons per
hectare by 1990 over annual average yields of the
1976-80 period."
v Soviet planners establish norms for fertilizer application accord-
ing to the yield response of crops to fertilizer in various parts of the
country. All the evidence indicates that the cost of fertilizer and the
profitability of its use are not important considerations in establish-
' Potatoes, vegetables, and industrial crops already receive fertiliz-
er close to recommended amounts. According to Soviet norms,
however, grain crops require an additional 12 million tons of
fertilizer. The area sown to annual and perennial grasses and corn
for silage requires 7 million tons. If natural haylands, meadows, and
for forage crops would be 2-5 million tons higher.
35 Soviet plans imply that, in the 1980s, each additional kilogram of
chemical fertilizer nutrients must provide 4 to 5 additional kilo-
grams of grain-approximately the returns obtained in the late
1970s. Grain yields are slated to rise from 1.6 tons per hectare in
1976-80 to 2.15 tons per hectare in 1990, with fertilizer accounting
for about half of the increase. Soviet plans are approximations at
4.6 percent for industrial production.
25X1
25X1
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
We estimate that, once goals for applications to grain
have been met and other nonforage crops have been
brought up to recommended levels, a maximum of 4-
5 million tons of fertilizer would be available to
increase applications on forage crops. These quanti-
ties, however, will not be sufficient to provide growth
in production of forage crops at rates needed to meet
plans for feed production.
We believe that production problems in the Soviet
fertilizer industry will keep deliveries from reaching
plan levels." The shortfall, however, is not likely to be
as large as that of 1976-80. Furthermore, we antici-
pate limited growth in output of phosphorous nutri-
ents relative to nitrogen and potassium in the 1980s.27
A shortfall in the availability of phosphorous fertilizer
will hold down the payoff from plans to increase
fertilizer use in the dry regions of the RSFSR and in
Kazakhstan, where the need for phosphorous fertilizer
is greatest. These important grain regions currently
use little fertilizer but are to account for an increasing
share of allocations to grain in the 1980s.
The most pressing problem related to fertilizer in the
1980s will be to keep marginal returns to fertilizer
applied to grain from falling off rapidly and to raise
the very low returns now being obtained from applica-
tions to potatoes, vegetables, and other crops (figure
9). Soviet farmers have the potential to increase crop
response to fertilizer by using it more efficiently. To
improve returns to fertilizer requires fewer losses of
fertilizer; more timely transportation from factory to
farm; more and better application equipment on
farms; seed varieties more responsive to fertilizer;
more efficient application practices; and greater use
of lime, gypsum, and pesticides."
" Although 40 to 50 percent of Soviet soils are deficient in
phosphorous, the Soviet fertilizer industry historically has been
unable to raise the overall proportion of phosphorous fertilizer
relative to nitrogen and potassium. This has limited gains in yields
and reduced crop quality and the effectiveness of nitrogen fertilizer.
31 Soviet sources claim, for example, that liming of acid soil
increases fertilizer response rates by 20 to 30 percent. Nevertheless,
plans to apply lime have been consistently underfulfilled. As a
result, areas of acid soil in the RSFSR, particularly the nonblack
soil zone, are increasing. Weeds, competing for nutrients, are a
major factor in the low response of grain, sugar beets, potatoes, and
vegetable crops to fertilizer. In 1980, less than half of grain crops
and only one-third of sugar beets received herbicide treatment.
Only half of agriculture's overall requirements for pesticides (insec-
ticides, fungicides, and herbicides) are being met. Soviet sources
indicate that 60 percent of required supplies will be available by
1985 but that supplies will not be fully adequate until the year
Insufficient quantities of fertilizer, together with
problems in delivery and application, will hold Soviet
1990 yields of hay, silage, and other forage crops
below present yields in Eastern Europe and below
those in analogous regions of the United States and
Canada in the 1960s and 1970s. Gains from using
additional fertilizer on grain are likely to compare
unfavorably with those in climatically similar areas of
North America even if fertilizer use and grain yields
reach plan levels.
Livestock Feed. Soviet farms largely depend on indus-
try to supply complete, nutritionally balanced, mixed
feeds. Industry also supplies protein supplements (oil-
seed meals, bone and fish meal, and single-cell pro-
tein) and premixes that include needed vitamins,
minerals, and protein that enable farms to produce
their own balanced feeds.29 Although nearly half of
the grain used for feed is processed into mixed feed,
much of the product is substandard. Roughly half of
mixed feed is produced without protein enrichment
because the needed raw material is not available. As a
result, the mixed-feed industry adds to the cost of
producing livestock products without proportionately
increasing the efficiency of production. Achieving the
1990 target of processing all grain that is fed into
mixed feed is improbable because it places too great a
burden on industries that produce the needed supple-
ments such as sugar, vegetable oil, and meat and
dairy processing, as well as those that produce chemi-
cal and microbiological feed additives. These indus-
tries would have to increase deliveries to the mixed-
feed industry by, on average, 30 percent over the 1980
level.
Soviet feed rations lack balance because, on average,
they are about 15 percent short of the quantity of
protein required to achieve the maximum output of
" Three-fourths of mixed feed in the USSR is produced by the
Ministry of Procurement, using grain purchased from farms and
imported grain. The balance is produced on state and collective
farms and in interfarm enterprises. According to Soviet authorities,
properly balanced mixed feed can reduce the need for concentrated
feeds by as much as one-third. Concentrated feeds are those high in
calories, such as grain and oilseed meals, with grain accounting for
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Figure 9
USSR: Fertilizer Applications and Crop Yields in 1980
as Percent of Recommended Levels'
Cotton
Sugar beets
Forage cropsb
a Recommended levels refer to fertilizer applications and the
expected crop yields that such applications would produce if all
farming operations were carried out correctly. Because of annual
fluctuations in yields, the three-year average (1979-81) is used.
b Includes annual and perennial grass and corn for silage. Includes
only cultivated forage crops reported in sown area statistics.
livestock products for a given quantity of feed.30 One
Soviet writer claims that the protein deficit exceeds
20 percent if losses of protein during harvesting and
storage are counted. Plans to reduce the deficit rely on
the traditional and thus far unsuccessful strategy of
increasing production of protein-rich pulse crops and
forage crops such as alfalfa, lucerne, clover, and
pulses." We believe that protein from these sources
10 The lack of nutritional balance, combined with a 20-percent
shortage in overall quantities of energy feed, means that it takes
about twice as long for cattle and hogs to reach slaughter weight in
60 80 100 120
will be well short of plan, creating additional demand
for industrially produced protein supplements." With
large increases in investment for food-processing in-
dustries and a 45-percent increase scheduled for the
microbiological industry, which produces single-cell
" Industry produced an estimated 7 million tons of high-protein
feed components (excluding milk products) in 1980. To boost
protein content of the average feed ration to the standard levels
would have required the equivalent of roughly an additional 11
million tons of soybean meal.~
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
protein and a number of other important feed addi-
tives, the capability to produce these important sup-
plements should expand.33 The flow to farms is likely
to increase slowly, however, because producers of feed
additives probably will continue to have difficulty in
getting raw materials from their own suppliersF_
Other Feed Additives and Veterinary Supplies. Soviet
technical writers have stated that only 40 percent of
the need for antibiotics for livestock feed and for
veterinary purposes is being met.34 A number of other
feed additives, such as elements of the vitamin B
complex and vitamin A, are also in short supply."
Production of important feed additives such as lysine,
methionine, and various enzyme preparations needed
to improve digestion are far short of demand, even
though production has grown substantially since the
mid-1970s. Although production of lysine, for exam-
ple, nearly tripled during the 1976-80 period, the
5,000 tons produced in 1980 covered only 15 percent
of demand.
Putting animal husbandry on an industrial basis,
which involves concentrating large numbers of ani-
mals in relatively small areas, has sharply increased
the need for veterinary services to prevent large losses.
The extensive shortage of such basic supplies as soaps
and disinfectants means sanitary standards are diffi-
cult to maintain. Veterinary supplies that are not
readily available include vaccines, drugs, syringes,
needles, rubber gloves, and laboratory equipment.
Industry's ability and planners' willingness to supply
these goods has been limited in the past, a situation
not likely to change substantially.
Energy. Increasing mechanization on farms will push
up agriculture's demand for energy, especially gaso-
line and diesel fuel. There are few prospects for
" Single-cell protein includes microorganisms such as algae, yeast,
molds, and other fungi grown either on byproducts of oil or on
organic wastes from agriculture and industry.
" Antibiotics are growth stimulators that increase feed efficiency.
Moreover, the addition of proper quantities of antibiotics to feed
reduces livestock death rates substantially. Soviet authorities report
that up to 20 percent of the calf crop is lost each year in some areas,
largely because of a lack of prophylactics, chiefly antibiotics, and
" Only two vitamins-D, and B,= are supplied in amounts ade-
quate for the enrichment of mixed feed and premixes.F_
substituting other fuels for gasoline and diesel fuel in
operating agricultural machinery." We expect con-
sumption of petroleum products in agriculture in 1990
to be at least one-third above that in 1980.37 Without
adequate expansion of secondary processing capacity
at oil refineries, however, deliveries of light petroleum
products to major consumers-transportation and ag-
riculture-could fall short of needs
Changing Agricultural Organization and Incentives
Soviet leaders realize that, unless transactions are
more efficiently synchronized between the farms and
organizations that supply machinery, fertilizer, and
other industrial goods and the organizations that
transport and process agricultural raw materials, new
investment planned for the 1980s will do little to
increase farm output and reduce waste throughout the
production process. Better coordination between par-
ticipants in the food production process requires less
cumbersome decisionmaking and more effective in-
centives for workers to use resources efficiently. In
contrast to the situation in China and Hungary, where
agricultural organization and management underwent
substantial decentralization in the 1970s, Soviet lead-
ers have opted to continue centralized planning and
management (see inset).
The Food Program
In keeping with concerns related to growing complex-
ity and rising cost, in May 1982 the Brezhnev regime
unveiled an agriculture-related program for the 1980s
that (1) reorganized the management of food produc-
tion, (2) redirected investment resources between the
farm sector and its supporting industries, (3) revised
incentives for farm workers and managers, and (4)
listed new targets for production of key agricultural
commodities and for allocation of goods and services
16 Small increments in natural gas and primary electricity should be
available to substitute for oil in operations such as crop drying and
in the heating of nonresidential structures.
" Coal currently accounts for about 20 percent of total fuel use in
agriculture. Natural gas is being used more in agricultural process-
25X1
25X1
25X1
25X1
25X1
25X1
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
Confidential
Agricultural Reforms in Hungary and China
The Food Program contrasts markedly with changes
made in management of food production in China
and Hungary. The net effect of changes in these
countries has been to increase output, raise produc-
tivity, and lower production costs
In both countries, procurement plans have been re-
duced or abolished, giving farm managers and private
producers more opportunity to make production deci-
sions. Although the RAPO concept (see text) offers
the possibility of decentralizing management to the
local level, Soviet farm managers will continue to
have no real autonomy to make decisions that should
be made at the farm level, such as what to produce,
when to plant, or what machinery to buy.'Their
Hungarian counterparts do not full centrally deter-
mined procurement plans, but plan output according
to prevailing prices and the amount of revenue needed
to cover labor and material costs. Hungarian farms
engage in relatively free trade to acquire machinery,
fertilizer, and other goods from industry. These
farms are also free to undertake other kinds of
production, such as small-scale manufacturing and
repair that provide off-peak employment, add reve-
nue, and increase the supply of services and equip-
ment to small farms.
The Chinese "responsibility system" introduced in
1978 replaced strict acreage and production quotas
with contracts between the state and a production
team or-more commonly-a group or family within
the team. These teams consist of 25 or 30 house-
holds, somewhat over 100 people. There are six
major variations of the new system, ranging from
those where planning and management are still high-
ly collectivized to others that resemble individual
farming. Western analysts agree that these reforms,
together with good weather and increased use of
fertilizer and equipment, are responsible for impres-
sive growth in output and productivity. Additional
reforms announced by China in 1983 and 1984 go
further toward decentralization. These include con-
tinued dismantling of communes, reducing the quan-
tity of farm products flowing through state procure-
ment channels, increasing flows of commodities
through free markets, and permitting peasants to
employ hired labor and subcontract land.
Moreover, Hungary and China support the private
sector actively. Although the Soviet regime in 1977
ordered greater state assistance for private farmers,
support and ideological acceptance of private agricul-
ture falls far short of that in most East European
countries. Hungarian cooperative farms, for example,
supply their members with seed, feed, young live-
stock, and transportation and marketing services.
Output of private plots is counted in production totals
of the farm. The USSR has taken only a small step in
this direction. In 1981 a decree was issued that
allowed state and collective farms to.contract with
individuals for raising livestock. The farms provide
young animals, feed, and veterinary services, and buy
back some of the mature livestock. State and collec-
tive farms are allowed to count products obtained
under contract in their output totals
In China, one variant of the "responsibility system"
divides collective land and other assets among peas-
ants and involves no collective accounting and distri-
bution. Approximately 70 percent of households par-
ticipate in this system. The household contracts to
supply a given quantity of farm products and makes
all decisions concerning the production process. The
household may sell above-contract production
through any marketing channel it chooses and may
use land not needed to meet contract obligations as it
sees fit.
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
used in production. The program reflects the leader-
ship's concern about lagging farm production and
represents a renewed political commitment to improv-
ing the Soviet diet. A central goal of the program is to
reduce dependence on imported farm products.
The Food Program calls for creation of agricultural-
industrial coordinating bodies at the all-union, union
republic, oblast, and rayon (district) levels. These
bodies will bring farms, service organizations, and
some other components of the "agro-industrial com-
plex" together under a single administrative hierarchy
that is responsible for coordinating the entire food
production process from farm to retail outlet.
The all-union body, the national Commission for
Questions of the Agro-Industrial Complex, is to "co-
ordinate" the activities of member organizations;
"monitor" plan fulfillment for state purchases of
agricultural products, deliveries of industrially pro-
duced goods, and the production of processed food;
and conduct "preliminary examinations" of plans
prepared by Gosplan. The power to carry out even
these functions is still undefined. Since May 1982, the
national commission has held regular meetings but
has been able to do little to speed the reorganization
or to ensure delivery of promised goods and services to
farms.
Councils at the oblast, kray, and autonomous republic
level are to monitor plan fulfillment and have the
authority to pool resources and redistribute them
among members of the agro-industrial complex, as
long as union republic ministries and departments
agree. These councils can also create interfarm enter-
prises to produce mixed feed, construction materials,
production equipment, and consumer goods. Decen-
tralization of decisionmaking to this level could help
eliminate supply bottlenecks, promote more efficient
use of resources, and improve coordination in the food
production process.
The reorganization carried out at the rayon level is
the most significant and controversial aspect of the
reorganization. The rayon agro-industrial associations
(RAPOs) include as members all farms, agricultural
service agencies, and processing enterprises in a given
district. As such, they cut across ministerial lines,
concentrating authority at the local level.
RAPO authority is constrained to a considerable
degree, however, and potential effectiveness is limited.
The existing system of central determination of quo-
tas for state purchases of agricultural products and
allocation of investment goods and other inputs is not
to change. RAPOs can redistribute production targets
among farms but can only "confirm" and "examine"
plans for service organizations, which are subordinate
both to the RAPO and to the parent ministry or state
committee. Although RAPOs nominally can redis-
tribute 10 to 15 percent of allocated resources, mem-
ber organizations must agree.
Problems in Implementing the Food Program
The Andropov regime publicly supported the reorga-
nization but appeared to recognize that, if it were to
work, it would require more time and strong leader-
ship support. Even if Andropov's successors can elimi-
nate current delays in implementation, benefits from
the reorganization will not appear in time to aid in
achieving 1981-85 goals. Full implementation has not
yet taken place for two reasons.
First, the scheme has been resisted by the ministries
and state committees that stand to lose authority if a
regionally oriented system is fully established. After
the May 1982 plenum, one Soviet writer observed that
oblast service organizations were advising their rayon
subdivisions to participate in RAPOs without giving
up traditional prerogatives. As a result, lack of control
over service organizations that supply equipment,
repair services, agricultural chemicals, and construc-
tion services severely limited the effectiveness of the
RAPOs. In July 1983 the Andropov regime took
additional steps to merge the interests of farms and
service organizations by issuing a decree that ties
rewards for service organizations to growth in output
and productivity on farms they serve. Although Mos-
cow correctly recognizes that farms need a responsive
service sector, so far the leadership has been unwilling
to eliminate the dual subordination of service organi-
zations. As long as the conflict between RAPOs and
the parent ministries continues, management prob-
lems will remain.
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
Second, republic commissions have not been fully
established, contributing to the lack of effectiveness of
both the national commission and RAPOs. Although
republic commissions have been formed, regulations
specifying their rights and duties have not yet been
published. The delay in drawing up regulations sug-
gests that ironing out differences between central
ministries and regional authorities at this level is
proving especially difficult
for farmworkers and employees of service organiza-
tions in the form of wage and in-kind payments in
products, primarily grain, sugar, and vegetable oil. ,
We believe that Moscow is reemphasizing payments
in kind to encourage livestock raising by private
producers. Payments in the form of scarce food 25X1
products are likely to provide greater incentive than
money payments that cannot be spent on the goods
and services that the population wants
Revising Incentives on Farms To boost farm profits, premiums (up to 50 percent of
Improving incentives for farms to carry out agricul- the procurement price) formerly paid only for above-
tural operations on a timely and efficient basis is plan deliveries are now to be paid to farms if they
probably the most important factor in raising product increase deliveries to the state over those of average
quality and reducing waste in harvesting, transporta-
tion, and processing of agricultural products. Im-
proved incentives are also needed to supplement and
reinforce the reorganization of agricultural adminis-
tration and provide more efficient use of new invest-
ments. Current plans, however, involve few imagina-
tive, new strategies for improving incentives.FI
Financial Incentives. The cornerstone of current in-
centive policy is an increase in money incomes of rural
workers and higher profits for farms. The regime will
continue to raise farm wages faster than those in other
sectors to motivate farmworkers and to make farm
jobs more attractive to younger workers who might
otherwise migrate to cities." Although the link be-
tween profits and the quality of managerial perform-
ance is weak, higher profits are intended to increase
the funds that farms have available to invest in new
production facilities, build housing and cultural facili-
ties, and pay money bonuses to workers.
Although Moscow will continue to reduce the gap
between urban and rural incomes, planners apparent-
ly recognize that more money income in rural areas
will be of little value as an incentive for workers
because of the inadequate supply of both consumer
goods and producer goods to be used in supporting
production on the private plots of farmworkers.
Therefore, added incentives are to be provided both
3? We estimate that agricultural incomes per worker-including
both money and in-kind payments-rose from 65 percent of
nonagricultural incomes in 1960 to 90 percent in 1980. A "quality
of life" index that reflected both household incomes and availability
of goods and services, however, would show a spread of much more,
levels during 1976-80. Additional bonuses will be
given to managers and specialists if farm product
sales and profits exceed the average 1976-80 level.
This new policy may increase intervention in farm
affairs if farm managers attempt to reap larger
bonuses by avoiding production targets levied by
planners for relatively unprofitable productsF~
Higher Procurement Prices. The concern of Soviet
leaders over the low profitability of farms led to the
introduction of higher procurement prices for most
products on 1 January 1983. As a result of price
increases, the subsidy bill will rise appreciably. The
regime plans to spend an additional 16 billion rubles
per year for direct price increases and for special price
supplements for unprofitable farms.39 Although prices
for all farm products were affected, 70 percent of the
16 billion rubles was to be used to raise procurement
prices on livestock products. Sellers of potatoes and
vegetables, on the other hand, were to receive only 3.7 25X1
percent of the funds. for price increases. Despite the
large allocation to prices of livestock products, prelim-
inary Soviet data indicate that in 1983 crop produc-
tion remained more profitable than livestock produc-
tion, although the gap between the two profit rates
narrowed somewhat. Thus, there appears to be no
" Speeches by Soviet leaders indicate that the regime presently has
no intention of raising retail food prices to cover the procurement
price increase. In 1981, subsidies totaling 33 billion rubles were
paid to cover the difference between retail prices and production
costs of food products. The 11th Five-Year Plan (1981-85) calls for
these subsidies to reach 50 billion rubles in 1985. This amount is
equivalent to one-half of national income originating in agriculture
25X1
25X1
k Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
great incentive for farms to switch resources into
production of feeds and livestock products, and pro-
curement plans that levy specific quotas for delivery
of farm products will continue to be essential to
achieve the desired mix of output.40
Soviet planners apparently recognize that costs of
industrial goods and services will continue to rise in
the 1980s and could erode new profit levels in agricul-
ture. According to Soviet writers, to preserve profit
levels, future increases in procurement prices will be
closely tied to increases in prices of goods and services
sold to farms."' Although this policy will not encour-
age efficient use of resources, it recognizes that
inflation is substantial and beyond farm control. F_
Soviet procurement price policy is much less effective
than that in Hungary, where procurement prices are
used as an indirect influence on the farm decision
making process. In Hungary, planners annually estab-
lish a list of countrywide procurement prices specifi-
cally geared to generating the product mix the regime
wants. Input prices are subsidized but geared to
encourage rational use.
Although China is trying to use procurement prices in
a similar way, the policy is not yet completely success-
ful. A sweeping price reform was undertaken in 1978
to raise rural incomes and to diversify production by
raising the profitability of industrial crops. As a
result, incentives to produce grain have suffered to the
extent that planners are concerned that there may not
be enough grain if bad weather hits. In addition,
inflation has become a problem in some rural areas as
growth in supplies of consumer goods has not matched
income growth. Because of the internal political situa-
tion, Beijing has been unwilling to make another
' Available data on the price increase indicate only how the
increase is being allocated among meat, milk, wool, grain, sugar
beets, potatoes, vegetables, cotton, and "other" products. Prelimi-
nary data for 1983 on the effects of the price increase indicate that
the major impact was to raise profitability of livestock production
on state farms, narrowing the gap substantially between crops and
livestock products. Although collective farms on the average did not
lose money on livestock products in 1983, the profit rate evidently
was very low and much smaller than that for crop production. C
" The new pricing scheme involves new policy toward subsidies paid
to farms for building materials, certain types of equipment, fuel,
and other supplies. Soviet sources indicate that the price increase , of
1 January 1983 will allow farms to cover additional costs stemming
from the 1982 increase in industrial prices (about 5 billion rubles)
out of revenues received from sales of farm products to the state.
Subsidies now paid as the result of pre-1982 price increases in the
sweeping price reform but is adjusting prices on a
crop-by-crop basis to help control the product mix.
New Wage Scheme. Problems with shortages of
skilled labor, high costs, and inefficiency would lessen
if a wage scheme could be implemented that rewards
farmworkers according to their contributions to pro-
duction.42 The Food Program moves in this direction
by calling for the "job contract plus bonus" system of
wages to be used throughout agriculture. Under this
system, which has been used in some areas since the
1960s, a team of workers contracts with the farm to
produce a given quantity of farm products with a
specific allocation of machinery and other goods."'
The farm supplies the equipment, seeds, and chemi-
cals, and agrees to guarantee prompt harvest and
storage of the crop. The teams are to be given latitude
to manage the production process as they see fit.
During the growing season, workers receive monthly
cash advances. After the harvest, total wages are
increased if crop yields and/or livestock productivity
have improved. The sum paid out as monthly ad-
vances is deducted from the new wage total, and
members of the team share the remainder, which,
according to Soviet officials, is expected to account
for at least half of total cash payments to workers.
According to Soviet writers, this scheme has been
successful in linking wages to the "final result." It is
an improvement on the piecework or hourly systems
of pay that encourage farm machinery operators, for
example, to plow, sow, or harvest as many hectares as
possible without regard to the quality of work done.
The job contract system, used on only 6 percent of
Soviet farms, has resulted in higher yields and lower
costs. The following problems, however, suggest that
it would be difficult to implement the system on a
wide scale:
? Many of the teams have disbanded because, in
recent years when crops were poor, workers who
received piecework or hourly wages earned more
than workers belonging to teams with contracts.
42 Under the various wage schemes adopted over the years, the
collective or state farmworker perceives little relationship between
the quality of work and the pay received
The size of teams appears to vary widely, ranging from small
groups of five to 10 workers to much larger brigades of 20 to 30
25X1
25X1
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Confidential
? Teams have not had a reliable supply of agricultural
machinery, because farms fail to supply the guaran-
teed machinery and equipment, choosing to use it
for other needs. Teams are dependent on these
inputs to meet production targets but have no
alternative suppliers and no effective capacity to
force farms to honor their part of the contract. We
believe that inadequate supplies of machinery,
chemicals, and other inputs will be-one of the major
factors limiting the success of the job contract wage
scheme.
? According to the deputy editor of a Soviet agricul-
tural newspaper, contract teams have not been more
widely introduced, because many workers lack the
necessary training to assume responsibility for all
phases of the crop-production cycle and for mainte-
nance and proper use of machinery and equipment.
Incentives in Procurement Organizations. If losses of
farm products in transportation and storage and in
processing are to be reduced, procurement organiza-
tions need better incentives to maintain product quali-
ty and to synchronize their operations with those of
farms and food-processing enterprises. The Food Pro-
gram, however, offers no new incentives to procure-
ment workers to maintain product quality. Recent
reforms require state procurement organizations to
pick up produce at the farm gate and to be responsible
for transportation and delivery to the food-processing
plant." (Formerly, farms were required to deliver their
products to procurement points.) Managers and spe-
cialists in procurement organizations will be rewarded
if they procure planned quantities of crops and live-
stock products. The only quality control in the pro-
curement process is to be done by teams of inspectors,
who will "monitor" the quality of agricultural raw
materials and processed food products. Their efforts
probably will have little effect on waste in transporta-
tion, storage, and processing. Any improvement will
come through the program to provide enhanced stor-
age facilities, better roads, and modern transportation
equipment.
" In the case of livestock products, only about 20 to 22 percent of
procurements are being picked up at the farm gate. The share has
risen slowly because of inadequate roads, too few vehicles, freight
rates that still do not cover costs, and because RAPOs still have not
coped with the fact that vehicles for direct pickup at farms are
scattered among three different organizations: Sel'khoztekhnika,
the Ministry of Meat and Dairy Industry, and the Ministry of
Soviet Perceptions of Reform
Because of inherent shortcomings and slow implemen-
tation, announced organizational changes probably
will make only limited contributions to improvements
in food production. As is indicated by one possible
scenario for the rest of the decade, average weather
over the next few years, close-to-plan deliveries of
industrial goods to farms, and price increases for farm.
products, however, probably will provide enough gains
in farm output and productivity, compared with the
1970s, for the regime to consider the Food Program
successful. Under these circumstances, there probably
would be few modifications to the Food Program. If
the weather is poor or if Soviet leaders decide that the
cost of likely gains is too high, additional changes in
the management of food production might be consid-
ered.
Although the Soviet press in the past several years has
debated the advantages of less centralized manage-
ment, we do not believe that in the 1980s Soviet
leaders will move very far toward the Hungarian or
Chinese systems. Although little has been written in
the Soviet press about China, one writer expressed the
opinion that the benefits of improved food supplies
had been outweighed by growth of inflation and
increased social differentiation within the country.
Although Soviet planners have investigated the Hun-
garian model for possible adaptation in the USSR,
they reject this and other East European experiments
because they feel that solutions appropriate for the
small countries of Eastern Europe are not suitable for
a country the size of the USSR .41
More important, however, Soviet leaders have a firm
belief in their own system. Movement toward market-
oriented systems appears to be unacceptable on ideo-
logical grounds. The leadership perhaps considers
raising efficiency and lowering costs less important
than providing an ideologically acceptable example of
management for other centrally planned economies.
" Soviet writers have noted that, if farms were to base production
decisions on a set of national procurement prices such as those used
in Hungary, a pattern of regional specialization in production
would develop that would excessively burden the transportation and
distribution system. Moscow is committed to regional self-sufficien-
cy in agriculture (trading higher costs of production for lower
transportation requirements), rather than regional specialization.
25X1
25X1
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Furthermore, Soviet officials for the most part do not
share the confidence of Chinese and Hungarian lead-
ers in the ability of local farm managers and private
producers to make the "correct" production decisions.
Local Soviet party officials continue to interfere in
day-to-day farm operations despite the fact that
Khrushchev, Brezhnev, Andropov, and current agri-
culture secretary Mikhail Gorbachev all have con-
demned this practice, recognizing that it reduces farm
efficiency. Even with authority, however, Soviet farm
managers would require a more rational price system
to improve decisionmaking substantially.
Average annual growth in net farm output for the
balance of the 1980s depends on:
? Growth in use of goods and services on farms.
? The degree to which new programs increase effi-
ciency in the use of resources.
? Weather. Gains in efficiency would be reflected, for
example, in accelerated growth in the overall crop
yield index and in reduction of feed requirements
per unit of livestock output. Good weather would
enhance the beneficial effects of Soviet attempts to
increase productivity, and poor weather would offset
the benefits from these programs.
Goods and Services Used in Farm Production
Present Soviet plans are to hold growth in inputs used
in farm production below 1976-80 levels (table 4) and
to derive output gains primarily from gains in produc-
tivity
During 1981-83, however, inputs grew at rates well
above plan. Although much of the extra growth
occurred because anticipated declines in farm labor
did not materialize, deliveries of industrial goods were
also above plan.46 Despite official statements, planners
.46 The number of workers employed in agricultural work on state
and collective farms declined steadily from 1965 to 1981. In 1982
and 1983 employment increased slightly. Since 1970, furthermore,
the number of hours worked per employee has increased as has the
number of seasonally employed nonagricultural workers. In addi-
tion, hours worked on private plots have increased because of the
Table 4
USSR: Average Annual Rates of
Growth in Inputs to Agriculture
1971-75
1976-80
1981-83
Actual
1981-90
Plan a
Total
2.5
1.7
2.5
1.0
Land
0.8
-0.1
-0.2
0.3
Livestock inventories
1.8
1.3
2.7
0.6
Capital stock
11.1
8.5
8.9
4.7
Purchases from industry
6.9
2.9
4.1
3.3
Labor
-0.2
NEGL
1.2
-0.3
a Estimated from Soviet plans for use of land and labor, investment,
herd growth, and deliveries of industrial goods.
appear to realize that-at least for the present-
output gains will require above-plan growth in inputs
and that productivity gains are not likely to reach plan
levels. We expect two major factors to influence
growth in inputs for the balance of the decade.
First, maintenance of above-plan growth in invest-
ments and other industrial goods used by farms would
require that the regime give very high, continuing
priority to the Food Program. The slow pace of
industrial growth that we project for the 1980s sug-
gests that adjustments in other programs might have
to be made if the Food Program is to be supported to
this extent.
Second, agriculture will continue to face manpower
shortages in many regions. Past policies to lure young
people to industrial centers, together with neglect of
rural regions, has left agriculture with an older,
relatively unskilled labor force. Although there was a
net increase in the total number of agricultural
workers in 1982 and 1983, workers adequately trained -
to cope with modern farming techniques and equip-
ment are still in especially short supply. The speed
with which major improvements in rural living condi-
tions are provided will determine whether labor turn-
over remains high, and retention of newly trained
skilled workers continues to be difficult
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
Confidential
Increased Efficiency in the Use of Resources
Growth in the combined productivity of land, other
productive assets, and labor will depend on the effec-
tiveness of changes in agricultural management poli-
cies and in their implementation. Although there are
several policies that will have a positive impact on
productivity, their benefits may be reduced by poor
weather or by the effects of organizational and man-
agement policies that tend to inhibit the growth of
efficiency.
growth rates in fora a production higher than those at
present.4
Second, the increase in use of summer fallow that has
occurred since 1975 should help stabilize grain yields
and increase their quantity and quality.50
Third, Soviet seed breeders have introduced several
new varieties of wheat and rye that could contribute
to grain quantity and quality. More efforts are also
being made to supply farms with crop seeds that are
adapted to the areas of. the country in which they will
Positive Influences. There are indications of several
long-term shifts in agricultural policies that could
improve growth in the overall crop-yield index and
increase efficiency of livestock productionF__
First, livestock feed rations are likely to improve to
some extent, although they will not reach optimal
levels by 1990.^' Increased supplies of grain, forage
crops, and industrially produced feed ingredients,
together with higher pasture yields, will raise the
quantity of feed per animal and improve nutritional
balance, especially if the regime adopts a policy of
slow herd growth.48 Growth in roughage production
will be more crucial for growth in the livestock sector
than grain production throughout the balance of the
decade. Assuming current feeding practices, our cal-
culations indicate that the need for roughages will
grow by nearly 3 percent per year during the remain-
der of the decade if meat output grows at the 1960-83
trend rate. The need for grain will grow by slightly
over 2 percent annually. If the regime continues to
raise the priority of forages in terms of machinery
support, seed production, fertilizer and labor use, and
storage and handling capacity, farms could sustain
41 Current livestock rations amount to 2.6 to 2.7 tons of feed units
per year for each standard animal unit. (Total standard animal
units are derived by weighting inventories of cattle, hogs, poultry,
sheep, and goats, according to feed requirements for each type of
animal.) Soviet writers claim that available feed units should
amount to 3.5 to 4.5 tons annually per standard animal unit.
u Historically, Soviet farms have been encouraged to increase her
numbers, even at the cost of declining animal productivity when
feed supplies were short. Recently, there have been indications that
this emphasis is shifting. Farms are being criticized for keeping
nonproductive animals merely to be counted in the 1 January
be grown.
Fourth, in addition to improving livestock feeding
practices, the USSR has indicated interest in procur-
ing North American-type cattle to improve the genet-
ic potential of the dairy herd.
Finally, imports from the West of technology for
machinery production, pesticides, and so forth, would
have a positive effect on efficiency.
Negative Influences. Two factors will make it diffi-
cult for Soviet agriculture to realize the benefits from
agrotechnical improvements.
First, we believe that new organizational measures
and incentives-though a step in the right direction-
are being implemented too slowly. They probably will
have only a limited impact in the 1980s on the
willingness and ability of farms to carry out more
" If farms do not produce sufficient roughage, they probably will
continue to cover deficits by feeding extra grain, despite the
campaign to reduce this practice. Because of low levels of mechani-
zation, insufficient fertilizer, and high labor requirements, feed
units derived from forage crops are more expensive than feed units
derived from grain, which has enjoyed much higher priority in
resource allocation. The share of grain in total feed use has
increased from an average of 25 percent during 1965-75 to 29
percent in 1982. In some areas such as Estonia, the share is as high
as 60 percent. Roughage shortfalls can be covered with grain, to a
limited extent. Overfeeding of grain, particularly to cattle, disrupts
digestion and causes problems, including sterility and various
diseases.
S0 Under the practice of clean fallowing, the land is not planted and
is cultivated only as needed to prevent weeds from growing. This
practice also permits accumulation of moisture and nitrogen in the
25X1
25X1
25X1
25X1
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
 Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
timely seeding, cultivating, fertilizer application, pest
control, and harvesting. The problem of synchronizing
activities of farms, food-processing enterprises, trans-
portation organizations, and so forth, is likely to
remain for the balance of the decade because central
ministries almost certainly will continue to resist the
transfer of control of food production to regional
bodies.
Second, it will be difficult to reduce costs and increase
efficiency as long as the leadership is unwilling to:
? Eliminate centrally determined quotas for output of
farm products and goods and services used in
production.
? Stop interference by party officials and bureaucrats
in day-to-day farm operations.
? Sufficiently overhaul the inappropriate price struc-
ture both for goods and services sold to farms and
for farm products.
? Replace gross farm production as the most impor-
tant determinant of success.
Projections of Growth in Net Farm
Output for the 1980s
Because the development of the Soviet farm sector in
the 1980s will depend strongly on weather and how
the leadership implements the Food Program, single-
value forecasts of average annual growth in net farm
output are inadequate to analyze the potential effects
of the relevant variables. Therefore, we present three
scenarios for growth in net farm output in the 1980s.
Each scenario incorporates different assumptions
about weather, leadership attitudes toward supplying
agriculture with inputs, and degree of success of
programs to increase efficiency.
Baseline Case. Our baseline projection assumes that:
? Weather approximates the 1960-83 average for the
balance of the decades' Weather would thus be
better than that experienced, on average, after
1978, but not as good as that experienced from the
mid-1960s to the mid-1970s.
? With better weather, planners become more opti-
mistic about programs to increase productivity and
reduce the current rate of growth of inputs from 2.5
percent to 1.5 to 2 percent, at or slightly below the
long-term average annual growth rate for 1961-75.
? Policy measures to increase productivity are partial-
ly successful. Productivity does not decline as it did
in the 1970s, but grows at 0.5 percent per year,
slightly below average annual growth during 1961-
75. Under these circumstances, net farm output
during the 1980s would grow at an average annual
rate of 2 to 2.5 percent. This is approxmimately the
same rate of growth that would occur if output of
major farm products grew at the 1960-83 trend rate
for the balance of the 1980s.
Worst Case. At worst, farm output growth would not
improve over the poor performance of 1976-80 and
would increase at 0 to 0.5 percent per year. This
assumes:
? No improvement from the less favorable growing
and harvesting weather experienced on average
after 1978.
? Efforts to improve feed rations, seed varieties, and
so forth, fall short. Crop yields stagnate and no
improvement occurs in feeding efficiency. Lack of
incentives and bureaucratic inertia keep costs high
and productivity low.
? Planners' attempts to maintain growth in inputs at
present levels (2.5 percent per year) to compensate
for much less favorable weather are not successful,
and growth in inputs remains at average annual
levels of 1976-80. Under these circumstances, net
farm output would grow at 0 to 0.5 percent, inputs
would grow at 1.7 percent, and productivity would
decline at 1.2 to 1.7 percent per year.
Optimistic Case. This projection assumes that:
? Substantial progress is made in livestock feeding
efficiency and in improving cropping practices. Crop
yields grow at an accelerated pace and output per
unit of feed inputs increases at a sustained rate..
Efforts to improve organization and management,
enhanced by good weather, provide growth in pro-
ductivity of 1.5 to 2 percent.
25X1
25X1
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85T00313R000300020005-4
 Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
Confidential
? Soviet leaders perceive less need to supply inputs at
above-plan rates and cut back growth to the plan
rate of 1 percent, releasing resources for other
programs. Under these circumstances, net farm
output would grow at 2.5 to 3.0 percent per year-
about the same annual rate as in 1966-70, when
productivity gains accounted for a high share of
total growth.
Impact on Per Capita Consumption
If production increases at rates set forth in our
baseline case, growth in net farm output in the 1980s
will be higher than in the 1970s and will provide some
gains in per capita consumption of quality foods.
Because consumer incomes are slated to rise at about
the same rate as our baseline case predictions for net
farm output, demand for quality foods (livestock
products, fruits, and vegetables) would keep pace with
growth in supplies." Many of the regime's 1990 goals
for per capita consumption, however, will be out of
reach. The following tabulation shows the degree to
which our baseline projection of growth in net farm
output in the 1980s would meet 1990 targets for per
capita consumption: 13
These calculations assume that output of major farm
products grows at the 1960-83 trend rate for the.
balance of the decade, waste factors remain un-
changed, and there is no net trade other than sugar
imports from Cuba.
The per capita consumption gains for most products
provided by this growth in farm output probably
would be considered adequate by the regime, especial-
ly if Chernenko continues the consumer policies of
Andropov. The meat shortfall is likely to be smaller
than that shown above because the USSR probably
will continue to import grain to boost livestock pro-
duction. Grain imports, however, are not likely to
reach levels necessary to meet plan goals for meat
production."'
Soviet policy toward food imports for the remainder
of the decade will depend on which production scenar-
io farm output follows and leadership attitudes toward
food imports from the West. Under baseline or opti-
mistic case conditions, imports of grain and other food
products are likely to be below the record levels of
recent years. If farm output follows our worst case
projections, the regime is likely to maintain levels of
No shortfall Shortfall of 15 Shortfall greater imports high enough to keep per capita consumption
percent or less than 15 percent of quality foods from declining.
In May 1982, in his Food Program speech, Brezhnev
x noted the "need to reduce imports of foodstuffs from
x capitalist countries." Soviet leaders apparently believe
that minimizing dependence on imports from the
West is more important than rapid growth in per
capita food consumption. As long as the regime
Vegetable oil x maintains this belief, large imports of grain and other
food products from the West probably will not occur.
"This calculation assumes that income elasticity of demand for
these products is equal to 1. In this case, consumers would increase
demand for these products in the same proportion to the increase in
income. If income elasticity is greater than 1, increases in demand
would be greater than those of income.
" Soviet 1990 per capita consumption goals for meat are approxi-
mately equal to 60 percent of US per capita consumption in 1982.
Per capita consumption goals for other products as a share of US
per capita consumption in 1982 are sugar-75 percent; eggs, fruit
and vegetables-100 percent; milk-130 percent; and potatoes-
"Our calculations show that, under these assumptions, the USSR
would have to supplement grain harvests with 30 million tons of
25X1
25X1
Approved For Release 2009/02/23: CIA-RDP85TOO313ROO0300020005-4
 Confidential
Confidential
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4
Approved For Release 2009/02/23: CIA-RDP85TOO313R000300020005-4