vc llllllL U 1 UJJY r 1 1 IUV U rur r l c l L U I 1 IU ro lr -1 Ut r UUO ' r UUUOUUO UUU r-L - SttHt - 7 L---··--•------- I USSR Improving Agricultural Performance Reduces Grain Import Needs L An Intelligence Assessment Secret GI 86-10084 sov 86-10056 December I 986 25 25 VQIIIUL I JVjJY f t t IVVt U IUI f ' t lt c i St u I I IUJ l j IA-KUt-' KUUo94R000600570001-2 Secret 25 USSR Improving Agricultural Performance Reduces Grain Import Needs __ 25 An Intelligence Assessment This paper was prepared by r Office of Globa l I-ss-u-es I 25 25 I _j -------- 1 Office of Soviet Analysis Comments and queries are welcome and may be directed to the Chief Strategic Resources Division OGI - - - ____ __J Reverse Blank 25 Secret GI 86-10084 sov 86-10056 nn n -1 ar I OR 25 USSR Improving Agricultural Performance Reduces Grain Import Needs r ------·-______ _J Key Judgments J iformation available as o 7 November 1986 was used in this report 25 Soviet agricultural performance has improved in 1986 and may exceed the record 1983 production an accomplishment General Secretary Gorbachev will undoubtedly highlight as a turnaround in the agricultural sector The improved performance is due to continued growth in the livestock sector combined with increased production of several major crops L _____ J 25 Recently Politburo member Yegor Ligachev predicted that the Soviet grain crop would be roughly 210 million metric tons This figure however is a preliminary estimate as harvesting is still not completed and final results will not be known for some time On the basis of meteorological data _ _i and fertilizer production statistics we would have 25X1 expected a grain crop closer to 195 million tons A higher figure would indicate among other factors greater success with the intensive technology program than we have estimated - - - - - 25 Depending on the final grain outturn the need for imported grain will fall to between IO million and 25 million tons compared with the almost 30 million tons imported during the 1985 86 marketing year MY Soviet grain purchases to date total about 10 million tons Livestock feed supplies are currently adequate and the growing glut of grain on world markets is increasing the prospects that already low grain prices will fall still further By playing a waiting game Moscow will be able to obtain grain at discount prices from grain suppliers desperate to sell - - - 25 In our view the Soviet Union will probably limit its purchases of US grain to corn a commodity that the United States holds in great supply can sell at fully competitive prices and can reliably deliver at any time of year Recent purchases of EC and Canadian barley and feed wheat and Yugoslav corn however may signal a decision to limit US corn purchases Moscow's failure to exploit US subsidy offers on almost 4 million tons of wheateven while purchasing Canadian and EC wheat-probably indicates that Moscow will continue to buy from other cheaper wheat suppliers before coming to the United States Given the outlook for sizable wheat export availability from US competitors the USSR may not purchase any US wheat during the current marketing year 25 _- - 7 Reverse Blank Ill Secret GI 86- 0084 sov 86- 0056 December 986 __ ___ '-' 'r-'J 'r-'r-''vvvu 1v1 1 1 11 1 11 ' - ' ' 1 L 11 1 vvv T1 vvvvvv vvv - Secret 25 Contents Page iii Key Judgments Introduction Grain Crop Developments Growing Conditions Mixed Harvest Uncertainties Outlook for Other Agricultural Products Soviet Grain Requirements and Imports The Need for Grain Grain Purchasing Activity Moscow Biding Its Time Implications 6 8 9 9 10 10 11 Appendix Methodology Employed in the Soviet Grain Estimate Reverse Blank V 13 Secret _ '-' 'l J ''t-'1-'' '' ' ' '' 1 1ca c -VI II lV 10 ll •l ' Ur-' 1 l ' UUO l ' UUUOUU UUU1·L '-'-· ___ '-'-t-' J I 't-'t-'' V V ' IV'I I V I V ' I I I I 1V '-'' 1 L l'I JI I vvv- J I v v v v v v v I v v v I -L Secret 25 USSR Improving Agricultural Performance Reduces Grain Import NeedsC _ Introduction 25 Grain Crop Developments Overall agricultural output in the Soviet Union is Growing Conditions Mixed Despite a mixed perforexpected to recover from the downward slide experimance in various areas the Soviets appear to have enced over the past two years We believe that 1986 done well overall with their grain harvest this year output may well exceed the previous record achieved Our analysis shows that following a promising start in 1983 1 Continued growth in the livestock sectorlast fall the outlook for 1986 Soviet grain yields which accounts for over half the total---combined worsened through the spring and summer because of with increased production of potatoes vegetables and adverse weather in some key grain-growing regions grain will more than offset projected declines in In addition the area sown to grain this year continued output of sugar beets cotton and sunflower seed As the drop begun in 1980 as the Soviets further expandthe first year of the 12th Five-Year Plan I 986-90 ed the area devoted to fallow I 25X1 comes to a close General Secretary Gorbachev will __ _______ very good yields from some late 25X1 undoubtedly point to a turnaround in the agricultural maturing spring grain regions in Kazakhstan and sector long a drag on Soviet economic growth L ___ 1Siberia have brightened prospects for what appeared 25 to be a poor grain crop 25 Since assuming power Gorbachev has assigned high In a recent Kremlin speech Politburo member Yegor priority to improving the efficiency of food production Among several moves he has further revised and Ligachev stated that the Soviet grain crop would be enhanced organizational aspects of the Food Program roughly 210 million metric tons- a harvest that would be the fourth largest ever This figure however by merging five ministries and one state committee into a state agroindustrial committee that is intended is a preliminary estimate Harvesting is only now being completed in Western Siberia and it will be to have broad authority over the production and processing of food and natural fiber He has also some time before actual results are known - - - _ J 25 issued a decree on agroindustrial management that is intended to give local authorities and farms more Given the evidence meteorological 25X 1 control over disposal of above-plan production and data we would have expected a grain crop closer to a that makes financial rewards for workers somewhat 195-million-ton level about 3 million tons more than more dependent on results Potential gains from these last year's output and about 2 million tons above the 25X 1 measures however will be constrained by traditional- officially reported average for the 1976-85 period 2 ly strong bureaucratic resistance as well as by the The US Department of Agriculture currently foremore fundamental problems plaguing Soviet agriculcasts the crop at 195 million tons Estimates by other ture For example farms will continue to face chronic Western grain analysts range from 165 million to 200 shortages of agrochemicals and equipment low labor million tons J productivity and high production costs for the fore'The 195-million-ton figure is our best estimate of the 1986 crop _ seeable future _ _ _ _ 25 ' Estimates of the value of total agricultural production arc derived from the gross output of crops and livestock products less feed seed and waste using 1970 average realized prices - but one that is subject to statistical uncertainty On the basis of our analysis of best and worst case scenarios there is a 98-perccnt probability that the crop will come in between 180 million and 210 million tons and a 75-percent chance that it will range between 190 million and 200 million tons L_ _ _ _ 25 25X1 Secret __ _____ --1 'l l ' V ''-' ' ' '' ' ' v I I IV IU 1 11' -f Uf ' f'-UUOtl t' UUUOUUb UUU1- Secret Figure 1 Estimated Soviet Grain Yields Mid-October 1986 Estimated Yielda Above average • Average ii Below average Economic region boundary Major grain-growing region liiiJ 25X1 _J 0 500 1000 K1lomelers 0 25 Secret 2 '-' •U II LIL VY JVtJJ t--'t-'IVVVY IVI 1 11 ii1v11 1 c L V I II IV IV J l n - 1 1 11 1 v v v - 1 v v v v v v v v v - Secret Table 1 USSR Grain Production a 1976-86 Million metric 1976-85 Annual Average 1981 1982 1983 1984 198 5 1986 192 7 1S8 2 186 8 192 2 172 6 191 7 19S O Wheat 88 8 81 1 84 3 77 5 68 6 78 1 85 0 Coarse • Other d 92 8 91 8 I 01 9 90 5 100 0 97 0 II I 69 4 7 7 10 7 12 8 13 5 13 6 13 0 Total 1011s b By crop By republic RSFSR 106 4 78 8 105 2 111 5 92 4 106 6 106 0 Ukraine 41 3 36 1 41 9 36 5 41 7 40 5 42 0 Kazakhstan 24 4 23 8 19 5 23 2 15 9 24 2 27 0 Other 20 6 19 5 20 2 21 0 22 6 20 4 20 0 • Measured in bunker weight that is gross output from the combine wh ich includes excess moisture unripe and damaged kernels weed seeds and other trash For comparison with US or other countries' gra in output an average discount of 11 percent should be applied In 1986 the USSR for the first time in five years released grain production data b Estimated Coarse gra ins comprise rye barley oats corn and millet d Other grains include pulses buckwheat and rice 25 We believe the outlook for the 1986 crop is generally good because of the good-to-excellent prospects in parts of the Soviet grain belt that together account for about one-fourth of grain production • In the Central and Northwest regions in the northern Ukraine and in Belorussia favorable weather throughout the crop season augurs well for bumper harvests ·--i - - - - - - - - - -_JfWest Siberia northern Kazakhstan and parts of the Urals appear headed for above-average or near-record crops Cool wet conditions delayed planting of spring grains in many areas of the New Lands but the abundant moisture allowed good spring grain emergence Timely precipitation throughout the growing season boosted harvest prospects Press reports indicate that yield 3 increases are much higher than planned in these areas I jgrain straw residue shows signifi-25X1 cantly more st raw accumulations than the historial average in both northern Kazakhstan and West Siberia • Krasnodar Kray and Stavropol Oblast were not as seriously affected by drought as the more northerly areas of the North Caucasus Yields reached record levels in a number of locales in these less affected regions and grain quality was reported as exception- 25X 1 ally good particularly in Krasnodar Overall Pravda termed the harvest in these regions a gratifying success C - - ____ j 25 Secret Secret --·····--- --r- ·r-r-·-•-- ' ' v v1M-f' ur 1 uuo 1 1 ' UUUOUUO UUU I-L 25X1 25 The outlook for the crop would have been even June rains brought relief in the northern Volga Valbrighter but for sustained periods of dryness in impor- ley in parts of the Ukraine an in Moldavia Drytant grain-growing areas In the RSFSR meteoroness however continued in the central and southern logical data indicated that below-normal April precip- Volga Valley and spread to the southern and eastern itation over the Volga Valley continued in May and Ukraine and Uralsk Oblast in western Kazakrstan A spread to parts of the North Caucasus and eastern weeklong period of hot desiccating winds a sukhoChernozem This was corroborated by May Landsat vey in mid-June that spread across the south rn imagery _that showed poor winter grain development Volga region Rostov Oblast and the eastern Ukraine because of inadequate moisture supplies and poor caused additional problems Because winter grains spring grain emergence in the lower Volga region were in or near the critical flowering stage potential especially in Volgograd Oblast and parts of Saratov yields were reduced - - - Oblast Farther west prolonged dryness also occurred ' Flowering is the stage of crop development where maximum in the southwestern Ukrainian oblasts of Odessa and potential grain yields arc determined -- Nikol ayev as well as in the Moldavian SSR ' - - - - - - Secret 4 25X1 25X1 2s ' • Vc ill llLIL V I VVtJY ntJtJIVVV I IVI IVC #ICCl tt L V I I IV I U v1n-1 ur JI 1 vuvv 1 vuvvvu vvv 1- 2s __ _ ___ -- - v I II IV IU 11 -' 'ur i Secret Subsequently conditions in the affected area-which produces about 20 percent of Soviet grain-continued to worsen • Meteorological information in mid-July showed that most of the Volga Valley and western Kazakhstan particularly eastern Saratov Volgograd and Uralsk Oblasts were struck by another sukhovey • Since that time persistent dryness in these heavily stressed regions along with Rostov Oblast and the southern Ukraine resulted in further grain losses the amount of grain - - -- - -- - ------a straw residue in harvested fields-a generally reliable indicator of yields-indicates that the winter grain harvest in some of these areas was fair and that the spring grain harvest was poor • In addition analysis of August Landsat imagery indicates that the 1986 corn crop-of particular interest as a livestock feed supplement-was probably reduced because of persistent dryness when many plants were in the grain filling stage The size of the 1986 grain crop is also limited by the area sown On the basis of statistics released by the USSR's Central Statistical Administration in July we believe that the final harvested grain area will total only about 117 million hectares well below the 121 5 million hectares averaged during the past five years • Assuming average yields such a decrease in area reduces potential grain production by some 7 million tons Harvest Uncertainties If the final Soviet figure is close to the 210-million-ton mark announced by Ligachev it would suggest • The Gorbachev-backed intensive technology program to increase grain production has been more successful than we estimated • The cutback in grain area appears to be a consequence of Moscow's policy to expand the amount of arable land put into fallow Between 1977 and 1985 the harvested grain area of the USSR declined steadily from a record high of 130 4 million hectares to 117 9 million while fallow increased from 12 4 million hectares to 21 3 million During this period about 3 6 million hectares were taken out of both fallow and production and allocated to other uses most likely to forage - - - Secret UUO J n uuuouuo uuu·1-L Impact of Chernobyl' Analysis of data from a wide variety of sources indicates that the Chernobyl' nuclear accident in April had a negligible tffect on Soviet grain production • Agricultural land in the evacuated zone is minor compared with the overall area of Soviet crop production • Very little grain is produced within the Qffected area which consists largely of forest grassland and swamps • According to Soviet press reports ___ planting of spring crops was not delayed '- --' an as of mid-July field work on both farms and private plots appeared to be normal outside the evacuated area • Grain harvested from regions close to the evacuated area may be slightly contaminated by windblown radioactivity but it can be mixed with clean grain during milling to reduce contamination to acceptable levels j ' • The Soviets have made gains in cutting the substantial harvest losses that have plagued agriculture in the past It is our view that Soviet grain production has benefited from a large-scale intensive technology program that was applied on some 29 million hectares this year-roughly a quarter of the area sown to graincompared with about 17 million hectares in 1985 The program is aimed at boosting average yields by almost I ton per hectare on lands with a high content of fertile chernozem black earth soils These lands are located primarily in the RSFSR the Ukraine and Kazakhstan In support of the intensive technology program the USSR substantially increased imports of Western herbicides insecticides and fungicides during the last 25X1 25X1 2bX1 25 25 25 25 25 6 '-1C UllllL U JVl-'Y l ' l-'l-''uv u IUI 1 a L U I I IV I U 11 ' - Urv l UUUv' tl UUUVVU J u u u 1- £ Secret The Soviet Intensive Technology Effort The USSR is expanding its massive intensive technology program in grain production According to Soviet economists the effort-now in its third year-grew out of Soviet frustration that agricultural production during 1970-85 grew by only 15 percent despite a more than doubling of investments over the same period Intensive technology as defined by the Soviets includes many farm management practices routinely performed in the West These include using high-yield varieties planting where possible alter fallow implementing efficient transportation routes and schedules and the more extensive use of agrochemicals including fertilizers and pesticides The program commenced in 1984 on selected test sites scattered over the Soviet Union and totaling only 20 000 hectares The impressive results of these trials encouraged Soviet planners to dramatically increase the intensive technology area to almost 17 million hectares in 1985 In 1986 the area has been further expanded to 29 million hectares Soviet comments on the success of the intensive technology program must be approached with caution Reported grain yields from areas under intensive technology-averaging 40 to 50 quintals per hectare approximately 20 quintals higher than on comparable lands-are selective and not representative of results over the entire area In 1985 Soviet officials credited the program with adding 16 million metric tons to Soviet grain output We believe this figure however represented the increased output on the lands where intensive technology was employed but did not take into account offsetting production declines in areas from which resources were pulled two years _ _ _ _ _ _ _ _ _ _ _ _____ We judge that net production gains of 10-15 million tons-factored into our estimate-were achieved this year with intensive technology despite the adverse weather in various parts of the Soviet Union but this is admittedly only a rough estimate I Net production gains probably did not exceed 5 million tons - - Despite the potential benefits of intensive technology Soviet farmers were initially reluctant to implement this type of high-input costly grain production Numerous training seminars along with educational articles in agronomic publications seem to have won over more of the rural sector press reports last summer made less mention of farmer resistance Even if this problem is overcome it is not yet clear whether the Soviets will be able to manage the inputs efficiently enough over large areas to assure a substantial net gain over the long term 25 - - much of the equipment in use is not designed for proper agrochemical application and perennial production and transportation problems have either prevented delivery of materials a together or delayed their arrival past the time of optimal application I Nevertheless the Soviet leadership has endorsed the intensification effort and plans a sizable expansion over the next several years In a recent speech delivered in Krasnodar General Secretary Gorbachev mentioned plans that call for the program to encompass 36 million hectares next year and 50 million hectares by 1990 Although Moscow has serious problems to overcome if intensive technology is ever to approach its full potential Soviet grain production will undoubtedly benefit from such expansion 25 25 25X1 I --- crease the amount of the crop ultimately available for use at relatively modest additional cost The US agricultural attache reported that special efforts to avoid grain leakage from trucks were being made and as a result much less spilled grain was evident to travelers than last year We believe that these conservation efforts have also been applied to on-farm We have no hard information on Soviet efforts to cut harvest losses They have recognized for some time however that improvements in this area could in 7 25 Secret 25 25 vt'1 ' 't't''VVC I II JI l' CICQ »C LU I I IU 10 1 1 - - Ut ' UU0' 14KUUUoUUo UUU1-2 Secret handling While we have no basis for judging the success of the efforts their potential is certainly significant-clearly in the millions-of-tons range Table 2 USSR Nongrain Crops 25 Outlook for Other Agricultural Products Prospects for the major nongrain crops in the Soviet Union-sunflowers sugar beets potatoes vegetables and cotton-are mixed as of early November Output of sugar beets sunflowers and cotton is expected to be less than last season but vegetable and potato production should exceed last year's harvest • Although sunflowers are hardy and droughtresistant plants the prolonged dryness in the North Caucasus Volga Valley and southern Ukraineareas that account for about two-thirds of production-will reduce output somewhat We estimate the 1986 sunflower harvest at 4 9 million tons below the 1985 5 2-million-ton figure and just under the 5-million-ton average of the last five years • Sugar beet production this year in the Soviet Union is likely to be about 74 million tons well below l 985's good 82-million-ton crop and short of the 76million-ton average of the past five years Generally dry conditions over the southern Ukraine and Central Chernozem during the spring and early summer hurt beet size considerably USDA personnel traveling through the Ukraine in September reported that the beet crop was in very poor condition The Ukraine normally accounts for over half of the USSR's sugar beet output • A good potato harvest of 81 million tons is anticipated for 1986 about 3 million tons greater than the last five-year average and 8 million tons more than the 198S season The weather remained generally favorable in the north European USSR-the principal potato-growing region- with mild temperatures and adequate precipitation A favorable rain pattern in 1986 ensured that the soil did not become saturated a condition that frequently gives rise to fungal diseases Area• million hectares Production million metric tons Sunflowers 1981 •85 b 4 2 1984 4 0 1985 4 1 11 9 I 1 5 12 9 4 1 12 0 1986 ' Sugar beets 1981-85 5 0 4 5 5 2 4 9 J 3 5 218 0 76 3 1984 3 5 247 0 85 4 1985 3 4 241 0 1986 C 3 4 214 0 82 1 74 0 d b Vegetables 1981-85b 1 8 161 0 29 2 1984 1 8 170 0 31 5 1985 1 8 157 0 28 1 1986 C 1 8 159 0 29 0 d Potatoes I 981-85 6 8 115 0 78 4 1984 6 8 125 0 85 5 1985 6 5 113 0 1986 6 7 121 0 73 0 81 0 b d Cotton 1981-85 b 3 2 28 1 9 1 1984 3 3 25 8 8 6 1985 3 3 1986 3 3 26 4 24 2 C 8 0 8 8 • Area figures are derived from production and yield values published in SSSR v tsi rakh v 1985 godu b Annual average Estimated d Production estimates are obtained by regression equations that take into account weather effects 011 a regional basis and a trend term indicative of increased technological inputs over the years Estimates have an error of about ± 5 percent 25 • Because of good precipitation and generally mild summer temperatures in most of the key producing areas of the Ukraine and the RSFSR we estimate Secret Yield quintals per hectare 8 - - l l t _ _ _ -- _ _ _ 1-1 I _ ____ -- I ti· -•·- - •· I -0 0 •· _______ --- O - Secret 1986 vegetable production to be 29 million tons This is about I million tons greater than last season but short of the 1984 record of 31 5 million tons As in previous years frequent reports relating problems with proper storage and distribution of the vegetable harvest continue to appear • The 1986 cotton crop reportedly dropped to 8 0 million tons below both the 1981-85 average of 9 1 million tons and 1985's 8 8 million tons The 1986 cotton crop was plagued by a variety of problems The main growing areas of Central Asia experienced a cold spring that delayed planting and promoted the spread of some diseases Subsequent hail and dust storms forced the replanting of 700 000 hectares By far the greatest problem however was the shortage of water Much-smallerthan-normal snowfall last winter in the mountains of Turkmenia and Uzbekistan-which produce three-fourths of the Soviet Union's total harvestcaused many rivers that supply irrigation water to dry up during the summer months 1 By comparison the outlook for selected forages-hay haylage silage and grassmeal-is excellent As of 6 October 1986 the last reporting date with some 93 percent of the crop in the forage harvest was running about 5 percent ahead of the record I 983 pace according to data released by the Central Statistical Administration Given this performance forage procurement could finish at record levels Because harvested forages in the Soviet Union comprise slightly more than one-half of the nutrient content of the livestock ration the outlook for feed supplies into 1987 is very good I -----' With such an abundant forage crop Moscow should be able to achieve the 1986 targets for meat milk and egg production Soviet statistics show that as of September meat production on state and collective farms-which produce nearly three-fourths of all Soviet meat-is running 7 percent ahead of 1985 even though the number of animals is not increasing Milk and egg production are also up by 5 and 7 percent respectively The Soviet press reports that the increases resulted from productivity gains ____ _ 9 Figure 4 11 USSR Harvested F'orages 1981-86 Million metric tons of feed unitsb 120 -- --rt I Grassmeal Silage IIII 11111• 111 •I Haylage •- •-- Hay 20 25 0 1981-85 1983 1984 1985 1986 • As of 22 Sep1embcr of s1a1ed year This is 1he date of la1cs1 complc1e da1a rcpor1ed for 1986 b A 1-k logram feed unil contains che nucricnl value of I kilogram of oats c Annual average 31 IOII 11 B6 25 Sm·iet Grain Requirements and Imports The Need for Grain Whether the harvest reaches the 210-million-ton level or is somewhat less it is likely that the Soviets will import much less grain during the current marketing year than they have in recent years Indeed Moscow could import as little as IO million tons or as much as 25 million tons I- - - - 25 25 Uncertainty over the exact size of the grain harvest is not the only factor accounting for the relatively wide range in import expectations Initiatives in the agricultural sector over the past few years have reduced the amount of grain required in meat production 25 Secret __ ___ ____ -- - 'f I '-·-- ' '' Secret Soviet farmers have been encouraged to boost forage production as part of a greater campaign to increase the amount of overall feed per animal while reducing the share of grain in livestock feed rations With the probable shift in feed composition that a large forage harvest will support the level of grain imports needed to meet Soviet livestock production targets could be reduced by as much as 2-3 million tons In addition if Moscow continues to restructure livestock herds in favor of animals that are not heavy grain consumers the demand for imported grain could fall by another 2-3 million tons - Figure 5 USSR Grain Imports J978-86a Million me1ril wm 60 50 25 40 Moscow also seems to be reducing the amount of grain required for other uses • Lowered alcohol production could trim overall grain needs by as much as 1 million tons • Recent increases in the availability of other foods have reduced overall consumption of grain products such as bread and cereals • The decision to reduce the area sown to grain in favor of fallow has resulted in a 2-million-ton decline in the use of grain for seed J Other Aus1raha European Community Argen11na Canada --7 Grain Purchasing Activity Soviet grain purchases in the marketing year that began 1 July 1986 now total about 10 million tons Last year 15 million tons had been purchased by November L Moscow has shown little interest in its long-term agreement LT A obligations Canada with recent sales of 2 5 million tons of wheat and I million tons of barley has been the only Soviet trading partner to sign any major deals under an LTA In the third year of the US-USSR LTA the USSR bought only 153 thousand tons of its 4-million-ton wheat commitment despite the subsidy authorized by the US Government in early August 5 Soviet coarse grain purchases against an Argentine pact also fall far short of the stipulated obligations reflecting both limited Soviet demand and an unusually poor-quality 1985 86 Argentinian corn crop 6 1 I ' The US-USSR LT A year runs rrom I October to 30 September Thus Moscow had nearly 1wo months 10 take advantage or the subsidized price The subsidy offer expired at the conclusion or the LTA year The agreement specifies that the USSR purchase 8-9 million tons or grain from the United States annually- 4 million ions of wheat and 4 million or corn The remaining I-million-ton commitment can be met with wheal or corn or with 500 000 tons or soybeans c________ • Coarse grains include corn barley oats rye sorghum and millet United S1a1cs O 1978-82 1984 1985 • DJtJ hJ sed on J market year ending wheat tnd rnars grain h Annual avcrngc · 1986 in June lnduuc 25 ' fatirnJtCJ 31 IOI I I 86 Moscow Biding Its Time Moscow does not face any great pressure to increase the pace of its grain purchases In part the Soviets can delay acquisition because of adequate supplies of livestock feed But financial constraints also may be holding grain purchases down Plunging world oil prices have cut into Moscow's principal hard currency earner sales of oil to the West this year are likely to be only about onehalf the peak level of $16 billion just three years ago Thus the USSR may be covering only immediate grain needs while waiting for even lower prices I ---- 25 25 25 With the current abundance of global grain stocks prospects are good that already low grain prices will fall further At present the world grain market is 25 L_ J Secret 1983 25 25 I0 Secret year round Moreover US corn prices are fully holding record wheat stocks Australia Canada and competitive Recent purchases of EC and Canadian the EC have nearly 40 million tons available to export Large stocks of coarse grains also exist with barley and feed wheat and Yugoslav corn however signal a decision to limit US corn purchases the United States holding 75 percent of the total The r may ·- -- ·----- - 1 market will be further glutted as this year's crops are II ' harvested -·-- -----i '-·- '------ _______ J - •---·-- ____J Moscow's failure to exploit the US subsidy offer on almost 4 million tons of US wheat-even while purchasing Canadian and EC wheat-indicates that Moscow will continue to buy from other cheaper wheat suppliers before coming to the United States Given the outlook for sizable wheat availability from other wheat exporters and their readiness to better US price offers Moscow is not likely to purchase any US wheat during the current marketing year - - A drop in US wheat production this year will be offset by an expected near-record corn crop Larger expected 1987 corn supplies from Argentina and China will add to the downward pressure on coarse grain prices that already stand at IO-year lows 1-- In addition Moscow has been at odds with major grain exporters since July over contractual terms that sellers consider unreasonable including a 30-day Soviet hard currency outlays for grain will in our grace period on payments for deliveries and the right view be substantially less than the $3 2 billion spent to refuse shipments upon arrival at Soviet portsT - 7 during the period 1 July 1985-30 June 1986 Because --· I I grain prices are expected to drop as much as 10 percent from the current average level of $90 per ton we believe Moscow could cover the upper end of our estimated need for grain with less than $2 billion I l 25 25 25 25 25 25 I i___ _ __ Implications Ample grain supplies worldwide mean that the USSR could obtain most of its needs from non-US sources if it so chooses Soviet press statements that a substantial portion of domestically procured wheat is of good quality suggest that imports of milling-quality wheat will be relatively less important than in earlier years and that coarse grains will be favored 25 ---- The United States may again supply a substantial share of Moscow's corn imports The United States is more reliable than the other major suppliers of corn has much greater supplies on hand and can export Revuse Blank 11 Secret -• ••- - ' '1 1 • 't't'' vvv'-' rv '' '' 'a ' ' v 1 11 1v1 1u vlf •l Ul l H l UUO t tUUUOUU UUUl-L vc u11u cu JUl-'Y 1 '11-'l-'IUVCU IUI r CICCl C u I I IU IU vl -r Ur 11 r UUU l tr UUUUUU J uuu 1- Secret Appendix Methodology Employed in the Soviet Grain Estimate Our estimate of Soviet crop production is prepared by a multidisciplinary team that includes agronomists agrometeorologists and imagery analysts This team makes periodic assessments of Soviet grain yields and production during the course of the growing season using the following information and techniques • Landsat Vigor Analysis Landsat satellite imagery is utilized to assess the vegetation vigor-plant growth intensity-of agricultural areas Vegetation vigor in an oblast kray or republic at flowering time is closely related to the grain yields of that area Vigor is determined by visual comparisons of the redness a measure of the near-infrared response of the crop area to nearby natural vegetation • Collateral lrlformation During the crop season this consists mainly of Soviet newspaper reports and broadcasts on planting progress crop status harvesting progress procurement status grain sold to the state and occasionally reported and expected yields We also obtain field trip reports from US Department of Agriculture travelers and staff from the US and other embassies who are allowed limited controlled visits to some of the major Soviet agricultural areas I r - 25X1 L_____ _ _ _ _ _ _ _ _L _______ I Recent Soviet disclosure of grain production and yields for the 1981-85 period-information that had been previously withheld-allows comparison with the accuracy of our methodology table 3 The data reveal that our coordinated process yielded final estimates that on the average varied only about 2 percent from reported figures ' ______ • Meteorological Analysis Daily precipitation temperature potential evapotranspiration and soil moisture conditions are entered into a computerized agronomic model that estimates reductions from a maximum potential oblast grain yield In addition regression equations relating yield and monthly meteorological parameters precipitation and temperature are employed in areas where available historical yield data have permitted the derivation of such equations J Table 3 USSR Reported Versus CIA-Estimated Grain Production Reported Grain Production RSFSR Percent Error USSR Ukraine Kazakhstan 36 24 USSR Ukraine Kazakhstan USSR 1981 78 8 36 1 23 8 158 2 80 I 982 105 2 41 9 19 5 186 8 IOI 1983 111 5 36 5 23 2 192 2 110 39 24 8 195 1 5 1984 92 4 4 1 7 15 9 172 6 97 44 17 5 178 3 1 1985 106 6 40 5 24 2 191 7 110 43 21 1 196 2 2 98 9 39 3 21 3 180 3 181 4 2 1 Annual average 25X Million metric tons Final Estimated Grain Production RSFSR 25X 158 -0 I 180 -3 6 25X Reverse Blank 13 Secret