USSR: 1984 GRAIN CROP SHORTFALL NECESSITATES MASSIKVE IMPORTS (GI 84-10149X)

Created: 9/1/1984

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4 Grain Crop Shortfall Necessitates Massive Imports

An iRUlligMce Assessment

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4 Grain CropShortf-.il Necessitates Massive Imports

Judgments

oraJlab'eft 1U1 report.

weather since April in several major grauiproducing regions of lhe USSR has eliminated Moscow's chances this year for even an average grain harvest. Indeed, with normal weather for the remainder of the season, wc believe that the crop will come in atillion loos,illion tons less than last year's estimated ouiput andillion tons below

A crop of this size, coupled with prospectsorage crop no larger than last year's record, means that the USSR will need toear-recordillion tons of grain during the market year that beganuly in order io iireet its estimated grain requirements. Having alreadyillion tons by late August, the USSR is now wellfinancially andaccommodate imports of this magnitude.heavy buying activiiy also suggests that Moscow foresees the need for even larger imports or is planning someas stepped-up attacks against Afghan insurgents inside Pakistan, or the introduction of combat aircraft intoit perceives couldS embargo. Barring an embargo, the United States probably will supply the largestleast IS milliongrain imported by the Soviei Union over the coming market year

in

4 Grain Crop Shortfall Necessitates Massive Import?

Following four poor-to-mediocre yean, overall Soviei agricullural produciion3 surpassed thc previous record setlthough output of mosl firm products fell short ofur analysis of thc latest available information suggests thai3 grain crop (aboulercent of the value of totaloutput) came in atillion tons,illion ions larger than our estimate of the previous year's harvest and the best she/winr; since8 recordillion tons. Forage productionew record for die second consecutive season, and ihc harvcsl of most other crops was up over the relatively2 levels as well. Meal and miiic output reached record levels, and ihc number of livestock roseew high

Lasi year's agricultural rerfornwnc. enabled Moscow lo improve food supplies whilehard currency expenditures for imports of Western farm producis3 by about 8longstanding goals of ihc Soviet leadership reaffirmed in the Food Program. Surveys of collective farm markets and state retail stores showed increased supplies of most foodstuffs. Estimated per capiia availability of meal3 rose by 3largest increase inesoll of record production and imports of meat. Even so, because deposable income grewimilar amount while meat prices remained constant, queuing and rationing did not decrease substantially. Soviet grain imports during the market year (MY) that ended on4 were roughly equal to those of ibe prervioas year

On the basis of the performance of the agricultural sector Ihrough July, we estimate that4 output will remain at leasl at last year'se believe that continued growih in the livestockwhich accounts for more than half of thcmore lhan offset the expected downturn in grain

'ore cfcttiledi siricohufi! year in the Soviei Union, see appendix A

1 Estimates of Uie value of tolii agricultural our put are derived frem ibe frees cetpal of cropssueV product'feed, irrd. aad nasie,0 average realized pricei.

production this year. Following theoverall growth averaged, this will help keep Ihe frood Program onhereby maintaining lhe credibility of the tadership't commitment 'othe cooscmer's diet. Continued progressowever, is being jraipardized by the smaller grain crop, and the possibility lhat foragean important source of livestockfall short of last year's record leve*

Under Soviet leader Chernenko, agriculluralappears to be the same as under his immediate predecessors, Suf-port for the Food Program is being continued, as are efforts lo improve lhe quality and quantity of forage production and to provide material inCCTtrVes directly to those involved in farmThe continuity signifies that Cherncnko, like Brcihncv and Andropov, hopes to close ihc gap between domestic supply and consumer demand for quality food Ihrough even beller agriculturalaugmentedioris. rather than byi cia il food prices

Crop Developments to Date

ood start last fall, pros peels for4 Soviet grain crop deteriorated sharply this spring and summer because of adverse weather in some key

grain-growing regions. Furthermore, the area sown to grain is one of the smallestecade.esult, even with normal weather for the rest of the year, total Soviet grainikely to be only seme

illion tons.illion tons less than last year's estimated output, and well belowiIlron-ton average forhe US Department of Agriculture currently forecasts the cropillion tons. Estirrtates by other Western grainysis rangeillionillion tons

Trgnre is oar best estimate of4 Soviet grain crop, bvt one that binb/rct to error. On ihe basis of ovr inilyiii or best ind ntrst esse scenarios, thereercent probability lhat tHc ertapcome It between ttS millionillionJ-pcrccRt chirvcr thaingtillionillion Mm. Than, it believe that thererttV lhan potential for Ihc crap at Ihii [otM in ihe toior

Title 1

USSR: Grain Production-

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Avrrair

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Mcatured in buritrr -eight.s. great output horn live eoinhnr. nhich incladrt rateii moisture, unripe and damaged

rash.US Of

MB" rocanin' grant oulpul. an average druoorn ofe.ee-t

*The ' has nolrall giant nroouclon or iield tutittiesi . Total grainas uBcrTeol-l, rrponed at HImm Dm fe- Kaiatnuaa11 arc official An other figures rcpriscai earnim comprnc ife.n ion. aadr-ivdr tabes. faort.Wai. aad

poor crop prospects Mem primirily from several cprrcaict of idverve wcalher. Moil damagingere drotigki during May ihii devastated crops in and around lhe Volgarea lhat typically produces about one-fourth of the annual Sovieimagery from both Landiat and National Oceanic and Atrriospheric Administration mcteoeolor/ical satellilcVIIRR) taken after the drought abated in early June showed that many giainfields had born destroyed and that damage io mosl of lhe surviving one* was irreversible.ubsequent improvement in the weather, we eapcel production throughout Ihe affected ref ion lo be well belowndeed L

Jposirurvcst straw residue tn lhe

towel Volgaarea hardestthai yields there may wellecord low

arras aflttied br ihe drought -ere Ihe Volga. Volga Vyatka. Central Blaea earth. -rit.ro KaMihaun.rati. aad

nariaria Norib Ca-caun re

Additional losses were incurred during July inthe Ukraine, and Belorimudata showoot half of thc grain cropwas hit with saihovcy conditionswinds)ouly. Soviet weathertemperatures as high asdegreesFahrenheit) and winds ofo ISthe sukhovey occurred duringields peobabJyCut byasercent. This was corroborated byarnounl of straw residue seen at ihcthe harvest in mid-Augusi

Thus, it now appears certain that Kazakhstan's crop willll below an, age this year

In th? western Ukraine and southern Brlorussia.C

^jji.iuicatc lhat prolonged. lawMinj ijiiiiaii umc roncrcd need growth and disrupted lhe harvest somewhat, iheieby reducing

raeaital yield* are dimncC

2

t-Oty. Nor'h

Cavtaiui. end*Ukroit.4

grain qualily and quantity. TTvcsc problems, however, havc been more than offsc! by bcllcr crop prospects elsewhere in ihc two republics. Because harvest losses from ihc excess wetness did not appear io be

Jwe estifliatc grain production in both republicsourth of the total crop)e above average.

MntarotoskalVItRki take-Sum iltuittain'leal aadmerily of Ihr Hay Jroirtl*kt Valta Vatky. Tie mtttntt of ltd rotor front fildi tn and around Volcoe.iB4 OvIaMraor train air un4ki irt rrrmwitu'eBytompatilt*.'taWik talar affieldi ia KrairaJor Kray amiblait-"tai ntn affetlrd nv iht tf'outiiiif -ell dt'thprd iron'

1

A secondary factor limitint this year's polenlialisheciaragr. On the basis ofby the USSR's Ceniral Sutislicalin early Jooe. are believe (bat the Trailjrain area will lotal onlyillionthealice2 and wdl=

ssuminf average yieWi.ecrease in hcctaraieoss ofillion ions of potential grain pftduciion

Thc outlook for4 croc would bc even worse were it not for the gcod-to-ei-rKent prospectsin the Soviet grain bell:

the Balile. Central, and Northwest Regions, ihe rxtsisience of mostly favorable weather throughout the crop season augurs well for bumper harvests there.

appears headedecord or near-record grain crapargely because of above-normal

rainfall this

crop growth is generally uniform andoften an indicator of high grain yield..

Ihe rVovri. Counuial ffeficui. preliminary yield data from Krasnodar Kray confirm our estimateood harvest there. Soviei press reports also indkaie lhal gma cujality in the entire repon is exception*Hy high

Outlook for* Grain Crop

Even ir ihe weather is nrjrmal for ihe rest of ihe year, wc believe lhal4 Soviet grain crop will come in al onlyillion Ions.illion tons less lhan last year's'estimated output and welt belowverageillion ions. Wiih only about two months remaining in lhc season, however, there is no guarantee that the Sovieis will be ablerop of Ihis silt Although the meet critical stages of development already have passed, lubsUntial reduc-liom in both quantity and quality can still occur. For

in (rain area arrears Us ha aof

V0 irraJy cipaad the lasoaor of ar.bfc. the handed inm area af*crt-<el .kjcW, rVa.afi-cre**cd7 nana,

hectare*aaan*

eiample. ealremely wet crsndilions during ihe second half of Ihdnow underan early onset of winter could force Soviet farmers to oat grair nchds prcinaiurciyar-ton ihem entirely.hen such corvditrorts were widespread, losses were eslimaied to have totaled abou!_iO million tons.

On the other hand, several factois couldositive Impact on thc outcome of thc harvest The Soviet midyear plan fulfillment results shear that deliveries of fertilizer to farms matched bsi year's record level. Because Siberia and parts of ibeUSSR have received adequate rainfall thisgrain yields in those areas could exceed the bumperlready incorporatedillion-lon figure. In addition, we estimate lhal the amounl of grain growing on land lhat was previously fallow is somewhat larger than in recent years.fallowing sacrifices produciion in lhc year in which lhc bad rs idled, il usually results in higher, more stable yields in subsequent years as long at lhc falloweds mainiairted in the crop rotation scbedult

Outlook for Other Croai

As of late August, prospects for the mayor nongrain crops in Ihesugar beets,vegetables, andmixed. Production of sunflowers and sugar beets it eipeetede above ihe average of (be past five years, while thai of potatoes and cotton is eslimaied lo bc somewhal below thc average.average vegetable harvest is now likely.'

The outlook for lhc harvests of selcclcdhaylige. silage, andimprovedin rccenl weeks. Becauseater start in harvesting: ibis year, forage procuremc.il as of early V, was running someerceni behind iheJ level, according to data released by tbe USSR Central Statistical Administration. By late August, however, lhc gap had been narrowederceni. With favorable wcalher for Ihe rest of lhc season, lhc deficit coord well be eliminated, ensuring adequate supplies of trtese feedsS- Harvestedterms of nutrientup aJaswt cenvhair of tbe livestock ration in the USSR.

'urr Jeliilodimeec jnnndii tl

3

USSR: Cumulative Procurement ol" Select ed Harvested'

Million atari of feed uniu*

IHHayUce

mmHay

0 i ai 12 H

jieopt

nvl*

um* tl ffr.jl(AI .V Itv i- fult

Grain Irrrpcrlseed for Grain, Soviet grain ImporisIhe marketing year thai began4 will depend largely on the sire of Ihe domestic grain and forage erects. If4 grain harvest comes inUas, thc USSR -ould be sceneillion tons short of the amount of grain we believe necessary to maintain current levels of seed, food, and industrial use; lo achieve planned oulput urgets for meat, milk, andnd to continue expandingerformance in the livestock sector tbtongh July inchcates4 goals can bcperhaps even creceded, if Moscow continues to uTvprart grain at rates implied by recent buying activity, and if supplies of nongrain feeds remain

' Bra ax dm USSR aurawrea sraia arcdoerioo from Ike fWhl

beforeiii Orjrmx. oaiesfimatr ofut

nan he ralnd br aa ai*erai< ofc/crar to bewish

tha mmtplou!eif hi rtuuir lot scol. foot. JfH

tint *thn wa TheihM vaeia teroeHaf touttk

lim priorad during harreil aadlorgrr Orhe wauM

Owcurrenl cttinulettandanl iIII erapof

roughly IAS million tornjhi crop ofon

laas) aaa tnararr-atbn acedsillion loci*

Fjlimaling Soviet Grain Keqairementi

Just as Our estimate of Savin grmim production it Subject to uncertainty at this point In the crop season, so Is our estimate of SovitMgrain requirements, especially the amount of train needed for livestock feed. Our estimates of grain quantities required for seed. food, industrial purposes, and export are fairly reliable

Estimates of grain for feed are based oat Soviet literature defining ike amounts of grain andneeded to produce meat and other livestock products, as well as lo support fit livestock herds. Such estimates assume that the mix of feed does not change

mm

eriiondint of the linkages between feedand livestock output, however. It cortl trained significantly by the paucity of published data. For example, data on quantities of feed used3 are not yet available, nix are data on the shares of grain, roughages, and other feeds In the ration. Moreover, because Soviet feed rations are deficient In protein and other Important nutrients. Western standards cannot be used lo estimate feed reqmlremenit

We know that ike mix of feed also changed somewhat. The leadership's campaign toeut the inefficient use of eoilly grain and to Increaseof harvested forages succeeded In lowering the share of grain In the total feed ration from abouterceni0 to aboutercenthould this decline continue, our calculaiicn of grain needed far feed thir crop year would be loo high, perhaps by as muckillion long. If. on ihe oiher hand, ihe share of grain in the ration increasesesult of tne possible shortfall in forage produetion. our estimate would be several million tons loo low. Theseassume lhal the Soviets will maintain current high levels of animal producllvily. Inhirdshould the leadenhip decide to accept reduced levels ofas dome in theof grain needs would again be too

high

USSR: Grain Purchases for Dell.ery During !o< July-Jane Mailteling Year

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wni> Urde. LTAi

SUIO

4

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Fraronie Community

Amiclii

1.7

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Meal output on tiate ando-thirds of lherunning well ahead of lasi year's record level, largely because of record herdnd substantially increased animal productivity (more meal per animal'

With the need for imported grain at record levels, however, political factors will also come into play in determining the size of grain imports. For example the leadership will have to rank the importance of achieving plans fo' the production of meat and milk against lhe goal of reducing Soviet dependence on the West

Early Grain-Buying Adlfity. Tbe USSR has moved unusually early to line up substantial quantities of foreign grain for import during1urchases for the year already stand at someillion toillion tons, half of the USSR's estimated needs, and about two-thirds of the total amount of grain imported in.ddition to these confirmed purchases. Moscow is coirtmiticd to buyillion tons ofg-term agreements with several countries.

The Soviets have been most active in the US grain market, purchasingillion Ions since early July. Afterillion ions of wheal for July-Scplenv ber shipment. Moscow lined up grain for shipment daring Ihc October-Dcceaiba period,ullioo loos of new-crop corn,illion ions of wheal. Purchases sinceearly August includedons of old-crop corn and IJ million Irani of-Vm for tm media tc th

S

i lie Soviets are now in Ihe process of wheal for December- February delivery. The USSR also hasonsiderable quantity of grain from lhe European Community, with purchases to dateillion tons. Some grain trader* expect thit total purchases from the EC wiltillion tons or more, compared to last year'* leveliDior

tmt Large fmctnicx The heavy buying activity ihrough early August has given lhe Soviets considerable flexibility in scheduling imports for lhe remainder of the year. Wilh an estimated capability to import aboulillion tons of grain during

" Asereenl bier thin*

oscow had the option of wail-ine severalwhich lime il would have known iiseeds morelhe market. Instead, afterhort wail, purchasessizable quantities for immediate shipment. This suggesis lhal Moscowthe need to import more thanillion ions of grain because;

A further deterioration in ihc grain crop is still possible before the end of ihc harvest in lateor early November.

Production ofclose substitute forexpected to beerceni below last year's output.

- The low international grain prices now prevailing makeood time lo buy and provide the USSR an opportunity to rebuild stocks drawn downeries of poor-to-mediocre harvests.

We cannot rule out lhe possibility thai Moscow is planning someas Mcppcd-up altacks against Afghan insurgents inside Pakistan, or the introduction of combat aircraft intoti perceives couldS embargo Soviet kcders may calculate thai signed contracts for giain deliveries in the July-December pcrod will pci-nit lhe USSR ia obtain the giain ahead of time or provide some insurance against the imposition of an embargo.

Thc USSR should have littleorimportsillion tons. Hard currency reserves were al record levels earlier this year, and grain financing is easilyddition. Moscow has -Jreadyapability to import SO million tons of grain annually and is continuing to upgrade its portfacilities '

The US fic-lr. Barring an embargo, lhe United Suit-probably will supply lhehare of grainby lhe USSR during this market year.an-favorable weather conditions in Canada andmay prevent them from satisfying sharp increases in Soviet purchases while maintaining exports io their other customers. According"

JXreports indicate that the CWB toW Me-scow that Canada will be unable to deliver barley sold in May Furthermore. non-US supplies.of coarse grain will be light until spring, when Southern Hcmisphcic grain becomes available. Wiih Soviet purchases from ihc Untied Stales as of late Augusi already greater than theillion tons imr-Ktcr? in all of. totalurchases f'om the United States could nw to at leastillion tons, even if overall Soviet imports arc limited toinion tons. Wiih larf-rr imports. US sales could go Still higher

Although il is loo early in the market >ear io estimate accurately total Soviet grain purchases, activityate suggest* that imparls will approach or exceed rreord levels. Many Western grain analysis arcimports for the year inS-milIionion range Several trade sources estimate ihai Moscow wii, be in thc market for as much asillion tons of gram, while anclhet forecasts lhal imports could go as high asillion tons TiK US Department of Agriculture currently estimates Soviet imports atillion ton

7

Appendix A

3 Agricultural Year in Relrospect

year's grain harvest in the Soviet Union totaled anillion ions, the besthen grain productionecordruliioo Ions. Thc crop season got oJToor sUrt when drought conditionsajor shortfall in winter grain sowings. With the onset of spring, however, the outlook turned around and remained mostly favorable through the barverl. Spring sowing progressed al apace, weather conditions during thewere gererafjy good, and analysis.

^indicated thai grain yields reached record levcli in some areas. Facessivc rainfall in Siberia during the end of the hsrvesting campaign, however, probably caused some fields io be abandoned,in minor crop losses

The ctaet size of3 Soviet grain crop is still unknown. General Secretary Cherncnko slated in his early March electioa speech thatillion ions' In late MarchC

J thc crop wsjillion tons "belowis statement, made in thc contextomparison witheriod,arvestillion loos. The USSR has not published overall grain production, yield, or state purchase statistics

The harvest results ol* Ihc major nongrain crop* in Ihe USSR were mixedJ. Pota.oes and sugar beets rcgisiered gains for Ihe second and third crjnsccutivc years, respectively. Cotton, sunflower seed, andcrops, however, fell slightly2 levels.

last year's harvest af selectedhay. haylage. silage, and2 record. Me>rcover. because most of the handling was carried out under favorable weather eondniens, forage quality increased as well.

numbers of livestock, bul alto because of substantial increases in feed supplies, particularly grain and forages. Meal and milk production per animal rote lasta four-yearbecause of larger feet' rations.

, aad enlinn nijcr oa

If tan* MreaaatJ

Soviet grain imports duringarket yearotaledillion ions, upons from Ihe previoei year, aooording to Ihe US Depart meat ofheal imports were pegged5 million Ions, and coarse grains5 million. In. the United Slates regained iu prxulJon ai the largest supplier of grain to Ihe USSR. With sales4 million ions, ihe United Stales captured one-third of the Soviet grain market, far below ihe three fourths share it held in. before ihc partial grain embargo, bul appercent share in. Thein US grain sales lo lhe Soviei Union was doc primarily to the signing last summerew US-USSR Long-Term Grain Agreementhich raised minimum Soviet grain purchasesillion torn compared toillion-ton requiremcnl of the previous LTA. Under (he terms of ihc newwhich began3 and eitends for five years, the USSR is to purchaseinimumillion Ions of wheat and coin in approximately equal quantities. As muchillion tons ofillion-lon minian be satisfied byons of soybeans and/or soybeanaximum ofilfion ions ofheat and corn can be purchased without prior eoniuliation wiih Ihc Uniled States Government. .

T*w. ntrmiK ncUort ricr ua*-ns

Sawi mam* tor imparl ts efcrsn Hi Mi nvrtuufd. ransom lar MYa totals tir tactions tear

livestock secioranner yeareat and milk cutout achieved new highs ofillion tons4 msDion ions, ropectivdy. Growth in these crucial products occurred not only because of record

sea**

table 3

USSR: Nongrain Crops

Despite gelling off toa good start, it now appears lhat ihc USSR is headedotton harvcil this year ofillion ions, below bothillion ions and the planillion torn.

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Jxjwing was com pi tied wiihin ihe optimum limehey also said lhal carry plani growth was betterear igo becanse of good soil moislurc and the appbaiion of more fertiliter. ln late July, however, many of the principal growing areas were hit with estremely hot lemperaiures during flowering, hindering pollination and probablyigher-than-acernal incidrr.ee of sterility,his was subsequently corroboiaitdovkl press report thai slated boll formation was lagging well behind thai of recent years.

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