6
IMPLICATIONS OF5 SOVIET HARVEST
THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL INTELLIGENCE.
THE UNITED STATES INTELLIGENCE BOARD CONCURS, EXCEPT AS NOTED IN THE TEXT, AS FOLLOWS:
The following intelligence- organiralioni participated in the preparation of the estimate:
IU Centre) Irtfefligence Agency, the tnleftaence orgonUotic-ii of the Depcwtm-ntt of Stole. Detente, ond Treawry, ond the Notiona! Security Agency.
Concurring:
The Deputy Director ot Control tnteltigenee ttpreie-nlmg Ike- Central Intelligence Agency
The Director o( Intelligenc* and Rctoorch repreieotiog Ihe Departmeit ol Stole The Director. Deienie Intelligence Agency The Director, Notional Secorliy Agency
The Special Aulilorit lo the Secretary (or National Security, Oeportmenl of the Treawry
Absfaining:
Tho Deputy Au'itonl Ad-uAniroHx for Notional Security. Energy Reteorch and Development Adwlnlitretion
The Assistant Director, Federol Bureau of IrrteilioatioA
Alio Participating:
Tho Astrstani Chief of Staff for Inialligertce, Department of the Army
The Director of Naval Intelligence, Department of the Navy
TheChief of Staff, Intelligence, Deportment of the Ait Farce
SfCWT
3f
CONTENTS
Pace
PRINCIPAL JUDGMENTS
L INTRODUCTION
II. DEVELOPMENTS5
5 Crop
Immediate
Consumer Unaffected So
The Rest of the Economy io
llard-Currency
OUTLOOK FOR
The Consumer
Growth
Foreign Trade and Payments Policy6
Impact of Another Crop
PROSPECTS
Longer-Term Economic
Soviet Need for US Grain
Longer-Term Outlook for
The political
ON MILITARY
VI. IMPLICATIONS FOR EASTERN EUROPE
ANNEX A: Agriculture in the Soviet Union
ANNEX B: Problems in Soviet Agricultural
ANNEX C: Soviet Crain
CLCltTT
-StC-ftH-
implications of5 soviet harvest
principal judgments
5 harvest was the worst in the Brezhnev era. Grain(ell to less than two thirds of stated needs, with the livestock sector especially hard hit by feedgraln shortages. Despiteof long-standing export commitments to Eastern Europe, extensive purchases abroad, and resort to stringent conservation measures, the regime will be unable to make up the shortfall. Distress slaughtering, already begun, promises to set back Brezhnev's meat productionfor some years to come. The GNP growth rate fell from lesso aboutpercent
Inside the USSR, the effects of the harvest are only now beginning to show up in consumer supplies. Meat shortages will become fairly widespread before long, and the quality of the national diet is likely to deteriorato by early summer. There will be widespread grumbling in the urban centers and possibly occasional disorders outside the major cities. Criticism and debate within the regime on agricultural policy can be erpected to mount.
Nevertheless, the regime's control mechanisms are adequate to cope with popular dissatisfaction even if malaise becomes pervasive. In any event, existing military programs will not be affected, andprograms would be among the last to be altered in any series of agricultural crises. Nor is the power position of the presentlikely to be challenged, although Brezhnev's prestige and that of certain of his colleagues can hardly escape some damage.
Another poor harvestGowever, could generate domestic difficultiescale that would affect regime cohesion. The succession problem would then take on more urgency, and the chances of factionalism would increase as the agricultural issue became critical.
In any event, even if the Soviets manage to cope adequately with the effects of5 harvest, climatic luiiidicaps and theagricultural system make it likely that their grain targets over the next five years win not be met. If so. the Soviets will periodically need more thanillion tons of imports to which they now have ready access under terms of the US-USSR grain deaL In terms ofhe five-year grain import agreement was an example of the Soviets yielding to US pressure for regularized beliavior in the grain market in order to obtain needed supplies. However, unless requirements for US supplies substantiallyillion tons, reliance on the US will normally have only marginal moderatingon other aspects of the USSR's international behavior:
Moscow already has assurances that some US grain will beevery year for the next five;
the Soviets doubt the capacity or willingness of the USgiven domestic considerations, to impose and maintain effective controls on exports;
short-term purchases can usually be made from other suppliers as well; and
over the longer term the Soviets could shift the patterns of their imports toward non-US suppliers.
Another major harvest failure during the next year or two would throw the USSR into acute temporary dependence on foreign gram supplies. In that contingency. Moscow would probably Judge itto avoid threatening or highly offensive behaviorime. And the recurring and heightened need for US grain would be one of the significant arguments in Moscow in favor of keeping US-USSR bilateral relations on an even keel and promoting mutual interests.
But in terms of implications for US policy, the "leverage" inherent inemporary dependency is limited. The stringencies that would face the regime are unlikely to be so desperate, nor the extent of US power to withhold goods so great, as to compel the USSR to substantially alter any important element of its domestic or foreign policy in response to outside pressure. Indeed, overt pressure from abroad would probably unify the leadershipegative reac-
tion. If the result were reduced access to foreign grain, the regime would, we judge, be able to maintain control over increasinglyconsumers.
The East European regimes stand to be testedesult of5 harvest. More than half of their normal grain imports come from the USSR, and these have been cut off for the current crop year, forcing them into Western markets. This phenomenon is likely toeduction in East European imports of Western capital goods (of which the US share isny sharp reduction in living standards in East Europe carries witheightened risk of popular disorders, more so than would be the case in the USSR. While the USSR probably will provide some financial assistance to its clients in their time of troubles, it will resist any accelerated redirection of their trade patterns toward the West. This willersistent dilemma for both the Soviets and the East Europeans.
As for the USSR's own trade, grain imports will be the main cause6 hard-currency trade deficit5 billion,ecord deficit estimated7 billion last year. This will force the USSR to bargain hard for low-interest credits and to sell gold. Some major purchases may be deferred, but the USSR presently intends toto increase its imports of high-technology Western products.
L INTRODUCTION
he harvest disaster5 has hecn the severest test yet of Brezhnev's guns and butter economic policy. This policy has stressed sharply higher rates of growth for personal consumption while continuing traditional high priorities for the military and heavy industry. Rapid expansion of meat supplies and supplies of other livestockhas been tbe backbone ol Brezhnevs consumer program. The urgency of this program has been heightenedapid rise In consumer Incomes, another feature of the regime's program.
1 In the past five years the regime has expanded livestock herds to attain meat goals quickly,first ensuring adequate supplies of feodgrains, gambling on an extended period of above-average weather. Massive grain Imports following2 harvest shortfall were sufficient to avert substantial herd reductions, but even larger grain purchase!5 were inadequate to prevent large-scaloil* lightering. This has cut deeply intonumbers,rogress in providing quality foods and probably raising questions lo Moscow about the viability of the basic policy.
II. DEVELOPMENTS5
5 Crop Shortfall
5 crop failure was the worst during the Brerhnev period. Farm output fell about 8tt percent- Production of all major crops, whichfor about two fifths of total agricultural output, sufferedevere drought during much of5 growing seasonrainamounted to onlyillion tons, roughlyillion tons below the averagend the worst in tlvc postwar period when measuredeviation from the long-term trend. Output of other major crops such as sugar beets and sunflowerimportant source ofabo4 levels. Further, the drought dried up pastures and reduced supplies of forage crops, compounding the shortage of feedgrains.
Immediate Measures
i TV Mm of the agreementfor eioepoona. Theell0 mflUon ton) if II dooUirashortage-Iltell moreillion loiu if tho USSRxceptionalUS pippua permit.
ralo production was leas than two thirds of needs, hitting the livestock sector the hardest. The regime did everything it could lo maintain herds, using such stopgap measures as shipping animals from drought to non-drought areas and feeding reeds, leaves, and other low-grade feed stuffs to starving livestock. Even long-standing erportto Eastern Europe, heretofore considered sacrosanct, were canceled to savenfllioo tons of grain. Finally, "since5 the USSR is estimated lo have contracted for aboutillion tons of foreign grain, largely for delivery during Fiscalo this connection, the Soviets foe the first time committed themselvesong-term grain Import agreement wiih the United States for the purchaseillion tons per year for the five years beginning October'
I
T.Wc I
USSR: PRODUCTION OF MAJOR CROPS
BM 70
it;i
l (arm oul-
P"*'
Cm***
Animal
u
j -1
1 -II. 1
t.O
Raw of Orowh (Parornt)-
i 1
0 1
M
0
Metric
mo
supplemental agreement recruires that at laait one third of all grain shipped be carried in US bottomshipping cost well above the current world market rata.
espite ail these measures and the use of rKm-strategic graineed supplies have been inadequate.esult, state and collective farms began distress slaughtering of hogs and
I Thaibi-aMonQ held aitocfa to minimi* the oifecti of harvestn addition to stocks to cover normal requlrementi. some unknown quantity ol pain Ii held for itratetfcto auppty the mlUlary force* and the economy with neededna. of war. Whan non-itrategx stoekt ara eahamied. thehcra,Imports. Wo fudge that present imports am probably beJiiR allocated for consumption and are not being used lo bol.let Mracexlc
poultry by late summer. Scattered source indicate that private owners also were killing their animals during the fall Private farmers provide about one third of the country's meat and oton over two fifths of the hogs and cattle and about half of the poultry.esult inventories of hogs and poultry droppedercent andercent respectivelyo far, sheep and cattle have been relativelyDespite the sharp decrease in the number of animals during tbe fourth quartereat output did not increase noticeably. Part of thein livestock numbers probably reflectstn reduce farrowing and latching rates In antittpation of reduced feed supplies. In addition, many animals were billed prematurely, and due to the earlier reduction in rations, ihe normal
-scene*.
dass washarbinger of difficulties to come
Consumer Unaffected So For
n general, the consumer was unaffected5 by agriculture's problems. Anof processed foods, coupled with the usual lagiop shortfallownturn In livestock production, kept enoughhepipeline. For the yearhole, per capita food consumptiont percent and meat coasumption wasercent,ecord level. Only late in the year, in parts of the drought-stricken area, shortages of some foodparticularly flour and in some casesreported. Meat prices rose in the free markets, but this was due not to shortages but rather to higher incomes and greater demand. There was somethat by late summer provincial officials were scrambling to line up provisions for their areas in anticipation of shortages. Thus far, there has been less evidence of consumer grumbling and hoaiding than in previous bad years.
The Rest of the Economy5fter slowing fiom an average annual rate of growth of 4ft percento lessercentoviet CNP growth slumped even further inabout 2ft percent. The low CNP growth rates during the past two years were due to two successive years of decline in agricultural output Other sectors of the economy were not visibly affected by agricultures problemsndustiisl output in particular equaled the average annual rate achieved foreriod. The rate of growth in the other principal sectors either maintain the same pace (services andor fell moderately (construction).
Hard-Currency Crunch
mports of grain cost the Sovietsncreasing the hard-currency deficit to anecord. The basic causes of lost year's deficitapid rise In most categories ofan estimatedillion tovery little export growth because of the recession in theeak gold market5 induced the Soviet* to borrow heavily in Western money markets,Soviet indebtedness stgnificandy.
III. THE OUTIOOK6
main impact of5 crop failurefelthe consumer will be hardestgrowth of industrial production and CNPbe slowed, and the Soviets will continuea large hard-currency trade deficitthe USSR's agricultural situation willwith carry-over stocks of grainherds reduced, remaining livestockand output goals dependent on
The Consumer Surfers .
Probably the most serious problem6 will be an expected one-quarter drop in per capita meat consumption. This will tetum the consumer to the level of the. Although per capita consumption of meat has increasedercentndercenthe average Soviet citizen still ears only two fifths as much meat as his US counterpart and throe fourths as much as the average Pole or Hungarian.
In addition, an expected downturn in egg and milk production5 levels, albeit less severe, will further erode the quality of the Soviet diet. This decrease in availability of livestockwill temporarily reverse the steady decline in the share of starchy staples in the average Soviet diet Dread and potatoes currently account for one half of the calories consumed (see
and Imported feed supplies willsufficient to support livestock inventories16 leveL Distress slaughteringextooding toat least fa the first quartercontinue to be slaughtered atweights. Production of meat willoff during the first part of the year,shortages in certain areas will occur.lierds will be small enough to beseasonal grazing and available feed. Meathowever, will then be at its lowestprolonged shortages ofbe common throughout theEven as0 crop becomes avallnble.
Composition of4
Sugar
Milk and Milk Products (Excluding Butter)
ils-
per day per
to rebuild the average weight of animals In order to support breeding will keep meatat depressed levels.
The USSR probably will try to import6 to augment domestic supplies. Non-US meat supplies appear adequate to permit the USSR to buy at least one-half million tons,urchases, and perhaps to double that amount Purchases of one millionas much as available Soviet port and storage facilities couldbolster per capita meatby roughlyercent but would add aboutillion to the Soviets' already large Import bill.
Other foods generally should be available. Thcrc should be no prolonged bread shortages even though the quality of bread will bealready seen in someincreasing the extraction rate in milling grain into flour.failures will produce spot shortages, however, and supplies of flour at retail outlets will belimited. The effects of5 shortfall in sugar beet production should be largely offset by stepped-up imports of sugar from Cuba. Similarity, altliougb output of sunflower seed fellcheduled imports ol soybeans and the availability of other oilseed crops should be sufficient to avoid vegetable oil shortages.
Consumer reaction to the expected meat shortages is difficult to predict. The Soviet people have traditionally accepted programs to build the military and boost industrial production asa slow growth In living standards. Although shortages and price increases Hemming fromagrarian policies sparked considerable dvfl discontent and some rioting in then the scale of0 Polish riots have never been reported in the Soviet Union.
6 contraction in meat supplies,will be unusually severe. Regime promises have aroused expectations among consumers who themselves have become Increasingly aware of higher living standards abroad. Moreover, thehas done little so far to prepare consumers for the coming shortages. Morale will undoubtedly sag and tensions will grow during the next few months,eak In late spring and early
7
acasx.
M Gwhi
when ihortages of livestock products will besevere. Disturbances could well occur,if an equitable form ofornot enacted. The regime's control meetuuiisms are adequate for their tasks,ervasive malaise is likely.
USSR probably will purchase onlyquantities of additional grain for deliveryJanuary andecause grainwill largely occupy port capacity ofmillion tons per month. Logisticalbe easedmall degree, however,is transshipped to the Soviet Union viaports by rail and coastal vesselpurchases of gram for delivery afterlikely. Prior to October (when thegoes into effect) Moscow probably intendsdirectly from the US only if it cannotelsewhere.
Growth6
CNP growthill be smaller than usual. Even if favorable weather provides aexpansion in crop production, growth in overall agricultural production will at best be slight, since both meat output and livestockwill be depressed. Moreover, in (heof last year's crop failure, growth inoutput, investment, and consumption willat record or near record lows.
Theercent rebound in6 projected in the Five Year Plan appears optimistic even with good weather. Even with the improvement In feed supplies that such weather would bring, production of meat wiD drop0 and cannot expand substantially until livestock herds are built up again. This takesyear or so for pigs, but several years for cattle. Thus the deterioration in the quality of the Soviet diet will persist
SO. The Soviets arei-per cent rise in industrial outputhe lowest target since World War II. Problems in bringing new plant and equipment into operation contribute to the low goal,hortage of agricultural raw materiab from5 crop for the food processing and soft goods Industriesrincipal constraint. Growth in investment is slated to proceed at the slowest paceercent)he Plan emphasizes the reduction' of the vast amount of capital tied up in uncompleted Investment projects. Meanwhile, the sag in food consumption will not be offset by acceteratioa in other consumer goods and services.
Foreign Trade and Paymonts Policy6
Grain imports will be the main cause of the hard-currency deficit on the order5 billion that we projectmports of grainfor5 will cost at leastillion or morend further purchases could boost Soviet imports another SI billion, as these higher grain imports should far outweigh cutbacks in non-grain purchases. Anotherillion might be spent foe meat- (The five-year grain agreement will not per se affect the USSR's hard currency balance over the longer term since tho amounts involved are about what the Soviets would expend in any case.)
The site of6 hard-currency trade deficit will depend largely upon Moscow's ability to expand exports to the West, where sluggishrecovery continues toonstraining force. The USSR,esult, may have to resort tomore borrowingith Its solid credit rating. Moscow will have no difficulty in attracting loans, but it would prefer not to pay high interest rates on massive short-term loans, wishing to retain its flexibility in the event ofagricultural failures. In any event, the Soviets will6 with an external debt that is sub-stariaalh-still within manageable limits.
We believe the Soviets will continue to sell gold as they did through mostespite the decline from the record gold priceer ounce4 to the current level ofnless tlie Soviet hard-currency trade positionsubataatially, sales couldmore0 milHoo at today's prices. Moscow could seD even more witlioutits reserves and probably will if the price Is right.
While equipment purchases contracted in previous years will6 imports high, Moscow is apparently reducing its planned cash expendi-
-SDC-frf-f-
This effort will havo little immediate effect on Soviet industrial production because of the long delivery periods for most machinery We regard current attempts to reduce imports as temporary. There is no indication that the USSR's longer-term policy of increasing Imports of high-technology Western products has changed. Because of current hard-currency stringencies, however, theof attractive financing will be an increasingly important factor in determining where equipment orders are placed US firms wfll be especiallybecause US industrial exports to the USSR are financed primarily by high-interest credits. While US Eaimbank facilities are desirable to the Soviets, even If they were available US leverage would be limited by continuing Soviet ability to get most, if not all. needed equipment abroad under long-term low-interest credits. Thus current Soviet financial difficulties do not increase US bargaining advantages.
Impact of Another Crop Failure
t is prematura to predict even roughly the size of0 grain crop Because spring growing conditions are so Important, it will be at least mid-July before reliable estimates can be made. Winter grains normally account for roughly one third of grain production. Unusually low temperatures and inadequate snow cover in December threatened most of the USSR's fall-sown grain crops. Since then, snow cover has relieved the winterkill daoger In much of tbe winter grain area. The areas where pre-winter development of seedlings was severely retarded by5 drought continue to bohowever. These regions, which usually account for one third of winter grain production, have not yet recovered from last summer's drought. Tbe low soli moisture also will Inhibit the growth of lower-yielding spring grains that will be planted to replace winterkilled sowings. Moreover, low sod moisture reserves fn several mafor spring grain areas presage poor sowing conditions in May. More predpilation than normal will therefore be essential for average or better yields.
f above-average weather conditions enable the Soviets to harvest considerably more than theillion tons of grain needed fordomestic requirementsillion tons) they cam (a) increase the weight of animals being marketed, (b) begin the slow process oflivestock herds, and (e) start to replenish carry-over grain stocks. If the harvest merely meets minimum needs, expansion of herds would be
Another harvest failure would force further Urge reductions In livestock numbers and additional massive imports of grain from Inn!-currency areas, worsening the large trade deficit anticipateda turn, this might force the USSR to make substantial cutbacks In non-agricultural imports from the US and other hard-currency areas to avoid rapid build-up of foreign debt
The Soviet consumer would face anotherIn meat supplies, erasing the gains made under Brezhnev. As the meat queues lengthened, the leadership would have to deride whether formal rationing should be substituted for the hit-and-miss distribution resulting from the queues.Moscow could raise meat prices to avoid the administrative costs of rationing or the unfairnessirst-come, fust-served system. The regime,has repeatedly indicated that it will avoid boosting food prion.
For the US. another poor Soviet harvest would mean additional grain sales over and aboveillion tons the USSR is committed to buy from us annuallySO. This wouldlead (he Soviets to reduce their purchases nnd contracts for other Western goods unless foreign demand for Soviet hard currency exports picks up.
IV. LONGER-TERM PROSPECTS longer-Term Economic Outlook
average weather prevails over theyears, GNP should growo 5year. The recently published guidelines forFive Year) Indicate noIn the allocation of resources. Tbethat while past developmenton rapid growth in Use labor force aadof plant and equipment, the USSR cansustain "extensive" development of thisthe new Plan emphasizes thatwill depend mainly on "Intensive"other words, rapid productivitythe first time io the history of Soviet planning.
outlays for investment arc to grow more slowly thanpercentercent (averageince Inputs of man-hours and the stock of plant and equipment arc slated to grow at less than three quarters the average rate. the regime is counting on marked efficiencyin the use of labor and capital. Theprogress required for these gains, however, is not ensured by any new proposals to address chronic problems in the Soviet economy.
Although one impedimentpeedierof new technology In the USSR isore fundamental obstacle is political. Party thinking opposes trulychanges that might threaten its right ofcontrol, while the ministerial apparatus opposes lesser reforms out of its ownInterests.
An alternative source of technicalImports of capital equipment from thewill be crucial for Soviet plans in certain key sectors.in theof foreign technology to growthill not be extensive. Soviet industry is slow to get foreign technology intoand even slower to spread itiven industry. Moreover, given Itsto go deeply into debt, the USSR isto Import enough plant and equipment toajor impact across the board.
To achieveoderate boost inthe active cooperation of the labor force is needed- Soviet workers, never noted foror motivation, are unlikely to Improve their performance in the facelower growth of personal consumption.
Soviet Need for US Groin
ven if the grain harvests in the next several yean are average or moderately above average, the Soviets will have to import from the West more thanillion tons per year stipulated in the US-USSR grain agreement. If the Soviets needed as much asillion tons per year, they could be expected to first takeillion tons from the US and exhaust non-US supplies ofmillion tons and then return to the US for their remaining needs. The demand for US grain depends on the sixe of the Soviet requirement and on production prospects in supplier countries; both conditions are impossible to predict accurately. Particularly over the longerespecially of the US-Soviet
agreement were abrogated or not
US share ol the USSR's grain purchases could be considerably reduced If the Soviets are willing to develop the markets of smaller exporting countries. The Soviets could shift the pattern of their Imports toward non-US suppliers, perhaps with the help of long-term contracts with Canada, Argentina, or Australia. These countries are amenable to such contracts with the Soviets at worid prices.
ow will Soviet foreign policy be affected by the USSR's reliance upon the US for grain imports? While its chronic agricultural problems will exert some moderating effect on Soviet calculations about adventurist foreign activity, Moscow probablythat it need not take this factor into much account in specific situations, reasoning that:
it is already entitled to buy upillion tons per year;
US ability to exert leverage is limited, since US farm and free trade interests will oppose any attempt to limitfor example, the maritimereaction to unwanted Soviet behavior, and any governmentalare likely to be short-lived;
in the short run, other countries will provide additional amounts;
the longer run, the Soviets could expect to shift the pattern of their imports toward other suppliers; and
extreme circumstances, substantial belt-tightening is possible, and this is the likely reaction of the leadership to overt foreign pressures.
Soviet behavior to date on such particulars as Jewish emigration and Angola suggests that the leadership feels no need to accommodate USbecause of its current reliance on US grain. At most, these imports supplement the otherwhich commend to the USSR the posture ol detente and attempts to improve bilateral relations with the US along the lines of recent years. Thus the theoretical US advantage will be difficult to
10
eces r
apply in practice without arousing an olnhiratc Soviet backlash.
ut matters could get worse forisastrous harvest67 would create import needs that only the US could satisfy. On occasions when the USSR wants to ciceedillion ton level of the five-year agreement, ft will probably judge that it sliould avoid threatening or highly offensive behavior In other arenasime. And if the bilateral detente relationship came under serious challenge, either in the USSR or in the US, the advantages of the grain arrangement would be one of the significant arguments inin favor of keeping that relationship on an even keel and promoting mutual interests. In sum, we judge that Soviet reliance upon US grainwill normally haveimited moderating effect on the USSR's international behavior but that it willreater effect in times when the economic situation is parlous or the bilateralis threaten'-1
longer-Term Outlook for Agriculture
ith the exception of livestock goals, plans for agriculture have not been revamped in the wake of5 harvest. Previous harvest failures have usually resulted in plans to Increase the emphasis on agricultural inputs, but these arc currently scheduled to grow at sharply reduced rales in the neat five years. The main features of the plan were probably worked out some time ago. perhaps as early5 billion ruble program to upgrade the non-black soil zone was unveiled. At that time, planners were euphoric following two record years for agricultures and evidently hoped to live off the benefitsecade of very large expansion of agriculture resource base,
This planning lag seems to be the reason why investment In agriculture is now planned to grow at an average annual rate of only 3Vj percenthile the rate of increase in the other sectors of the economy is plannedercent. At these rates, agricultures share of total investment would slip slightly0 although continuing to soak up somewhat more than one fifth of total investment
We suspect that the modesty of the goals for additional resource allocation to agriculture stein
Table 2
USSRi SELECTED INPUTS IN AGRICULTURE
Average Annual Kates ofPercent
Total9
Deliveries of:
Tractors
Troda
Afffcultural Micfcfaerr ..
Delivery of
from the unwillingness of the leadership to sponsor grand new programs until the full effect of5 harvest shortfall can be assessed. However, some short-run adjustments are likely. Already, some republic leaders are questioning the planned pattern of investment for farms, specifically, the wisdom of continuing to build large-scale livestock complexes without first ensuring an adequate feed base. In addition, some middle-level planners, who last spring wrote bullish articles about farmduring the past decade, have recently changed their tunc and now stress that agriculture will continue to need the help of Oliver lectors in order to move ahead.
lthough some adjustments will probably be made, Moscow's choices during tho next five years arc few. The regime is already encouragingprivate sector to produce more. About one quarter of total agricultural output, including one fifth of thepotatoes, fruits, andwell as one third of the livestock products, comes from private producers. The long-run policy toward this sector has been constrictive, but restrictions have been temporarily relaxed after bad harvests. In the past, output in tho private sector has been easily spurred by supplying more livestock and feed to individuals, reducing taxes, lowering barriers to the use of public lands, and allowing some urban residents to own livestock- Tbe current leadership is familiar with this process; when farm production stagnatedheregime immediately turned to tho private sector. Private livestock holdingsercent in that year, andotal acreage and livestock holdings In the private sector were uppercent
;:
CCCOCT
IS percent, respectively,4 levels, while outputercent.
urrently planned investment is largelyto save farm labor. If the Soviets shifted over now to emphasizing increased output, they might transfer some resources, for example, from construction of automated livestock feeders toof traditional agricultural machinery. But in Order to Increase substantially the deliveries of agriculturalomplex changeoverecond shift or addition of new production capacity would be required. Given lags inand commissioning of newwell as the competition from similar projects such as the Kama truck plant and the Baikal-Amur mainline railroad for funds to buy capitalwould have had to start years ago In order to bring this capacity on line. No program was started.
farm output goals forcan not be achieved without better-than-average
weather during the next few years. Grainplans have not been revised. Production must significantly exceedrend in order to meet the five-year plan target for an annual average grain harvestillion tons. The frequency of weather-related crop shortfalls iaodthat .one or perhaps two of the next five years will be unfavorable, making fulfillment of the grain production plan unlikely.nd Bthe fundamental reasons for Soviet agricultural difficulties and the USSR's technological efforts to overcome them.)
output targets have been alteredambitious. The live year average foris slated at aboutillionabove the level achieved Ine estimateeat production of aboutillionwillpercentincrease in meat output during theof the five-year plan period. Withfeed supplies questionable, the Sovietsforced to rely on continuing substantialgrain to meet the plan for livestock products.
The Political Outlook
On the political front, effects of5 harvest disaster have not yet surfaced. The weather rather than individuals has been blamed foreconomic proUerns, although the possibility remainscapegoat will be offered up from the second echelon of leaden. Characteristically, the Brezhnev regime has allowed little publiclet alone debate, about causes and remedies for its farm problems and doubtless intends to hold to this course at the Party Congress in February.
Nevertheless, questions about agriculture's priority and administrative organization have long stirred disputes among the Soviet leadership.stimulation of the private sector has been necessary but remains ideologically unpalatable. Some leaden surely fedeaker resource commitment to agriculture exposes tho country to unnecessary risks- Others in the regime may be convinced that projected allocations for agriculture will sustain rapid increases in output with theof normal weather. If there is anotlier crop failure6stablished agricultural priorities and perhaps even organizational forms would be challenged. Great pressures would be generated for Immediate and large remedialfor agrlcullure-
The senior echdon of theand those of his agesuflidently wdl entrenched to survive5 harvest But this group's record on other policy fronts Is mixed, and its cohesion is likely to weaken as age takes its toll on Individual rnemben in the neat severalumper harvest6 would repair its reputation, but conversely anotherpring and summer of exasperatingwould further reduce its prestige and probably its cohesion as well. These drcurnstancos would lend more urgency to the succession process in Moscow and also, by posing the agricultural Issueritical form, increase the chances ofand competition In that process.
V. IMPACT ON MILITARY PROGRAMS
the past, no slackening of keyhas been noted following croppoor harvests of theccurredmidst of the lint major build-up of Soviet stra-
in
tegicSimilarly, tbe poor harvest2 cameime when the Soviets wereumber of new strategic missiles for production and deployment, andittle to indicate these efforts were affected.
Five Year Plan suggests that theestablishment will remain insulated fromof last year's harvest- The resourceto agriculture appears weakened ifgrowth in investment in farm machineryits former rapid pace. Although thedo not permit precise estimates ofit appears that the plan allows for aexpenditures for military and space programs.
VI. IMPIICATIONS FOR EASTERN EUROPE
The Soviets normally supply roughly half of Eastern Europe's grain imports. As crop conditions deteriorated last summer, the USSR canceled grain deliveries to these clients, forcing them to seek grain in the Westesult. East European grainfrom the West In6 probably will be on the orderillion tons, well above the average of recent yeais-illion tons are likely to come from the United States. Moscow's cancellation of deliveries has raised doubts in some East European countries concerninguture source of grain, giving themexcuse to shift economic arrangements from East to West Poland, for example, tentativelywith the US in late November for annual imports of possiblymillion tons of grain for at least the next five years. The Czechs and East Germans, the other major grain importers in Eastern Europe, may try to make similar arrangernents with Western suppliers.
Despite the fact that Moscow has beenenerally tough line in Its economic dealings with Eastern Europe, it will have to be careful not to push its allies too hard to gain short-term relief for Itself. The East Europeans are already suffering from the impact of Western inflation and Soviet price hikes, and In most countries the people have been told that some bclt-tightening is in order. Indeed, some shortages of consumer goods have already been reported, as have instances ofconsumer grumbling In this atmosphere, it is unlikely that the East European regimes will allow shortages of basic foods to persist or to spread at a'time when they nre under strong economic pressures to raise the prices On some consumer goods.
We do not anticipate major shifts inpriorities tliat would permit the Eastregimes to maintain their recent Impressive growth rates of living standards, despite their re oendy reiterated public commitments on that score. We expectontinuing "consumer alert" hy the regimes, with reactions to potential or actual disruptions tailored to the immediate problem. Re-acttorrs thus far have followed this pattern. In FelMuary andor example, whenoccurred In Poland over meat shortages. Party leader Cierek reacted by Importing more meat and by drawing down stocks slated for export to the West Similarly, Romania's Ceausescupeed-up of deliveries of food and consumer durables to distribution centers,reports of consumer resentmentumber of areas.
The need to pay hard currency for grain normally imported from the USSR will further strain the balance of payments of the importingEast Germany and Poland. Such imports will notajor element In theoverall hi nl-currency deficitThe cost of additional deliveries of grain is estimated at aboutmillionut the total deficit In that year may well match the5 deficit of J7 billion. The reasons for the deficit5 and the6 deficitpoor export performance resulting from a) the Western recession and tho diversion of someto tbe USSR to pay for higher priced Soviet commodities aad b) substantia! imports of Western capital goods, many of which have price tagsby the inflation In the West
With another large deficit expectedhe Eastern European countries might opt toreduce imports of capital goods from the West There is little evidence of this happening to date. The regimes will strive to avoid this, since in the longerajor reduction in suchwould jeopardize growth in Eastern Europe. Somo shift away from capital goods In favor of larger supplies of agricultural commodities and
Lectin
teener-
materials from Ihe non-Communist world is possible, especially ii the Eastern Europeans be-licve that they cannot depend on the USSR for the latter. It is unlikely, however, that the Soviets will permit any accelerated redirection of East European trade toward the West This willersistent dilemma for both the Soviets and East Europeans.
hift to the West for imports ofcommodities could mean larger US sales,on East European preferences for suppliers. Since the US isajor supplier of capital goods to Eastern Europe, any associated cutback in this category of imports would have little effect on US exports to Eastern Europe.
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Annex A
AGRICULTURE IN THE SOVIET UNION
in the USSR face*ecause three fourths of the sown area Is climatically comparable to the Prairie Provinces of Canada and the Northern Great Plains area in the United States, the farmland of the USSR is less productive on the average than that of the United States. Evenarger0 millionillion acres) under crops, production is less. Moreover, although like these North American regions the USSR hasong history of wide cyclical swings in weatherthe fluctuation in Soviet grain yields bgreater. Improved farming practices, which have dampened such fluctuations in North America, have not been adopted in the USSR.
As in analogous areas in North America, the Soviet Union's agricultural land is relativelyin adequate amount of heat, moisture, and nutrients. More thanercent of the USSR is too cold for agriculture, and an additionalercent is so cold that only hardy, early-maturing crops can be grown. Only in the southern USSR docs the available warmthide range of crops.
Moisture deficiency isajor problem. Although drought-resistant varieties of plants arc being developed and dry-farming techniquesthe most effective response to moisture deficiency remains the age-old technique ofHowever, irrigation requires large amounts of both capital and labor, and in some areas benefits are difficult to sustain because of soli deterioration.
The Soviet Union has some comparatively good soils, but natural soil fertility suppliesart of plant nutrient requirements. Good matching of soil and crop, skillful crop rotation practices, and large quantities of organic and mineraland of trace elements arc necessary.
ot only are there differences between the environmental and technological resources of the United States and the USSR; Institutionalare aba vast. The collectivization ofin the USSR has resulted in the division of farm organization into twosocialized sector, which consists of state and collective farms and which accounts for three fourths of agricultural production; and the private sector, which consists of small private garden plots that account for the remainder of total farm output. The socializedis chronically afflicted with lack of motivation and responsibility.
a Soviet agricultural output was aboutercent ol the US levelince that time the dollar value of Soviet output has increased by aboutercent and by thetood at about three fourths of US production. However. Soviet farm Output is still dominated by bread grains andUSSR normally produces about twice as much wheat as the United States butercent as muchoutput of higher quality foods, particularly meat and fruits, lags far behind that of the United States and is patently inadequate to satisfy the growing demands of the Soviet consumer.
gricultural production is generally sufficient to provide consumers with enough to eat in terms of dally calories, but their diet is heavily weighted
with starches and deficient In meat, vegetables, and fruit. Per capita consumption of meat and other quality foods in the Soviet Union is still markedly' less lhan in other industrialized countries. Asincomes increase on an already determined schedule, consumer demand for meat rises about
proportionately. Production of meat aid oilierproducts has not yet kept up with this grow-
in5 demand, and shortages are endemic. Imports of agricultural commodities even during years of abundant harvests indicate the determination of the leadership to upgrade the Russian diet
S. The USSRarm labor force more than eight times the size of that ia the United
States on SO percent more cultivated land. But in the USSR one farm worker feeds seven, while in the United States he feeds SO. Ihe USSR maintains more than one fourth of its labor force inby far the largest share among Industrialized nations; the United States employsercent of its labor force in agriculture.
Annox B
raOBlEAAS IN SOVIET AGRICULTURAL TECHNOLOGY
weaknesses in agriculturalorganization are being compounded by asuccess in fieldi ol importance to any realadvances in agricultural productivity,
assimilation of foreign agricultural
development of new wheat and other crop varieties.
Agricullurol Technology
Although agricultures share of totalwill not change significantly during theFive Year Plan, total spending will rise by one fifth. Part of the money will be spente West, particularly the US. to payide variety of advanced agricultural technology andLarge amounts will be spent on developing improved varieties of crops, on improve! fertilizers and methods of application, on other agricultural chemicals, on soil conservation and moistureand on irrigation and drainage projects. Highest priority will go to machines for growing, harvesting, storing, and processing crops,and engineering aspects of large-scale animal operations, fertilizer plants, and tho technology and equipment needed for huge irrigation and drainage projects.
Major agricultural items already delivered, or in the process of being acquired, include:
Technology and equipment for self-propelled forage harvesters at an estimated cost0 million,actory capable of0 such machines per year.
Technical assistance, licensing agreements, and plants for the production of tractors and trucks based on US models.
Up toanure recycling complexesa new process for the production of an urea-based animal feed.
Fifteen alfalfa processing plants, worthoillion each, with licensing rights to hulld en.
A number of prototype feedlots. which will then be duplicatedarge scale.
illion deal involving plants for the manufacture of ammonia andadd.
Licenses and technology for the construction of chemical complexes to produce USpesticides.
A wide range of US technologyulti-billion dollar landprogram with emphasis on irrigation.
in Soviet agriculturalwill be slow. The USSR's record on theof foreign technology has not beenautonomy and Incentives forand workers and inefficientof farm research will continue to beto any diarnatic improvement inagricultural output
Wheat Problems
Soviets normally produce roughlyof the world's wheat, as much as twiceoutput, but they still suffer from ahigh-quality wheat The inadequacies ofavailable:
down the yields the Soviets mightachieve through greater use of fertilizer, rnexsianization, drainage, irrigation, pestand other improved cultivation practices.
-aw
-GCCIKi
the rate of yield Increases and thus limit the Soviet ability to produce the quantities of grain needed forey factor in the Kremlin's pledge to provide more meat, milt, and eggs.
Contribute to wide fluctuations in the Soviet harvest and cause major disturbances in world grain markets,
Make it difficult to produce good-quality bread, still the mainstay of the Soviet diet
The increased use of fertilizer, coupled with the emergence of new types of rust, haveeed for new varieties with added characteristics. New varieties are needed with gertnplasm different from present varieties to reduce the risk of large-scale damage from rust, to respond more vigorously to the application of fertilizer, to resist lodging and shattering, and to provide more resistance to other disease* and insects. Soviet scientists, gambling with shortcuts, have not succeeded In developing any new varieties in (he past decade.
Although Soviet geneticists haveide range of US and other foreign varieties, none has met the special Soviet growing conditions andexceptery limited scale.
A proper breeding program shouldet of several varieties, with different genetic histories, each set capable of substituting for one of the present widely grown varietieside area and of outproducing it in some areas. But even If such varieties arc now being tested instations, no major improvements could occur for at least several years; if genetic crosses from among the wide range of genetic materials collected from all over the world need to be made, moreecade could be required.
Groin Harvesting and Storage Lossot
The Soviets perennially experience losses of grain during harvesting and storage. Reportsthat Soviet grain harvesting combinesoperate with no lesspercent grain loss, and losses could range as high asercent In comparison, US combines are capable ofwith losses as lowercent The excessive losses of grain which the Soviets incur during harvesting reflect in part fundamentalin the design of their combines.equipment and harvesting methods not only cause losses of grain but also increase the costs of hat veiling.
In the USSR, in bumperargeof newly harvested grain has to be stored temporarily outdoors in uncovered piles because grain handling, drying, and storage facilities are inadequate. An estimatedillion tons werestored in the opennder Soviet climatic conditions as much asoercent of freshly harvested grain contains excessive amounts of moiiture and other extraneous materials that must be removed quickly if spoilage is to be avoided. Inadequate storage conditions thus reduce the quality as well as the amount of grain.
i
Annex C
SOVIET GRAIN BALANCE
The increase in Soviet grain production0 has not matched the rising demand for grain. The result has been an unprecedented level of grain imports in recent years. Even with these imports, it Is very doubtful that the USSR has been able to add to grain reserves. Indeed, allthat substantial reductions in reserves have occurred over the past few years and that current imports are being used to meet needs rather than to pad stocks.
examination of Soviet data permitsreconstructionrain balancepitducrjon. net imports, and majorof consumption. Although the USSRproduction, it does not release informationmain uses of grain, the amounts lost inand storage, or the size of stocks.data exist to make reliable estimates ofof grain for seed, food, industrial products,imports. Data on which to base estimatesfed5 willtwo thirds of the domesticmuchthese are far less accurate thanfor other uses. While the data do notto make estimates of the size of grain stocks,believed to be sufficient to detectin grain aUocation-
Tho Supply of Grain
Grain production in the USSRmore thanercent0 andharvest yearhe increase wasresult of better seed varieties, urmrovcmenland harvesting practices, the use ofand farm machinery, and ain sown area. The overall trend inbeen obscured by large year-to-yearexample, the cropear ofwas three-fifths larger thanrop.
production has climbed. Itschanged; in particular, feed grains havegreater attention.
Barley, the share of which rosef total production0 toercentas been stressed because it generally has higher yields than other grains.
Oats and corn, which fell into disfavor ear her.
Nevertheless, traditional breadgrains still account for ncariy three fifths of production.
Wheat, lower-yielding spring wheat and hifher-rielding winter wheat, comprises about one half of total grain production. Although wheat is used primarily for food, as much as one third of the total wheal crop has been used ns livestock feed in recent years.
Rye remains important because of the Russian fondness for rye breads.
Imports
grain imports have ranged fromamounts in theo an estimatedtons Inor data on yearlyexports sinceee.
USSR: GRAIN TRADE6
Thousandi
FY IWS FYFYFYHT4 (eel)
or ihMh.
19
tcsin<
Demand (or Groin
demand for grain haa grown rapidlyUSSRetulioderate increase iniM- for foodharp expansion in its usefeed. Indeed, growth in demand hasproduction in recent years.
The USSR produces ample grainits population.ears ofood requirements consume lesshalf of total production. In thenly one fourth of thetons) was used as food.
ndustrial Raw MateriaU: One to two percent of the grain crop is used by industry to makebeer, starch, and syrup.
eed: Eachillion tons ofused for seed. Improved yields haveshare of the crop set aside for seed fromfifth in the first half ofoin. We estimate the quantityrequired for seed from the area plantedofficially recommended seeding rates.vary according to the type of grainhigh compared with Western practice.in the amount of grain used for seedfrom minor shifts in cropping patternsfrom the varying amounts of reseedingeach year because of
A small and declining share ofgrain is exported. Wheat accounts for theexported grain, and most of it goes toand to Cuba. The Soviets havethat exports to Eastern Europe,to be sacrosanct, will be drasticallyin6 (see
Feed: Estimates of total graincalculated from official Soviet data onof concentrates fed. These data,not presented by type. From totalsve deduct the estimated quantities ofoilseed meals, and alfalfa meala residual of grain fed. In contrast tofor the other uses of grain, grainlivestock Is almost certainly overstated by (In-.
calculation Ixtause the ii lima lea are based ondata rather than on standardized, orweight. The difference betweenand standardized weight is: (a) excesstrash, and dirt, which have no nutritional value, and (b) weed seeds and grain admixtures, which may have substantial feed value, particularly in cases where one grain has grown mixed with another. Estimates of grain fed to livestock are therefore adfusted accordingly.
he share of the total grain crop fed to livestock has doubled from an estimated one third in theo two thirdsith the higher priority given to the livestock program under Brezhnev, herds have increased, and grain fed per animal has risen rapidly. Productivity gains have not followed suit. Due to poor breeding,rations (too much bulky roughages,energy and proteinnd lack of proper management practices, the grairt-to-final-product ratio in the Soviet Union remainshigh.
Grain Balance for Recent Years
ough grain balance fors shown in. The difference between total supply and total requirementsotional estimate of additions or deletions from non-strategic grain stocks. In any event, it gives no clue as to the sixe of strategic grain reserves. If it is assumed.ver, that non-strategic reserves were exhausted, or Dearly so. following the2 harvest. It can be seen that even the surplus production from the USSR's3 harvest and this year's massive imports are not enough to meet demands Inn fact. If non-strategic reserves werelarger than we believe,SSR6 would almost' certainly draw down more thanillion tons shown inO as to increase the feed allocation closer to the level of recent years. It is therefore improbable, given the magnitude of the shortfall and the priority demands of the bvestock sector, that current imports are being used to build strategic reserves, which are probably maintainedredetermined level based on estimated wartime requirements through good years and bad.
20
-
USSR: ESTIMATED SUPPLY AND DEMAND FOR GRAIN6
Mil Son Merle Tom
P Non-
wi.* ioo.o as.o * 1
portaUoA andand^ 3
*atu resulting (torn ticeu moitture and tiUaneoui maiMr.
(ted eonwrnpUoo ten anlor tandlin. loo. and wart*.
n" Und""DP'yfoe feed -ouH hove beao or. the order
1
21
-Sfcoua-
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