THE SOVIET GRAIN DEFICIT (S-09068)

Created: 9/16/1975

OCR scan of the original document, errors are possible

CENTRAL INTELLIGENCE AGENCY.d">

eptember5

MEMORANDUM FOR: The Honorable Paul W. MacAvoy Member

Council of Economic Advisers Executive Office Building

The Soviet Grain Deficit

Attached is our current assessment of the Soviet grain situation for. Because of the possible interest of other components of the Washington economic community in this subject, this Office may send the attached material to other interested officials.

Di rector EcOnonic Research

as stated.

historical review program release as9

twillxTIr

THE SOVIET GRAIN DF.FICIT

Principal Findings

Our current estimate of Soviet grain production for6illion tons falls aboutillion tons short of requirements.

The USSH has so far purchased approximatelyillion tons of foreign grain in In addition, Moscow undoubtedly will draw down grain stocks, which we believe do notillion tons and may be considerably less. These.two factors, taken together narrow the difference between available supplyinimum ofillion tons.

The Soviets presumably will have toombi-

nation of unpalatable steps: (a) negotiate for further

large amounts of grain from the United Statesthe

only large supplier in sight; <b) import additional quantities of soybeans from the United States and Brazil;

(c) cut livestock feed rations to2 level while maintaining livestock numbers, saving up toillion

tons; and (d) slaughter additional livestock %

reduction in herds would save about, i; million tons).

Because of the continuing high priority given to

increasing meat production, the latter two options will be takenast resort.

Production and Requirements

Soviet grain requirements this year are expected to far exceed supply. Direct grain needs are estimated to beillion metric tons. In addition, due to unusually large losses this year of hay and other forage cropsnormally supplying about two-thirds of the

*

USSR's livestock feed"at leastillion more tons of grain may be required to feed livestock.** The lost forage added to the normal grain requirementsotal grain needs toillion tons. (See Table)

The quantity of grain required, however, cannot bo directly balanced with tho estimated gross output. The USSR reports grain productionbunker" weight basis, that is, as the grain cones from the combine beforeiminary cleaning and drying isnd before

handling and transportation losses occur. At the sa-nc

*Important forage crops include4 of total food units the year of most recentreenotatoes and food roots,nd.

ince the nutritive content (or "feed-unit" value) varies by type of grain, the conversion from forage into grain equivalent depends on the type of grain available for feeding. Because corn is the most likely feed grain to be imported we have expressed the forage cropin "com equivalent." The calculation is based on hay and silage losses only. It does not include anof possible loss of pasture feed.

unker weight includes excess moisture, trash, dirt, weed seeds and grain admixtures, all of which are reduced to acceptable standards in several stages from farm to user.

time, uses shown in the tabic arc givenleaned and standardiznd basis. Therefore, to be comparable, gross production must be discounted to exclude waste and losses.

Although the discount varies from year to year, evidence indicates that grain productionas measured in standard conditionhas been fromess than reportod. The* average exaggeration foryear period has been In addition, roughlyf the reported production is lost in handling and transportation.

If our current production estimateillion tons is realized, and if we have correctly normal requirements, "looses" caused by exaggerated production data and in handling,ho possible grain deficit causedV.by forage losses, the total gap will beillion8.s shown in the table.*

So far, during FYhe USSR has contracted for aboutillion tons of foreign grain. In addition.

* Another way to look at this adjustment is the oviet grain requirementillion tons would be coveredrain production, as reported by the Soviets,illion tons. The resulting deficit ofillion tons is reduced toillion tons when adjusted for losses. illion tons of usable qrainross productionillion tons is derivedillion tons from the total requirementsillion tons. Because of rounding, this total is slightly belowillion tons derived byillion tons) ross productionillion tons.

ussr: estimated production and requirements of grain

million metric tona

year

production

170

haste and/

"TT

19

m

. requlrcr.er.t3 total- paed pood b/ seed industrial

27

r4T

206 / 60

/

at wasto and loss rate of lit applied to loss factor and an estimatedaste fact natter included ln theeight moasu tion for theame to about b* our estimates of the quantity of grain for flour and groats.

ncluding an allowance2 nilli crops.

d. this doficit ofillion tons isillion tonaotalillion ln official soviet terms, (seeroductionillion tons7 million tons is obtained by subtracting

(nrossillion tons

production, or resulting

ronent of required

this includes an cstinatcdandling from excess moisture and extraneous grain (see text) the average exaggera-

or

for food are based on production data

tons of corn equivalent for losses of forage

ived by "inflating" the total roquiromants of tons, the amount of grain required ta be reported dividedand subtracting the gross

because ofominal deficit of the net availabilityillion tons ondolumnrocsof

rofflHffHL

tho Soviets undoubtedly will draw on its stocks, which we believe do not exceed 10 toillion tons.* This would narrow the gap between expected current supply (expected production net of losses and waste, plus current purchases ofillion tons, plus the use ofillion tons of stocks) and requirements toillion tons.

This estimate of the remaining gap between grain requirements and production is note'likely to be too low

than too high.

" An unofficial Soviet spokesman has admitted publicly that grain production would be "as low as" when itillion * tons. This suggosts.that production is expected to be no higherillion tons, but could be lower.

Our estimate of current requirements is It allows foroderate increase in livestock feed supplies considering the trend in livestock numbers.

" As mentioned above, wo believe our allowance for drawdown of stocks to be high.

* Stocks could be substantially less. Less is known about Soviet grain stocks than any other aspect of the supply and demand situation. Tho quantity held in reservetate secret, protected by law. Estimates must be derived by balancing uses against production and imports using lcss-than-adequate data and requiring arbitrary assumptions for some important factors.

Original document.

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