oa. historical review PROGRAMGffipSfffE
William N. Horell, Jr. Assistant Co the Sec. 'Nn: for National Security Dept. of the Treasury
We have reduced our estimate of the Soviet grain cropillion tons. The attached paper discusses this estimate and.its indications.
Director Economic Research
HO. I "ic it
Identical Blue. Notes to:
' 'The "Hon'. Alan. Greenspan, CEA
acftvoy,r. J. McIEP The.instontate ^he..Hon.:William G. Hyland, State,.
Theartraan; "Deane' Hintbh,'1 StateJul'ius L. -Katz,Hon..Gerald Partky,Hon. "Richard E. Bell,Donald':
The Honorable Earl L. Butz The Secretary of Agriculture
This is to alert you to the fact that we have lowered our estimate of the Soviet grain cropillion tons, slightly belowhis indicates that the USSR will be in the international market for any grain it can get but will also be forced to reduce its livestock herds and to make other internal adjustments. The situation is bound to have serious political as well as economic implications in the USSR.
We are giving the attached classified memorandum only very selectiveat this time. Wider dissemination will follow later tliis w'eek. CIA doer, not intend to make any public announcements.
i cc: The Honorable Henry A. Kissinger The Honorable William K. Simon The Honorable Rogers C. B. Morton The Honorable L. William Scidman The Honorable Charles W. Robinson Ambassador Frederick Dent
CENTRAL INTELLIGENCE AGENCY.
PROSPECTS FOR SOVIET GRAIN OUTPUT
The cumulative effects of the hot. dry weather in the Soviet grain lands luvc led us to cut our forecast of Soviet grain outputillion tons, downillion tons from our previous forecastillion tons.
drought is more severe in the southern and eastern
Ukraine, northern Uials, and northern Kazakhstan than previously thought. Thb year's drought is more widespread than the onend in many areas is worse than3he poorest agricultural years in theain fell it the end of July, bul this was too late to help the grain crop. The drought has also curtailed forage crops, although recent rains have improved the outlook for potatoes, the other important starchy staple in the Soviet diet.
The total shortfall in Soviet production in relation to expected requirements probably will be in the order of SO millionhe equivalent of one-fourth of the total US grain crop and more than one-thud of total workt grain exports last year- To date the Soviets have contracted for2 million tons of foreign grain, and it now seems certain that Moscow will be back for additional large quantities. Although the Soviets should be able to finance larger imports of grain, available world supplies ait nowhere near sufficient to satisfy all Soviet needs 'without drastic increases in world, pnecs.
Although the eventual volume of Soviet grain imports will be affected by the size of Western grain crops, it is clear in any event that Moscow will have lo make substantial domestic adjustments to copeubstantial part of the shottfall. The Soviets will draw on their small cushion of grain reserve'sillion ton range) and will take some combination of the following steps
raise millingncreasing lite amount of flour milledon of grain (as Khrushchev did following the3 harvest) would reduce Ihe quality of flour butillion tons of grain;
CENTRAL INTELLIGENCE AGENCY.
slaughtereduction in livestock inventories to2 level% cut) would lower the demand for feedgraim byillion tons; and
reduce feed rations per head off these were reduced to2 levels, anotherillion tons could be saved but the future output of meat would fall.
Although the Soviet government^ wilh its commitment to raising living standards, will be very reluctant to take such steps, it will have no alternative.
A harvest failure of this magnitude will complicate political life in Moscow and weaken Brezhnev's position in the leadership. The failure will have an impactide range of matters: the consumer program, formulation of the next five-yearrogram for the Party. Congress in February, and relations with the West. Debate and disagreement arc likely to become more heated on many issues-Original document.