CENTRAL INTELLIGENCE AGENCY. s
Director, Office of Food Policy and
Bureau of Economic and. Business Affairs Department of State '
Transmittal of Paper, "USSR:Demand fory
directed gnments andwelcomed and may be'
Office 'of Economic Research
At tachment: As stated
cia historical review program release as sanitized
DATE IMPOSSIBLE TO .DETER.
USSR; Supply and Demand to_r_jy ands_ions
Past Soviot failures to produce grain in excess of requirements have spurred imports and have thwarted efforts to build and maintain substantial grain stocks. oreillion metric-tons of grain were bought from the West in eaoh of five years, and grain output plus imports are estimated to have fallen short of total requirements in nineequiring stock drawdowns.
During the next decade the Soviet need for grain is expected to increaselower rate thannd to lie within the range of projected output.. For individual years, however, output probably will fall short of requirements because of adverse weatherontinuing inability to grow sufficient grains such as corn. The USSR thus may continue to import sizable amounts of feed grains but major purchases of wheat are likely only ollowing years of severe, weather-related crop shortfalls:"
Moscow's interest in the formationorld grain reserve system is likelyparticularly ifystem penalizes non-participantsbecause of their* recurrent need for imports. The Soviets haveillingness to hold grain reserves. BovcVer, their past reluctance to
abide by provisions of international commodity agreements and their continued unwillingness to provide data onoutput and requirements may limit their
Grain output in the USSR grew at aniavorage annual rate*, but with large annual (see For3ear of favorable weather, was one-third larger than the2 crop. Although bread grains still account for nearly three-fifths of total production, the share of feed grains has risen, reflecting the increasing importance of the livestock sector.
The demand for grain has grown rapidlynd in recent years has outstripped output growth; average annual grain productionreater thanhile domestic consumption increased by. The composition of grain .demand has changed radicallyts use for food has increased onlyhile its use as livestock feed has grown The USSR produces ample grain to feed the population. Even in years of harvest failure, food requirements consume only about one-third of'total production. In thes
one-third of the total grain crop was fed to livestock but theyesidual claimant; in poor harvest years, rations were cut and livestock slaughtered. Now the livestock has higher priority, and imports have prevented massive slaughtering. esult,illion tons of grain were fed to livestockore than twice tho amount fed The use of grain as an industrial raw material,
for seed and for exports iseclining share of total output.
Subtracting estimates of domestic requirements from productionesidual "of enormous variability. 0 the surplus has been overillion tons63hortfall of aboutillion occurredS After each of tho deficit years, imports increased substantially. Although imports reduced the need to use reserves, stocks are estimated to have been drawn down in nine of theears prior
Many .variablesweather, fertilizer use, aroa sownaffect the harvest, making accurate forecasts difficult.
Different sets of assumptions can be made, however, whichrobable range of grain output. These estimates are only preliminary and further research will be necessary
to establish their validity. One estimate of grain output can be derived from the historical trend. This would represent the most conservative case an it prosumes that fertilizer use and its effects on grain yields will grow at the samo rate aa in the past. In fact, this is much lower than the application rates planned by the Soviets. Based oninear time trond fitted ;to reported
yields ofrains and pulses, average annual outputould beillion tonsillion tons annuallysee
Taking the opposite extreme, it is assumed thatplans for fertilizer application are net andweather prevails. In this "bestutputan averageillion tons annually inan averageillion tons per year. case assumes an intermediateand probablyposition between the two extremestons per yearillion tons
The demand for Soviet grains estimated to increase at an average annual rate of aboutompared% average yearly rate recordedearly all growth in consumption will come from the rising use of grain for livestockased on Soviet livestock goals and future feedingfons of grain pro-
duced5 could go to tho livestock program. The use of grain for food will continue tomaller part of total5 compared with an average. Uses other than for food and feed will also continue their declineercentage of the total. Thus annual average requirementsre estimated toillion tons andmillion tdns. In general corroboration of this estimate, Soviet minister of Agriculture Polyanskiy recently said, "In the near future wo must produce, on average,on of grain per head of the population in the country. Consequently, we are speaking now about gross outputillion tons and above."
when estimates of future output and requirements are compared, the Soviet position looks relatively more favorable than during the pastears. For the periodholemall amount of imports would be required and reserves could lxs built, except for Case 1. For individual years, however, output could still fall short of requirements,emand for imports, because:
Soviet grain output will continue to be subject to fluctuation although extreme swings may be ironed out by. the.greater use of chemicals and increased output from areas with more reliable rainfall.
(1 The kinds of grain produced may not satisfy Soviet requirements. Sufficient high-energy feed grains such as corn probably cannot be grown in the next decade.
Soviet Participationorld Grain Reserve System
Since the Soviets need periodic access.to world grain supplies, it would appear to their-advantage toorld reserve system, especially ifystem penalizes non-participants. Past Soviet actions offer some clues to their probable response to the main provisionsrain reserves1 Specific reserve targets*
The Soviets seen to havo no objections to holding
large internal roserves. In the past they have consistently
attempted to build stocks rather than depend on world markets
but have been frustrated by their inability to produce
ahead of demand. Soviet-officials claim that their goal is
to accumulate stocks equivalentear's requirements
currentlyillion tons. However, they lack
the storage capacity required to holdupply in
additionurrent crop. 3 total storage capacity
* Those three provisions are contained in the' "Options Paper on Grain Reserves" issued to the members of the IFRG Working Group on
wasillion tons. Apparently in response to bumper harvestsnd high losses caused by poor storage, the Soviets have just embarkedajor grain storage construction program. They plan to constructillion tons of storage capacity.
system of information exchange andthe Soviets have been uncooperative in
providing the kinds of information that would be essential to the smooth operationrain reserve agreement. on the size of grain stocks and policies affecting them are not published'as it comes under the State Secrets Act of the USSR. Although statistics on crop production and demand are not as highly classified, the Soviets remain unwilling to reveal forward estimates. Tho US-USSR Agricultural Cooperation Agreement signed3 specified the exchange of forward estimates on consumption, production, demand and trade of major agricultural conmodities. Only plan figures havo been provided. In the past the USSR has providod to international commodity agreements only information "within the limits of the statistical data published in the country."
or rules for achieving reserve*for the^ release and replenishment of reserves
Moscow hasiimber of international agricultural commodity agreements but has carefully delimited its partlci-
potion in the rules of the game. For example, tho USSR has never accepted production controls and has excluded
from consideration its trade with other Communistightly controlled grain reserves system, therefore, would
seem incompatible with its policies, particularly ifthat it will be less dependent on worldin the future.Original document.