LBJ LIBRARY Mandatory Casc#NLLail
rgg^ Con^nt.al
Memorandum
Agricultural Performance
and Prospects for Grain Trade in Eastern Europe
Corjfffential
approved kit omsk
rrt-s3
AUG 0
NTELLIGENCE-irectorate of Intelligence
INTELLIGENCE MEMORANDUM
Agricultural Performance and Prospects tor Grain Trade in Eastern Europe
Summary
Current prospects in Eastern Europe indicateillear of above average and possibly record harvests of breadgrain (wheat and rye) and fair to good harvests of row crops. This favorable outlook, combinedairly good Soviet wheat harvest and wheat surpluses in Bulgaria and Rumania, may decrease Eastern Europe's demand in fiscal year (FY) or wheat from last year's most important Free World suppliers, Canada and France. Other than multi-year contracts with Canada calling forf wheat inone of the Eastern European countries has contracted for or is known to be currently negotiating for wheat from Free World countries. Although the import requirements of the northern countries for feedgrain are expected to change little from last year, the united States can expect increased competition for this market from France, Yugoslavia, and possibly Rumania. All three countries will have unusually large quantities of corn, as well as barley from France, for export from7 harvests.
7 throughhe crop year and the consumption year cover the same time span.
** Tonnages are given in metric tons.hia memorandum uae produced by CIA. It uae prepared by the Offioe of Economic Reeearoh; the estimates and conclusions represent the beet Judgment of the Directorate of Intelligence as ofhe term Eastern Europe comprises, unless otherwise stated, Albania, Bulgaria, Czeohoelovakia, East Germany, Hungary, Poland, and Rumania.
Eastern Europe had an outstanding agricultural year For the first time, every country in the area achieved, or exceeded its planned rate of growth. Net agricultural production'for the region increased byhe fourth successive annualnd wasercent above the averagesee Figure The highest gains in outputere registered by Albania, Bulgaria, Czechoslovakia, and Rumania. (For indexes of total and per capita agricultural production, see Nearly perfect weather conditions prevailed in most countries, and all except Albania had the benefit of governmentpolicies that were designed to increase the resources devoted to agriculture and to raise farm prices and incentives. Continuation of these policies favors long-run improvements in agricultural production.
The bumper grain crops6 permitted imports of grain in7 to drop for the second successive year to anillion tonsillion tons below the peak level of5 (see The USSR regained the role of major supplier of wheat to Eastern Europe largely at the expense of French shipments, and the United States increased its share of the feedgraln market.' US sales of feedgrain to Eastern Europe during7 are estimated to haveillionew high. Bumper harvests in Bulgaria and Rumania provided grain surpluses estimatedonsillion tons,respectively.
The food situation improved during7 throughout-Eastern Europe,-especially in the southern countries, whichroughtrop shortfall The per capita availability of livestock products improved in all countries, although demand still exceeded supplies. Prices of meat and meat products went up, but' the costof the worker's food basket during7 remained stable in most countries because, of lower prices for vogetables, potatoes, and animal fats. The overall food situation is expected to continue relatively good during
CONFIDENTIAL
Crop Production6
of grain,and oilseeds, the major crops inwas greater6 thanndof all except potatoes reached newbumpier crops resulted more fromper hectare than from significantacreage. Better growing conditions werefactor in the higher yields, especiallysouthern countries, but higher farm pricesinputs of chemical fertilizer,machinery, and improved seeds also played
a
Pru-.Vj.ction of grain in Eastern Europe6ew high of aboutillionercentnd production in every country exceeded the average annual output. As shown in Tablehere were generally large increases in the production of coarse grain throughout the region, especially in Bulgaria and Rumania. The harvest of breadgrains declined in every country except Albania, Bulgaria, and Czechoslovakia, but output was still above the average annual levelnd was of relatively good milling quality.
The harvest of late summer crops was much improvedhen drought in the southern countriesungary, Rumania, and Bulgariaand too much rain in East Germany, Poland, and Czechoslovakia adversely affected yields of row crops. Production of potatoes and sugar beets increased byercent andercent, respectively, compared The largest increases were registered by Czechoslovakia and the southern countries. The sugar content of the beets was below average in the major producing countries, and the estimated output of raw sugar increasedercent. The output of oilseeds for the region was mixed, the southern countries achieving higher production and the northern countries generally lower production than Production of fruit and vegetables equaled or exceeded the output5 in all countries.
Yields of forage crops and pastures6 were very good throughout Eastern Europe. For the northern countries this was the second successive year of good forage production. Although the usable quantity of green feed was reduced by wet weather, untimely harvesting, and improper storage, it was still sufficient to oms-mit an increase in the output of beef and milk6 and the first quarter
Livestock Production6
The three-year upward trend in theof livestock products continued in most countries of Eastern Europe, but the rate of growth was lower than Good results in the production and procurement of livestock products can be attributed to higher procurement prices, improved feeding practices, and continued import of high protein feeds.
Output of red meat roseercent5 (see. Although production of beef increased, production of pork was down in Bulgaria, Czechoslovakia, Hungary, and Rumania because of the smaller number of hogs carried over The total output of milk for the regionew high, in spite of fewerand exceeded the average annual outputyercent. The dairy industries in Eaat Germany, Czechoslovakia, and Poland, however, were -unable
to use all of the increased output of milk. The production of poultry meat was up throughout the area. Higher feed costsepressed market lowered egg output in East Germany and Poland, but production in the other countries increased.
price policies forthat were initiated by theombined with goodforage crops, have raised the number ofa new high, only in Bulgaria did the6 decline and remain belowannual level. The numberhowever, showed smaller increases than for
all cattlej the number for Czechoslovakia and Hungary is still below the average annual levels shown in Table 3. The total number of hogs in Eastern Europe changed little from the low level Althoughincreases occurred in East Germany andhortage of grain for feed and unfavorable pricing policies caused the number of hogs in the other countries to decline, or at best to remain constant. The total number of sheep in Eastern Europe rose,ercent, mostly on the strengthercent increase in Rumania. Except for the two largest sheep raising countries, Bulgaria and Rumania, the number of sheep has been declining since thes. However, the introduction of higher prices for wool and breeding subsidies to sheep farmersay have reversed this trend in Poland and, possibly, in Czechoslovakia.
had been forced toecause of foot-and-mouthincreased its exports of both beefn spiterop in meatcontrasted with the decision of theto reduce meat exports, evenincreased, in an effort todemand. Bulgaria and Rumaniaof beef to Western Europe. exports of eggs and butter werebecause of lower demand in
Food Situation ln7
food situation in7 improved slightly. The mostin availability compared with ahave been in green vegetables, potatoes,and,esser extent, dairyprices have been lower forand animal fats, partly offsettingfor meat and meat products. Althoughcapita availability of meat went up inEast Germany, demand still remained In Czechoslovakia and Hungary, suppliesespecially pork, dropped slightly, and in
Rumania and Bulgaria there was no improvement. Good breadgrain harvests in most countries and imports of wheat' have assured adequate bread supplies in all countries until the next harvest. Because of two successive record harvests of wheat in Bulgaria and Rumania, their carryover stock for this grain as7 may be the best in several years.
average East European'sfood, in terms of calorics, has beenstable for several years, but improvementsquality and variety of tho diet haveof expectation in most countries. workers with higher incomes havebetter foods, especially animalregimes, unable to satisfy this demand,several occasions raised retail prices formeat products and raised farm prices products in order to encourageexample, inretail prices for meats an average ofbut the results of these increasesfully satisfied either the consumer orin Eastern Europe.
governments of Eastern Europein their five-year plansinvestments, new management techniques,measures that are neededthe food industry and marketing They hope that these efforts willa greater quantity and variety of lower costs, fewer losses in handlingand increased capacity to processto modernize and increase the capacity
of the food industry has in the past causedlosses of raw materials and limited the ability of the industry to use effectively increased quantities of farm products. For example,airy industries in Poland and Czechoslovakia were unable to process all of the milk offered by farmers, with the result that milk spoiled and above normal amounts were fed to livestock. Fruits and vegetables also spoil in.
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years of high production, and workers are forced to pay high prices during the. off-season. Improved efficiency and higher, output in the processing1 and marketing of food, as well as increases in- -agricultural production, are essential in order to reduce the share of the average worker's income spent on foodcurrently higher than in countries of Western Europeimilar stage of economic developmentand to satisfy his demand for better quality.
Trade in Grain,7 and Outlook for8
12. Eastern Europe importedillion tons of grain duringncluding anillion tons of wheat (sea Tablehus, total grain imports declined for the second successive year from the record of5 and about equaled the annual average-. The drop reflected improved breadgraln production in Poland, Hungary, and Bulgaria, the latter two of which attained self-sufficiency in wheat in both the past two years. In addition, Bulgaria joined Rumania inor the first time in several years,et exporter of grain (mostlyumaniaumper grain crop andotal ofillion tons for export or to build up stocks. Rumania, like Yugoslavia, is having difficulty in selling6 corn crop in Western Europe because of the sharp competition in that market.
13. In7 the Soviet Union replaced the Free World for the first time since3 as tha major source of Eastern Europe's grain imports. The USSR supplied anillion tons of grain, including some low-grade wheat for livestock feed to be delivered from France. Poland, the main beneficiary of increased grain exports from the USSR to Eastern Europe, receivedons more than last year, enabling it to reduce wheat purchased with hard currency. Because aboutercent of the grain imported from the USSR was wheat, Eastern
CONFIDENTIAL
t;ONTWKNTIAL
Europe's demand for wheat from the Free. World in7 dropped sharplyby about 40 Imports of feedgrain from the Free World, however, dropped less thanercent.
14. Sales of grain by the Unitedo Eastern Europe duringonsisting ofoercent feedgrain, exceeded slightlyillion tons shipped in The United States now accounts for about one-third, of Eastern Europe's grain purchases from the Free Worldup fromercent Although Rumania and Yugoslavia have both experienced difficulty in selling their corn in the European, market, there is no indication that they have offered this grain to other countries of Eastern Europe. -
is estimated that'Eastern.-Europe'for imported grain inS will bemillion tons, the same as last year. is based on the very good prospectsas of mid-July forhroughout Eastern Europe. The Freeof the total amount imported may. increaseexpense of the Soviet Union. Followingsmaller harvest than6 and ain commitments to the Middle East,is unlikely to export more grain toand East Germany than last year, andto Poland probably will decline.
demand for feedgrain and other
high protein foods from the Free World is. expected to remain strong as the countries of Eastern Europe expand their livestock industries. Efforts by most of the countries to' raise production of feedgrains during the past few years have not been particularly successful, whereas the demand for concentrated feeds has increased in East Germany, Czechoslovakia, Poland, and Hungary. Although Bulgaria, Poland, Czechoslovakia, and Hungary have recently renewed or given indications of extending thoir multi-year wheat agreements
with Canada to runxports of wheat from the West are not expected to increase during the next several years.
lep-er.ts ultural Policy
17. There were no major changes inpolicy during the past twelve months, but preparations were underway for implementingannounced reforms* that will decentralize management and increase incentives. In roost-countries, the reforms for agriculture are loss extensive than those for industry and are being introduced more slowly. Government officials are reluctant to relinquish their control over food production unless they are assured thatof farm management and relaxation of price controls will not have serious short-run effects on the output and price of food.
IB. Except for Albania, the various regimes are increasingly using incentives rather than administrative means to guide agricultural All the regimes hope to achieve higher levels of outputore rational use of resource)ore intensive application of advancedtechniques. Albania alone continues to rely on tight central control. The collectivization of private farms in the mountainous areas of that country was hastily completed earlyampaign was launched to get collective farmers to give up, voluntarily, their household plots. These, as well as other measures, appear to have been influenced by Peking.
*" See CIA/RR , Eastern,ONFIDENTIAL.
19. Hungary and Czechoslovakia, by way offor the economic reforms to be introducedave merged into one ministry their ministries dealing with the production, marketing, and processing of food. This move is apparently an effort to consolidate lines of authority, to replace some politicians withand to provide for better coordination and efficiency in the' production, marketing, andof agricultural products. The introduction of collective farm unions or measures to encourage inter-farm cooperation inastungary, and Rumania are intended to increase specialization, to encourage more rational use of inputs, and to improve marketing techniques.
In support of policies designed to reduce and eventually eliminate government subsidies to collective and state farms, several countries increased procurement prices for some farm commoditiesincluding grain and6 Higher prices are also being paid for better quality and for more timely delivery of farm produce. In addition, the bonus system, which provides higher prices for deliveries in excess of plan or above the previous year, wasin Bulgaria for livestock7 and was expanded in East Germany to include crops. East Germany's system of bonuses, introducedas made more complex by calculating deliveries of crops as well as of livestockrain-equivalent basis and by paying bonuses only if the collective farmredetermined minimum rate of growth in the fund for reinvestment in the The latter change was made toigher level of investment and increased productivity.he Poles chose to encourage grainby reducing the cost of industrial inputs rather than by raising the contract price for grain as they didS. Parmers signing7 were entitled to purchase and mixed feeds at reduced prices and were also offered land tax concessions. Some countries which raised farm prices also raised the cost of services and industrial inputs to agriculture in order to reduce government subsidies.
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21. The problem of attracting or retaining young skilled workers in agriculture is receiving increased attention. Most of the countries of Eastern Europe have stepped up their efforts during the past few yearB to close the gap In income and social benefits between farmers and industrial workers. Minimum guaranteed wages for collective farmers are being introduced or encouraged, and managerial and professional personnel on state farms are receiving salary increases, as well as bonuses for achieving above-plan profits. New pension systems and health benefits for collective farm members in Hungary and Rumania went into effect Although pension plans may successfully keep older farmers from migrating to the cities, the gap in incomes and otherbetween the farm and urban workers is still too large to attract youth to agriculture.
Production Plans and Prospects7
22. Planned changes in gross agricultural production7 rangeercent decline for Poland to unrealistically high increasesercent for Rumaniaor Albania. The planned rates of growth are generally in line with those needed to0 goals. Unlike the caseivestockis scheduled to increase more than the production of crops, except in East Germany and Albania. This shift is realistic in view of the outstanding production of crops last year, which on the one hand will provide improved supplies of food and on the other hand make further increases more difficult. Most countries plan to increase the number of beef cattle and lean-type hogs and to raise the productivity of all livestock. In addition, most countries expect to have small gains in the output of red meat relative to gains in other livestock products, because they plan to rebuild and upgrade the quality of their herds, especially hogs in the southern countries. Rumania, Bulgaria, and Albania have planned for unrealistically high increases in grain produc-
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CONFl#KNTIAL-
line with five-year planinvestment and inputs fromagricultural sector are to increase ininvestments are to go largely intoschemes and the support ofwhereas collective farms are toshare of their income going to agricultural'-'and farm buildings. Plans callsubstantial increases in tractors,feeds, chemical fertilizers, andwith the largest increase inby Hungary and Rumania. In mostand forage crops have been giventhe increased allocations of fertilizer. gains planned in the output of highmixes are intended to stretch grainto improve livestock productivity on state
and collective farms.
for achievingore favorable for livestock productioncrops. Livestock will benefit from theof concentrated feeds and foragearvests, favorablefor most livestock products, andpastures. Crop prospects as ofabove average for winter grains andcrops, but they were not better than The southern countries have moreyear, but less favorable soil moistureand it will be extremely difficultto exceed the high yields for summer crops Nevertheless, current prospects areabove-average agricultural yearEuropehole, including thegrain.
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Table 1
Eastern Europe: Indexes of Net Agricultural Production a/ Total and Per
0
Country 0 l 2 3 * 5
Bulgaria
Gercany
Europe
Ivt Capita
Bulgaria
Europe
Excluding Albania. The indexes are based on the value or crop production less feed (including Inportedeed, and waste and on the value of livestock products, including changes ln the number of livestock. West European regional price weightsf the Food and Agriculture Organization and the Organization for European Economic Cooperation were used to compute the Indexes.
Eastern Europe: Production of Selectednnual Average6 (Preliminary)
MIL!Ion Metric Tons
Czecho- Eaat
Commodity and Bulgaria Slovakia Germany Hungary Poland Rumania, Total
Table 2
Eastern Europe: Production of Selectednnual Average6 (Preliminary) (Continued)
Million Metric Tona
: JLai
Oilseeds d/
nnual
vheat, rye, barley, oats, corn, and miscellaneous grain; excluding rice.
and rye.
oats, corn, and miscellaneous grain.
Bulgaria, Hungary, and Rumania, sunflower seed; all others rapeseed.
Eastern Europe: Jtober of Livestock and Livestocknnual Average6 (Preliminary)
Table 3
Eastern Europe: Number of Livestock and Livestocknnual Average6 (Preliminary) (Continued)
ar.ii Years
East [aria Slovakia Germany Hungary 'Poland Humanja
Metric Tons
Milk
nnual average
i96*
reliminary
u,
dates are aa of the end of the year, except for that of Poland, which is as of tbeJune.
for Hungary arennual average.
carcass weight; Including beef, veal, mutton, pork and, if significant, goat and
Eastern Europe: Estimated Gross Imports of Grain a/ Annual Average Fiscal Yearsnd Fiscal
Thousand HetrLc Tons
nnual Average
I965
reliminary qj
and Destination Total Wheat Total
Total Wheat Total Wheat Total Wheat
the Free World Albania d/ Bulgaria Czechoslovakia East Germany Hungary Poland
Total
From the USSR e/ Albania Bulgaria Czechoslovakia East Germany Hungary Poland
Total
0
osr
0:
Table *
Eastern Europe: Estimated Groan Import* of Grain a/ Annual Average Fiscal Yearsnd FiscalContinued)
Thousand Metric
nnual Avcruge
reliminary jy
and Destination Total Wheat Total Wheat Total Wheat Total Wheat Total
rice.
first of July of the previous year throughune of the stated year.
on known shipments and contracts as of
on Chinese Communist account
Soviet purchases of French and Canadian wheat for shlpoent to Eastern Europe. Thetrade with Rumania.
Original document.
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