L!’ - { '5" ' ;" ii} 5’ P. y.. M,F;:k . % 53% isagpq 4,15 1’._,C17O RA *::‘;."~rfz:.:%’.:i1’:;,‘;’:’r‘er1: iJg"gi'{,,IQr§;ifif ‘ - “L-‘ii ii tZ!‘l'l'n. H :§ 5.’ 5 3 .: 3 f j mwm Tim umumfl Mwiiiaiuiflwwtwnll Universitr bf UBRARYOF ’ 010-103860 4 couenessfi SOVIET AGRICULTURE AND THE GRAIN TRADE ISSUE BRIEF NUMBER IB7507O AUTHOR: ma t, John P. Senior Specialist, Soviet Economics Tonlinson, Kate S. Office of Senior Specialist THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE ORIGINATED g9_411[_7§ DATE UPDATED ggglgggg FOR ADDITIONAL INFORMATION CALL 287-5700 0821 CRS- 1 IB75070 UPDATE-08/13/80 l§§E§-2§§l!lIlQE Poor agricultural performance due to unfavorable weather in 1963, 1965, 1975, and 1979 has propelled the Soviet Union into the role of a major importer in the world grain market. The Soviet leadership's commitment to raise meat output -- a goal that depends on sustained increases in feedgrain availability —— accounted for steadily increasing imports, of corn and soybeans. Soviet demand for wheat in the international market has been less consistant, as it is more dependent on the vagaries of the weather. with the emergence of the Soviet Union as a large, albeit, intermittent grain importer, the United States has become the Soviets‘ major grain source. Because the Soviet Union's exports to its allies in Eastern Europe are likely to diminish, these countries -- especially Poland, Czechoslovakia, and the German Democratic Republic -- are likely to step up their purchases of U.S. grain, given their commitment to maintain or improve their citizens’ standard of living. To stabilize the U.S.-Soviet grain trade, the two countries signed a 5 year grain agreement in 1975 to extend to October 1, 1980. The 0.5. thereby hoped to provide a dependable outlet for grain surpluses, improve its balance of payments, and contribute to the stability of the international grain market. East European grain purchases, which have exceeded Soviet imports in some recent years, could further benefit the U.S. if they were both expanding and predictable. In Nov. 1979, the Soviets revealed that their 1979 grain harvest had dropped to 179 million metric tons (EMT), 48 million tons (HT) less than p‘1nned, and 58 million tons below the previous year's harvest. (A metric 1 n is 2,204.6 pounds.) Consequently, the Soviets arranged for an especially large purchase of U.S. grain -- 25 HMT. However, in retaliation for the Soviet's military intervention in Afghanistan, President Carter announced on Jan. H, 1980, that they could only purchase 8 MET of grain. In July Republican Presidential candidate Ronald Reagan endorsed Sen. Robert Dole‘s (R-Kan.) and Rep. Thomas Harkin's (D-Iowa) move to lift the partial embargo on the grounds that it was ineffective and unfair to American farmers. §AQ§§BQQ§2-&§2-2QLlQl.AEALZ§l§ To extract investment funds for needed industrial growth, Premier Joseph Stalin began to collectivize Soviet agriculture in 1928. Forced grain extractions and harsh penalties for grain hoarders, including deliberate starvation, deportation and execution, were carried out against all segments of the peasantry. Poor weather conditions and resistance to collectivization led agricultural production to plummet, resulting in the great famine of 1932-1933 which-according to some Western estimates--took up to five million lives, virtually wiping out the kulak or wealthier peasant class. World War II and the German seizure of most of the Soviet Union's agricultural land interrupted a slow and ‘only partial recovery. The aftermath of the war found Soviet Russia's grain heartland devastated, the peasantry dislocated, and millions of military and civilian war dead. By 1' 1, although collectivization had been restored, industrial recovery was gi.en priority over the devastated agricultural sector. Government control over the peasant population continued absolute until Stalin's death in 1953, and agricultural production remained at or near pre-revolutionary levels. CRS— 2 IB7507O UPDATE-O8/14/80 Nikita Khrushchev, after coming to full power in 1956, began an intensive campaign against the works and policies of Stalin, charging him, among othe things, with criminal neglect of the agricultural sector. To help rectify the years of abuse, Khrushchev raised procurement prices for agricultural products by as much as 300% over several years. The government abolished centralized State control over agricultural equipment and began to sell its tractors to state collective farms, further providing an incentive to produce. A more accurate system of reporting agricultural statistics was introduced to substitute for_ Stalinist exaggerations of agricultural productivity. In an extensive effort to increase crop output, Khrushchev brought vast amounts of additional acreage under cultivation in West Siberia and Kazakhstan and introduced corn-growing to soviet farms on a massive, * although ill—conceived and apparently excessive scale. Even after Khrushchev's needed reforms, Soviet agriculture still lagged far behind that of the West and.remained vastly undercapitalized. The poor performance of agriculture reflected the low priority which had been assigned to it throughout the years. Only after Khrushchev's downfall, hastened by the 1962-6n crop failures, did the Kremlin reassess agricultural policy and allot more resources to farming. Secretary Brezhnev, in the March 1965 Plenum of the Soviet Communist Party, announced that the agricultural sector would receive special priority under the new government and ‘allotted large increases in capital investment, on a scale beyond Khrushchev's inclinations. The average annual percentage rate of growth of investment in agriculture was 9% during 1966-70, and 9.6% during 1971 to 1975. However, increases in 1976 and 1977 have been only 4% and 2.5% respectively. Capital investment plans for 1978 call for an increase of less than 2% above 1977. This slowdow" seems largely to do with the general tightening of investment funds plannet throughout the economy. In spite of much evident progress, Soviet agriculture is not easily being changed into highly mechanized, capital-intensive agribusiness such as is found in Western Europe and the United States. A major reason is the falling productivity of investment capital. Although the amount of investment has increased, the productivity of added capital has steadily fallen for a decade. In an effort to deal with falling productivity the Central committee of the Communist party, on June 1, 1976, ordered new measures to streamline agriculture and put it on a more efficient and intensive basis. The decree from the Central Committee set out provisions for increased cooperation among farms, more intensive specialization, and close links between farming and industry. In a report to the Central Committee in July 1978, entitled "On the Further Development of Agriculture of the USSR", Brezhnev restated the leadership's commitment to the agricultural sector and the party's fundamental policy of steadily increasing capital investments in agriculture. [The share of agriculture in overall investments has grown from 20% under the 7th Five Year Plan to 23% under the 8th Five Year Plan, 26% under the Ninth Five Year Plan and to more than 27% under the 10th Five Year Plan.] In his report, Brezhnev expressed concern that although more capital investments a‘ material reqources have been allocated to agriculture each year they do not "yield the proper returns in the form of output." He stressed the need to intensify agricultural production and strengthen the material and technical bases of agriculture, noting that for the first two years of the Tenth Five Year Plan the target for gross agricultural production was not met. He CRS- 3 IB75070 UPDATE—08/1H/80 particularly stressed that grain production remains the most urgent job in agriculture. VIET AGRICULTURAL PERFORMANCE IN THE MID'1970S In 1975 the agricultural sector suffered a major setback when poor weather conditions caused the lowest harvest under the Brezhnev leadership (1h0 MET). Grain production was less than two thirds of the plannedw goal and as a result, net livestock production, directly effected by the feed grain shortage, fell 7% for the year. Total agricultural output fell by 9% because of the poor harvest, thereby forcing any future livestock programs to a standstill for the next several years. Historically, the U.S.S.B. has stressed the production of food grains such as wheat and rye. However, the expansion of the Soviet livestock herd has raised demand for feed grain and oil concentrates considerably, and the Soviets are having difficulty reorienting their agriculture to the production of livestock feed. Problems in growing corn and soybeans—-two major sources of high protein livestock feeds--have contributed to large import requirements to satisfy growing demands for the herds. with a lower level of oil concentrates, Soviet livestock rations are considerably inferior to US rations in protein and digestible nutrients. correspondingly, livestock output per equivalent caloric unit of feed is much lower for the USSR than the United States- Dr. Gale Johnson, an economist from the University Chicago, noted that it takes the Soviets one year-twice as long as Americans—-to produce a hog of 190 pounds. with an animal stock I 1ghly equal to that of the US, the Soviets obtain only about 3/H the yield 1“ animal products. Also, because Soviet livestock do not eat as much feed as their American counterparts, Soviet cattle yield less beef than American .cattle. Unable to make up for the 1975 shortfall, the Soviets had to import grain extensively from the West, (they committed themselves to a 5-year grain import agreement with the United States in October 1975), release reserve stocks, cancel export commitments to Eastern Europe, and increase slaughtering to conserve available feed and grain supplies. The 1976 grain output was 22a million metric tons, 60% more than the 1975 crop, however it contained substantially more moisture and trash. with a larger harvest, the Soviets were able to increase livestock herds, begin rebuilding grain reserves, and increase the weight of the animals being marketed. The 1977 grain harvest fell short of its:target reaching only 195.5 MHT. This shortfall of approximately 18 MHT, was attributed primarily to poor weather conditions with most of the losses occurring in the region east of the Volga River. Although dissappointing, the 1977 grain crop was still the fourth best in history and much better than the 1975 crop of 1&0 HHT. The 1978 grain harvest reached 237 million metric tons. This was 17 MMT or about 7% over the planned harvest, and equaled the target set for 1980. F Jrable weather was primarily responsible for this large yield. Although this is a record harvest, deficiences in the agricultural sector --including lags in the construction of grain elevators and beet sugar processing plants -- are still causing problems. The more serious of these problems include a CRS- 4 IB7507O UPDATE-08/1n/80 deterioration in grain quality and abnormal post harvest grain losses. In a speech at the November 1979 Plenum of the CPSU Central Committee General Secretary Brezhnev revealed that the 1979 grain harvest was 17- million tons -- H8 million tons less than planned and 58 million tons less than the previous year's banner harvest. Even before the disappointing final harvest figures were announced, the U.S.S.R. requested permission to buy up to 25 million tons of grain from the U.S., as stipulated in the 1975 U.S.-Soviet agreement on grain purchases. The U.S. Government informally approved the Soviet request on Oct. 3, 1979. EASTERN EUROPE host East European governments, like the Soviet Union, are placing a stronger emphasis on increasing agricultural output and the productivity of land and labor. Particular emphasis has been placed on animal noutput in recent years, as Eastern European leaders attempt to satisfy the increasing consumer demand for meat products caused by rising incomes. To accomplish ‘this, more resources have been channeled into the agricultural sector in the form of increased investment in machinery and equipment, improving technology on farms, providing farmers with more incentives, and. developing pricing systems more responsive to market conditions. Agricultural performance has remained uneven in spite of increased allocations. Various factors contribute to this unevenness, with weather being a major factor. While wheat and rye crops were affected onl_ moderately by unfavorable weather--such as drought--during 1975, feed grain crops were hurt more severely. As a result, Eastern Europe imported more than 6 MMT of grain from the United States that year in efforts to sustain the rate of growth of animal output. According to the B.N. Economic Commission for Europe (ECE), the CDMECON region had its highest grain production in 1976, despite unfavorable weather. Total grain output of about 302 nnT—-nearly one—fifth above the average for the last five years--resulted largely from record harvests in the USSR, Romania, and Bulgaria. Grain production rose elsewhere except in Hungary and the German Democratic Republic (GDR). The ECE attributed the all-time high to the more intensive use of modern farming methods and the. greater mechanization of agricultural work. Although progress in mechanization of agriculture has been impressive in Eastern Europe its level, except in Czechoslovakia and the GDR, is still behind that of Western Europe. During 1977, total agricultural production in Eastern Europe remained unchanged compared with 1976. Although livestock production increased, it was offset by a drop in crop output, further widening the gap between feed requirements and domestic feed supply. Grain imports during the 1977/78 period reached an estimated 13 million tons. The East European trade deficit--in part caused by lagging agricultural production, the deterioration in the terms of trade and tr eagerness of the Eastern countries to supply their consumers with increasin, quantities of meat at artifically low ‘prices—-continued to rise in 1977 putting serious agricultural import constraints on each country. Future increases in such imports will turn on the ability of the Eastern countries to raise exports and the willingness and ability of exporters to continue to CRS- 5 IB7507O UPDATE-O8/14/80 extend credits. Agricultural production for 1978 was up in all Eastern Europe countries except Yugoslavia, but was less than planned. Poland and Bulgaria met the ‘78 agricultural plan, but were behind schedule in meeting the overall 5-year agricultural plan. Self sufficiency in grain production suffered serious setbacks in Romania and Yugoslavia and seem to remain distant for GDR and Poland. The East European countries have chronic shortages of hard currencies, and therefore the financing of agricultural credits from the Commodity Credit Corporation (CCC) is an obstacle to U.S. agricultural trade with the area. Three East European countries--Poland, Romania and Yugoslavia—-have been eligible for CCC credits and a fourth-Humgary—-became eligable in 1978. During 1977, CCC credits to Eastern Europe totaled about 75 million, virtually all going to Poland. During 1978, in an effort to increase U.S. agricultural exports, legislation was introduced in the Congress which would have, among other things, authorized the Commodity Credit Corporation to extend commercial credit to non-market economy countries presently denied Most Favored Nation status. While such credits were made available to the People's Republic of. China, they were not extended to the USSR or to those East European countries unwilling to adhere to the provisions of the Trade Act of 1974.. Aggravating the overall problems of finance and lagging production is the fact that the USSR, itself beset with agricultural shortfalls, has been forced to cut back on its exports to Eastern Europe. Thus the East European countries have become gradually more dependent upon the Rest for future grain r eds. .THE GRAIN TRADE On four occasions in recent years, Soviet leaders have been compelled to purchase huge quantities of grain from foreign markets. In 1963, the Soviet Union's grain harvest fell to 92 million tons from the 1962 level of 109 million tons, and Soviet leaders purchased grain on the world market. In 1964 they imported 9.9 million tons of grain, including 1.8 million tons from the United States. A further disappointing harvest in 1965, plus the need to rebuild grain reserves, increased total grain imports to 21.4 million metric tons from 1964-66. The year 1972 was disastrous for Soviet agriculture and a crucial one for Soviet policy-makers. An unusually harsh winter and a short summer led to massive crop failures, and the import of 39.4 million metric tons of grain in 1972 and 1973. The United States sold 25% of its 1972 wheat crop to the Soviets, a total of 12 HHT. Also sold were 6 HUT of U.S. feed grain and 1 MMT of soybeans. The total U.S.S.R. imports in that year were 29 NET. The Commodity Credit Corporation extended a credit of $750 million (of which $550 million was actually used) to the Soviet Union for imports of U.S. grain. The credit was extended for a three-year period, at interest rates of 6 /8 to 9 1/2%. Under the wheat export subsidy program that began in 1949, the USDA provided subsidies to U.S. grain exporters in order to compensate them for the difference between U.S. domestic prices (which prior to 1972 had been relatively high) and lower world market prices. Thus exporters to the CRS- 6 IB7507O UPDATE-O8/14/80 Soviet Union were provided subsidies to sell U.S. wheat at $1.63-1.65 per bushel--the market target price - that they had purchased in the U.S. at $1.68 to $2.09 per bushel. Since little non-U.S. grain was available or world markets, at the time of the Soviet purchase, the target price wa_ considered in retrospect to be too low. Mcreover, critics of USDA's handling of the transactions maintain that no subsidy was needed to consummate the sales. Criticism of the 1972 sales was based largely on the cost to U.S. taxpayers, which, including subsidies to U.S. shippers who carried the grain, totaled an estimated $305 million. The secrecy with which sales were concluded also became an issue, particularily among producers who claimed they would not have sold their grain so early or so cheaply if they had known the size of the Soviet purchases. Defenders of USDA's action countered that these costs were offset by net savings to the U.S. Treasury of $u57 million as.a result of a reduced storage cost for U.S. stockpiles and reduced federal payments to U.S. farmers. However, the inflationary impact of the sales, the rapid depletion of U.S. grain reserves and the inability of developing countries to compete for scarce grain, either as concessional sales or donations, generated pressures for change in USDA's operating procedures. In the aftermath of criticism that enveloped the 1972 grain deal, several laws have been enacted pertaining to the regulation of agricultural trade. The Agriculture and Consumer Protection Act of 1973, P.L. 93-86, requires exporters of certain agricultural commodities to report any contract for export to the Secretary of Agriculture. According to regulations adopted in ipursuance of the law, a grain exporter must.now notify the USDA within one business day of any sale in excess of 100,000 tons per day or 200,000 tons per week to a single destination. The Jackson-Vanik Amendment to the Trade Act of 197a prohibits CCC credits to non-market economies with restrictive emigration policies. The Export Administration Act as amended is another significant law regulating the sale of U.S. agricultural commodities. This Act authorizes the President to institute export controls if any level of foreign demand results in an excessive drain of scarce materials or exacerbates domestic inflation. In addition to the above legislation regulating trade, in 1973, the United States and USSR signed a joint agreement to exchange agriculture information. Article II of this agreement stipulates that both countries shall work toward the exchange of information such as crop forecasts for current and future grain production, consumption, and international trade. However, despite the presence of U.S. agricultural attaches in Moscow, the United States has had continuing difficulties in obtaining Soviet. agricultural information. The regime's extreme sensitivity about its past. agricultural failures and the historical importance of grain stocks explains why crop predictions are still treated as virtual state secrets by the USSR. Critics have called for the Soviets to give U.S. officials reasonably advanced warnings on grain needs from year to year and permit on-the-spot inspection of ~Soviet croplands to determine more accurately the size of Soviet harvests from year to year. Representatives of the USSR have indicated that they can provide only the annual and 5-year goals for crop production and that they would like more information on US long-range plans for agriculture. The effect of Soviet grain sales on U.S. food prices has been controversial factor in U.S.-Soviet grain trade. The 1972 sales contributed to the highest round of food price increases for the American consumer in several decades. However, total U.S. grain exports to other countries, especially Japan and Western Europe, were considerably higher than grain CBS’ 7 IB75070 UPDATE-08/1H/80 exports to the USSR in 1972, and therefore also contributed to the high food prices. a Soviet purchases in 1975 were not as large as those of 1972 and therefore d not have such an adverse effect on food prices. Nevertheless, some price increases, due at least in part to the Soviet grain deal, did occur. Supporters of the Soviet grain sales argued. that moderate price increases were necessary to keep U.S. farm prices from dropping in a bumper-crop year, and to allow farmers to break even. The USDA suggested that there was a i"crossover point" (the amount of grain the U.S. could sell to the USSR before experiencing any large inflationary effects) of 14 million tons. However, critics stated that the crossover point had already been reached and additional sales to the USSR during 1975 would cause much more than a minimal impact on prices. On July 23 the International Longshoremen's Association (ILA) convention gave unanimous approval to a resolution authorizing ILA leadership to forbid loading of grain for“ shipment to the USSR if the shipments would boost US food prices. On July 29, Federal Reserve Board Chairman, Arthur Burns testified before the Joint Economic Committee that grain sales to the USSR could lead to a sharp rise in food prices. Partly in response to such events, Secretary of Agriculture Earl Butz on August 11, 1975, asked U.S. grain exporters to voluntarily withhold future sales to the Soviets until such time as the domestic price impact of such sales could be more clearly ascertained. The low level of U.S. grain stocks was cited as a further reason why U.S. sales to the Soviets shoulds be more carefully analyzed. On August 18, longshoremen began their boycott of ships loading grain for the USSR. .On September 9, 1975, President Ford extended the moratorium on sales until mid-October and announced his intention to seek a longterm trade agreement w'th the USSR the ILA agreed to end its boycott. In October of 1975 the U.S. and USSR signed an agreement providing for .annual soviet grain purchases from the United States between 1976 and 1981. This agreement has provided a greater degree of stability to U.S.-Soviet grain trade. The agreement commits the Soviets to buy at least 6 million tons of U.S. grain-half wheat and half corn--per year starting October 1, 1976. The agreement also provides that whenever the United States has a total supply of grain of more than 225 million metric tons in a given crop marketing year, the USSR has the option to purchase an additional 2 million metric tons-—or a total of 8 million metric tons of wheat and corn--in each crop marketing year without consulting the U.S. government. Export restrictions on this level of exports are prohibited under Article II of the agreement. Also provided under the agreement are consultations by the two Governments in advance of purchases in excess of 8 million tons of wheat and corn in any one crop year. Shipment of grain under the agreement is to be in accord with the U.S.-U.S.S.R. maritime Agreement. Soviet purchases of other U.S. grains such as barley and grain sorghums or of soybeans are not covered by the agreement. After the agreement was signed on October 20, President Ford ended the export controls on grain sales to the Soviet Union. Because the 1976 record grain crop in the U.S.S.R. made domestic grain more available and reduced import requirements, during the 1977 calendar year, the USSR was able to cut grain imports from the U.S. substantially, purchasing only 6.7 million tons. (Wheat imports were 3.0 million tons, a s‘ stantial increase above the 1976 total of 1.7 million tons, but corn imports at 3.6 million tons, declined by almost 60%. Under the terms of the U.S.-U.S.S.R. trade agreement, during the first CRS- 8 1375070 UPDATE-08/1fl/80 year (Oct. 1976-Sept. 1977) Soviet wheat and corn imports totaled 6 million tons, the minimum amount called for under the agreement. During the second year (Oct. 1977-Sept. 1978) of the agreement U.S. exports of wheat and cor" to the Soviet Union totalled 3.5 MMT and 11.1 MMT respectively. In the third year of the agreement the Soviet purchases reached 15.3 MMT -- the maximum allowable that year -- of which coarse grains (corn and barley) accounted for 11.5 MMT. In response to the disappointing 1979 harvest, the Soviet Union sought and received permission in early October 1979 to purchase up to 25 MMT of grain during the 4th year of the grain agreement. If, as was expected, the Soviets had purchased the full amount permitted, it would have been their largest purchase, by far exceeding those of 1972 and 1975. 2hs-§r2;2-§2her92 On Jan. M, 1980, President Carter announced that the U.S. would sell the Soviet Union only 8 MMT of the agreed upon 25 million metric tons of grain as part of a package of measures in retaliation for Soviet military involvement in Afghanistan. Of the 8 MMT of grain that.were still to be sold to the Soviet Union, approximately 5.5 MMT had already been shipped to Soviet ports. (At the same time, the President effectively embargoed all agricultural exports to the Soviet Union other than the 2.5 MMT of grain remaining to be shipped.) The authority for the President's controversial action derives from the Export Administration Act of 1979, which empowers the President to .suspend exports of goods, including agricultural ccmmodities, for reasons of national_ security, foreign policy, or short supply in domestic markets. In his announcement, the President cited both national security and foreign polic reasons. If reasons of foreign policy are cited, the Act requires the President to report to and consult with Congress. The Administration reported that it has complied with these requirements. If agricultural exports are suspended, Congress can lift the suspension with the approval of both Houses within 30 days of the suspension. Cutting American grain exports by 17 million MT would depress grain prices and reduce farm income in the absence of forceful counter—measures. Believing that farmers should not have to shoulder the entire burden of the embargo, the Carter Administration concurrently announced a program to maintain grain prices by removing corn and wheat from the market. As outlined by Secretary of Agriculture Bob Bergland on Jan. 5, 1979, the program included the following measures: changes in the operation of the farmer-owned grain reserve program to induce farmers to store twice as) much corn and an unspecified additional quantity of wheat; purchases by the Commodity Credit Corporation (CCC) of about.u MMT of wheat for foreign food assistance; a proposal to re-institute the acreage diversion program, if warranted; export promotion by increasing the levels of official financing and insurance; and incentives for increased gasohol production. Congressional approval will be necessary to implement several of these measures. On January 7 Vice-President Mondale announced an additional measure -- assumption by the CCC of contractual obligations for the corn, wheat, ar‘ soybeans that the grain companies had sold, but not delivered to the SOViL Union. As of January 3, the grain companies held contracts to sell the Soviets 21.8 MMT of grain, including 6.7 MMT of wheat and 15.1 MMT of corn. Two days later the U.S. International Longeshoremens Association (ILA) declared its refusal to load vessels with cargo bound for the Soviet Union. CRS— 9 IB75070 UPDATE-O8/14/80 Despite presidential pleas to load these grain shipments, which were said to be clogging up port and transportation facilities, the ILA continued to refuse to load any of the approximately 2 million UT of grain still to be shipped to the U.S.S.R. this year. On Jan. 19, the President directed the ‘C to purchase some of the unloaded grain. On January 28, three Federal arbitrators ordered ILA locals in New Orleans to begin loading a vessel bound wfor the U.S.S.B. with grain. The order was upheld by a 0.5. District Court. At the end of January, the Administration clarified its policy on the export of agricultural products other than grain, which had been halted in the wake of the President's sanctions. Under the new policy as explained by Commerce Department Secretary Kluznick, products that are not related to the "feed—livestock complex" and have no strategic significance -- fruits and vegetables, for example —— may be exported under general licences. Products such as tallow and meat extenders that. conceivably could be used as substitutes for meat or feed may be exported after a case-by-case review of applications for validated licenses. Like wheat and corn, soybeans, dairy products, meat, poultry, and a few other products are embargoed. As had been widely predicted, the Administration decide to honor U.S. export commitments during the fifth and final year of the U.S.—Soviet grain agreement. The decision, announced on May 31, authorizes Soviet purchases of up to 8 MMT of corn and wheat, beginning on Oct. 1, 1980. By purchasing a small amount of grain on July 23, the Soviets laid to rest speculations that they would not purchase any U.S. grain during the final year of the agreement. Whether they will purchase the entire 8 HUT remains to be seen. In a move widely interpreted as an easing of the grain suspension, the Administration confirmed on June 20 that the grain-trading companies would be a‘lowed to sell non—U.S. grain through their foreign affiliates. In L mnection with the assumption by the Commodity Credit Corporation (CCC) of their contracts with the Soviets, the companies had been informally requested to refrain from selling non-U.S. grain to the Soviets. The Administration denied that the change indicated a softening of its resolve to maintain the embargo. Some Members of Congress viewed the decision as unfair to U.S. farmers. Beginning in June, the Administration's resolve to maintain the restrictions on grain sales to the Soviet Union was tested by a bipartisan legislative effort in both houses to lift the embargo. On July 3 Ronald Reagan endorsed these efforts, making the embargo a major campaign issue. Asserting that it was having an adverse impact on Soviet meat production, the President vowed that he would not lift the embargo unless the Soviets made a "tangible and demonstrable" move to end their occupation of Afghanistan. The following are the highlights of the Administration's price support program (1) sI..1;.a;n9..<.e.§-;1.r;_an<_i..§2h§22t.1sr.;1=...ez.2an§i2z1._2.1§.1=.1_;<2_£.§.x:._s_:_ .. .. I.-zeserze 229322!- To induce farmers to place more corn, wheat, and soybeans in the reserve, increases in loan, reserve, call, and release prices went into effect on January 8. These changes were intended to siphon grain off the market and er file participating farmers to sell their crops when they could get a more au.antageous price. Not all farmers were eligible to participate in the reserve program, however. On April 15, previously ineligible corn growers became eligible to place corn into the reserve on a first-come-first-served CRS-10 IB75070 UPDATE-08/1Q/80 basis until Hay 15 or up to 7.5 MHT, whichever came first. The Administration stated that this expansion of the reserve program was necessary because previously ineligible farmers were not placing enough cor? into the reserve. (2).A§§2m2§i2n-21-L9e-§§§-9£-22ntra2§ual_2§li9a-i92§.£9£.2heé£l- 2222 and §21bsan§.a££e2:sd-22_£he.en2e292- The CCC concluded agreements with 12 of the grain-exporting companies to assume contractual rights to more than 16 EMT of the embargoed grains and oilseeds. In the case of corn contracts, the CCC was instructed either to take physical delivery of the feedgrain or to sell (retender) the contract at a later date. Any corn acquired was not to be sold until the farm price exceeded the estimated pre-embargo price of $2.00 per bushel. Contracts assumed were to be sold only if the farm price equalled or exceeded $3.15 a bushel, i.e., 150% of the loan price. In the case of wheat contracts, the CCC was directed to take physical delivery of the wheat, which would be permanently diverted from the market for use in the P.L. 480 program. In connection with this plan, the Administration requested congressional authorization for supplemental funds for the FY80 P.L. #80 program and for the establishment of a strategic grain reserve for donation in times of short supply on the domestic market. In the face of criticism that its action would act as a damper on prices, the CCC started to retender the contracts it had acquired, beginning in late March. By Hay 28, the CCC had resold all the soybean rights it had acquired (.7 HHT) at a weighted average price of $6.25 a bushel. As of June 17, the rights to 5.2 MET of corn.and 2.8 MMT of wheat had been sole at weighted average prices of $2.97 a bushel and $0.57 a bushel respectively. - (3) CCC purchases of qrain and, subsgqgggt;1,_g§_gggn_g§_ggll. (a) flhggt. The CCC was directed to purchase about Q HHT of wheat - the total amount affected by the embargo -- for use in the P.L. #80 food aid program. Purchases began on March 7 and ended in mid-April, after approximately 0.2 HMT had been purchased. The overall weighted average price per bushel was $3.68, which represented a permium of $.18 over cash prices, which were $3.50 a bushel in some areas. Excluding storage and transportation costs, these purchases cost about $569.3 million. (b) gggg. In mid—Harch Agriculture Secretary Bergland announced that additional purchases of corn (in addition to the small amounts of grain purchased in connection with the ILA boycott) were a necessary supplement to the changes in the farmer—owned grain reserve program. The amount of corn to be purchases was not set precisely, but was to range from 1 to 9 HMT, depending on future prices. By June 10, about 3.8 MMT had been purchased at an overall weighted average price of $2.47 a bushel. Excluding transportation and storage fees, the total cost was $371.7 million. ins r nos. £92. 22212 (4) 1n2re2§2§_ lezele- 9:- Qfiisial- finansing and- _._-.. experts -' - To promote 0.5. grain exports, the Administration requested that Congress increase the Exort Sales Credit Program's FY80 authorization from $725 x $800 million and that of the Non-Commercial Risk Program's from $600 to $800 million. For the latter program a total of $2 billion in guarantees was proposed for FY81. For the former no FY81 authorization was requested. CRS-11 1375070 UPDATE-O8/1h/80 (5) In9en:ives_t2_ iugreaee- nreduezien- 9:- gaeehel. 1222- Alsehel Eagle E£Q9£é!L- Based on tax credits, loans, and loan guarantees to make gasohol ~mpetitive in price with unleaded gasoline and to encorage the construction of facilities for producing alcohol from grain, this program combines old and inew proposals by the President and Congress. In the estimation of Secretary Bergland, the program could absorb as much as 3 MMT of the embargoed corn. Critics of the program charge that it is an ineffective response to the fembargo because the U.$. does not have sufficient distillery capacity. (6) A-2led92_:9_i2§£;t2te-2 paid acreag izersien- 2299222 :92. the- me! 1e2r;-;£-:err§nt2é_h1-§222l2:dem§n§.922§itic §- Citing the inflationary impact of such a program and increasing demand for U.S. grain, the Administration decided against paying farmers not to produce grain. This decision predictably was unpopular in farm states. A related issue is the Administration's policy toward U.S. imports of Soviet anhydrous ammonia in return for exports of American superphosphates under the terms of a 20 year agreement reputedly worth $20 billion between Armand Hammer's Occidental Petroleum Company and the Soviet Union. This agreement, which swaps two ingredients of fertilizer, is often considered the bell-weather of U.S.-Soviet relations. In October, the U.S. International Trade Commission (ITC) had ruled by a 3 to 2 vote that imports from the Soviet Union were injuring the U.S. ammcnia industry. On December 11, President Carter rejected the ITC's recommendation to impose a quota on imports of Soviet ammonia, but on January 18 he reversed his decision and approved a $1 million short ton quota. In February the President suspended P S. exports of phosphate to the Soviet Union. with the appointment of a new L,mmissioner, the ITC reconsidered and reversed its decision by a 3 to 2 vote on Harch 20. It is expected that the Administration will have to lift the ,quota. §ele:;!§_I22222-9n_:he_U-S- and the U-S-S;.. Measuring the economic impact of the embargo is difficult because single factors alone do not cause changes in performance. Thus, U.S. exports of feedgrain and of phosphates do not fully determine Soviet meat production or agricultural performance. Likewise, the price of American grain and U.S. farm income are determined by other factors besides smaller purchases by one country —— even a major customer like the Soviet Union. In the wake of the President's Jan. H speech, prices for wheat, corn, and soybeans, predictably declined. Partially in response to the Administration's price support measures (outlined above), prices began to recover following the imposition of the embargo. According to USDA, the iprice of wheat had reached and surpassed the pre-embargo level at most locations by Feb. 5. The price of the more heavily affected corn, however, was slightly below pre-embargo levels. Prices for these commodities declined thereafter. Whether the embargo caused the subsequent decline is still being debated. Similarly, some argue that the embargo has imposed enormous losses on the American farmer, while others note that factors unrelated to the embargo such as rising prices for fuel and fertilizer have contributed to the financial CR5-W2, IB7507O UPDAEE-03/in/E0 difficulties of the farm sector. Since 0.5. agriculture is necessarily becoming increasingly dependent on exports, U.S. farmers were also concerned with the trade effects of tht embargo. The USDA initially estimated the short-term trade loss due to the embargo as approximately $2 billion, but in the months that followed ; became clear that increased foreign demand for American grain would order most of the expected loss. As early as rid-January, Howard Hjort, usrx chief econonist, predicted that 0.3. agricultural exports would reach record levels, despite the esbargo on sales to the Soviet Union. The 3333 subsequently predicted that 0.5. grain erprts would exceed last year’s, reaching $36.u billion in value and 150 HHT in quantity. East European countries, especially Poland, are expected to be among the major purchasers of American grain. 1;”? H’ "5 Q ‘ram *- ('1; In spite of the favorable short-term outlook for American grain exports, many observers are concerned about the embargo's long-tern impact. They warn that potential and actual importers of u.s. grain and other agricultural commodities nay conclude that the 0.5. is an unreliable supplier and sash alternate sources. Thus, future sales to the Soviets are expected to deci.ne even if the embargo is lifted. Induced supply responses elsewhere have nisa been predicted. ‘ The final budgetary effects of the embargo are beginning to be totaled up. According to USDA and Congressional estimates, the direct costs could amount to some $fl billion. Some of the budgetary outlay will be recovered as the ,grain purchased by the Government is marketed and as farmers repay loans. In restricting grain sales to the Soviet Union, President CarteE* explicit purpose was not to starve the Soviets, but to deny them a plaunea improvement in their diet. The bulk of theegrain withheld was to be used as animal feed. Among government and non-governmental analysts a consensus that the Soviets have been fairly successful in replacing the grain eubargoed pf the U.S. has developed. For example, Lt. Gen. Eugene F. Tighe, Director J the Defense Intelligence Agency, testified before a Senate subcommittee I July 31, 1980 that the Soviet Union would probably be able to purchase o*L3 90% of the amount of grain it intended to import during the July *79 - only '80 marketing year. while most of the grain and oilseed exporting countries assured the 0.5. that they vould not increase their exports to the U.S.S-F~ over traditional levels this year, Argentina and Brazil did not. In addition to larger than normal imports from krgantina, and leakages from other countries, the Soviets reportedly have purchased as much as 1 HHT of meal crushed from U.S.~groun soybeans in Western Europe. The Soviets, however, have had to pay a premium price for non-U.S. grain -- $1 billion more than if they had been able to buy the total amount f to the 3.3“, according to General Tighe's estimate“ Despite their considerable success in replacing the embargced grain; continued General Tighe, supplies will still fall short of requirements and neat and dairy products are in short supply. In July, the USDA predicted that Soviet meat production would decline by about .6%. This translates into a decrease in per capita consumption of about 1 to 2%. CONCLUSION CBS-13 IB7507O UFDATE“G8/1Hfl€3 Agriculture will remain the most uncertain link in the Soviet econoeis chain for zany years to come. inefficiencies in production, its productivity: and an ideological preference for increasing industria. capability at the expense of agriculture almost guarantee hat agricu1tu;. ll always lag behind other sectors of the soviet economy. Since the Soviefi union, like all nations, is unable to insulate its agriculture fr: -at ,9 S13 (*3 w r‘-4 rcapricicus weather conditions, it cannot increase meat consumption to Western *3 levels without being propelled into the world feed grain market. The ¥G?a and 1975 grain purchases clearly demonstrate the desire to continue expanding livestock nerds and increase meat consumption rather than risk a decline 11 the herds and the attendant fall in the quality of the Soviet diet. Before the embargo, analysts predicted a growing Soviet demand is? feedgrains, and depending on the weather, an occasional demand for the wheeze Qhe embargo, has, of oourse. thrown the future of the 0.5.-Soviet grain trade into question. While no one predicts that the grain embargo or the other retaliatory measures announced by President Carter will induce the Soviets to pull their troops out of Afghanistan, the Administration hopes to make the Soviet Union pay a price for its actions and to deter it from similar action in the future. Periodic grain sales to the U.S.S.R have raised several inporrant questions: '1 How much rain should the United States continue to sell to the x 0.3.5.3. at a time when there is a critical need for U.s. grain in the underdeveloped countries and other markets? (2) Should the United States continue to sell grain to the U.S.S.R. oe 1 n“udiscriniratory basis without first obtaining Soviet crop forecasts; a /ance warnings on future grain needs, and/or Soviet promises of participation in an international grain organization? (3) Should the United States tie its grain trading policy to Soviet political affairs. (4) Should the Pederal Government use its pre-notification policy on grain sales to control sales vlcluding embargoes as appropriate? (53 In an effort to increase 3.5. agricultural exports, should the United States extend CC: credits to all non—marke1.econcmy countries? (6) shat rate? of domestic food price* inflation is acceptable when consideration is given to alloying sales to the U.S.S.R. above the 8 million metric ton level? §§l.1i.L‘l§- U.S. Congress- Hcuse. Committee on Agriculture. Grain sales «» to Russia (Statement of Under Secretary of State for Economic Affairs). Hearing, 9Qth Congress, 1st session. Dec. 3, 1975. Washington, U.S. Gcvt. Print. Off., 1976. 1.3. Congress. House. Covmittee on Agriculture. Subcommittee on Livestock and Grains and Subcommittee on Department Operations, Investigations, and Oversight. Commodity Credit Corp. Export Sales, Hearings, 93th Congress, 1st session. Nov. 5 [and] 6, u.s. U.S. U.S. 0.5. U.S. U.S. cns-1u 1375070 UPDATE-O8/1Q/80 1975. 1976. Washington, U.S. Govt. Print. Off., 13a p. Congress. House. Committee on Banking, Currency and Housing. Subcommittee on International Trade, Investment and Monetary Policy. Briefing on East-West Trade. Hearings, 94th Congress, 1st session. Mar. 19, 1975. Washington, U.S. Govt. Print. Off., 1975. 56 p. Committee on Foreign Affairs. Subcommittee East—West Relations in the Hearings, 96th Congress. House. on Europe and the Middle East. Aftermath of Soviet Invasion of Afghanistan. Congress, 2d session, Jan. 24 and 30. Washington, U.S. Govt. Print. Off., 1980. 125 p. Congress. House. Committee on International Relations. United States grain and oil agreements with the Soviet Union. Hearing, 9flth Congress, 1st session. Oct. 28, 1975. Washington, U.S. Govt. Print. Off., 1975. Congress. Joint Economic Committee. Subcommittee on Priorities and Economy in Government. [Testimony of Lt. Gen. Tighe, Director of the Defense Intelligence Agency]. Hearings, 96th Congress, 2d session, June 30, 1980. Forthcoming. Congress. Senate. Committee on Agriculture and Forestry. Russian Grain Sale. Hearing, 94th Congress, 1st session. Sept. n, 1975. Washington, U.S. Govt. Print. Off., 1975. Congress. Senate. Committee on Agriculture and Forestry. Subcommittee on Foreign Agricultural Policy and Subcommittee on Agricultural Production, Marketing, and Stabilization of Prices. Grain export policy management. Hearings, 94th Congress, 2d session. Washington, U.S. Govt. Print. Off., 1976. 96 p. Congress. Senate. Committee on Agriculture and Forestry. Subcommittee on Foreign Agricultural Policy. Who's making foreign agricultural policy? Hearings 9flth Congress, 2d session. Jan. 22 and 23, 1976. Washington, U.S. Govt. Print. Off., 1976. Congress. Senate. Committee on Agriculture and Forestry. Subcommittee on Foreign Agricultural Production, Marketing, and Stabilization of Prices and Subcommittee on Foreign Agricultural Policy. Grain Export Policy Management. Hearings, 9uth Congress, 2d session. June 2%, 1976. Washington, U.S. Govt. Print. Off., 1976. 96 p. Senate. Committee on Agriculture, Nutrition, and Forestry. Embargo on Grain Sales to the Soviet Union. Hearings, 96th Congress, 2d session, Jan. 22, 1980. Washington, 0.5. Govt. Print. Off., 1980. 65 p. Congress. Senate. Committee on Agriculture, Nutrition, Emergency Agricultural Act of 1980 Congress. and Forestry. (S. 2199, S. 2258, S. 226R, S. 2277, and S. 2315). Hearings, 96th Congress, 2d session, Feb. 25, 26, 27 and Mar. 6, 1980. Washington, Govt. Print. Off., 1980. 197 p. CBS-15 IB75070 UPDATE—08/14/80 U.S. Congress. Senate. Committee on Banking, Housing and Urban Affairs. Subcommittee on International Finance. United States-Soviet grain agreement, 5. 2492 and other matters. Hearings, 9uth Congress, 1st session. Washington, U.S. Govt. Print. off., 1976. Hearings held Dec. 9 [and] 10, 1975. U.5. Congress. Senate. Committee on Commerce, Science, and Transportation. Embargo of Phosphate Exports to the Soviet Union. Hearings, 96th Congress, 2d session, Feb. 19, 1980. Washington, U.5. Govt. Print. Off., 1980. 44 p. U.5. Congress. Senate. Committee on Finance. Subcommittee on International Trade. roblems in international agricultural trade. Hearings, 95th Congress, 1st session. July 13, 1977. 107 p. U.5. Congress. Senate. Committee on Government Operations. Permanent Subcommittee on Investigations. Grain Sales to the soviet Union. Hearings, 9uth Congress, 1st session. July 31 and Aug- 1, 1975. Washington, U.S. Govt. Print. Off., 1975. 3§2QB.13§-A.!D_§Q.1‘1§Bl3.§§I.Q.1!;1L-P.Q§1l!§!1‘§ Export Administration Act Amendments of 197M (Debate and vote in the House). Congressional record (daily ed.) v. 120, June 11, 197a: 510201-510319. I U.S. Congress. House. Committee on Foreign Relations. Subcommittee on National Security Policy and Scientific Developments. Science, technology, and American diplomacy. U.S.-Soviet commercial relations: the interplay of economics, technology transfer, and diplomacy, by John P. Hardt and George D. Holliday. U.S. Congress. Joint Economic Committee. Impact of Russian grain purchases on retail food and farm prices and farm income in the 1975 crop year. Study by George E. Brandon, Professor of Agricultural Economics at the Pennsylvania State University. Washington, U.5. Govt. Print. Off., Sept. 29, 1975. At head of title: 94th Congress, 1st session. Joint Committee print. Reorientation and commercial relations of the economies of Eastern Europe; a compendium of papers. [Washington, U.5. Govt. Print. Off.) Aug. 16, 1974. 771 p. _ At head of title: 93d Congress, 2d session. Joint Committee print. U-S. Congress. Senate. Committee on Foreign Relations. Subcommittee on Multinational Corporations. USSR and grain. Staff report. 9flth Congress, 2d Session. April, 1976. Washington, U.S. Govt. Print. Off., 1976. 1.5. Laws, statutes, etc. Export Administration Act of 1979. Washington, U.S. Govt. Print. Off., 1979. CBS-16 IB75070 UPDATE—08/14/80 QEEEB.§QE§BE§§lQE£L-AQ1lQE Johnson, Gale. "Soviet agriculture and United States—Soviet relations." Current history, v. 73, Oct. 1977. Johnson, Gale. =The Soviet impact on world grain trade. British-North American Committee, 1977. 62 p. U.S. Library of Congress. Congressional Research Service. Environment and Natural Resources Policy Division. Agriculture: U.S. Embargo of Agricultural Exports to U.S.S.R. [by] Penelope C. Cate. [Washington] Mar. 7, 1980. (Continuously updated). IB80025 ' ----- The U.S. Embargo of Agricultural Exports to the Soviet Union: = Agricultural Impact [by] Penelope C. Cate, A. Ellen Terpstra, and Jaspar Homach. [Washington], Jan. 21, 1980. U.S. Department of Agriculture. Impact of Agricultural Trade Restrictions on the Soviet Union. Foreign Agricultural Economic Report No. 158. [Washington] April 1980. U.S.S.R. agricultural situation - review of 1976 and outlook for 1977. U.S. Department of Agriculture, Economic Research Service. Foreign Agricultural Economic Report No. 132. #7 p. . U.S.S.R.: The impact of recent climate change on grain production. CIA research aid, October 1976. » QE§QEQLQ§l-QE_§E§EI§ 07/04/80 -4 President Carter affirmed resolve to maintain restrictions on grain sales to the Soviet Union. 07/03/80 —— Ronald Reagan endorsed efforts by a group of Congressmen to lift the grain embargo. 06/20/80 - Senator Dole, Representative Harkin, and others introduced legislation to rescind the grain embargo. 06/20/80 -— Administration confirmed that it had given permission to the grain-exporting companies to sell non-U.S. grain to the Soviet Union. 05/31/80 -- Soviet purchases of up to 8 HHT of corn and wheat during the fifth and final year of the U.S.-Soviet grain agreement approved. 03/20/80 - lThe ITC reversed its earlier ruling and concluded that imports of Soviet ammonia were not injuring the U.S. ammonia industry. 03/07/80 -- USDA issued first offer to purchase wheat and corn. 03/04/80 02/29/80 02/25/80 02/15/80 01/29/80 01/28/80 01/19/80 01/13/30 01/09/80 01/07/30 01/05/80 01/OH/80 12/27/79 12/11/79 11/27/79 10/00/79 05/05/78 CRS-17 IB75070 UPDATE-08/1Q/80 Agriculture Secretary Bergland announced that USDA would soon begin to purchase wheat and corn. Secretary Bergland announced that the Administration had decided against a paid acreage diversion program for 1980 grain crops. President Carter bans the export of superphosphates. CCC assumed contractual obligations for over 16 HMT of corn, wheat and soybeans from 12 grain companies. Commerce Department Secretary Klutznick clarified licensing requirements for agricultural commodities other than grain. A Federal arbitrators ordered ILA locals in New Orleans to begin loading a vessel bound for the Soviet Union with grain. Administration announced purchase of Soviet bound grain, which longshoremen refused to load. President Carter reversed his earlier decision and imposed a quota of 1 million short tons on imports of soviet ammonia. U.S. International Longshoremen's Association publicized its decision not to load vessels with cargo bound for the U.S.S.R. Grain futures trading resumed. Embargo on export of 17 MMT of grain and other agricultural commodities went into effect. Grain futures trading is suspended.for two days. Secretary of Agriculture Bob Bergland outlined Administration's price support measures. President Carter announced embargo and other retaliatory measures. Soviet-backed coup in Afghanistan ousted Amin Government. President Carter rejected the U.S. International Trade Commission's October ruling that imports of Soviet ammonia were injuring the U.S. ammonia industry and recommendation that a quota be imposed. Brezhnev announced that 1979 Soviet grain harvest was 179 million MT. 0.5. granted Soviet finion permission to buy 25 million HT of grain from the U.S. during fourth year of 1975 grain agreement. The Soviet report that in the country as a whole the 12/00/77 11/02/77 05/00/77 01/05/77 12/00/76 09/30/76 06/2“/76 CBS-18 IB75070 UPDATE-O8/1a/80 spring crop sowing rate is lower than in the past 6 years. This is due to cold weather, rains, and snowfall in many areas of the European part of the USSR. The 0.5. and U.S.S.B. sign a five-year extension to the 1972 U.S.—U.S.S.R. Agricultural Agreement. Leonid Brezhnev announced that the 1977 Soviet grain harvest would produce only 19H million metric tons. The Soviets raised their goal for grain output for the 10th 5-year plan (1976-1980) to 220.4 EMT. The Soviet Union announced that its grain harvest had totaled a record 223.8 EMT. The Soviets have purchased 3 EMT of U.S. wheat and 3.3 EMT of U.S. corn under the 0.5.-U.S.S.R. Grain Agreement of 1975. The Export Administration Act (P.L. 93-500) expired, following a dispute over foreign boycotts. Export administration is now under the authority (by Executive Order) of the Trading with the Enemy Act, until the 95th Congress can act. All indications are that it will be a first order of business in the new Congress. Poland's Prime Hinister Piotr Jaroszewicz announced food price increases, ending a five-year experiment in price freezing. The cost of food, especially meat has been a sensitive issue in Poland since the 1970 workers‘ riots against price increases forced out Party leader Rladyslaw Gomulka. The price freezing experiment is _ draining the state treasury of money urgently needed 05/00/76 *- 12/02/75 ‘- to 25 an for investment in farming and industry, but attempts abolish the experiment lead to workers riots by June forcing the government to withdraw the increases for indefinite time period. A campaign has begun in Moscow to conserve meat by having meatless Thursdays in restaurants, cafes and cafeterias. In a continued effort to save meat supplies, Soviet processing plants were ordered to reduce substantially the amount of beef and pork used in making sausage. In announcing the nation's 1976 budget to the Supreme Soviet, Chairman of the State Planning Committee “Nikolai Baibakov suggested that severe droughts in both the spring and summer of last year contributed to a cut in the 1975 initial 215.6 million ton goal for grain production. On Jan. 31, 1976 the Soviet government confirmed the 1975 grain harvest figure to be 1&0 million tons - the lowest yield in 10 years. Although drought was named as the main cause for the low yield, officials have also blamed inefficiency and poor 11/27/75 10/20/75 09/29/75 09/22/75 09/09/75 08/20/75 08/18/75 08/11/75 08/07/75 07/31/75 07/24/75 07/22/75 CBS-19 IB75070 UPDATE-08/13/80 mechanization in the fields. Secretary of Agriculture Earl L. Butz, announced that the United States and Poland reached an agreement whereby Poland will buy an annual amount of 2.5 million tons of U.S. feed grains. Butz stated that the agreement will help stabilize grain prices in the world market which would assist Poland in developing her livestock production. The agreement requires Poland to purchase within 20% of the 2.5 million tons each year, depending upon need. U.S. and Soviet negotiators signed a 5-year agreement on Soviet purchases of U.S. grain. The United States and Poland agreed in principle to a long-term grain trade agreement. The Ford Administration announced a temporary suspension of further grain sales to Poland. The Ford Administration announced that all future sales to the Soviet Union would be halted until nid—October. U.S. maritime workers announced they will go ahead and load U.S. grain ships bound for the U.S.S.R. An embargo had previously been stopped by a court order. A U.S. Federal Court.judge ordered U.S. longshoremen toi load a Yugoslav ship full of grain bound for the Soviet Union. ' George Meany, President of the AFL-CIO, called for an embargo against loading ships bound for the Soviet Union. Agriculture Secretary Earl Butz asked grain exporters to voluntarily withold future grain sales to the Soviet Union until after their effect could be better ascertained. Assistant Secretary of Agriculture Bell estimated the maximum amount of grain the U.S.S.R. would need in 1975 to be more than 25 million tons. The London Daily Telegraph estimated this at 30 million tons. Assistant Agriculture Secretary Bell, appearing before a Senate Investigations Subcommittee, predicted that 1975 grain sales to the Soviet Union would have a small impact on U.S. prices. John Schnittker, Undersecretary of Agriculture under President Johnson, disagreed, testifying that grain sales to the U.S.S.R. could be a catalyst for a 10% rise in U.S. food prices in 1976. The USDA sharply raised its estimates of Soviet grain import needs, up to 1a million tons. U.S.S.R. ordered 5.6 million more tons of grain from the U.S., bringing its total grain orders from the United States to 10.8 million tons for 1975. 07/16/75 06/11/75 03/07/75 02/04/75 01/14/75 11/10/70 10/29/74 10/19/70 10/O7/7H 09/26/74 08/1a/7n 07/3o/7n 06/27/7u cns-2o 1375070 UPDATE-O8/10/80 U.S.S.B. agreed to buy 3.2 million metric tons of wheat from Cook and Cargill. USDA officials predicted that Soviet grain imports for the period 1975-76 may have to be increased from 7 to 10 million tons. USDA announced the removal of requirement for prior approval of large export sales of wheat, corn, and soybeans. Monitoring of such export sales continued. Cook sold 100,000 tons of corn to the Soviet Union, a sale which was later approved by the Dept. of Agriculture. Secretary of State Henry Kissinger announced that the U.S.S.R. had cancelled the U.S.-Soviet trade agreement, claiming it could not abide by the new laws permitting extensive emigration from the Soviet Union. The U.S.S.R., at the World Food Conference in Rome, expressed dissaproval about a proposed system for an international sharing of crop information and future import needs of member countries. President Ford signed the Export Administration Amendments Treasury Secretary Simon announced that arrangements had been worked out to sell the Soviets 2.2 million tons of grain in return for a Soviet promise not to buy any more American grain until the summer of 1975. USDA announced new regulations for exports of wheat, corn, and soybeans requiring prior approval for large sales of those commodities. President Ford, citing political reasons, requested Cook and Cargill, which had recently sold 3.0 million tons of corn and wheat to the U.S.S.R., to voluntarily nullify the sales. In response to a query by the U.S. embassy in Moscow on 1970 Soviet grain import needs, Soviet officials declined to state any figures but said they would let the United States know at the same time they made contracts commercially there. President signed H.J.Res. 1164 extending the Export Administration Act of 1969 to Sept. 30, 197a; (P.L. 93-500) President signed Executive Order 11796 invoking the Trading with the Enemy Act of 1917 to continue export controls despite the expiration of the Export Administration Act on this date. President Nixon arrived in Moscow for summit talks, designed chiefly to establish a broad framework for 11/20/73 08/10/73 07/00/73 06/25/73 06/17/73 04/11/73 10/18/72 09/22/72 08/29/72 07/31/72 07/08/72 05/22/72 04/21/72 Ofl/11/72 CBS-21 IB75070 UPDATE-08/1Q/80 U.S.-Soviet commercial relations. Office of Export Administration discontinued licensing requirement for short-supply agricultural commodities. The Consumer Protection Act (P.L. 93-86) was enacted. This law requires exporters of certain agricultural commodities, such as wheat, feed grains and cotton, to report their sales directly to the Secretary of Agriculture on a weekly basis. Office of Export Controls established a monitoring procedure for grain and cotton exports. U.S. and U.S.S.R. signed the~joint agreement on agriculture, providing for the exchange of crop data and forecasts, and predictions of future Soviet import needs from the United States. General Secretary Brezhnev arrived in Washington for discussion of political and economic relations. USDA predicted that the Soviet Union will have to buy sizeable quantities of grain for delivery in 197a, about 1H million tons. U.S.—Soviet trade agreement signed in Moscow. USDA suspended its export subsidy program entirely. Amendment to the Export Administration Act of 1969, V P.L. 92-412, enacted. Called for further relaxation of controls on exports freely available from sources outside the U.S. soviet buyers, alarmed at reports of massive crop failure‘ at home, returned to the U.S. and completed the second part of the 1972 wheat deal. The United States and the Sowiet Union signed a 3-year grain export agreement in which the U.S.S.R. could purchase up to $750 million of subsidized grain, to make up for Soviet crop failures. President Nixon arrived in Ebsco for a summit conference. Both sides agreed to establish a U.S.-U.S.S.R. Commercial Commission and to negotiate a general trade agreement. Soviet-American maritime agreement announced to facilitate access to the ports of both countries by the ships of the other. Agriculture Secretary Earl Butz in noscow offered to sell grain to the U.S.S.R. on three-year credit terms. a CBS-22 IB7507O UPDATE“08/1H/80 ADQEIIQ HA1.-..§§.E§BE!QE-§QEB.QE§ Hathaway, Dale E. Food prices and inflation. Brookings papers on economic activity, no. 1, 197R: 63-116. Johnson, Gale D. The Soviet livestock sector: problems and prospects. The University of Chicago, Office of Agricultural Economics. Paper no. 74: 1 Mar. 1974. Jones, B.F. Grain Reserves in Agriculture and Food Policy. Station Bulletin No. 124, Bay 1976. Agriculture Experiment Station, Purdue University.p Mayer, Leo. "The Russian Grain Agreement and Future 0.5. Food Policy". Toledo law review. Spring 1976. vol. 7 No. 3 Pisar, Samuel. Coexistence and commerce: guidelines for transaction between East and West. New York, Ecsraw-Hill Book Co. [c 1970} 558 p., The Central Intelligence Agency. USSR Agriculture Atlas. Washington, D.C. December 197a. 59 p. Trezise. Philip H- E§22ilii2q-§£e _§g§g;gg§. Brookings Institution Washington, D.C. Hay 1976. . in 67 p U.S. Dept. of Agriculture. Prospects for agricultural trade with the.U.S.S.R. Economic research service. Washington, Apr. 1974. [See Also Agriculture: The United States and the World Food Supply, IB73010; Agriculture: Domestic Problems and Prospects, IB75075; Agriculture: International Food Reserves, IB741u2] 4~—«.t..;_"£..';w. :.‘!.t :- V Au:-v-.';.7 -_ -1:. -:2 :_' .:_: -s . -u.A_4*n_',_r-:.2g..-.n. :_i._. ..:.a, H; r- "gv-3} 1,:’~"_n v:>’l_-‘ »_r"~;j.‘. 3 i-1.. .' -:*.;?5t F1 _-."~-‘+1-. ..;"‘M{I.‘ u..." *1 6' '. .»: y.« _n 1 ' ""—"N-’—'-,7"\,Yj E ‘lafizfiia E N M: 25 5%: UNW’ $uLmws—m,. F334;}; ._!.'L’: .14. .‘a-‘uu..a..—_,‘- ‘ r‘.¢'1'.r’(Xf(j-‘ "{T'E'_I! 3.- 4 A 7....)