E/INCB/52/Supp

INTERNATIONAL NARCOTICS CONTROL BOARD Vienna

Report of the International Narcotics Control Board for 1980

Demand and Supply of for Medical and Scientific Needs

UNITED NATIONS New York, 1981 ABBREVIATIONS

The following abbreviations are used, except where the context otherwise requires:

Abbreviation Full title

Board (or INCB) International Narcotics Control Board

Commission on Narcotic Drugs Commission on Narcotic Drugs of the (or Commission) Economic and Social Council

Council (or ECOSOC) Economic and Social Council of the United Nations

1961 Convention Single Convention on Narcotic Drugs, signed at New York on 30 March 1961

Division of Narcotic Drugs Division of Narcotic Drugs of the (or Division) United Nations Secretariat

Fund (or UNFDAC) United Nations Fund for Drug Abuse Control

General Assembly General Assembly of the United Nations

Narcotic drug Any of the substances in Schedules I and II of the 1961 Convention, whether natural or synthetic

1972 Protocol Protocol amending the Single Convention on Narcotic Drugs, 1961, signed at Geneva on 25 March 1972

Secretary-General Secretary-General of the United Nations

WHO World Health Organization

NOMENCLATURE OF COUNTRIES AND TERRITORIES

In referring to political entities, the Board is guided by the rules governing the practice of the United Nations. The designations employed and the presentation of material in this publication do not imply the expression of any status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. INTERNATIONAL NARCOTICS CONTROL BOARD Vienna

Report of the International Narcotics Control Board for 1980

Demand and Supply of Opiates for Medical and Scientific Needs

UNITED NATIONS New York, 1981 E/INCB/52/Supp December 1981

UNITED NATIONS PUBLICATION

Sales No. E.82.XI.4

Price: $US 15.00 Foreword

This Study of the demand and supply of opiates for medical and scientific needs has been prepared pursuant to Article 9, paragraphs 4 and 5 and Article 15 of the Single Convention on Narcotic Drugs, 1961, as amended by the 1972 Protocol, and in accordance with the request of the Economic and Social Council in Resolution E/1980/20. TABLE OF CONTENTS

STUDY OF SUPPLY AND DEMAND OF OPIATES FOR MEDICAL AND SCIENTIFIC NEEDS

Page

CHAPTER I GENERAL CONSIDERATIONS 1

CHAPTER II DEMAND FOR OPIATES FOR MEDICAL AND SCIENTIFIC NEEDS 8

CHAPTER III PRODUCTION OF RAW MATERIALS FOR THE MANUFACTURE 21

OF OPIATES

CHAPTER IV MANUFACTURE OF OPIATES 34

CHAPTER V INTERNATIONAL TRADE IN OPIATES 42

CHAPTER VI STOCKS OF OPIATES 51

CHAPTER VII BALANCE BETWEEN DEMAND AND SUPPLY OF OPIATES 55

CHAPTER VIII LEGAL CONSIDERATIONS 60

CHAPTER IX ECONOMIC CONSIDERATIONS 70

CHAPTER X CONCLUSIONS AND RECOMMENDATIONS 80

ANNEXES A STATISTICAL TABLES 91

B UNITED NATIONS RESOLUTIONS 144

C COUNTRY STATEMENTS 159

Australia 159 France 165 Hungary 175 India 179 Poland 187 Romania 189 Spain 191 Turkey 199 Yugoslavia 205 CHAPTER I

GENERAL CONSIDERATIONS

1. The present Study is concerned exclusively with the supply and demand of opiates for medical and scientific needs; consequently whenever reference is made to cultivation, production, trade etc, we are concerned exclusively with the licit aspects of these activities unless the context indicates otherwise.

2. The Study consists of ten chapters together with statistical tables included as Annex A. The first chapter deals with definitions and certain introductory questions which will facilitate an examination of the technical chapters which relate successively to demand, production of raw materials, manufacture, international trade, stocks and the balance between the supply and the demand of opiates (Chapters II to VII). These chapters are termed technical because they consist mainly of an analysis of the statistical data. The Board has reserved for certain paragraphs of Chapter VIII, Legal Considerations; Chapter IX, Economic Considerations; and of course Chapter X, Conclusions and Recommendations, the expression of some opinions. For purposes of reference, Annex A which includes the basic data is followed by Annex B consisting of the resolutions adopted by United Nations organs related to the subject of the Study.

3. Finally we have left the statement of the exact situation in each producing country to the country itself, and statements by those countries wishing to contribute are included in Annex C.

4. For reasons of clarity and precision, a special terminology is used in this Study. This terminology is not always that used in the treaties on narcotic drugs. For example the concept of consumption used in this Study is much more inclusive than the definition in the Convention of 1961 (see paragraph 22 below). The term "production" is applied in the Convention of 1961 only to "the separation of , coca leaves, cannabis and cannabis resin from the plants from which they are obtained". We shall however speak of the production of poppy straw. The term "ton" or "tonne" refers to metric tons.

5. The term opiates is used in this Study to designate the phenanthrene alkaloids of opium and their derivatives which have been placed under international control.

Diagram of manufacture

6. Among the drugs used for medical and scientific requirements, the most important group from the point of view of the quantities consumed is made up of substances derived from various methods of processing the plant of the species . Nowadays, some of these substances are derived in very small part from the Papaver bracteatum plant. 1/ Diagram I gives a summary of the process whereby these substances are manufactured.

1/ See however paragraph 119 below. DIAGRAM I: OPIATES MANUFACTURE 7. The agricultural products of these two species of Papaver, used as raw materials in the manufacture of opiates, are opium and poppy straw on the one hand, and Papaver bracteatum straw on the other.

8. , natural (as opposed to semi-synthetic codeine produced by methylation of morphine) and can be obtained from opium and poppy straw by straight extraction. The process of extracting these alkaloids from poppy straw is sometimes temporarily halted at the stage of concentrate of poppy straw, in which there is considerable trade. The principal extraction product of Papaver bracteatum straw is thebaine. Papaver bracteatum straw means all parts (except the seeds) of the plant of that species after harvesting.

9. Concentrate of poppy straw, thebaine and the bulk of morphine are used in the manufacture of other opiates of which the principal are semi-synthetic codeine, , pholcodine, hydrocodone and oxycodone. In addition, dihydrocodeine is manufactured from codeine. Other products, such as heroin, hydromorphone, nicomorphine and acetyldihydrocodeine, are also manufactured by conversion. All these substances, including natural codeine and a very small proportion of the opium produced (2 %) and the morphine manufactured (1 %), are intended for use in preparations.

Yields

10. It is useful to examine yields from the point of view both of control and of forecasts. In addition to the direct surveillance which can be exercised over harvest operations in the fields or over extraction and conversion in the factories, the calculation of the yield makes possible an indirect control of the security of the licit channels. Any reduction in yield not attributable to a specific cause should give rise to an investigation. Furthermore, the decision to cultivate an area of poppy adjusted to a final demand expressed in amounts by weight of different opiates will be well founded only if a whole series of yields are known at least approximately.

11. Opium is harvested in the form of latex, which may have a moisture content of up to 40%; it is then subjected to several conditioning processes for purposes of export, which reduce its moisture content to about 10% for Indian opium and 20% for Turkish opium. 2/ In the USSR opium was not intended for export and the latex was processed directly to extract the alkaloids. The moisture content may vary within certain limits over time. A small percentage variation in the moisture content results in a difference of several tonnes in the total harvest. This fact must be taken into consideration when the results for a year are drawn up and exports and imports are compared.

12. Poppy straw is subject to still greater variations especially if it is not compressed and processed into granules, as is done by certain manufacturers. Moreover, in the course of processing a not inconsiderable part (up to 8%) may be converted into a powder which is unusable for extraction because the morphine it contains is oxidized by contact with the air.

2/ Turkey decided not to produce opium after 1972. Table of coefficients of equivalence

Equivalent quantity of morphine Substances per unit of weight of the substance

Codeine 1.042 Dihydrocodeine 1.042 Ethylmorphine 1.100 Pholcodine 0.820 Morphine 1.000 Raw opium 0.110 Medicinal opium 0.100

Poppy straw

Australia 1971-1974 0.0046 1975-1976 0.0055 1977 0.0047 1978 0.0060 1979 0.0068 1980 0.0081

France 1964-1973 0.0018 1974 0.0024 1975-1976 0.0029 1977 0.0033 1978 0.0025 1979 0.0027 1980 0.0045

India 0.0024

Spain 1974-1978 0.0023 1979 0.0041 1980 0.0061

Turkey 1964-1972 0.0026

1974-1980 0.0036

USSR 0.0025

Yugoslavia 0.0025 Preparations of Schedule III of the 1961 Convention

21. Some preparations have been exempted by the 1961 Convention from certain measures of control because of the limited risks of abuse and drug recovery which they imply. These preparations, which are included in Schedule III of the 1961 Convention, are exempted in particular from the accounting system which enables national administrations to report to the INCB the precise use to which each narcotic drug has been put. Consequently, there are no statistics available on imports, exports, distribution or stocks of these preparations.

Consumption

22. According to the treaties, the term "consumption" denotes the quantity of narcotic drug supplied to any authorized person, enterprise or institute for retail distribution, medical use or scientific research. On the basis of this definition and in the light of the preceding paragraph, the only case in which a precise calculation of consumption can be made is that of a narcotic drug for which there is no Schedule III preparation, since the quantities of the latter delivered by wholesalers to retailers are not known. Most opiates (almost 90% of codeine) are transferred from the wholesale to the retail level in the form of Schedule III preparations. For want of a better alternative, it is assumed by and large that the quantities of Schedule III preparations manufactured in the course of a year are entirely consumed during that same year and in the country where they were manufactured. In the present Study, consumption, properly speaking, will include the quantities of narcotic drugs used in the manufacture of Schedule III preparations.

Choice of period for the basic data

23. The necessarily arbitrary choice of a period for the basic data can have a considerable effect on the conclusions of a study. The year in which the Single Convention entered into force, 1964, has been chosen as the point of departure for the statistical base, as certain data (the international movements of poppy straw and separate data for the concentrate of poppy straw) were not available before this date. Furthermore, the chosen period is neither too long nor too short and allows a sufficient time interval to examine the events which during the last decade resulted first in shortage and later in over-production. However, in some cases, where the relevant statistics were available, a longer period has been chosen. CHAPTER II

DEMAND FOR OPIATES FOR MEDICAL AND SCIENTIFIC PURPOSES

Introduction

24. The narcotic drug requirements of scientific research are quantitatively very small and practically negligible compared with the medical requirements. Narcotic drugs are used in human medicine for the treatment of pain, cough and diarrhea, in anaesthesia and for some other indications in veterinary medicine. These same effects, however, can be obtained in certain cases by methods other than the administration of chemical products or by chemical products other than narcotic drugs. Consequently, a study of the demand for narcotic drugs for medical needs calls for knowledge of the alternatives, particularly the non-narcotic substitutes which occupy a predominant place on the market.

25. However, the material constraints are such that we are obliged to base our Study chiefly on the data on narcotic drugs furnished by Governments, either under the treaties or entirely voluntarily. A further limitation derives from the fact that although these data are sufficiently precise for purposes of control, they do not meet the required standards of precision from a purely statistical point of view. Thus, the exports of Schedule III preparations are, as has already been mentioned, included in the domestic consumption of the exporting country, resulting in an imprecision regarding consumption which can in some cases be as high as 20%.

26. The main purpose of a study is to derive rules for future action from past experience and this presupposes a knowledge of the causal relationships between the variables. However, the absence of complete or precise data makes necessary an empirical approach, which has its limitations. We shall see that on the whole the trends in the consumption of opiates remain fairly steady over time. Moreover, knowledge of the cause of a phenomenon does not always bring about improved forecasting; legislation and scientific discoveries can have considerable effects on consumption and these factors are difficult to predict.

27. Consumption of opiates accounts for approximately 90% of total narcotic drug consumption. After the development during the Second World War of entirely synthetic substances (pethidine, methadone, etc.) it was predicted that synthetic drugs would take the place of so-called natural narcotic drugs in the more or less short term. However, the consumption of opiates in absolute terms has increased considerably since that time. But what about their relative share in the analgesics and cough-remedy market, etc.? It is difficult to answer this question. All that can be said is that the synthetic narcotic drugs placed under international control have not gained a large relative share of the market. Figure I. TOTAL CONSUMPTION OF CODEINE Codeine consumption

28. Total codeine consumption was 52 tonnes in 1950 (see Annex A, Table 1); it reached 163 tonnes, its highest level, 23 years later, in 1973. The points indicating codeine consumption since 1950 are plotted on the graph in Figure I, page 9. Until 1974 there is very little scattering of these points around a statistically adjusted straight line, so that the straight line can justifiably and usefully be substituted for the broken line joining the points representing the raw data. Thus, it can be deduced that, between 1950 and 1974, codeine consumption increased at a fairly regular annual rate of 4.7 tonnes. In 1975, the previous trend breaks, the consumption curve lies well below the extrapolated line and the gap widens, increasing from 16 tonnes in 1975 to 27 tonnes in 1979. The cumulative consumption "deficit" during these five years amounts to 107 tonnes of codeine, or the equivalent of 930 tonnes of opium.

29. There are seven countries which consume more than five tonnes of codeine per year. These are: the United States of America, the USSR, the Federal Republic of Germany, the United Kindom, France, Canada and India. The relative shares accounted for by these countries in total consumption followed a general downward trend between 1950 (73%) and 1971 (60%) and then increased to 67% in 1979. However, in absolute figures, their total consumption increased steadily, from 38 tonnes in 1950 to 108 tonnes in 1979. Figure II, reflecting the development of consumption in each of these countries over the period under consideration, shows that, with the exception of the USSR, the general trend was either towards an increase or towards stability.

30. This development took place in two phases in the United States. Between 1950 and 1970, there was a regular and gradual increase by 330 kg a year as a result of population growth. During this phase, consumption per million inhabitants remained virtually unchanged at around 105 kg a year. During the second phase, consumption in terms of both absolute figures and per million inhabitants doubled over eight years. The main factor explaining this rapid increase was better medical insurance coverage; two other less important factors were the ageing of the population and population growth. Other explanatory factors of some significance were probably the success of some specialities combining paracetamol and codeine and also the development of generic codeine preparations.

31. The United States now accounts for 30% of total codeine consumption and the future development of its consumption will therefore strongly influence demand in respect of opiates. According to official forecasts prepared five years ago, consumption in 1985 should amount to between 63 tonnes and 74 tonnes. However, there are now some signs that even the lower limit of the range might be too high. First of all, consumption declined in 1979 and 1980 compared to 1978; then, in the United States, per capita consumption is in seventh place among the major consuming countries. Lastly, as full medical insurance coverage comes closer to being realized, the impact should dwindle. To sum up, it is most likely that codeine consumption in the United States will either grow much more slowly or be stabilized at around 50 or 55 tonnes. Figure II. CONSUMPTION OF CODEINE 32. In the USSR, sustained growth at an annual rate of 780 kg a year caused codeine consumption to increase from 8 tonnes in 1950 to 26 tonnes in 1972. Consumption per million inhabitants increased over the same period from 40 kg to 100 kg. After 1972, reformulation of some preparations with a view to further enhancing their safety resulted in a decline and then in a stabilization of consumption at between 15 and 18 tonnes a year. In 1980, however, consumption fell to 10 tonnes, the lowest level since 1952. Consumption per million inhabitants remains moderate, at 70 kg.

33. Starting at a fairly low level in 1950 (2 tonnes a year, or 55 kg per million inhabitants), codeine consumption in the Federal Republic of Germany grew slowly until 1967 and then rapidly until 1970, subsequently becoming stabilized at 14 tonnes a year, or 220 kg per million inhabitants. This country is in third place among consumers in terms of absolute figures and in fourth place among consumers in per capita terms, after Denmark, Canada and Bulgaria.

34. In the United Kingdom, after a strong growth between 1950 and 1955, codeine consumption became stabilized at around 11 tonnes a year. Consumption per million inhabitants, 200 kg, has remained virtually unchanged since 1955.

35. In France, a similar but less rapid development brought about stabilization of consumption beginning in 1969 at around 9.5 tonnes a year, or 180 kg per million inhabitants. This country is in eleventh place among the major codeine consumers in per capita terms. 36. In Canada, a nearly linear growth over the whole period under consideration resulted in an increase in codeine consumption from 1.3 tonnes in 1950 to 8.1 tonnes in 1980, bringing Canada from eleventh place among the major consumers in per capita terms to second place, after Denmark, with a consumption of 340 kg per million inhabitants. Despite this steady growth, it is difficult to project the same trend into the future because the saturation point must eventually be reached, even in a country where the climate justifies greater use of this narcotic drug than in other countries.

37. In India, on the other hand, the steady growth which has taken place since 1950 and has speeded up since 1968 should continue in the future, since consumption amounted in 1979 to only 9.5 kg per million inhabitants. In absolute terms, consumption increased from about 2 tonnes in 1964 to more than 6 tonnes in 1979.

38. Among the seven countries considered above, which in 1979 accounted for two-thirds of total consumption, only India has a very high growth potential; in the other countries, the likely trend in consumption will be either in the direction of slower growth (United States and Canada) or stability (the USSR, Federal Republic of Germany, United Kingdom and France). Accordingly, their total consumption during the period 1981-1985 should amount to something between 110 and 125 tonnes of anhydrous base codeine. Official forecasts are slightly greater than this projection. 39. In absolute terms, the countries other than the seven major consumers experienced growth that was far more rapid than the average between 1950 and 1970. Their relative share of total consumption rose from 27% in 1950 to 40% in 1970, their total consumption increasing during this same period from 14 to 62 tonnes. Between 1970 and 1974, codeine consumption in these countries reached an average level of 61 tonnes, falling off during the next four years to below 50 tonnes in 1978, after which there was a slight upturn in 1979 to 52 tonnes. These countries accounted for only 33% of total consumption in 1979.

40. A detailed study of the 23 countries in each of which consumption is less than 5 tonnes but more than 1 tonne per year confirms this general analysis. Only four countries have experienced uninterrupted growth since 1950: Spain, South Africa, Romania and Egypt. In the case of Denmark, Switzerland and Hungary, growth has been followed by a levelling off. All the other countries recorded a drop in consumption, occurring mostly during the 1970's following more or less prolonged growth. This was the case in Australia, Japan, Italy, Czechoslovakia, Yugoslavia, Finland, Bulgaria, Turkey, Belgium, the German Democratic Republic, Brazil, Mexico, Poland, Iran, Pakistan and Nigeria.

41. It is not easy to find a general explanation for this development. The fact that in most cases the decline occurred after 1973 strongly suggests that it was a consequence of the supply difficulties and the rise in prices that prevailed at the time. The scarcity of codeine, the uncertainty with regard to future supplies and the rise in prices undoubtedly prompted manufacturers of preparations to abandon codeine in favour of synthetic substances. This was certainly the case in many Latin American countries where, until the supply difficulties developed, consumption had been growing rapidly. The same factor may even have been at work in certain codeine-producing countries where there was strong export demand.

42. Nevertheless, this explanation cannot be regarded as a general one, for it is a well established fact that, in certain cases, the drop in consumption resulted from legislative action or from deliberate governmental intervention; this was the case in Italy, Finland and Pakistan. In the first two countries, consumption fell by two-thirds in just a few years and in the case of Pakistan it was suppressed beginning in 1977 in order to prevent abuses. Finally, it is distinctly possible that in certain cases the substitution of synthetic products was not linked to the codeine supply situation.

43. Whatever the reasons, the replacement of codeine by other substances is a trend which could be retarded and even stopped altogether, were codeine to become available in greater amounts and with greater reliability. But a reversal of this trend will require a great deal of time. In the medium term, an increase in codeine consumption in the group of countries considered would be a reflection of significant growth in such countries as Spain, South Africa, Egypt, Turkey, etc. Consumption in these countries between 1981 and 1985 might amount to between 52 and 60 tonnes, and in light of the conclusions mentioned in paragraph 38, total consumption could reach between 162 and 185 tonnes of anhydrous base codeine. 44. Table 2 (Annex A) contains a list, in descending order, of the countries in which, for a period of at least five years between 1950 and 1979, annual consumption was equal to or greater than 50 kg per million inhabitants. It will be observed that the major consumer countries in absolute terms are not necessarily among the leaders in per capita consumption. Of the 39 countries listed in this table, consumption has increased at least during the last decade in eleven (Canada, Switzerland, United States, Norway, Guyana, South Africa, Spain, Romania, Portugal, Malta and Malaysia), the trend has been towards a levelling off in consumption in seven (Federal Republic of Germany, United Kingdom, France, Iceland, Netherlands, Turkey and Singapore), while consumption has fallen in 21, or more than half of those listed. Among the latter, only Sweden, the German Democratic Republic, Argentina and Uruguay showed a drop before 1965; the decline occurred in all the others after 1970.

45. The long-term prospects for codeine consumption are linked, in the first place, to advances in scientific research and, secondly, to the possibilities of access to medicaments on the part of the greatest possible number of people in the third world.

46. It is up to health professionals - pharmacologists, toxicologists, physicians, etc - to decide which drug is the first choice for treating a specific ailment. Once this decision has been made, economic factors come into play: availability, regularity of supply, price, etc. Temporarily, economic factors may make it necessary to resort to a second choice drug, but such factors must ultimately give way to the overriding concern of public health. In other words, licit requirements for drugs in general and opiates in particular should determine the level of supply and not vice versa. The countries which produce the raw materials used in opiate manufacture must be willing to draw the necessary conclusions from this principle, with all its related consequences.

47. That having been said, the eventuality that an opiate such as codeine will soon be replaced by a new product that is safer and more efficacious and that will immediately become established everywhere in the world market is unlikely. The procedures for licensing a product and for obtaining the authorization to market it are frequently very lengthy. Even after that, a great deal of time is required before the product becomes well known and is accepted by the medical community. Finally, it is rare that the efficacy of a product is not accompanied by certain secondary effects, some of which may come to light only after many years of use. The placing under international control of certain substances introduced more than 20 years ago provides examples in point. In comparison with all the new products, codeine offers the advantage of being a drug whose therapeutical qualities and drawbacks are well known and which has stood the test of time.

48. Scientific research and innovation are not always reflected in substitution, but occasionally in terms of complementarity. There is a considerable number of preparations in which the main active component is associated with codeine. As a consequence, the success of other substances may, in certain cases, lead to increased consumption of codeine. 49. Finally, even in the case of substitution, economic factors sometimes come into play to resist change. The numerous existing preparations must be on the market for a minimum period if they are to be profitable. In conclusion, the direction of progress in scientific research is not solely towards the reduction of codeine consumption, and, when such a reduction occurs, it can only be gradual, thus giving time for the necessary adaptation.

50. It follows from Table 2 that most of the developing countries have a very low consumption of codeine. Even taking into account the preparations mentioned in Schedule III of the 1961 Convention, the non-industrialized countries as a whole must have a consumption level amounting to about 20% of the total. However, morbidity in these countries is characterized by a considerable prevalence of diarrheal diseases. In the list of essential drugs prepared by a group of experts of the World Health Organization, 3/ codeine is the only drug quoted for symptomatic antidiarrheal and antitussive treatment. Consequently there is a considerable potential need for codeine in developing countries.

51. The efforts of the developing countries to facilitate access to health care for a large sector of the population which is deprived of it should inter alia result in an increase in the consumption of codeine.

Consumption of dihydrocodeine

52. Quantitatively speaking, dihydrocodeine (Annex A, Table 3 and Figure III page 16) is the most widely used opiate after codeine. Consumption, which was only just over 1 tonne in 1955, rose constantly to reach 9.6 tonnes in 1970 and then stabilized between 1971 and 1976 at the level of 8.3 tonnes. There was a further upturn in 1977, and consumption of dihydrocodeine exceeded the level of 10 tonnes for the first time in 1978. This trend is essentially the result of the development of the use of this substance in the only two countries whose consumption is above 1 tonne, namely, Japan and the United Kingdom. The other countries, the largest users among which are the United States, the Federal Republic of Germany, the Republic of Korea and Italy, consume only about one-third of the total.

53. The consumption of dihydrocodeine in Japan amounted to nearly half of the total between 1960 and 1970. During this period consumption rose constantly, from 1291 kg in 1960 to 4854 kg in 1970; it then declined rapidly and reached the level of 2144 kg in 1975; during subsequent years, a slight upturn began, but it is still quite far from the level achieved in 1970. The Japanese authorities attribute this development to the difficulties of supply. They anticipate a slight recovery of consumption in 1980 and 1981, followed by stabilization.

3/ World Health Organization, Technical Report Series, 1979 - No. 615. Figure III. TOTAL CONSUMPTION OF OPIATES OTHER THAN CODEINE*

* Consumption expressed in actual weight of the substance except opium, which is expressed in its morphine equivalent. 54. From 1974, the United Kingdom became the leading consumer of dihydrocodeine and maintained that place during subsequent years, except in 1976 and 1977, when Japan again took first place. In twenty years, the use of dihydrocodeine in that country increased by a factor of 23, reaching 3557 kg in 1979. Even more rapid growth of consumption occurred in the United States from 1970, consumption increasing from 54 kg to 889 kg by 1979. On the other hand, the pattern of growth in the Republic of Korea and Italy has been similar to that already described for Japan, with a regression in 1976. In the Federal Republic of Germany, the country which was the first to introduce the use of dihydrocodeine, consumption has been irregular, showing a slight rising trend. The total utilization by countries other than those mentioned above has a tendency to remain fairly stable.

55. Taking into account these various developments, the total consumption of dihydrocodeine in the next five years should lie between 9.5 and 11.5 tonnes.

Consumption of ethylmorphine

56. The total consumption of ethylmorphine (Annex A, Table 4 and Figure III page 16) developed in steps between 1963 and 1971, rising from an average of 7350 kg for the period 1963-1967 to 9250 kg between 1968 and 1971. From 1972 onwards it began to decline, reaching 7100 kg in 1978 and 1979.

57. France is the largest consumer of ethylmorphine; its relative share of the total was nearly one-third until 1972 and increased subsequently as the result of the drop in consumption in other countries. After increasing sharply in 1968, utilization of ethylmorphine in France stabilized at the level of about 3160 kg.

58. India is the second largest consumer of ethylmorphine, with 1003 kg in 1980, a figure reached after growth in which consumption quadrupled from 1964. In Hungary, consumption, which has stabilized at approximately 620 kg between 1968 and 1977, fell abruptly to about 400 kg in 1978 and 1979.

59. In other countries, the consumption of ethylmorphine is either stable or on the decline; it has even ceased altogether in Vietnam (1974) and Mexico (1976). As an example, consumption of this drug fell in Italy from 1092 kg in 1971 to 90 kg in 1980 and in the USSR from 1000 kg in 1968 to 400 kg in 1980.

60. In the next five years the consumption of ethylmorphine should lie between 7 and 8 tonnes.

Consumption of pholcodine

61. The total consumption of pholcodine (Annex A, Table 5 and Figure III page 16), which reached 6544 kg in 1978, has tripled since 1964. France on its own consumes more than half of the total. The United Kingdom is the second largest user of pholcodine, with consumption that seems to have stabilized since 1968 at about 1 tonne per year. On the other hand, utilization of this drug seems always to be rising slightly in France, and the same is true of most of the other countries. In view of these trends, it is assumed that the use of pholcodine will develop in a range between 6 and 7.5 tonnes in the next five years. Morphine consumption

62. There is a long-standing downward trend in the use of morphine as such (see Annex A, Table 6 and Figure III, page 16) probably due to the existence of "synthetic alternates" that are equivalent to and may, in some respects be superior to the opiates for the relief of moderate to severe pain; and some of which are being used to a considerable extent. 4/ Of the seven countries which had been using more than 100 kg per year since 1964, that is, the USSR, the United Kingdom, the United States, India, Pakistan, Australia and the Federal Republic of Germany, all except India have subsequently registered a fall in consumption. In 1972 total consumption of the substance fell for the first time ever below 2 tonnes, the level at which it should stabilize for the next five years.

Opium consumption

63. Consumption of opium preparations in the form of extracts, tinctures, etc. (Annex A, Table 7 and Figure III, page 16) has followed the same trend as morphine consumption. In 1964 six countries were using more than 1 tonne of opium for this purpose: India, the USSR, 5/ the United Kingdom, the United States, France and Bulgaria; in subsequent years all recorded a considerable fall in consumption levels. Since 1975 opium consumption has varied between 15 and 20 tonnes and it should remain in this range between 1981 and 1985.

Overall demand for opiates between 1981 and 1985

64. The conclusions drawn in the foregoing paragraphs concerning the possible development of demand for the major opiates between 1981 and 1985 are reflected in the first column of the table below; the second column expresses them in terms of morphine equivalent. According to these estimates, the amount of opiates required for medical and scientific purposes should be between 195 and 224 tonnes of morphine equivalent between 1981 and 1985.

Projection of overall demand for opiates between 1981 and 1985

Amount required by Amount required in terms weight of morphine equivalent Opiate (tonnes) (tonnes)

Codeine 162 - 185 168.8 - 192.8 Dihydrocodeine 9.5- 11.5 9.9-12 Ethylmorphine 7-8 7.7-8.8 Pholcodine 6 - 7.5 4.9 - 6.2 Morphine 2-2 2-2 Opium 15-20 1.5-2

Total 194.8 - 223.8

4/ World Health Organization, Technical Reports Series 1972, No 495, page 18, Conclusions (1).

5/ Opium consumption in the USSR has stopped completely since 1976. Demand for thebaine

65. For a long time thebaine was a by-product which one did not seek to recover because its conversion into other opiates was difficult and gave only very small yields. However, owing to the difficulties in obtaining supplies of morphine at the beginning of the 1970's and to technical advances, ever increasing quantities of thebaine have been recovered; the quantity of this drug manufactured rose from 5.3 tonnes in 1970 to 12.9 tonnes in 1978. This substance is also obtained in very small quantities from poppy straw; however, the thebaine content of poppy straw varies according to the country, and in certain manufacturing processes it cannot be recovered.

66. Apart from the opiates mentioned above, only oxycodone and hydrocodone are used for medical and scientific purposes in quantities greater than 100 kg per year. Amounts of these substances required were not included in over all consumption because they are mostly manufactured from thebaine, which is a by-product of the extraction of morphine and natural codeine from opium, poppy straw and concentrate of poppy straw. Some thebaine is also produced from Papaver bracteatum straw. Thebaine is further used in manufacturing codeine, etorphine, naloxone, naltrexone, nalbuphine and drotebanol.

67. Following the appearance of the new preparations containing nalbuphine, there were fears that thebaine might become scarce. Industrial yields from the conversion of thebaine into other substances are sometimes lower than 50%, so that a relatively large quantity of thebaine is needed to manufacture a small quantity of the end product. These fears have been heightened by the cutback in opium use in favour of concentrate of poppy straw since most thebaine is derived from opium. Thus in 1979 only 9.7 tonnes of thebaine were manufactured as against 12.9 tonnes the year before. Future thebaine requirements must therefore be evaluated.

68. Consumption of oxycodone, 90% of which is used in the United States, has more than tripled since 1964, increasing from 575 kg to 1797 kg in 1979. Within five years it could reach the 2 tonne mark, equivalent to 2.7 tonnes of thebaine. The United States is also the country which uses most hydrocodone, accounting for nearly two-thirds of total consumption. Hydrocodone consumption has increased little since 1964, reaching 964 kg in 1979. Future requirements for the next five years can be estimated at 1 tonne of hydrocodone per year, or the equivalent of 2 tonnes of thebaine. Thus annual requirements of thebaine for the manufacture of oxycodone and hydrocodone might be of the order of 4.7 tonnes per year. If a possible increase in demand for thebaine for the manufacture of nalbuphine is added to this figure, thebaine requirements could be as high as 7 or 8 tonnes, which could be derived from 670 tonnes of opium, at an average yield of 1.2%. 69. At present much thebaine is also used to manufacture codeine and dihydrocodeine, which are normally obtained from morphine and codeine, respectively. Much of the hydrocodone manufactured is in turn converted into dihydrocodeine. Consequently, if need arises, thebaine could be reserved for the manufacture of substances which cannot be manufactured from any other substance, but it will probably not come to that.

70. To sum up, there should be enough thebaine available during the next five years, without resorting to the measures described in paragraph 69, and a fortiori, without having recourse to the manufacture of thebaine from morphine by means of a process that is at present uneconomic. CHAPTER III

PRODUCTION OF RAW MATERIAL FOR THE MANUFACTURE OF OPIATES

71. Almost all opiates are currently manufactured from opium and poppy straw; however, some thebaine is being extracted today from Papaver bracteatum straw.

OPIUM

72. The total production of opium 6/ like so many other agricultural products, has always been characterized by cyclical movements with periods of abundance followed by periods when stocks were drawn down substantially to assure the supply of current needs. In the course of the three last decades four cycles have succeeded each other with peaks (highs) and troughs (lows) corresponding to the following periods:

HIGHS LOWS 1953 1004 tonnes 1954 - 1957 618 tonnes 1960 - 1962 1156 tonnes 1965 - 1968 725 tonnes 1969 - 1972 1162 tonnes 1973 - 1975 960 tonnes 1978 - 1979 1529 tonnes

Figure IV at the end of this Chapter provides a graphic account of this cyclical development.

6/ Production of the following countries: India, Turkey (until 1972), the USSR (until 1973), Yugoslavia (until 1973), Bulgaria, and Japan as well as the production of Iran until 1955. 73. Opium production, which was superabundant before the Second World War, had decreased considerably thereafter and had fallen in 1949 for the first time below medical needs. These needs represented by a discontinuous line in Figure IV practically tripled between 1950 and 1980. On the other hand opium production, putting aside the periodic fluctuations, had remained remarkably stable until 1972: the highs and lows were produced at about the same levels at intervals of several years. Thus the average production from 1969 to 1972 (1162 tonnes) was only six tonnes different from that of 1960 - 1962 (1156 tonnes). The stability of opium production until 1972 is demonstrated by the fact that the abundant harvest of 1960 (1247 tonnes) was an absolute maximum for seventeen years, exceeded only in 1978 (1646 tonnes) and in 1979 (1413 tonnes). The last cycle after 1972 has clearly evolved at a higher level than the other cycles with a low in 1974 less pronounced than in the past and a high in 1978 never before reached since the end of the Second World War.

74. From 1950 to 1980 opium production was greater than consumption during five years only: between 1950 and 1953, and in 1960. Since 1964, production has been on the average 1044 tonnes per year, sufficient to cover 59 % of the current needs.

75. Between 1964 and 1980, the period chosen for the basic data for the current Study, nine countries produced at least during some years opium for legal requirements: Bulgaria, the People's Republic of China, India, Iran, Japan, Pakistan, Turkey, the USSR and Yugoslavia. This Study does not cover the legal requirements of registered opium users in Iran and also not the quasi-medical requirements of Pakistan, which absorbed the total licit production of these two countries. From 1979 poppy cultivation was prohibited in these two countries. The statistics for this Study also do not include the medical and scientific needs of the People's Republic of China and its licit production for its internal requirements. Consequently total opium production is understood as the production of the six other above-mentioned countries. The production of India, Turkey, the USSR and Yugoslavia will be studied in further detail. Bulgaria and Japan produce only some kilogrammes of opium per year.

Poppy cultivation and opium production in India

76. Under the Indian Constitution opium poppy cultivation and opium production and export are the responsibility of the central Government. Control is exercised pursuant to the laws of 1857, 1878 and 1930. On 1 April 1950, control passed by law from the states to the Government of India, and the control laws became applicable uniformly in the states of the Indian Union. Poppy cultivation was initially permitted in four states for the production of opium for the central Government, in two states for consumption inside those states only and in two states for the production of poppy heads and seeds only. By 1961, cultivation was limited to three states; and the central Government was purchasing all opium produced. 77. Opium poppy cultivation is permitted only under individual licenses issued by the Indian Government on approved tracts determined by cadastral surveys in the three states. The Government policy has been to limit production and consequently acreage cultivated to a level sufficient to satisfy legitimate internal consumption, to maintain exports and to establish a reasonable reserve. The guiding principle of licensing enunciated repeatedly by the Government has been to eliminate uneconomic and undesirable cultivators and unproductive tracts by progressively stepping up the minimum yield qualifying a cultivator to receive a license. Licensing criteria were further tightened in 1960, based on the average harvest during the preceding three-year period, and only cultivators whose production was continuously satisfactory during that period were permitted to continue. The Government estimates that as of 1977-78, the number of growers was 245161; about 3.7 million people depended on opium production for their livelihood, and opium production contributed 20 % of the gross product of the poppy growing areas. (For the full Government statement see Annex C.)

78. Data on opium poppy cultivation and opium production in India are given in Annex A, Table 9. An examination discloses the efficacy of the system of licenses as a means of regulating opium production. In fact the areas sown are only slightly less (-3.7 % on the average between 1964 and 1980) than the areas for which licenses were granted. In the same way almost the entire area sown has been harvested (99.35 % on the average). Furthermore, the yields, although variable, are relatively predictable. Except for the harvest of 1974 when only an average of 17 kg per hectare was produced, the yields since 1974 have always been greater than 20.5 kg per hectare and less than 32.2 kg per hectare. The average yield for the entire period has been 24 kg per hectare with an average variation of 2.6 kg per hectare. Consequently the harvest could be predicted with sufficient precision.

79. The precision of the forecast of harvests can be improved by taking account of a tendency for the yield to be inversely proportional to the total areas cultivated. This is because the licenses are given by priority to growers who have obtained the best yields. However, in the last decade, a perceptible improvement in yields has been achieved, permitting increased yields over substantial areas: the 1978 and 1979 harvests are notable examples.

80. Following the accumulation of substantial opium stocks between 1960 and 1962 the cultivated area was decreased to 12072 hectares in 1966. From 1966 the area was progressively increased, except in 1973 and 1975, until it reached 64784 hectares in 1978. In the two succeeding years a rapid decrease took place, bringing the area down to 35921 hectares in 1980. The cultivated area was on the average 38175 hectares between 1964 and 1980. During this same period opium production varied between 340 and 1646 tonnes and was on the average 890 tonnes per year.

Poppy cultivation and opium production in Turkey

81. In 1933 Turkey had created an opium monopoly to limit production to export needs, to absorb stocks and to introduce modern techniques into opium cultivation. The 1933 law also provided for a licensing system, which was long delayed in application for lack of a cadastral land survey. Previously, no permit had been required for a cultivator, who could dispose freely of his production. During the years following the Second World War, Turkey was after India the most important producer of opium. 82. In 1959 a law obliged cultivators to deliver their total production to the Government Office of Soil Products. This put an end to the free internal market and to a system of approved intermediaries who had purchased opium from cultivators to resell it to the Government. In place of a licensing system, certificates were required from cultivators stating the area and the location of the cultivation.

83. From 1959 to 1961 cultivation of opium was permitted in 42 of Turkey's 67 provinces. Beginning in 1962, the Government progressively reduced the number of provinces where opium poppy cultivation was authorized, eliminating in particular those provinces near frontiers and concentrating the production towards the centre of the country for more effective control. From 1962 to 1972, the year when opium poppy cultivation was stopped, the number of authorized provinces was reduced to 25 in 1963, 19 in 1966, 9 in 1969, 7 in 1970 and 1971 and finally 4 in 1972.

84. Turkish opium production perceptibly decreased after 1964. Between 1950 and 1963, Turkish production as evidenced by the purchases of the Soil Products Office was on the average 205 tonnes per year. Between 1964 and 1972, the last year in which poppy cultivation was authorized for the production of opium, the average annual production had fallen to 102 tonnes per year. The reduction of the number of provinces in which cultivation was permitted was undoubtedly a factor in reducing the amounts purchased by the Soil Products Office. Another factor was a tendency for farmers, in the face of the maintenance by the Government of the purchase price of opium at the same level between 1960 and 1970, to cultivate the poppy for seed and oil and for unincised straw for export and to reduce their production of opium accordingly.

85. With the progressive reduction in the number of authorized provinces the cultivated area, estimated on the basis of producers' certificates, correspondingly decreased from 42800 hectares in 1960 to 28000 hectares in 1964 to 13000 hectares in 1968. Cultivated area reported for the years 1966 - 1968 included poppy cultivated for the production of seed and oil. In 1970 and 1971, cultivation estimated on the basis of producers' certificates (10028 and 13477 ha respectively) was substantially higher than the actual cultivation (7045 and 9100 ha respectively). The cultivated area for 1972 of 6383 hectares was based on an actual survey of the fields cultivated.

86. In 1958 the Turkish Government reported that 100000 families of farmers were engaged in poppy cultivation. Prior to 1960 the actual number of cultivators was unknown because producers' declarations were not required before that date. From 1960 to 1971, the number of cultivators was calculated on the basis of certificates of producers. In 1964, the number was 160671; in 1971 it had fallen to 89283. In the intervening period the number fluctuated upwards and downwards in a descending scale between 134180 and 71751, but not invariably corresponding to the reduction in the number of authorized provinces. In 1972 the number of cultivators receiving individual licenses was reported to be 21761. Poppy cultivation and opium production in the USSR

87. The USSR was until 1973 one of the three major producers along with India and Turkey of opium for morphine manufacture (Table 8). The entire production was used within the country. Production reached a peak of 226 tonnes in 1970, then declined to 93 tonnes in 1973, the last year of production. Production was terminated as the result of a long-term policy of the progressive substitution of poppy straw for opium as the raw material for the extraction of morphine.

88. From 1948, the control of cultivation had been entrusted to a Central Board of Administration under the Ministry of Public Health, which was given a monopoly of the cultivation of the opium poppy in the Soviet Union. Cultivation was limited to a very few regions and was carried out under license on a small number of state and collective farms under state supervision. Internal controls were intensified during the harvest. The entire crop of raw opium was delivered to state pharmaceutical factories for processing under strict official inspection.

Poppy cultivation and opium production in Yugoslavia

89. Yugoslavian production of opium reached its peak in 1930 at 140 tonnes. Falling in 1932 to 8 tonnes, it recovered to 75 tonnes in 1939 but never again exceeded the 1930 level. From 1964 to 1973, it fluctuated from 1 to 9 tonnes (Table 8), and reports for that period invariably indicated that production was adversely affected by winter frosts and rain during harvest. Extraction of morphine from poppy straw was begun in the late 1960's, was expanded, and had replaced the opium process by 1973, the last year of opium production.

90. In 1931 Yugoslavia by law had limited cultivation to certain regions, and in 1932 established an opium export office to have a monopoly over exports and to control production. In 1964, the law was amended to apply the provisions of the Single Convention. Opium cultivation took place on small areas; from 1965 it was reported to be restricted to the Republic of Macedonia. Cultivation and production were under the supervision of the administrative commune, which reported to the republic authority, which in turn was responsible to the federal authority. The state agency having sole authority to buy, manufacture and export, contracted with cultivators, fixed the cultivated area and took delivery of all opium produced. The number of cultivators, some of whom grew the crop for seed and straw only, varied between 15000 and 30000 and was usually about 25000.

POPPY STRAW

91. The three principal products of poppy cultivation have been opium, seeds for the baking industry and poppy seed oil. The seeds are important in the dietary traditions of certain regions such as Turkey, India and Eastern Europe. The capsules when separated from the seeds have had only little or no economic value.

92. Europe, a center for the consumption and the exportation of alkaloids, is a continent where the poppy is extensively cultivated. From there the idea emerged of using poppy straw, a cheap and locally available raw material, for the extraction of alkaloids, and rare are the European countries which have not tried with varying degrees of success, following the example of Hungary, to engage in the exploitation of this resource. 93. Despite this interest poppy straw had remained until 1970 a by-product. On one hand the fluctuations in cultivated area responded to the demand for the principal products and not to the demand for straw. On the other hand the traditional nature of this cultivation and the dispersion of the plantings made the collection of the straw rather uneconomic. Only a part of the straw produced was recoverable to the point that certain manufacturing countries had recourse to imports of straw.

94. The treaty conference of 1961 did not deem it useful to require statistical reports on the production of poppy straw. In fact, the accumulation of information on a material which was not a narcotic drug by definition although it contained a very small proportion of alkaloids, and which was a waste material, was not a subject of great interest. The situation was different for that part of the production acquired by the manufacturers. This quantity would permit a precise determination of the availabilities, and by comparison with the utilization (the only data on poppy straw actually required by the treaties except for international trade), an evaluation of stocks.

95. This situation has completely changed since 1970 with the development of poppy cultivation for the production of poppy straw as the principal product. Such is the case in France, Australia and Spain. Turkey since 1974 should also be placed in this category although the seeds have an importance in Turkey at least equal to that of the straw. These four countries have voluntarily established a system of control similar to that provided by the treaties for poppy cultivation for the production of opium, and they provide voluntarily data on the area of poppy cultivation and the production of straw and stocks of straw.

96. Complete data on the production of poppy straw is available only for those countries where the poppy is cultivated for the principal purpose of producing straw for the extraction of alkaloids. The total production of Australia, France, and Spain and of Turkey since 1974 has been calculated in equivalent morphine content (Annex A, Table 14, Figure II). For those countries which were historically the first to use poppy straw for the manufacture of alkaloids, but where the poppy is cultivated principally for seeds and oil, data on the total production of straw are not available and in fact are not relevant to our Study, since only part of the straw produced is used for the manufacture of opiates. The approximate quantities of domestic straw used during each year by these countries for the extraction of alkaloids (Table 14, Figure I) have been calculated, also in tonnes of equivalent morphine, as follows: the quantities of straw actually used in the extraction of alkaloids have been increased by the amounts of straw exported and reduced by the amounts of straw imported.7/ As for India, and for Turkey before 1973, only the quantities exported have been included, in tonnes of equivalent morphine, (Table 14, Figure III), since the remainder of their production did not enter into the manufacture of opiates.

7/ In those few cases where this calculation resulted in a negative figure for production for a given year, the negative figure was replaced by zero in that year, and the negative figure was subtracted from the quantities utilized in the following year or years. 97. From Table 14 one can see the steady increase in the quantities of poppy straw produced for the extraction of alkaloids. The quantities doubled between 1964 and 1971, and doubled again between 1971 and 1979; however they fell to a lower level between 1972 and 1974 due to the prohibition of poppy cultivation in Turkey during those years. In absolute terms the quantities increased from 37 tonnes (morphine equivalent) at the beginning of the period to the highest level of 207 tonnes in 1977. From 1978 to 1980, quantities declined from this record level due to a net reduction by Australia, France and Turkey, which cut back cultivation and production to adjust to the situation of oversupply which was building up.

98. At the United Nations Conference for the Adoption of the Single Convention in 1961, it was accepted that poppy straw was needed as a supplement to opium to meet the total demand for alkaloids. One delegation argued without objection being raised that the quantity of alkaloids manufactured from poppy straw greatly affected world prices, acting almost as a price regulator.8/ In Figure IV page 33 we see that from 1964 to 1976, production of opium and poppy straw moved in much the same pattern, increasing and decreasing during the same periods. In 1977, poppy straw production peaked at a level higher than opium, and then fell along with opium production to corresponding levels. In fact, from 1975 to 1979, increased poppy straw production, when added to increased opium production, resulted in the expansion of total raw material supplies to levels in excess of consumption requirements.

99. Table 14, Figure I discloses the stability of the contribution of those countries producing poppy straw primarily for purposes other than alkaloid extraction. Over the entire period the annual production of those countries fell below 20 tonnes in one year only, exceeded 40 tonnes in one year only, and averaged 31 tonnes per year. The development of poppy straw production in some of these countries is briefly discussed below. (Statements by Poland and Romania are included in Annex C).

100. In Hungary, where an economic process for the extraction of alkaloids from poppy straw was first developed and had been applied since 1931, the principal product of poppy cultivation continues to be poppy seeds for bakeries, with annual requirements of 3000 to 3500 tonnes. Alkaloid production depended exclusively on domestic poppy straw production until 1950 after which straw was imported to supplement domestic supplies. Initially the major part of supplies came from private farms of less than one hectare; now the major supplies come from state farms and co-operatives. The cultivated area has varied between 2000 and 6000 hectares and in 1981 was 5000 hectares. (See Annex C for the statement of Hungary).

101. In Yugoslavia, one of the first countries to change from the opium to the poppy straw process, poppy seeds also constitute the principal product, and the demand for seeds both for the domestic market and for export has determined the acreage devoted to poppy cultivation. Since domestic poppy straw production was insufficient for manufacturing requirements, imports were made. The cultivated area since 1964 has varied

8/ Records E/CONF.34/24, pp. 37-41; E/CONF.34/24/Add.1, pp. 66-69, 148-153. from 1000 to 10000 hectares, and has averaged about 2700 hectares annually. In the future it is expected to meet manufacturing requirements by adding to 3000 tonnes of straw obtained from Papaver somniferum, 1500 tonnes of straw to be obtained from Papaver bracteatum, thus eliminating the need for imports of straw. (See Annex C for the Government's fuller statement.)

102. In the Soviet Union, the oil-bearing poppy is cultivated for seeds, poppy oil and straw, mainly in the European part of the country. Requirements for poppy seed both for domestic consumption and for export have been substantial. Poppy oil is used mainly in bakery products. It was the experience in the Soviet Union that morphine could be obtained at lower cost there from poppy straw than from opium. Consequently, poppy straw was used increasingly in preference to opium as a raw material for alkaloid extraction until opium production ceased entirely in 1973. It was also felt that a more effective control was possible over poppy straw.

103. Countries producing poppy straw primarily for alkaloid extraction (Table 14, Figure II) made no contribution to supplies before 1970, except for a very small French production. From 1964 to 1972, Turkey was the principal supplier after the countries listed in Table 14, Figure I. Turkish exports of poppy straw increased from 6.3 tonnes (morphine equivalent) in 1964 to a high of 37.7 tonnes in 1971. They constituted one-half of all straw available for alkaloid manufacture in 1966, 46% from 1969 to 1971, and an average of 36% during the nine-year period.

104. From 1971 the production of the countries listed in Table 14, Figure II had an increasing impact. In 1970 Australia and France together produced 2.8 tonnes (morphine equivalent), in 1974, 12.6 tonnes. In 1975, production rose to 39 tonnes as Turkey resumed exports. In 1976 these countries provided for the first time more than one half of total poppy straw supplies for alkaloid extraction. In 1977 at their highest level of 173.7 tonnes, they provided 84% of the total. From 1975 to 1979, their share was 74%. Turkish production alone at its peak in 1977 constituted more than one half of total supplies and from 1975 to 1979 accounted for an average of 46% of the total.

105. The development of poppy straw production for alkaloid extraction in Australia (Annex A, Table 10) is described by the Government in Annex C. Commercial production began in 1971 on the initiative of a United Kingdom manufacturer primarily for manufacture for export to the British market. Production was substantially increased from 1976 to meet the needs of the first factory, which was expanded, and of a second plant established by American and Polish interests. The poppy is cultivated exclusively in the island state of Tasmania, under ideal conditions, in rotation with other crops, with irrigation available, on portions of single operator farms having an average area for all purposes of 100 to 150 hectares. Up to 900 farmers are involved in an intensive, mechanized, research-based agro-industry. Seeds are also purchased and marketed but are of secondary value. Acreage has varied from 1000 to 9000 hectares, with 5000 hectares deemed to be the optimum; 3742 hectares were harvested in 1981. Production was increased from less than 500 tonnes in 1971 to a maximum of 7665 tonnes in 1979. Acreage and production were then reduced to adjust to market requirements and to take account of carry-over stocks, but high yields, the world's highest (0.81% in 1980) partly offset the effect of the acreage reductions. The estimate of the area to be sown in 1982 is 4940 hectares, however. 106. Poppy cultivation and poppy straw production in France (Annex A, Table 11) is described by the Government in Annex C. Because of ruptures in supplies in the past and the risks of too great dependence on foreign suppliers, it was deemed necessary to provide for essential domestic requirements and export obligations through domestic production. From 1964 to 1971, cultivation was increased from 350 to 1000 hectares and straw processed to 600 tonnes. Beginning in 1972, cultivation was expanded from 2720 to 7650 hectares, and production has varied since then between 3100 and 9129 tonnes. Future acreage is forecast at 4000 - 5000 hectares and production of green straw at from 4000 to 5500 tonnes. In France also increasing yields (0.45% in 1980) partially vitiated the effects of acreage reductions upon total production. In France poppy straw must compete in price and returns with other traditional crops. The seeds of the green straw are of second quality, are a source of inferior oil and have an uncertain market. Poppy cultivation is concentrated in eastern France, and is carried out on about 1000 farms on plots which are limited to from 4 to 6 hectares for more effective control.

107. The situation in Turkey is described by the Government in Annex C. Up to 1972, poppy straw in Turkey was a by-product of the cultivation of the poppy for seeds and oil or for the production of opium. The poppy plant has always served many essential purposes for the Turkish farmers: seeds for baking, oil for cooking, stalks for fuel for heating, waste for animal feed. In addition substantial quantities of straw were exported for use in the extraction of alkaloids abroad (Table 14, Figure III).

108. In 1971 the Government prohibited the cultivation of the opium poppy in Turkey from the autumn of 1972 as a radical measure to prevent the diversion of opium to the illicit market. In the face however, of national opposition to the ban on cultivation, and the demonstration of the social and economic importance of poppy cultivation, the Government decided to resume cultivation in 1974 on condition that the poppy not be lanced and that opium not be produced. The Government had the support of the United Nations and has benefited from United Nations assistance in the transition to the poppy straw process. Since 1974, poppy straw has been produced for the extraction of alkaloids. This extraction has taken place abroad while awaiting the Turkish alkaloid factory to become operational (Annex A, Table 12). Between 1975 and 1980 poppy acreage increased from 8500 hectares to a maximum of 72000 hectares, and then declined to 18000 hectares. In the same period straw production rose from 5800 to 36000 tonnes and then decreased to 13000-14000 tonnes. The current policy is to restrict acreage to 40000 hectares and production to 20000 tonnes. In view of the accumulation of stocks, the acreage is to be kept at 30000-32000 hectares, and production at from 13000-14000 tonnes. Stocks will not be allowed to fall below 20000 tonnes, equal to the annual requirement of the alkaloid factory. Cultivation is limited to seven provinces and is subject to individual license. There are about 120000 licensed growers. 109. The situation in Spain, the latest poppy straw producer to enter into commercial production, is described by the Government in Annex C. Spanish production has been exclusively for domestic requirements. The policy objective has been to attain national self-sufficiency in raw material supplies and thus to avoid a recurrence of the serious supply difficulties Spain encountered in the early seventies. Based on the results of experimental cultivation in 1972 and 1973, commercial production began in 1974. Acreage sowed was increased between 1974 and 1980 from 104 to 3200 hectares, and production from 20 to 942 tonnes of poppy straw (Annex A Table 13). In the short period of three years (1978-1980) yields were increased to 0.61%, with even higher yields anticipated, assuring the fulfillment of internal requirements. Poppy straw is produced on about 100 plots involving some 3000 workers.

110. Indian exports of incised poppy straw (Table 14, Figure III) first came on the market in 1972, (capsules used for decorative purposes excepted) in response to supply difficulties, at the same time as Turkish production and exports temporarily ceased. At their highest level in 1976 they were an important contribution to supply, reaching 31 tonnes equal to one-fourth of total straw available in that year. Subsequently they steadily diminished and practically ceased by 1980. As a by-product of opium production they remain a potential raw material source, however. Unlike opium, poppy straw in India is not sold by the Government or subject to Government monopoly, but is collected and exported by private traders.

Papaver bracteatum

111. Papaver bracteatum differs from Papaver somniferum in that it is perennial, and is a source of thebaine as its principal alkaloid. It is indigenous to northwestern Iran and bordering areas in neighbouring countries, and the early research on its possible utilization for the manufacture of alkaloids took place in Iran.

112. International interest in Papaver bracteatum as a possible commercial source of alkaloids began in the early 1970's as a result of the temporary shortage of raw material supplies for the manufacture of morphine and codeine. The Commission on Narcotics Drugs encouraged and supported research on Papaver bracteatum as an additional source of codeine, which could be derived from thebaine. The research was conducted in various countries, and was co-ordinated at the international level by the United Nations Narcotics Laboratory of the Division of Narcotic Drugs. This collaborative research project began in 1972 and resulted in four meetings of working groups of scientists organized by the United Nations Laboratory, which took place in 1972 at Geneva, in 1973 at Teheran, in 1974 at Beltsville, Maryland, USA and in 1976 at Rennes, France. Certain drug manufacturers were represented at these meetings as observers. The United Nations Fund for Drug Abuse Control contributed $79700 to the research project during the five-year period 1972-1976. 113. Under this international research project, the United Nations Laboratory upon request provided small samples of seeds for research purposes and experimental cultivation to scientists in a total of thirty-seven countries, namely, Algeria, Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Egypt, the Federal Republic of Germany, the German Democratic Republic, Ghana, Greece, Hungary, India, Ireland, Israel, Italy, Japan, Madagascar, Mexico, the Netherlands, New Zealand, Norway, Pakistan, Poland, Romania, Senegal, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Turkey, the United Kingdom, the United States and Yugoslavia. The original plant material was obtained mostly from Iran, which provided seeds of two main varieties.

114. The research under the guidance of the working groups related to breeding selection, plant improvement, seedling establishment, weed and disease control, and harvesting practices. Investigation was also carried out on methods of extracting thebaine, the biosynthesis, translocation and metabolism of thebaine in the plant, precursor studies for the improvement of yields, and the seeds and oil. The reports of the working groups with respect to the research were made available to the Commission on Narcotic Drugs and to Governments.9/

115. The Single Convention on Narcotic Drugs subjects to international control the opium poppy, defined as the plant of the species Papaver somniferum L. Papaver bracteatum is not subjected to control by the Convention. Its principal alkaloid, thebaine, is however included in Schedule I of the Convention. The question of international control over Papaver bracteatum was raised at meetings of the Commission on Narcotic Drugs in 1976, 1977 and 1978.10/ In January 1976 a working group of experts convened by the United Nations Laboratory to evaluate the risks of the conversion of thebaine into drugs of abuse, expressed the view that Papaver bracteatum cultivation should be controlled in such a way as to prevent leakage of thebaine to the illicit market.11/ At the 1977 meeting of the Commission, some delegates expressed the view that lack of information on Papaver bracteatum cultivation and on the quantities used for the extraction of thebaine might interfere with a full assessment of the supply situation.12/ Subsequently at its session in 1981, the Commission adopted a resolution urging the voluntary reporting of statistics on the cultivation of Papaver bracteatum and the manufacture of thebaine-derived drugs obtained from Papaver bracteatum and recommending that the Board consider what steps are necessary to adequately monitor Papaver bractetum production and utilization.13/

9/ ST/SOA/SER.J/1, 2, 15 and 23. 10/ E/5771, E/CN.7/587 para 205, E/5933, E/CN.7/605 paras 345 et seq; E/1978/35, E/CN.7/621 para 305. 11/ MNAR/4/1976. 12/ E/5933, E/CN.7/605 para 363. 13/ Resolution 2 (XXIX). See Annex C. 116. At its session in February 1977, the Commission on Narcotic Drugs discussed the proposal which the United States reported it had under consideration, to permit the domestic cultivation of Papaver bracteatum to meet part of the United States requirements of narcotic raw materials.14/ The Commission adopted a recommendation that the Secretary-General transmit to all Governments the opinions and proposals expressed during the debate on these issues, and urged Governments of countries which up to then had not cultivated the poppy to give those views the most careful consideration in taking all decisions on issues related to starting the cultivation of Papaver bracteatum for commercial purposes.15/ The Economic and Social Council endorsed this recommendation in May 1977.16/ The United States subsequently withdrew the proposal from consideration. In August 1981, however, the United States Drug Enforcement Administration, in promulgating a regulation with respect to United States policy on the importation of narcotic raw materials, decided that concern about the future availability of thebaine (due to increased reliance upon concentrate of poppy straw for alkaloid extraction) was well-founded, and that consequently the United States Drug Enforcement Administration would give further consideration to currently existing policy with respect to narcotic raw materials, including the possibility of limited domestic production of Papaver bracteatum to satisfy some portion of United States narcotic raw material needs.17/

117. The Board has available limited information with respect to the cultivation of Papaver bracteatum for the commercial extraction of alkaloids and the production of thebaine from Papaver bracteatum. The Board has since 1977 requested information on how much thebaine manufactured annually has been obtained from sources other than opium, poppy straw and concentrate, but has received little information as a result. A few Governments have sent in information in 1981 in response to Resolution 2 (XXIX) of the Commission on Narcotic Drugs.

118. In 1975 Israel reported the extraction of 66 kg of thebaine from 3 tonnes of Papaver bracteatum imported from the United States in the course of research to determine the feasibility of commercial extraction. In 1980, three countries reported extraction of some thebaine from bracteatum; the United States (711 kg); Switzerland (18 kg); and the United Kingdom (0.094 kg). Poland has reported that although research on the cultivation of Papaver bracteatum was carried on for five years, Papaver bracteatum is not now cultivated in Poland and there is also no manufacture of thebaine-derived drugs obtained from Papaver bracteatum. Romania has reported that at present Papaver bracteatum is not cultivated in that country.

119. In 1981 Yugoslavia reported that it had 119.33 hectares of bracteatum under cultivation, having begun plantings in 1975. Yields have been obtained which are at least three times as high as from somniferum straw on the same acreage. Yugoslavia expects that a plant to extract thebaine from bracteatum will be ready for operation in 1982. Yugoslavia projects that its raw material requirements will be met in the near future by 3000 tonnes of somniferum straw and 1500 tonnes of bracteatum straw, making straw imports unnecessary after two years.

14/ E/5933, E/CN.7/605 paras 349-366. 15/ Recommendation I (XXVII), E/5933, E/CN.7/605 pp 118-199. 16/ Resolution 2067 (XLII). 17/ United States Federal Register - Volume 46, No 159 - p 41776. Figure IV. CONSUMPTION OF OPIATES AND PRODUCTION OF RAW MATERIALS Tons of equivalent morphine CHAPTER IV

MANUFACTURE OF OPIATES

Manufacture

120. The two raw materials which are produced for the manufacture of opiates, opium and poppy straw, are different in significant respects, and these differences lead to different treatment for the purposes of manufacture. Opium, a material having high value in small volume, can be shipped readily and economically in international commerce. Poppy straw, extremely bulky, having very low value per unit volume, is costly to transport even when the enormous quantities required are reduced in volume by compression. As a consequence, the major part of the opium utilized for manufacture, e.g. 91.5% in the year 1979, has been processed by manufacturers in countries other than the producing country. The converse is true with respect to poppy straw which is generally processed by manufacturers in the producing country in facilities located close to the areas of poppy cultivation. The single exception is the Netherlands which alone among manufacturing countries relies exclusively for its raw material on poppy straw imported from producing countries.

121. The statistics on the manufacture of morphine are given in Annex A, Table 15 for all manufacturing countries, by year, for the period 1964-1980. For each country, manufacture of morphine from opium is given on line 1 and manufacture of morphine and poppy straw concentrate from poppy straw on line 2. The global totals by year for the manufacture of morphine are given at the end of Table 15, on line 1 for morphine from opium, on line 2 for morphine and poppy straw concentrate from poppy straw, and on line 3 for morphine (including poppy straw concentrate) from both raw material sources.

122. The total manufacture of morphine (including poppy straw concentrate) from both opium and poppy straw increased substantially during this period from 119 tonnes in 1964 to 191 tonnes in 1979 or by 62% (Figure V, page 34). After rising steadily to 176 tonnes in 1970, manufacture began to decline in 1971 and the decline accelerated through 1974. Manufacture regained the 1970 level in 1976, and continued to rise until 1978, when it reached the highest level of 213 tonnes. Thereafter it fell to 191 tonnes in 1979 and to 172 tonnes in 1980.

123. From 1964 to 1976 manufacture of morphine was mainly from opium. Starting at 68% in 1964, the share of opium rose to 77% in 1966, the highest participation. The opium share declined to 60% in 1968, remained at between 63% and 67% from 1969 to 1973, rose to 70% in 1974 and then fell to 65% and 61% respectively in 1975 and 1976. In 1977, for the first time, more morphine was manufactured from poppy straw than from opium, the latter's share falling to 46%. In 1978 and 1979, 58% of morphine was manufactured from poppy straw, and in 1980, 63%. Manufacture of morphine from opium

124. The manufacture of morphine from opium during this period (Table 15, Total, line 1; and Figure V) was on the average 98 tonnes per year. Manufacture from opium was 81 tonnes in 1964; then declined in 1967 and 1968 before rising to the highest level of 118 tonnes in 1970. From 1971 to 1976 it varied between 101 and 110 tonnes, declined to 88 tonnes in 1977, came back to 94 tonnes in 1978 and in 1979 stood again at 80 tonnes, the same level as at the beginning of the period. In 1980 it fell further to 64 tonnes.

125. In 1970 when manufacture from opium was at its highest level, ten countries : the United Kingdom, the USSR, the United States, France, Japan, the Federal Republic of Germany, Italy, India, Spain and Switzerland manufactured 96% of the total. The first four countries listed together manufactured 75% of the total processed. In 1978, these same ten countries, plus Yugoslavia, accounted for 96% of the total manufacture from opium. The countries accounting for the principal part of the balance of the manufacture from opium were Belgium, the Netherlands, Portugal, Norway, Argentina, Bulgaria and Burma. Among those countries manufacturing morphine from poppy straw Czechoslovakia and Hungary used opium in small amounts in certain years and Poland in somewhat larger amounts from 1973 to 1977.

126. The United Kingdom's manufacture of morphine from opium was on the average 22.3 tonnes per year from 1964 to 1978. Between 1966 and 1976, it varied between 22 and 27 tonnes except for a decline to 15 tonnes in 1975. After 1976, it declined and fell sharply in 1979 to 9.2 tonnes and in 1980 to 3.4 tonnes as the result of the replacement of opium by poppy straw concentrate from Australia.

127. The USSR maintained manufacture from opium at a constantly high level from 1964 to 1973, when opium production ceased in the Soviet Union. Manufacture averaged 22.3 tonnes per year during this period. Thereafter manufacture based on imported opium varied between 6.8 and 12.9 tonnes and averaged 9.8 tonnes per year.

128. The United States increased manufacture from opium from an annual average of 20.8 tonnes from 1964 to 1971 to an annual average of 28.6 tonnes from 1972 to 1980. The highest level of manufacture was 36.5 tonnes in 1974. From 1977 to 1980, the United States also used substantial amounts of poppy straw concentrate, which exceeded the amount of opium used in 1977 and equalled the amount of opium used in 1978.

129. French manufacture of morphine from opium was maintained from 1964 to 1973 at an average level of 11.2 tonnes per year. Thereafter when domestic poppy straw was being used in substantial and increasing quantities, manufacture from opium fell to an average annual level of 8.1 tonnes from 1974 to 1978, to 6.6 tonnes in 1979 and to 1.5 tonnes in 1980.

130. In the Federal Republic of Germany from 1966 to 1979, manufacture ranged between 4.3 and 7.5 tonnes except in 1968 and 1969 when it fell below 2 tonnes. In 1980 it dropped to less than one tonne as German factories closed because of the precipitate decline in codeine prices. 131. Indian manufacture increased steadily from 2.7 tonnes in 1964 to 7.9 tonnes in 1980, as a reflection of the expansion of the consumption in the domestic market, which the manufacture supplied. Japan's manufacture, which was for domestic requirements remained stable during the entire period, ranging between 3.1 and 6.3 tonnes and averaging 4.9 tonnes per year. Italy manufactured at a level of 3-4 tonnes per year from 1964 to 1969 and of 4-5 tonnes per year from 1970 to 1978, except for a record output of 5.7 tonnes in 1971; in 1979 and 1980 manufacture had fallen to one tonne. Yugoslavian manufacture from opium was greater after 1973, when opium production ceased in that country, than before that date; from 1974 to 1976 it averaged 3 tonnes per year, dropped in 1978 below 2 tonnes and ceased in 1979 and 1980. Switzerland's manufacture for the entire period averaged 1.3 tonnes per year. Spain manufactured in the range of 1.5 to 2.5 tonnes per year from 1966 to 1980.

Manufacture of morphine and concentrate of poppy straw from poppy straw

132. Ever since Sertürner isolated morphine for the first time at the beginning of the 19th century much research has been undertaken to extract this alkaloid directly from the poppy plant without the production of opium. The Hungarian chemist Kabay was the first to suggest an economic extraction process. In 1928 he established Alkaloïda in Hungary to put into operation his process and the first 100 kg of morphine was produced from his small enterprise in 1931. In the course of the 1930's, three other countries applied this process: Poland, Germany and Switzerland. The manufacture of morphine from this raw material reached a total of 1842 kg in 1937 (4.4% of world manufacture of morphine).

133. In the course of the Second World War the number of countries using this process increased. France, Czechoslovakia, the Netherlands and Argentina, together with the four countries mentioned above, manufactured a total of 7767 kg in 1946, equal to 19.8% of the world manufacture of morphine. Other countries were added in the 1950's: Bulgaria, the German Democratic Republic, Norway, Romania and the USSR. On the other hand Switzerland abandoned the process in 1949, and inconclusive experiments conducted in Australia and Austria were also abandoned. In the course of the 1950's unproductive efforts were also made in Bulgaria and the United Kingdom. Finally the Federal Republic of Germany, Argentina and the German Democratic Republic gave up the poppy straw process in 1959, 1967 and 1968 respectively. On the other hand from 1966 Yugoslavia began to reconvert its opium production, which had become uneconomic because of the cost of labour, into the production of poppy straw.

134. Most of the efforts to establish the poppy straw process taking place before 1970 were explained by concern for assuring an adequate supply. This was evident for the war period and the period immediately following. It seemed to be the case also for certain manufacturing countries located far from the sources of opium production, for example, Argentina. The importance of economic factors could not be denied; in certain cases, however, poppy straw continued to be used where the economic conditions were most unfavourable. For example, the small poppy straw processing capacity maintained by France from the end of the war until 1970 was probably justified by security considerations and not on economic grounds since many other countries in the same economic situation gave up this type of manufacture. Figure V. MANUFACTURE OF MORPHINE 135. The legitimate concern for the security of supplies had for a long time been the reason for the research to make economic the extraction of alkaloids from poppy straw available locally. In the course of the 1950's the cessation of opium production in Iran, which had been a major exporter until 1956, and the reduction of cultivation in India and in Turkey, had stimulated manufacturers to increase research. The research undertaken by a British company which led to the establishment in 1970 of the first extraction plant in Tasmania, Australia began in 1950. The extraction of morphine from green poppy capsules in France required the solution of several problems before it became economic in 1970. The so-called green poppy process had the advantage of reducing the effect of climate on the poppy crop and its morphine content. The capsules which are harvested before maturity are not subject to the risks of rain. On the other hand the seeds which have not yet matured have a negligible residual value. This process had been long considered to be unachievable on an economic basis.

136. If economic factors had been a secondary consideration until 1974, the establishment of new installations after that date and the expansion of existing ones for the purpose of exportation seemed to be unjustified by other factors at a time when the decision by Turkey to establish its own alkaloid factory was known. Spain is a special case since it established a manufacturing capacity adjusted to its internal needs.

137. Manufacture of morphine (including poppy straw concentrate) from poppy straw was approximately 40 tonnes at the beginning of the period; at the end it exceeded 100 tonnes (Table 15, Total, line 2; and Figure V). After increasing to 63 tonnes in 1968, it declined in 1969 and 1970 to 58-59 tonnes, and then recovered in 1971 and 1972 to 63-64 tonnes. It fell in 1973 to 56 tonnes, and even further to 46 tonnes in 1974, the two years when Turkish production and exports of poppy straw temporarily stopped. Recovering in 1975 it continued to increase and reached its peak in 1978 at 118 tonnes, then declined in 1979 to 111 tonnes and in 1980 to 107 tonnes. In 1977 the amount of morphine manufactured from poppy straw first exceeded the amount manufactured from opium and remained larger from 1978 to 1980.

138. In 1978 when manufacture from poppy straw was at its peak the following ten countries manufactured 98.5% of the total amount from this material: Australia, the Netherlands, France, Hungary, the USSR, Yugoslavia, Poland, Czechoslovakia, Romania and Spain. In 1979 these ten countries manufactured 100% of the total. The first four countries listed accounted for 78.5% in 1978 and for 77.5% in 1979. Four other countries manufactured from poppy straw during the period: Bulgaria manufactured about 1 tonne per year from 1964 to 1970, one-half tonne from 1971 to 1973, then progressively less until having no production in 1979 and 1980; Norway manufactured small amounts in each of fourteen years through 1978; the German Democratic Republic manufactured an average of 1 tonne per year from 1964 to 1967 when it stopped manufacture; and Argentina less than one tonne total in 1964 and 1966. 139. Australian manufacture began in 1971 and increased progressively from 2.9 tonnes in 1972 to 8 tonnes in 1976, 16.7 tonnes in 1977, to a peak of 33.1 tonnes in 1979. Manufacture in 1980 was 27.5 tonnes. French manufacture from straw was less than one tonne per year until 1970 and between one and 2.5 tonnes from 1971 to 1973. It then rose steadily from 1974 to reach 20.5 tonnes in 1977. A temporary decline occurred in 1978 (16.1 tonnes) and then production rose to 25.4 tonnes in 1980.

140. Hungarian manufacture throughout the period ranged from 6 to 14.8 tonnes and averaged 10.5 tonnes per year, as peak manufacture in 1968 and 1978 was offset by periods of lower output in 1970, 1971, 1974 and 1975. The USSR's manufacture was less than 2 tonnes from 1964 to 1966, increased to 7.4 tonnes in 1967 and then expanded to a level of 12 to 14 tonnes per year from 1968 to 1971; it then fell to an annual average of 8.8 tonnes between 1972 and 1977 and again to a level of 6.6 tonnes in 1978 and 1979, ending the period at 3.4 tonnes. Yugoslavian manufacture, which was less than 2 tonnes in 1968, rose to 3.2 tonnes in 1969, and from 1970 to 1979 averaged 4.9 tonnes per year; it was 2.7 tonnes in 1980. Czechoslovakian manufacture was at a level of 6.6 tonnes annually from 1964 to 1970, fell to a level of 5.2 tonnes from 1971 to 1975, and then after a sharp decline to 1.6 tonnes in 1976, maintained an annual average of 3.2 tonnes during the remainder of the period. Romanian manufacture varied between about 1 tonne and 2.5 tonnes over the period and averaged 1.6 tonnes per year.

141. Spain did not manufacture from poppy straw until 1978 when it inaugurated an extraction plant using domestic straw to meet internal consumption requirements. Manufacture of 1.1 tonnes in 1978 was increased to 4.9 tonnes in 1979 and was 4.6 tonnes in 1980.

142. The Netherlands, the only manufacturer dependent exclusively on imported poppy straw, had an important output throughout the period. Beginning in 1964 with 4 tonnes, Dutch manufacture increased steadily to 18.8 tonnes in 1971. It fell to 11.7 tonnes in 1973 and to 7.2 tonnes in 1974 when Turkish straw was not available, then recovered in 1975 and steadily expanded to a peak of 30.5 tonnes in 1978. In 1979 and 1980 it levelled off at about 22 tonnes. The Netherlands' manufacturer used mainly Turkish and some Indian straw, and since 1974 has been the principal processor of Turkish poppy straw.

143. When the Turkish alkaloid factory begins commercial operation in late 1981, Turkey will become the major manufacturer of morphine.

Capacity of manufacture

144. The capacity of a morphine manufacturing factory depends on a number of variables, such as the nature of the raw material, its morphine content, the efficiency of the extraction process, the qualifications of the technical personnel, the operating time of the factory, etc. This capacity, measured in tonnes of morphine a year, is therefore very difficult to determine.

145. A given factory is equipped either to process opium or to process poppy straw. At this level, there can be no substitution between the two raw materials, and therefore if there is no flexibility in capacity, a shortage of opium cannot be compensated for by an abundance of poppy straw, or vice versa. 146. In addition, all extraction factories have the equipment required to isolate the morphine completely from the raw material used. When the extraction process is stopped at the stage of the poppy straw concentrate with a view to exportation, part of the equipment is not used as a result. Furthermore, none of the countries which import poppy straw concentrate has equipment specially designed for extracting morphine from this intermediate product. The concentrate imported is usually processed in factories originally intended for processing opium, and the difference in nature between the two products means that, once again, part of the equipment is not used. Apart from the fact of this partial utilization of equipment both in the exporting country and in the importing country, poppy straw concentrate is substitutable for opium. It is, however, clear that for the sake of achieving full utilization of equipment, manufacturers exporting concentrate would be well advised to market a more highly processed product than the concentrate, whereas manufacturers importing concentrate should preferably use a crude raw material.

147. The morphine content of the raw material used for extraction considerably affects capacity. Indian opium is a virtually uniform product although subject to minimal fluctuations in composition from year to year and depending on the share of each region in overall production. Poppy straw, on the other hand, is subject to much sharper fluctuations. In some cases, morphine content has been doubled through a selection of varieties and thus the capacity of a factory processing the same volume of straw is also doubled.

148. The efficiency of the extraction process varies greatly depending on the technique used, the obsolescence of equipment, the training of the technical personnel, etc. In response to these factors, even for opium, extraction results may vary up to 100%. As regards poppy straw, a distinction can be drawn between factories using water as a solvent and those using organic solvents, which are more expensive but make possible higher yields. The former have been set up in countries where poppy straw was a cheap locally available by-product. Whatever equipment was used, the best manufacturers with time developed their own techniques allowing the maximum yield to be derived from the raw materials used.

149. The capacity of a factory depends on its operating time in terms of hours a day, days a week and weeks a year. Modern factories using straw as a raw material are designed to operate continuously around the clock. It is nonetheless necessary to stop them several days a year for servicing of equipment.

150. In this Study, we have avoided seeking to determine the maximum capacity of factories throughout the world, since that would entail the risk of arriving at a theoretical figure which would be open to question in view of the complexity of the above-mentioned factors. Instead, a "proven" capacity has been determined on the basis of the quantities of morphine and poppy straw concentrate actually manufactured by each country. Table 16, which indicates the capacity of each manufacturing country, was prepared as described below from Table 15, which is a compilation of statistics for the manufacture of morphine from opium or of morphine and poppy straw concentrate from poppy straw. Three successive periods, namely, 1964-1969, 1970-1974 and 1975-1979, are covered. For each of these periods and for each manufacturing country, the maximum quantity of morphine manufactured from each of the two raw materials was taken as a measure of capacity. The total figures thus obtained are shown at the bottom of Table 16. 151. Capacity for the extraction of morphine from opium increased from 125 tonnes in 1964-1969 to 144 tonnes in 1970-1974, and then declined to 124 tonnes between 1975 and 1979. It is evident that capacity did not actually decline in 1975-1979, but that the decrease resulted only from the method of calculation used. The figures given without a doubt reflect a very conservative estimate of global capacity, since a number of major morphine manufacturing countries are able to meet most, if not all, of their requirements by using opium.

152. Capacity for the extraction of morphine and concentrate from poppy straw increased, according to our estimates, from 67 tonnes in the late 1960's to 79 tonnes (+18%) at the beginning of the 1970's, and to 136 tonnes in the late 1970's. Thus, this capacity more than doubled in ten years despite the fact that, in the interim, manufacture ceased in Argentina and the German Democratic Republic (-2.7 tonnes) and declined in Bulgaria, Czechoslovakia and the USSR (-7.2 tonnes). Capacity increased in Australia, France, the Netherlands, Spain and Yugoslavia. It remained constant in Hungary, Norway, Poland and Romania.

153. The global estimate of capacity up to 1979 does not include the capacity of the factory in Turkey, which did not start operating until 1981 although its establishment was planned from 1974. By a conservative estimate, it can be calculated that this factory could process 8 tonnes of straw a day, 250 days a year, or 20,000 tonnes of straw a year. With an industrial yield of 80%, and a morphine content in the straw of 0.36%, the capacity of the factory might be 60 tonnes of morphine a year.

154. Present capacity for the extraction of morphine and concentrate from poppy straw therefore amounts to at least 196 tonnes of morphine, or the equivalent of total world opiate requirements. If the capacity of the factories processing opium (124 tonnes) is also taken into account, an estimate of 320 tonnes for global capacity is obtained.

155. The treaties on narcotic drugs specifically limit the manufacture of opiates and leave the prerogative of limitation of capacity to the Parties. The Commission on Narcotic Drugs 18/ appropriately recommended to the Parties in 1956 and 1957 that special attention should be paid to this matter since the existence of excess capacity does have some effect on the opiates market. The manufacturers endeavour to make full use of their personnel resources and equipment and to maintain these at a level above the break-even point. The joint efforts of the manufacturers result in very keen competition which threatens the stability of the market.

18/ CND, Res. I (XI) and Res. V (XII). Control of the manufacture of natural and synthetic drugs. CHAPTER V

INTERNATIONAL TRADE IN OPIATES

156. Because of the special characteristics of opiates, which are indispensable in medicine but which also have a dangerous potential for abuse, their trade and distribution are subject to special controls established by treaties. These treaty provisions are discussed in Chapter VIII. National markets in opiates are regulated by Governments for the purposes among others of putting into effect the controls required by the treaties and of ensuring that adequate supplies will be available. In the international market, however, opiates are bought and sold in transactions in which prices in particular are freely determined by buyers and sellers, as discussed in Chapter IX below.

157. It is not easy to discern the main trends in the multitude of international trade statistics owing to the number of products and the number of exporters and importers. Therefore before turning to a product-by-product study of these statistics, certain overall data should be considered.

158. Annex A, Table 17 reflects an effort to determine the requirements of opiates which can be met only by imports. For this purpose, the share of the consumption of producing countries met from local production has been deducted from the total consumption. Some countries such as India, Turkey (except in 1973 and 1974, when production was nil) and Australia from 1978, produce more than they consume. Their consumption has been deducted from the total consumption in Table 17. Others have a production which can cover only part of their consumption, and this part has also been deducted from total consumption.

159. The consumption met by imports increased from 103.5 tonnes in 1964 to 148 tonnes in 1979, and its relative value by comparison with overall consumption remained virtually unchanged at 75%. During this period, an important change took place in two producer countries which are at the same time important consumer countries. Until 1971, the USSR was able to cover its domestic requirements through its own production and often had a surplus for export. After 1971, the USSR became a net importer of opiates. France, on the other hand, which was a net importer until 1976, was able, beginning in 1977, to cover all its domestic requirements, and even had a surplus for export.

160. The surplus of production over domestic consumption has been calculated in Annex A, Table 18. Among the producer countries, Bulgaria and Romania had no surpluses for export. In addition, Spain had a production intended for its domestic requirements. These three countries are not shown in Table 18. The producer countries which regularly had surpluses between 1964 and 1980 are India, Turkey, Hungary and Poland. The USSR had surpluses until 1971. Yugoslavia, Australia and France had surpluses beginning in 1972, 1975 and 1977, respectively. Lastly, Czechoslovakia occasionally had some surpluses. 161. It will be seen that the annual surplus of the producer countries over their consumption, which amounted to around 80 tonnes between 1965 and 1967, doubled in 1969 and then declined to around 120 tonnes in 1973 and 1974. Beginning in 1975, it rose rapidly, to reach its highest level, 318 tonnes, in 1978. A comparison of this surplus with the requirements of the importing countries shows that it consistently fell short of these requirements at the beginning of the period, except in 1969 and 1971. It was only from 1976 that the situation was reversed. In the period from 1964 to 1975, of course, regular and special stocks were drawn upon to help meet consumption requirements, and opiates seized in the illicit traffic were also made available. From 1976, on the other hand, stocks increased.

162. Strictly speaking, however, there is no overall market for opiates. Rather, there are markets for individual products, since importers may or may not have the infrastructure for extracting and processing, and this infrastructure is specialized in the processing of a given raw material. The demand for opium is therefore distinct from the demand for poppy straw, which in turn is distinct from the demand for other products. Sometimes one product can be replaced by another (poppy straw concentrate and opium), but at the cost of under-utilization of manufacturing capacity.

163. The fact that there are separate markets for the individual products does not mean that there are no links among them, since the end user of opiates has very little interest in the origin of the raw materials, and in the place where they were processed. The price structure for the various products can vary only within certain limits, or otherwise demand for one product will shift to another. For example, in 1981, a manufacturer producing morphine from opium decided to close down and import codeine, the price of which had fallen to a very low level. Such a decision resulted from a comparison of the advantages (lower codeine prices) and the disavantages (temporary or permanent closing down of the plant). It is obvious that, given a "normal" price structure, the manufacturer would turn to opium rather than to codeine. Let us then turn to a product-by-product examination of the international trade in opiates.

Opium

164. Total opium exports by producers are shown in Annex A, Table 19 along with the amounts (in kg) and percentages for each producing country. They increased from 654 tonnes in 1964 to 823 tonnes in 1966 as stocks were drawn down to supplement production. They dropped to 563 tonnes in 1967, when both production and exports were at their lowest points, then recovered as production increased and rose to 961 tonnes in 1971. From 1971 to 1978, they were maintained at an average of 930 tonnes per year and peaked at 1115 tonnes in 1976. In 1979 and 1980 they declined to 782 and 730 tonnes respectively.

165. There has never been more than four opium exporters, and the number has now been reduced to one as the others have ceased producing. India has always been the principal exporter. Turkey was the other main exporter until after deciding in 1971 to prohibit production. The USSR and Yugoslavia, whose exports were insignificant, both stopped production after 1973. The share of India from 1964 to 1971, the last year of Turkish production, was 77.1% on the average. After 1973 India provided all exports except for very small amounts from Turkish stocks. The Turkish share was highest (33%) between 1964 and 1967. 166. Indian exports of opium (Annex A, Table 20) went mainly to the following countries which imported in every year: the United Kingdom, the United States, the USSR, France, Japan and Italy. The Federal Republic of Germany imported annually from 1967. A number of countries which had imported from Turkey turned to India: Belgium, the Netherlands and Switzerland in 1970, Poland in 1972, Norway in 1973, Yugoslavia in 1974, Portugal in 1975. Spain and Argentina, which had imported from both Turkey and India, increased imports from India after Turkey stopped production. Bulgaria, which had not imported opium from Turkey, began yearly imports from India in 1968.

167. India exported to the United Kingdom an average of 206 tonnes annually from 1964 to 1978. The imports satisfied demand for codeine for domestic consumption, which remained constant at between 10 and 12 tonnes. They also provided the raw material for codeine manufacture for substantial exports of codeine which ranged from 5 to 14 tonnes annually. When Indian exports to the United Kingdom were below the average level, e.g. in 1967-1968 (160 and 173 tonnes) United Kingdom codeine exports declined, and in 1975 when exports were at their lowest level (149 tonnes) United Kingdom codeine consumption fell below 10 tonnes for the first time. Indian exports to the United Kingdom dropped in 1979 to 82 tonnes and in 1980 to 7 tonnes as the principal United Kingdom manufacturer substituted poppy straw concentrate from Australia for Indian opium.

168. India supplied 62% of the United States' opium imports from 1964 to 1971 when Turkey decided to stop production, and increased its exports to the American market from 43 tonnes in 1964 to 221 tonnes in 1971. In 1973 and 1974, exports dropped below 200 tonnes because of short supplies, but then ranged between 225 and 260 tonnes from 1975 to 1978. In 1979 and 1980 India exported 340 and 500 tonnes respectively as the United States took advantage of a price discount to rebuild stocks. The rising United States requirements in the latter 1970's, when codeine consumption increased from 36 to 48 tonnes, were met, however, only by the importation of poppy straw concentrate, which equalled opium utilization in 1978 and exceeded it in 1977. Indian opium production was not sufficient to meet both rising United States demand and other world requirements.

169. India exported to the USSR an average of 102 tonnes per year from 1964 to 1978. These exports supplemented Soviet production of opium (which was stopped after 1973) and poppy straw, principally to meet Soviet consumption requirements for opiates, which increased from 23 tonnes in 1964 to a peak of 30 tonnes in 1970 and then declined to 16 tonnes in 1979. Soviet codeine exports which had ranged from 5 to 10 tonnes from 1966 to 1971, stopped between 1973 and 1977, resumed in 1978 and reached 3 tonnes in 1980. The Soviet market for Indian opium remained constant despite the changes in Soviet opium production, opiate consumption and codeine exports. India's exports to the USSR increased to 160 tonnes in 1979 and held at 125 tonnes in 1980.

170. India shared the French opium market with Turkey until 1973 but supplied the major part. From 1964 to 1970 exports averaged 58 tonnes annually, from 1971 to 1978, 87 tonnes. French opium imports were maintained despite manufacture from domestic straw as demand was sustained at a high level for domestic consumption and exports. In 1979 and 1980, exports to France fell to 41 tonnes and 21 tonnes respectively as manufacture from domestic straw further expanded. 171. Indian exports to Japan averaged 30 tonnes per year from 1964 to 1972, when Turkey was also a supplier, and 51 tonnes per year from 1973 to 1980 when India was the exclusive supplier. Japanese imports were for domestic consumption, which remained stable at 2 to 2.6 tonnes of codeine annually. Indian exports to Italy, which averaged 24 tonnes annually from 1964 to 1968 when Italy was also importing small amounts from Turkey, averaged 48 tonnes per year from 1969 to 1977. Exports to Italy were for manufacture for domestic consumption which correspondingly rose from approximately 2 to 4 tonnes of codeine between 1964 and 1975. From 1976 codeine consumption in Italy fell by one-half, and imports of opium dropped in 1978, 1979 and 1980 to 26, 14 and 3 tonnes respectively.

172. Indian exports of opium to the Federal Republic of Germany averaged 73.3 tonnes per year from 1970 to 1977. The Federal Republic's consumption of codeine varied between 12 and 14 tonnes during this period, and rose to 15 tonnes in 1979. Its exports of codeine reached a peak of 8 tonnes in 1974 while averaging 4.6 tonnes between 1970 and 1977. Indian opium exports to the Federal Republic fell from 1974's peak figure to one-half of this level in 1978 and 1979 and to only 4 tonnes of opium in 1980 as depressed codeine prices made recourse to opium uneconomic and forced the closing of Federal Republic manufacture. Exports fell in 1978 to 48 tonnes and to 4 tonnes in 1980.

173. In 1980, consequently, the export market for Indian opium was reduced mainly to three countries, the United States, the Soviet Union and Japan, which together took 91% of total exports. Moreover, the United States' imports, which were made for stock rebuilding, were about twice the previous level of imports. Exports to the United Kingdom, France, the Federal Republic of Germany and Italy, all traditional customers, were only 35 tonnes in total amount, which was one-tenth of the level in 1978. The other countries which had begun or expanded imports of Indian opium between 1970 and 1978 (see above) and which had taken a total of 109 tonnes of opium annually from India during that nine-year period, took a total of only 30 tonnes in 1980. Of these countries, only Spain maintained its level of imports through 1980 (22 tonnes), and Spanish opiate requirements could now be met from its own manufacture based on domestic straw.

174. Turkish exports of opium (Annex A, Table 21) should be considered in connection with its exports of poppy straw (see below). Opium exports from current production extended only to 1972; they continued from stocks in 1973 and in small amounts in 1975 and 1976, stopping entirely after 1977. Exports went principally to the United States (35.4%), France (16.2%) and Japan (9.9%). The Federal Republic of Germany (8%) took a significant amount in one year only, 1966. The United Kingdom, which imported predominantly from India, took 6.8%, Spain 6.1%. Other countries importing from Turkey in all or most years, in smaller amounts, were Switzerland, Belgium, Italy, the Netherlands, Portugal and Argentina; they together accounted for 14.7%. Yugoslavia imported from Turkey in two years only. Poppy straw

175. Unlike opium and poppy straw concentrate (see paragraphs 181 et seq.), poppy straw is a bulky raw material and costly to transport, with the consequence that international trade in it is limited. There have been a maximum of five exporters and by 1980 the number had been effectively reduced to one. Total exports in kilogrammes of equivalent morphine are shown in Annex A, Table 22 which also gives amounts and percentages per year for each exporting country.

176. Total exports increased from 9.0 tonnes in 1964 to 41.5 tonnes in 1971, then declined to 12.4 tonnes in 1972. During these years Turkey was the principal exporter, contributing an average of 87.6% of total exports. The only other exporters were Yugoslavia and the USSR, each with 5.8% of the total and India (0.8%), which began incised straw exports in 1972. Yugoslavia ceased exports after 1971, as did the USSR except for less than one tonne in 1975.

177. Between 1973 and 1980 total exports increased from 9.4 tonnes to 48 tonnes in 1980, the highest level (55 tonnes) having been reached in 1976. Turkish exports practically ceased from 1973 to 1975 due to the prohibition of opium poppy cultivation. Exports from Turkey resumed in volume in 1976 and had doubled by 1980; from 1976 to 1980, 77? of total exports came from Turkey and in 1980 practically all were from Turkey. From 1973 to 1975, when Turkish straw was not available, India supplied 87% of total exports, the balance being provided by Iran and the Soviet Union. Indian exports comprised 58% of the total in 1976, 24? in 1977, fell to 4% in 1978, recovered to 21% in 1979, and then dropped to 0.1% in 1980.

178. Turkish exports of poppy straw are shown in Annex A, Table 23 in tonnes and in kilogrammes of equivalent morphine. They totaled 341.2 tonnes (in morphine equivalent) of which 182.6 tonnes were made from 1964 to 1973 and 158.6 tonnes from 1975 to 1980. The Netherlands was the principal importer, taking 62? in the earlier period and 72? in the later period; all Turkish exports went to the Netherlands in 1979 and 1980. From 1964 to 1973, the other principal importers were Czechoslovakia, Yugoslavia, Bulgaria and Hungary, which together took 32%. Poland, Romania, France and Norway imported smaller amounts in certain years only. From 1976 to 1980 the principal importer after the Netherlands was Hungary with 19%. Poland and the Federal Republic of Germany imported the balance, except for a very small import by the United States for trial purposes.

179. India's exports are shown in Annex A, Table 24 also in tonnes and in kilogrammes of equivalent morphine. From 1972 to 1980 they totalled 96 tonnes (in morphine equivalent). The Netherlands was also the major importer with 71? followed by Czechoslovakia (10%), Hungary (9.4?) and Yugoslavia (5%). The United States, the Federal Republic of Germany, Norway and Poland imported small amounts in certain years.

180. The USSR exported a total of 12.8 tonnes (morphine equivalent), mainly to the Netherlands, Yugoslavia and Hungary (Annex A, Table 25); Yugoslavia, a total of 12 tonnes, principally to the Netherlands and Hungary (Annex A, Table 26); and Iran, 5.8 tonnes to Yugoslavia and Czechoslovakia (Annex A, Table 27). Poppy straw concentrate

181. There was a substantial expansion in exports of poppy straw concentrate, as more exporters entered the market in response to increased demand for concentrate, mainly from the United States and the United Kingdom, resulting from difficulties in obtaining adequate raw materials. Annex A, Table 28 gives annual exports in kilogrammes of equivalent morphine and includes a breakdown of amounts and percentages by exporting countries. It is only from 1966 that exports of concentrate were reported as such in accordance with the 1961 Convention; formerly they were declared as morphine pursuant to previous treaties. Total exports, which were 6.8 tonnes in 1966, increased to an average level of 10.2 tonnes between 1967 and 1973; then dropped to a low of 4 tonnes in 1974, and recovered to 9 tonnes in 1975. Thereafter exports greatly expanded from 20.8 tonnes in 1976 to 43 tonnes in 1977 and to their highest level of 58.5 tonnes in 1978. In 1979 and 1980, exports decreased to 50.7 and 40.2 tonnes respectively.

182. Six countries accounted for 95% to 100% of all exports of concentrate: the Netherlands and Poland; Hungary which began exports in 1969, France in 1972, Yugoslavia in 1976, Australia in 1977. In 1980, there were only three exporters: Australia, the Netherlands and France. Australia manufactured exclusively from domestic poppy straw and France, Hungary, Poland and Yugoslavia predominantly from domestic materials. Only the Netherlands relied exclusively on imported straw, which was obtained primarily from Turkey and India.

183. From 1966 to 1978 the Netherlands was the major exporter, supplying 52% of all exports. In 1979 and 1980 Australia supplied about one-half and the Netherlands one-third of total exports. France supplied 17.1% from 1974 to 1980; Poland provided 12.5% from 1966 to 1979. Hungary supplied 9.4% of exports in the six years it exported. Yugoslavia supplied 2.5% during the three years (1976-1978) it exported.

184. Tables 29 to 34 giving annual exports by country to principal destinations in kilogrammes of equivalent morphine are included in Annex A. The Netherlands' exports were mainly to the United States (45%), which imported in volume from 1976, South Africa (28 percent), which provided a constant demand, Belgium (14%) and Switzerland (9-10%). Belgium and Switzerland shifted their major imports from the Netherlands to France in the latter 1970's. Australian exports went mainly to the United Kingdom (73%) as a result of arrangements between the principal Australian manufacturer and the major British processor; next most important were exports to Poland (21%), which stopped after 1979 when the Polish interest ceased in the manufacture of concentrate in Australia. French exports were mainly to the United States (65%), Belgium (17%) and Switzerland (10%). Polish exports were mainly to Belgium (45%) and Spain (35%); the United States and the Federal Republic of Germany took most of the balance. Hungary exported mainly to the United States (72%) and also to Belgium (24%). Yugoslavia exported to Portugal, the United States and Switzerland. Morphine

185. Morphine is mainly an intermediate product in the manufacture of opiates. It follows that the trade in morphine is more complex and involves a larger number of exporters and importers than is the case with opium, poppy straw and concentrate. In 1964 and 1965 as explained above, exports of morphine included concentrate. For this reason the export figures for these two years were the highest during the period.

186. Exports of morphine (exclusive of poppy straw concentrate) declined substantially during the period. Annex A, Table 35 shows annual totals and exports by principal countries, in kilogrammes, and percentages for each country. From 1966 to 1971, exports were on the average 17.0 tonnes per year; thereafter they fell steadily from 11.9 tonnes in 1972 to half a tonne in 1980. Since the manufacture and consumption of opiates was expanding, it is apparent that morphine was being exported in increasing quantities but as poppy straw concentrate (see above) rather than as morphine. The principal exporters were Hungary (22.6%), the Netherlands (15.0%), Czechoslovakia (13.4%), France (12.5%), the United Kingdom (12.0%), Poland (10.8%), Switzerland (4.3%) and Yugoslavia (3.7%). The Federal Republic of Germany, Italy, Romania and the USSR exported smaller quantities. Morphine exports were characterized by extreme variations in the shares of exporting countries in the years they exported, as shown in Table 35.

187. Exports of morphine by country, with principal destinations, are given in Tables 36 to 47 in Annex A. The major market for morphine exports was the Federal Republic of Germany. Hungary sent 65% of its total exports to the Federal Republic of Germany; the Netherlands 44%; Czechoslovakia 84%; France 85%; Switzerland 82%; Yugoslavia 62%. Hungary's next most important market was Brazil (25%) which imported from Hungary in every year. Poland's main exports went to Australia (51%) and Brazil (29%); exports to Australia stopped after 1976 when Australia had become a manufacturer and exporter. The United Kingdom exported predominantly to Australia (90%); these exports fell to insignificant amounts after 1971, when the United Kingdom ceased to be a significant exporter. The morphine trade included re-exports. The Federal Republic of Germany, the principal market for exports, was also an exporter (Table 35). The Netherlands, the United Kingdom and Switzerland, all net exporters, also imported morphine in some years; with regard to the United Kingdom imports took place at a time when domestic manufacturers could not meet immediate needs.

Codeine

188. Codeine, the principal end product and the most widely used opiate, gives rise to an extensive international trade involving most countries. A large part of this trade is in the form of preparations (Schedule III of the 1961 Convention), which are not included in the trade statistics furnished to the Board in accordance with the treaties.

189. Annex A, Table 48 shows total codeine exports, by year, as well as exports, by year, of the twelve countries which exported an average of more than one tonne per year over the period, and which together supplied more than 90% of total exports. Exports of individual countries, by year, by principal destinations, are shown in Tables 49 to 60 in Annex A. Total exports more than doubled from 1964 to 1980. In 1964 they stood at 21.0 tonnes: they increased yearly to a level of 50.2 tonnes in 1971, and were on the average 47.5 tonnes per year during the balance of the period. Exports reached their highest level of 52.0 tonnes in 1974 and in 1975. In 1980 they were 47.8 tonnes. 190. The United Kingdom was the principal exporter throughout the period (25.1%) and also in every year except 1966, when equalled by the USSR, and 1980, when exceeded by the Netherlands. The second most important exporter was the Netherlands with 15%. In order thereafter came the USSR (9.8%), Hungary (9.2%), and the Federal Republic of Germany (8%). Poland, Australia, Denmark, France, Czechoslovakia, Yugoslavia and Belgium each exported smaller quantities constituting less than 5% of the total.

191. United Kingdom exports of codeine (Annex A, Table 49) increased steadily from 5.2 tonnes in 1964 to their peak of 14.3 tonnes in 1970. From 1971 to 1974 they averaged 12.4 tonnes, fell to 9.9 tonnes in 1975, recovered to 13.8 tonnes in 1976 and averaged 10.4 tonnes from 1977 to 1980. The United Kingdom exported to countries in every continent. The major importer was Canada which took 36.5% of all United Kingdom codeine exports. Next came Pakistan with 6.3% and the Federal Republic of Germany with 5.5%. Each of the remaining more than 30 importing countries took less than 5%. The United Kingdom exported codeine in every year to Canada, New Zealand, Mexico, Malaysia, Sweden, the Territory of Hong Kong, Guyana, Chile and Kenya, and in every year but one to Denmark, Iran, Nigeria, Lebanon and Australia (which practically ceased imports after 1976, having become itself an exporter).

192. The Netherlands' exports (Annex A, Table 50) expanded steadily from 1.9 tonnes in 1964 to a peak of 10.5 tonnes in 1971; then declined between 1972 and 1978 from 9.5 to 3.9 tonnes, recovered to 7.5 tonnes in 1979 and stood again at 10.4 tonnes in 1980. The Netherlands also had a wide range of importers, including 12 countries from Europe, 9 from Asia, 5 from the Americas and 4 from Africa. The principal importers were Denmark (15.7%), the Federal Republic of Germany (14.7%), Turkey (12.9%), Mexico (6.9%) and Israel (6.7%). Each of the remaining importers took less than 5%. The Netherlands exported in every year to Israel, in every year but one to Denmark and Austria and in every year but two to Mexico, Finland and Sweden. Most other countries imported in some years only and in small amounts.

193. Hungarian exports (Table 51) averaged 3.8 tonnes per year. In 1964 they were 4.8 tonnes, and exceeded 4 tonnes in eight years of the period, including a record export of 8.8 tonnes in 1979. They fell below 2 tonnes, however, in 1967, 1970 and 1976. Hungary exported in every year to Denmark and Finland, the principal importers, which took 15.1% and 14.4% respectively of the total. Next most important was Switzerland (7.0%), Sweden (6%) and Turkey (5.8%), which imported only in 1977 and 1978. No other importer took as much as 5%. Other countries to which Hungary exported in most years included Norway, Morocco, Austria, Mexico and the Territory of Hong Kong. The remaining countries imported intermittently.

194. The USSR exported from 1964 to 1972, and in substantial amounts between 1966 and 1971, when exports averaged 7.7 tonnes per year (Annex A, Table 52). The USSR made no exports from 1973 to 1977, resuming in 1978 at less than one tonne, increasing to 3.3 tonnes in 1980. From 1978 to 1980 it exported only to Bulgaria. The principal importers were Bulgaria (29%), the German Democratic Republic (23.2%), Czechoslovakia (19.1%) and Cuba (6.5%). No other importer took as much as 5%. When the USSR stopped exports from 1973, countries it had been supplying had to look to other sources. Bulgaria imported from the Netherlands, Yugoslavia, the Federal Republic of Germany, Denmark, Belgium and Poland. The German Democratic Republic imported from Denmark, the Federal Republic of Germany, Hungary, the Netherlands and Yugoslavia. Czechoslovakia, itself a net exporter, imported from Denmark, Hungary and Poland. Cuba imported from the United Kingdom and Czechoslovakia. 195. The Federal Republic of Germany exported codeine in every year, averaging 2 tonnes per year from 1964 to 1970, and 5 tonnes per year from 1971 to 1978 (Annex A, Table 53). Its peak export of 8.2 tonnes was in 1974. In 1979 and 1980, exports fell to less than 2 tonnes. Principal importers were Denmark (11.4%) and Pakistan (8%). Among the other importers, no one of which imported more than 5%, Venezuela, Mexico and Peru imported from the Federal Republic of Germany in every year, Indonesia in every year but two.

196. An examination of the trade statistics will disclose the extent to which some exporting countries imported codeine in some years. For example: The Federal Republic of Germany imported from all the other eleven exporting countries, in greatest amounts from the Netherlands, the United Kingdom and Yugoslavia. The United Kingdom, the major exporter, imported substantial quantities between 1976 and 1978 from Australia at a time when United Kingdom manufacturers could not meet immediate needs. Yugoslavia imported from Denmark and in lesser amounts from Poland, the Netherlands, the USSR, the Federal Republic of Germany and Hungary. Czechoslovakia, Hungary and Poland, all net exporters, imported from the USSR before 1973, and the USSR itself imported from the Federal Republic of Germany and Denmark from 1974 to 1976. Denmark, having no manufacturing capacity, depended exclusively on imports for its codeine exports.

197. In Annex A, Table 61 the net codeine exports of all manufacturing countries have been calculated to determine the amount of codeine exports exclusive of re-exports. These have then been deducted from total codeine exports to arrive at the intermediate trade. It can be seen that between 1964 and 1971 exports exclusive of re-exports ranged from 20 to 42 tonnes and averaged 30 tonnes per year; between 1972 and 1980 they were on the average about 35 tonnes per year totalling 41.5 tonnes in 1980. It can be concluded that the intermediate trade in codeine, i.e. the re-exports of codeine, varied from about 1 tonne in 1964 to as much as 18.5 tonnes in 1974. From 1971 to 1980 re-exports averaged about 12 tonnes per year. CHAPTER VI

STOCKS

198. According to the definition of the 1961 Convention, stocks are the amounts of drugs held in a country and intended for consumption for medical and scientific purposes, for utilization in the country for the manufacture of drugs and other substances, or for export. They do not include amounts of drugs held by retail pharmacists or other retail distributors or by doctors or scientists. They also do not include special stocks, which are amounts held in a country by the Government for special government purposes and to meet exceptional circumstances (Article l, l(w), (x)). Pursuant to the treaty the stocks declared to the Board, either as estimates under Article 19 or as statistical returns under Article 20, are those amounts held as of December 31 of the year to which the estimates or returns relate. Under the Convention, only quantities of "drugs", as defined by the treaty are to be estimated or reported as stocks. This means that while opium stocks must be estimated and reported, the same requirement does not exist for poppy straw stocks. The Board receives voluntary reports, however, from time to time from certain countries.

199. Stocks are held at the various levels of production, manufacturing and distribution. Producers hold stocks of raw materials; manufacturers, stocks of raw materials and intermediate products; manufacturers and wholesalers, stocks of refined products. The stocks held by retailers, though not within the treaty definition, serve as reserve supplies for consumption requirements, so do the special stocks of Governments in the case of emergencies, as experience has shown.

200. Stocks should be sufficient for continuous production and manufacture, and for anticipated contingencies, for otherwise there is a risk of shortages in supplies of drugs for essential public health requirements. At the same time, they should not be higher than required for these purposes, since the higher the stocks, the greater the risk of diversion to the illicit market, and the greater the burden on the stocking country in terms of the controls that must be exercised, the costs of storage, the risks of deterioration and the financing charges.

201. There are contingencies which cannot be dealt with through the availability of stocks alone. Such are changes in supply or demand which are structural or of prolonged duration, such as the stopping of raw material production in a principal producing country, or an important expansion in demand in a major consuming country or countries. In such cases stocks can act as a buffer to cushion the market temporarily until production can be adjusted to the new situation. Structural changes of substantial amounts in supply and demand, upward or downward, must be dealt with, however, through the regulation of production.

202. Since it is the function of stocks to ensure a regular supply to all users, it is necessary to consider not only the size of stocks but also their distribution as among producers, processors, manufacturers, formulators and wholesalers, and as among the various products involved. The size of the stocks for any given country will depend upon various factors specific to the country, for example, its distance from sources of supply, its requirements for domestic consumption or for export, etc. A situation of imbalance is not favourable to the optimum distribution of stocks among different users. In cases of over-supply and falling prices, users tend to defer purchases, whereas in times of tight supply and rising prices, there is active competition among users for the scarce supplies available for stocks. As a result stocks tend to accumulate in producing countries in times of over supply, while in times of tight supplies, local disruptions may occur due to the maldistribution of products.

203. The Table included at the end of this chapter (page 54) provides data on stocks, in tonnes of morphine equivalent, for the years 1964-1980. Total opium stocks are given by year in Column 1, and in Column 2 the annual totals have been expressed in months of usage of opium. Column 3 shows stocks of opium for the corresponding years of the major producer, India. Columns 4 and 5 contain the yearly data on stocks of morphine and poppy straw concentrate and codeine respectively. Column 6 gives the stocks of dihydrocodeine, ethylmorphine and pholcodine. Column 7 gives the totals of Columns 4, 5 and 6; and Column 8 presents those totals in terms of months of the total demand for opiates. Poppy straw stocks are not included in this Table.

204. The primary function which producers' stocks fulfill is to bridge the period between one harvest and the next to assure a continuous supply of raw material. Since the production of opium and poppy straw is periodic, whereas the manufacture of morphine is a continuing process, the stocks built up after a harvest must provide a regular supply for manufacture until the following harvest. Harvests are made at different times in different countries. Indian opium is harvested in February-March; in view of the numerous operations required to process the opium after harvest, it becomes available for export only by May-June. Consequently the stocks in existence on 31 December must ensure a steady supply for at least the first six months of the following year. The harvest in Australia comes in January-February, so that end of year stocks may be smaller. The harvest in Turkey is in August; end-of-year stocks must therefore ensure a continuous supply for manufacture for at least eight months. Other producing countries will have corresponding carry over stock requirements, depending on the time of harvest and the carry over period. Stocks held on December 31 of a given year, which are sufficient for six to eight months of manufacture, are not properly speaking, however, reserve stocks, since their function is exclusively to supply production requirements until the following harvest.

205. In considering what the optimum level for carry over stocks should be, the assumption is made that production is adjusted to demand. On this hypothesis, on 31 December of any given year, there should be a stock of raw materials sufficient to ensure until the next harvest a regular supply for the continuous manufacturing operations. Taking the harvest time into account, the carry over stocks should consequently be at a minimum of approximately six months usage for opium and eight months usage for poppy straw. The table shows that from 1968 to 1976, opium stocks were on the average 7 to 8 months usage and dropped to 6 months usage in two years. During this period, however, in order to meet consumption requirements, opium was released from special stocks in the morphine equivalent of 38.4 tonnes and opium and morphine seized in the illicit market were released in the morphine equivalent of 22.7 tonnes. When it is recognized that stocks could be maintained at these minimum levels only because of these releases, it can be understood that a tight supply situation existed during this period, and that a reduction of stocks below these levels risks the disruption of continuous supply for manufacture. 206. A regular supply is also necessary of intermediate products for manufacturers and of refined products for manufacturers of preparations and wholesalers. If it is considered that the period immediately following 1964 was one of adequate supplies (Table) it can be concluded that stocks approximately equal to 7 months total demand for opiates, held in the form of morphine and poppy straw concentrate, codeine and other refined products, have been adequate for this purpose. This is again on the assumption that supplies of raw materials are regularly reaching the manufacturers. The table shows in Column 8 that during the thirteen year period 1964-1976 stocks of intermediate and finished products were maintained at about 7 months of total demand. Thereafter stocks rose in successive years to levels of 9, 10 and 11 months, reflecting a situation of growing over-supply.

207. In addition to carry over stocks, however, there must also be stocks to provide a reserve in the event of a poor harvest or a series of poor harvests. Another contingency is a temporary imbalance between supply and demand, attributable to an unanticipated increase in demand. Conversely, a series of good harvests or a temporary decrease in demand will permit stock levels to be restored.

208. In determining the size of the reserve stock, it should be remembered that the wide geographical distribution of producing countries minimizes the risks of a general crop failure. It can be anticipated that a failure in one country would be compensated by better than average crops in another or others. The contingency of the failure globally of as much as 20% of the crop for three successive years would seem to be the maximum risk which it would be reasonable to anticipate. Therefore a reserve stock of seven months of raw material supplies would seem to be adequate for this purpose.19/ As a result the total stock requirement as of 31 December, for carry over and for reserve, should be 13 months of usage for opium and 15 months of usage for poppy straw.

209. The table shows in Column 2 that opium stocks were below this optimum level (13 months) from 1966 to 1977. They were above this level in 1964 and 1965 and again in 1978, 1979 and 1980. In 1980, they were equivalent to 42 months of opium usage, or triple the optimum level. Corresponding statistics are not available on poppy straw stocks. It is known, however, that stocks of straw in Turkey alone had risen at the end of 1980 to 66000 tonnes, equivalent to about 200 tonnes of morphine, or roughly 14 months total demand for opiates. It is conservatively estimated that when stocks of other producers are added, total poppy straw stocks would be found to be also at least twice the optimum level of 15 months usage.

210. It is necessary to conclude that total stocks are, at the minimum, equivalent to 36 months or 3 years of total current demand. India and Turkey each is currently holding enough stocks to supply total opiate demand for one year, and there are stocks equal to at least one additional year of demand held by all other countries. Moreover, the stocks are unevenly distributed and the burden of maintaining them falls mainly upon two producing countries. In 1980, India held 78% of total opium stocks (Table, Column 3), and Turkey the major proportion of all poppy straw stocks. The depressing effect which the existence of these excessive stocks has upon the market for opiates, has adverse consequences, moreover, for all countries.

19/ A crop falling short of the average by 20% in three successive years would represent 7 months of usage, i.e. 20% of 36 months. Table Stocks of Opiates in tonnes of equivalent morphine CHAPTER VII

BALANCE BETWEEN DEMAND AND SUPPLY OF OPIATES

211. In this chapter we shall discuss the balance between supply and demand for opiates, as it has been affected by the fluctuations in production, manufacture and consumption, which have been more fully described in the preceding chapters. We shall conclude by seeking to measure the extent of the existing imbalance which, in the face of a slowing of the increase in demand, the increased production and manufacture in recent years have brought about.

212. The situation of balance between opiate demand and supply can be defined as the complete coverage of medical and scientific needs and the existence for that purpose of adequate but not excessive supplies. Our consideration is limited to medical and scientific needs which result in a real demand on the opiate market (an offer to buy a certain quantity at a certain price). The actual consumption of opiates coincides with this demand only when the supplies are adequate. When there are supply difficulties, consumption reflects only that part of the demand which has been satisfied. The lack of precise statistics on demand means that we are not in a position to calculate the extent of equilibrium or disequilibrium between supply and demand. Nevertheless, the data on changing trends in consumption, production, stocks and prices agree well enough for us to make a plausible assessment of the situation.

213. It has already been noted that the consumption of opiates in general and of codeine in particular (see Figures I-IV above) increased in a more or less linear fashion between 1950 and 1973. Opiate consumption reached the high level of 198 tonnes in 1973, which has not been surpassed since. After 1973, the trend changed, as consumption first declined, recovered in 1977 to nearly the 1973 level, and then resumed its decline through 1980 (see Figure IV, page 33). The fall in consumption which occurred in several countries at the same time after 1973 was a reflection of the supply difficulties which existed. The substitution of synthetic non-narcotic products for opiates during this period may explain why there was no revival in opiate consumption when the supply of raw materials became abundant towards the end of the 1970's.

214. The supply of opiates in a particular year consists of the stocks and the year's production. Together they should be enough to ensure an adequate supply at each stage of manufacture and distribution. In addition to this quantitative requirement there is a qualitative one regarding the kinds of products available, given that the production system is specialized and the scope for the substitution of one raw material for another is limited. On the other hand, the supplies should not be excessive in relation to the requirements for consumption and for adequate reserve stocks to meet contingencies.

215. In the period immediately preceding 1964 a considerable accumulation of stocks resulted from a sizeable increase in production. In fact between 1959 and 1963 total consumption requirements could have been met from opium production alone (see Figure IV, page 33). Moreover, the quantity of morphine made from poppy straw reached 44 tonnes in both 1962 and 1963, or more than double the amount manufactured three years earlier. Production therefore had to be reduced in order to bring stocks down to proper levels. 216. The decline in total opium production began in 1963 and continued until 1967. India's output was reduced by 55% between 1962 and 1966. The quantities of opium purchased by the Turkish Soil Products Office, which had averaged 236 tonnes a year between 1959 and 1963, fell to an average of 102 tonnes per year between 1964 and 1972, a drop of 60%. The supply of straw for the extraction of morphine was also reduced in 1964 and 1965 but to a lesser extent. These reductions, coming at a time when there was a strong increase in demand, led to a sizeable diminution in the supplies of raw materials to the point where the United States was led to release to its manufacturers 160 tonnes of opium from its special stocks in 1967.

217. From 1968 onwards, mainly as a result of the increase in the area under cultivation in India, production increased, and during the next four years succeeded in more or less covering current needs, but not to the point of rebuilding opium stocks, which were just adequate to bridge the gap to the next harvest. The lack of reserve stocks of opium, which was to persist up to 1976, was particularly noticeable in 1973 and 1974.

218. At that time important changes took place in certain countries, suppliers of raw materials and opiates. Turkey, which on the average had exported the equivalent of 33 tonnes of morphine between 1968 and 1972 in the form of incised poppy straw and opium, gave up growing poppies altogether. At the same time, the USSR, which between 1968 and 1971 had had excess supplies available for export equivalent to about 10 tonnes of morphine per year, began to reduce its output of opium from 1971 and of poppy straw from 1972, and came to abandon opium production altogether from 1974. Finally, opium production in India, which had been increasing since 1967, declined by 125 tonnes in 1973 over the previous year as the result of a bad crop on reduced acreage. An increase in the area under cultivation by 35% in 1974 did not produce the expected results, because the yield fell to a very low level, the lowest in the entire period. As a consequence, production no longer covered current needs.

219. Consumption reached its highest level in 1973 due to withdrawals from stocks, but during the decade of the 1970's it was on the average four tonnes below the figure reached in 1970. Governments endeavoured to make up the shortfall of production by exceptional measures. The United States released 224 tonnes of opium from special stocks during the years 1974 and 1975. Opium and morphine seized in the illicit traffic, and even heroin converted back to morphine, were used for medical purposes. Greater use was made of codeine manufactured from thebaine. In order to reduce delivery times, opium was no longer transported by boat but by aeroplane. Manufacturers sought out all possible sources of raw materials, including countries where the poppy was cultivated to meet the treatment needs of drug addicts, and even countries where cultivation was illegal.

220. To remedy this situation, unco-ordinated measures were taken, which later proved incompatible. On the one hand, efforts were made to reduce the demand for opiates through the use of synthetic substitutes. On the other hand, efforts were made to increase production by using new sources of raw materials, bringing new areas into cultivation, increasing the yield per hectare, developing more productive varieties, reducing losses due to the oxidization of alkaloids and improving the yield from the extraction and conversion of the alkaloids. 221. Between 1972 and 1979 poppy straw processors began to import Indian incised straw, which had never previously been used for the extraction of alkaloids. During this period India exported on the average the equivalent of 11.5 tonnes of morphine a year in the form of incised straw, equivalent to 104 tonnes of opium. These exports of straw reached a maximum of 31.5 tonnes (in morphine equivalent) in 1976. At the same time opium production in India was increasing and exceeded 1000 tonnes for the first time in 1975. During the next two years Indian opium production reached the level of total opium production in 1969 and 1972, before Turkey, the USSR and Yugoslavia stopped producing this raw material. In 1978 an increase in the area under cultivation by 11%, coinciding with an improvement in the yield per hectare by 26%, produced a harvest of 1646 tonnes, enough in itself to meet 93% of total opiate needs (see Annex A, Table 62). The drastic reduction in the area under cultivation in 1979, and particularly in 1980 (45% less in two years), was accompanied by an improvement in the yield, which in 1980 reached the record level of 32.2 kg of opium per hectare.

222. Turkey resumed poppy cultivation from 1975, but only for the production of poppy seed and unincised straw. The plant constructed in Turkey for alkaloid extraction and conversion was to process 20000 tonnes of poppy straw a year, for the manufacture of about 60 tonnes of morphine in the form of concentrate and various alkaloids. Production of poppy straw in Turkey measured in morphine equivalent increased rapidly from 21 tonnes in 1975 to 51 tonnes in 1976 and 130 tonnes in 1977, an amount sufficient by itself to cover 69% of total opiate requirements in the same year. Over a period of six years Turkey's production was only in two years greater than the planned capacity of its alkaloid factory, but the average annual production for the whole period was 66 tonnes in morphine equivalent, because of two exceptional harvests in 1977 and 1978.

223. Australia began to manufacture alkaloids from poppy straw produced in Tasmania from 1970, but it was only from 1975 onwards that there was any exportable surplus. Output expanded up to 1979 under the double influence of an increase in the area under cultivation and an improvement in the morphine content of the straw, reaching the equivalent of 52 tonnes of morphine, enough to cover 27% of total opiate needs for that year. In 1981 output was 63% lower than 1979 and acreage to be sown in 1982 will be 47% less than that sown in 1978.

224. Since the end of the Second World War France had always maintained a capacity for processing straw in small quantities. From 1971 onwards it began to increase its output through using the so-called green poppy process and gradually succeeded in covering its domestic needs completely. In 1977 and 1978 there was a surplus for export as a result of an output of 22 and 22.8 tonnes respectively of morphine equivalent, or about 12% of the total opiate needs. In 1979 production fell to 12.9 tonnes, rising again later to 16.8 tonnes as a result of a 67% increase in the morphine content of the straw.

225. After completely replacing its opium production by poppy straw, Yugoslavia had a surplus available for export from 1976 of about 3 tonnes of morphine a year. Among the other producer countries, Spain met its domestic needs; Czechoslovakia, Hungary and Poland had surpluses for export, which tended rather to decline; whereas the USSR had become a net importer. 226. Since 1975 the production of raw materials has been greater than the total consumption of opiates, which has not resumed its upward trend. The surplus increased until 1978, when it reached 185% of consumption, and then declined in 1979 and 1980. The greater part of this surplus accumulated in the form of stocks of opium in India and poppy straw in Turkey, and to a lesser extent in the form of alkaloids in the manufacturing countries.

227. During the period of the total opiate availabilities (consisting of current production plus stocks) in relation to the total consumption of opiates is shown graphically in Figure VI, page 59. Until 1968, production was below consumption, but the deficiency was compensated by withdrawals from stocks, which were adequate for the purpose. From 1969 to 1971, (except for 1970, when production again fell below consumption), production was above consumption but not sufficiently so to enable stocks to be restored to safe levels. From 1972 to 1974, production was below consumption and stocks were inadequate to meet distribution requirements, resulting in temporary supply difficulties. From 1975 to 1978 the increase of production above consumption resulted in the rebuilding and eventually the expansion of stocks, until in 1978 production and stocks together exceeded consumption by three and a half times. In 1979 although production was reduced, it still exceeded consumption by more than 50% and stock accumulations pushed total availabilities to their highest level.

228. In 1980, despite a further reduction in production, total supplies stood at about 700 tonnes of equivalent morphine, far in excess of the amount required to satisfy consumption and to provide adequate reserve stocks. It should be noted, furthermore, that total stocks are currently considerably greater then shown in Figure VI inasmuch as poppy straw stocks, which are not included in the tabulation for lack of statistical data, are known to be about 200 tonnes in morphine equivalent in Turkey alone. The resulting imbalance, therefore, consists in availabilities of about 900 tonnes, compared to current consumption requirements of somewhat less than 200 tonnes, in morphine equivalent. Figure VI. TOTAL AVAILABILITIES VERSUS DEMAND FOR OPIATES Tons of equivalent morphine CHAPTER VIII

LEGAL CONSIDERATIONS

229. The international control system operating under the Single Convention on Narcotic Drugs 1961 20/ has been generally effective in its objective of preventing the diversion to the illicit market of narcotic drugs produced for medical and scientific use. It has not been equally effective in ensuring that adequate supplies of opiates are invariably available for medical and scientific requirements, and that licit production does not exceed what is necessary for those requirements. On the contrary there has been a history since 1964 of the recurrence alternately of shortage and of over-supply in the availability of opiates for medical and scientific needs.

230. It can be contended that the treaty system has been adequate for the adjustment of supply to demand as long as the fluctuations on either side of the equation have been moderate and temporary. It appears, however, that the treaty system has not been equal to the task of keeping supply and demand in balance when the fluctuations have been immoderate and persistent and even structural in their nature. In the 1970's the international market in opiates was subjected to extraordinary pressures, firstly when supplies of raw materials were greatly reduced as a result of important producers stopping production and a succession of bad opium harvests, and subsequently when supplies were increased far beyond consumption requirements at the same time as demand tended to stabilize and even to decline.

231. The control system under the treaties was developed at a time when opium was the preponderant raw material for the manufacture of opiates. This is no longer true. Poppy straw, i.e. the straw of Papaver somniferum, has come to be used increasingly as a narcotic raw material and now equals or exceeds opium in importance as a source of morphine.

232. Poppy straw was not included by the 1961 Conference within the control regime of the Convention applicable to opium. The Conference concluded then that such strict control measures for poppy straw were neither justified nor practicable. It was agreed that poppy straw was not likely to be diverted to the illicit market because of its bulk, its low morphine content and the complicated process for its utilization for drug manufacture. It was felt that a strict control regime would create difficulties for countries where poppies were grown mainly for the seeds and oil. It was admitted, however, that poppy straw should continue to be used as an important alternative raw material and as a market regulator. 21/

20/ The 1961 Convention was amended by the 1972 Protocol which came into force in 1975. 21/ Records E/CONF.34/24, pp. 37-41; E/CONF.34/24/Add.1, pp.66-69, 148-153. 233. Before considering the applicable provision of the 1961 Convention, there may be value in pointing out certain areas where the Convention makes no attempt to regulate: i. Papaver bracteatum, a species of poppy different from Papaver somniferum, is beginning to be grown on a commercial basis, and to become an additional raw material source of alkaloids. Papaver bracteatum is not covered by the Convention, which was worked out at a time when its utilization was not envisaged; ii. The Convention does not provide for international action to regulate the extent of poppy cultivation for the production of poppy straw for the extraction of alkaloids; iii. the Convention has no automatic mechanism for the adjustment of the supply to the demand for opium. Instead the treaty relies mainly on the decisions of producers to determine the levels of cultivation and production and on economic forces to bring about restriction and expansion as needed; iv. The Convention does not prevent one exporter from taking away the market of another exporter in market competition. It provides no assurances to any exporter of the right to supply a particular market; v. A producing and exporting country which loses markets to a competitor may be left with undisposable production resulting in excessive accumulation of stocks. As a consequence there would be pressures on the country pursuant to the treaty to reduce authorized cultivation and production in order to reduce stocks, thus adding a further penalty to the loss of markets; vi. The treaty accepts that competition will determine how supplies will move from producers to consumers; vii. The Convention does not regulate prices. It places no floor under or ceiling on prices, which are left to the forces of the market. In practice the price of opium is fixed each year by the Government of the principal opium exporter, whereas the prices of poppy straw and concentrate are negotiated separately in each transaction.

GENERAL ASPECTS

234. A principal objective of the Convention is to bring about a continuing balance between the supply and demand of narcotic drugs for medical and scientific requirements. It provides that the Board in co-operation with Governments shall endeavour to limit the cultivation, production, manufacture and use of drugs to an adequate amount required for medical and scientific purposes, and to ensure their availability for such purposes (Article 9, 4). The Board also has an important role to play in the limitation of drug supplies to be obtained by imports (Articles 19 and 21 discussed infra). 22/

235. It should be noted that the Convention presents this objective as a target for which to aim. It is a matter for which Governments are primarily responsible, because the treaties, even in the case of opium, do not give the Board the right to impose its point of view as the final word. However, in accordance with the treaties, the Board has to exercise a moral influence by means of a "permanent dialogue" and it has exercised this influence not only with respect to opium, but also with respect to poppy straw. It therefore follows that even if Governments should decide to place other raw materials than opium under a more comprehensive control, these measures, undoubtedly necessary, would not suffice in themselves to re-establish the balance. Indeed, in the last analysis all decisions affecting the balance of opiate requirements and resources fall within the competence of Governments. This will be demonstrated by a cursory examination of the relevant provisions of the Convention.

22/ Commentary on the 1972 Protocol, page 10, paragraph 2. CULTIVATION

236. The Parties to the 1961 Convention are required to furnish to the Board annually estimates of the area and geographical location of land to be used for the cultivation of the opium poppy (Article 19, l(e)). This is required whether the poppy is to be used for the production of opium, for poppy straw or for seeds and oil. Any state may furnish supplementary estimates during the year. Once the estimates are provided, they shall not be exceeded (Article 19, 5) except that any State may furnish supplementary estimates during the year.

237. The area of cultivation is consequently limited but the amount of the estimate is fixed at such levels as the country itself determines subject only to amendment by the Board with the consent of the Government concerned. In case of disagreement between the Government and the Board, the latter is given the right to establish, communicate and publish its own estimates (Article 12, 5).23/ In addition Parties are required to furnish statistical returns on the ascertainable area of cultivation of the opium poppy (Article 20, l(g)). These provisions apply whether the cultivation is for the production of opium, or for the production of poppy straw for alkaloid manufacture, or for seed and oil.

PRODUCTION LIMITATIONS - GENERAL

Opium

238. A Party may not in principle initiate opium production or increase existing production without first having taken account of the prevailing world need for opium in accordance with the Board's published estimates so that the production of opium by the Party does not result in over­ production in the world. In addition a Party shall not begin or increase production if in its opinion this may result in illicit traffic in opium (Article 24, 1).

239. Production for export is further limited. Parties which exported opium of their own production during the ten years preceding 1 January 1961 may continue to export opium they produce. Other Parties may export amounts up to 5 tonnes annually providing they notify the Board, supply information on controls and countries of export and obtain Board approval. For amounts in excess of 5 tonnes annually the Economic and Social Council must be notified, be given relevant information and approve (Article 24, 2 and 3).

240. A Party which permits opium poppy cultivation for the production of opium is required to establish a national opium agency (or agencies) to take delivery of all opium produced and to have the exclusive right in respect of opium of importing, exporting, wholesale trading and maintaining stocks other than those held by manufacturers and formulators. Through the agency, areas and plots on which cultivation is permitted shall be designated, and only licensed cultivators shall be authorized to engage in cultivation, with each license to specify the extent of land on which cultivation is permitted (Article 23).

23/ This provision was added by the Protocol of 1972 which entered into force in 1975, and the Board has not had occasion to apply it. Poppy straw

241. There are no corresponding provisions in the case of poppy straw (even for that used for the extraction of alkaloids) for limiting the number of producing countries or their access to the export market, or for the control in a producing country of cultivation and production through the designation of areas for cultivation, the licensing of cultivators and the exclusive purchase and export by a national agency.

242. The control of poppy straw for purposes other than the production of opium is limited to the requirement of measures to ensure that opium is not produced, and that drug manufacture from the straw is adequately controlled. In addition the system of import certificates and export authorizations is applied to poppy straw, and statistical reports on the import and export of poppy straw are required (Article 25).

243. In practice Governments have voluntarily applied to the production of poppy straw for the extraction of alkaloids, similar control provisions to those governing the production of opium under the 1961 Convention.

PRODUCTION LIMITATIONS - QUANTITATIVE

Opium

244. A producing country is required not only to estimate the area of land to be used for the cultivation of the opium poppy (see supra) but also to estimate the approximate quantity of opium to be produced (Article 19, l(f)). Then it is required to organize and control production in such a way as to ensure that so far as possible the quantity produced in any year does not exceed the estimate (Article 21 bis, 1). The Board may establish estimates if they are not provided, to the extent practicable in co-operation with the Government concerned, and may amend estimates with the consent of the Government (Article 12, 3). Since the entry into force of the 1972 Protocol in 1975, the Board is specifically authorized, in case of disagreement with the Government, to establish, communicate and publish its own estimates (Article 12, 5) together with the estimates of the Government. The 1972 Protocol also amended the Convention to make it clear that the purpose of the Board's examination of estimates is to seek to ensure that supplies for medical and scientific use are neither excessive nor deficient. 24/

245. Parties are required to furnish statistical returns on the production of opium (Article 20, l(a)), and also on the ascertainable area of cultivation of the opium poppy (Article 20, l(g)). This latter provision enables the Board to review the compliance of Parties with their obligation not to exceed the estimates of area and production. 25/

24/ Commentary on the 1972 Protocol, page 19, paragraph 4. 25/ Commentary on the 1972 Protocol, page 56, paragraph 2. Poppy Straw

216. There are no corresponding provisions for estimates of poppy straw production (even for poppy straw used for the extraction of alkaloids), or for matching actual production to estimates. Since poppy straw is not like opium classified as a drug under the 1961 Convention, there is also no obligation to make statistical returns on its production. There is a requirement, however, for statistical returns on the utilization of poppy straw for the manufacture of drugs (Article 20, l(b)).

ESTIMATES OF REQUIREMENTS AND STATISTICAL RETURNS

247. Opium and concentrate of poppy straw are subject to the estimates required annually of quantities consumed, utilized for manufacture, and of stocks (Article 19). Correspondingly statistical returns are required for both opium and poppy straw concentrate on an annual basis with respect to production, utilization for manufacture, consumption and stocks. In addition statistical returns are required on a quarterly basis on the imports and exports of poppy straw as well as of opium and poppy straw concentrate (Article 20).

LIMITATION OF MANUFACTURE AND IMPORTATION

248. The manufacture of drugs is required to be under license except when the manufacturer is a state enterprise (Article 29). The requirement of a license implies that Governments will exercise discretion in issuing licenses, based on the aims of the Convention. The treaty does not however require Governments to limit the number of manufacturers licensed or to adjust their number to the capacity required for domestic needs and for export. In the absence of such a treaty requirement the Governments have recognized the need for a limitation. In 1935 the League of Nations Council approved a decision by the Opium Advisory Committee to urge manufacturing countries not to issue new licenses if the factory capacity was sufficient for domestic needs and exports. 26/ The Commission on Narcotic Drugs adopted a Resolution in 1956 and repeated it in 1957, inviting manufacturing countries to limit to the strictly necessary minimum the number of firms permitted to extract morphine from opium and to manufacture its salts and derivatives.27/

249. The treaty system for limiting the supply of drugs to those required for medical and scientific purposes rests on a limitation of manufacture and imports to the amounts estimated. Parties have an obligation not to manufacture or import drugs in any year in excess of their estimates of drug requirements, plus quantities exported in that year. The system is monitored by the surveillance of stock levels.

26/ League of Nations Journal, 16th year, No.2, February 1939, p.102. 27/ Resolutions I (XI) and V(XII), and E/CN.7/SR. 296, 297, 301, 302, 306. Monitoring of stocks

250. A first attempt to regulate opium production by international agreement was made with the adoption of the 1953 Protocol. Under the Protocol, which covered opium poppy cultivation and opium production and trade, the mechanism of limiting the quantity of opium produced to medical and scientific needs was a limitation on stocks. It was provided that stocks should not exceed certain maximum levels (2.5 years utilization for export and domestic manufacture by a producing country, two years normal requirements for a manufacturing country, and five years' consumption for other countries). In addition there was a system of annual estimates of requirements for consumption, manufacture and addition to stocks, which could not be exceeded unless or until modified by supplementary estimates. If it appeared from import and export returns that exports to a country exceeded that country's total estimates, that fact was notified to all Parties who agreed with certain exceptions to authorize no new exports to that country during the current year.

251. The 1953 Protocol did not receive wide acceptance and was not in force when the 1961 Conference codified previous narcotic treaties and the provisions above were not retained inasmuch as the authorized stocks were in general far above those actually maintained. The 1961 Convention provided for a different system for limiting supplies to medical and scientific needs. It was made applicable to all controlled narcotic drugs; opium was defined to be a drug for this purpose but poppy straw was not. Instead of establishing maximum levels of stocks, the 1961 Convention provided for a surveillance of stocks of individual drugs held by each Party to the treaty. A Party was required to estimate the amount of stocks to be held at year's end. This estimate was the Government's decision; it could be amended by the Board with the Government's consent and the Board could if it disagreed make an independent estimate, in which case both estimates were published. In addition, also annually, the Government was required to estimate the quantities of each drug needed for consumption, manufacture of other drugs, Schedule III preparations and uncovered substances and special stocks. After the end of the year, on the basis of statistical returns, the exact quantities consumed, manufactured, imported and exported would become known as well as stock levels. If the quantities manufactured and imported in any one year should exceed the sum of the quantities consumed, used for manufacture, added to stocks, and required for special purposes, all within the relevant estimates (exports being treated as an addition), then the excess in stock would be deducted from the quantity to be manufactured or imported and from the total of estimates in the following year (Article 21).

252. In this way the import and manufacture of each drug by country were adjusted to what the actual domestic and export requirements of the country for the drug turned out to be. At the manufacturing level there is consequently an automatic regulation of manufacturing supplies to requirements.

253. To recapitulate, for opium as for manufactured drugs, Parties are required to estimate annually stocks of drugs to be held on 31 December of each year (Article 19, l(c)) and to furnish statistical returns annually on stocks held as of that date (Article 20, l(f)). This requirement which has been applied to poppy straw concentrate as well as to opium does not apply to poppy straw. The 1961 Convention provides for limiting stocks to the estimated level by reducing excess manufacture and importation. 254. This provision for adjustment of stock levels to estimates, is supplemented by provisions requiring Parties to prevent the accumulation by drug manufacturers (Article 29, 3) and by traders, distributors, state enterprises and other authorized persons (Article 30, 2(a)) of quantities of drugs and poppy straw in excess of those required for the normal conduct of business having regard to the prevailing market conditions. The determination and implementation are left to the country involved.

255. Whenever quantities imported and manufactured exceed estimates, the Board thus has available two mechanisms to seek to adjust excess supplies downward to the level of actual requirements. The excess of importation and manufacture over estimates is deducted from the country's supplies and from the total of the estimates for the following year. Furthermore the Board may notify the excess import to other countries, which are required not to make further exports during that year of the drug concerned to the country which has exceeded its estimates (Article 21). An exporting country has an obligation to permit exports only within the limits of estimates of the importing country (Article 31, 1(b)). There is no corresponding mechanism for adjusting deficient supplies upward to the level of requirements. The Board may only through its annual reports (Article 15) focus attention on global supply deficiencies and examine possibilities for increase in production in order to meet rising consumption requirements and to rebuild stocks.28/

256. It is important to note that in the case of the limitation on import and manufacture, there is an unavoidable time lag in the operation of the adjustment mechanism. Statistics on end-of-year stocks must be furnished to the Board not later than 30 June following the year to which they relate (Article 20, 2(a)). Consequently the Board is not in a position to determine whether an estimate has been exceeded, to deduct any excess, or to notify or publish the excess until the third or fourth quarter of the following year. Yet it is pointed out that Governments have at their disposal all the data required for determining the deductions and can make the computations themselves for the purpose of allocating quotas to manufacturers or importers. 29/ Because import and export statistics are due within one month of the quarter to which they relate (Article 20, 2(b)), the Board cannot determine the existence of excessive imports in the first 3-4 months of each year. Furthermore excessive imports in the last quarter of the year cannot form the basis of action by the Board, since the trade statistics will not have been received until after the end of the year to which the action could apply.30/

28/ This the Board did in its Reports for 1973, 1974 and 1975. See E/INCB/21 pp. i-xiv; E/INCB/25 paras 161-174; E/INCB/29 pp. i-vi. 29/ Commentary on 1961 Convention, page 269 paragraph 5. 30/ Commentary on 1961 Convention, page 271 paragraph 5. Regulation of Production

257. No similar regulatory mechanism exists for the adjustment of the cultivation and production of raw materials to consumption requirements. Since opium is classified as a drug, the estimates and stocks monitoring systems apply to it, but they do not apply to poppy straw which is not a drug. In the case of opium, estimates of production should so far as possible not be exceeded (Article 21 bis, 1.). If estimates of opium production are deemed too high or too low, the Board when discussing with a country acreage for the next year may suggest reductions or increases. It may do so also in regard to poppy straw.31/

258. The treaty language (Article 19, 1(e), Article 20, 1(g)) acknowledges the difficulty of estimating and regulating acreage and production, as compared with manufacture. The latter may be adjusted upward and downward according to supply and demand. Cultivation and production adjustments are subject, however, to social and political as well as economic factors, which are the legitimate concern of the Governments of the producing countries. Production does not have the same flexibility as manufacture for being increased or reduced. Increases in agricultural production cannot be accomplished quickly but are subject to the growing cycle and land development. Reductions have serious social and political implications, and unlike manufacture, production cannot be just shut off until an over-supply is used up, or just expanded for a time to meet an unanticipated demand. Production is also subject to the risks of weather. In the nature of things, production would not respond automatically to fluctuations in manufacturing and importing requirements, and the larger the fluctuation, the more difficult to obtain an adequate and a prompt response.

UNITED NATIONS RESOLUTIONS

259. The Economic and Social Council adopted Resolutions in 1979, 1980 and 1981 on the subject of the maintenance of a world-wide balance between the supply of narcotic drugs and the legitimate demand for medical and scientific purposes. 32/ Resolution 1979/8 of 9 May 1979 was adopted by 44 votes in favour, none against and 5 abstentions. Resolution E/1980/20 of 30 April 1980 was adopted without a vote. Resolution E/1981/8 was adopted by 41 votes, none against, and 5 abstentions. The General Assembly by a Resolution adopted by consensus on 15 December 1980 urged all States to take suitable steps to implement ECOSOC Resolutions 1979/8 and 1980/20. 33/

31/ For example, in 1978 the Government of Turkey followed the Board's recommendation to limit the spring sowing, and the harvest was 25000 tonnes as compared with 36000 tonnes in the previous year, E/INCB/41, para. 47. 32/ See Annex B for the United Nations Resolutions on this subject. 33/ Resolution 35/195 operative paragraph 4. The Resolution was sponsored by Argentina, Australia, Austria, Bahamas, Bolivia, Costa Rica, Cyprus, the Dominican Republic, the Federal Republic of Germany, India, Jamaica, Lesotho, Malaysia, Mauritania, Morocco, New Zealand, Niger, Norway, Pakistan, Papua New Guinea, the Philippines, Sweden, Tunisia, the United States, Uruguay, Yugoslavia and Zaire. 260. These Resolutions of the Council adopted upon the recommendation of the Commission on Narcotic Drugs have as their objective to buttress and supplement the actions of Governments and of the Board under the treaties with a view to restoring and maintaining a balance between supply and demand. The Resolutions all take as their point of departure the provisions of the 1961 Convention limiting the cultivation, production, manufacture and use of narcotic drugs to medical and scientific requirements. They also refer to the international drug abuse control strategy and policy, which has been under debate by the Commission during the period, an important aspect of which is the maintenance of a world-wide balance between the supply of narcotic drugs and the legitimate demand for medical and scientific purposes. 34/ The Resolutions refer to the substantial over-production of opiates, the expansion of morphine manufacturing capacity beyond requirements and the excessive and burdensome stock accumulations, all developments which it is the purpose of the treaty system to prevent. The clear implication is that further action is necessary by Governments, and internationally, in accordance with the Convention or supplemental to it but consistent with its objectives.

261. The Resolutions single out for support and assistance the countries which have been for a considerable period of time principal producers of narcotic raw materials for export. The Resolutions imply that the treaty system and the actions by Governments thereunder, particularly of importing countries, have not adequately protected the legitimate interests of these producers.

262. The Resolutions refer in particular to the need of the long established producers for protection against the proliferation of sources of production of narcotic raw materials for export. The proliferation of sources of production is controlled by the 1961 Convention so far as opium is concerned; it is not so controlled in respect of poppy straw. Established supplier countries are protected by the regulations of the Convention with respect to the admission of new opium producers into the export market. No corresponding treaty regulation exists for poppy straw producers.

263. The Resolutions also make reference to the increase in recent years of manufacturing capacity for export and urge the responsible major producing and manufacturing countries to restrict substantially their production levels. The 1981 Resolution urges these countries to restrict production programmes mainly to their domestic requirements.

264. Finally the Resolutions request the Board to undertake this detailed Study of the situation and to make recommendations, for which reference is made to Chapter X, Conclusions and Recommendations.

34/ See paragraph 266 below. 265. The United Nations General Assembly, the Economic and Social Council and the Commission on Narcotic Drugs have adopted other Resolutions which relate in whole or in part to the supply and demand of opiates for medical and scientific purposes. The texts are available in Annex B. 35/

266. In addition, the Commission on Narcotic Drugs in response to a request from the General Assembly, reviewed and approved at its twenty-ninth session in February 1981, strategy and policies for drug control. The approved long-term strategy includes a section on the achievement of a balance between demand for and supply of narcotic drugs and psychotropic substances for legitimate purposes. The applicable paragraphs (E/1981/24.E/CN.7/668, paragraphs 11-15) are also included in Annex B.

35/ GA Res. 33/168 20 December 1978, Narcotic Drugs, preambular paragraph 6 and operative paragraphs 2 and 5; ECOSOC Res. 1978/11 World requirements of opiates for medical and scientific purposes; ECOSOC Res. 1978/12 Long-term projections for legal opiate supply and demand; ECOSOC 2067 (LX11), 13 May 1977, Restriction of the cultivation of the poppy; CND Res. 2 (XXIX) 2-11 February 1981 Voluntary reporting on Papaver bracteatum; CND Res. V(XII) April/May 1957 Control of the manufacture of natural and synthetic drugs. CHAPTER IX

ECONOMIC CONSIDERATIONS

267. The basic aim of the international drug treaties is to ensure that there are no leakages from production centres and distribution channels, and that there is a regular supply of opiates which are indispensable in medicine. The first of these objectives can be achieved by acts of public authority, but this does not apply to the second, unless the state assumes complete and direct responsibility. Most of the operators who produce, manufacture, package and distribute opiates are motivated by economic considerations within a legislative framework which is intended to prevent opiates from being diverted into illicit channels. It is possible to set an upper limit for the number of such operators and the extent of their activities, but legislation cannot guarantee a minimum level of production or manufacture.

268. If, however, economic motives play an essential part in maintaining an acceptable level for the production of raw materials, and the manufacture and distribution of opiates, this does not mean that they should be allowed completely free scope. Regulation of such activities by economic mechanisms alone can result in surpluses which are not only disastrous as far as control is concerned but are also contrary to the interests of agriculture and industry as a whole. The consequences of economic imbalances on the various sectors are examined below before other economic questions, such as the prices of opiates, are dealt with.

The effects of imbalances on production

269. Imbalances, i.e. shortages and surpluses on production, can be temporary or lasting. A temporary imbalance may be caused by a good or bad harvest or by a temporary increase in demand as a result of an epidemic, etc. A lasting imbalance may arise from a structural change in supply or demand. The function of reserve supplies is to remedy imbalances caused by economic factors and, in the case of lasting imbalances, to gain time until the production apparatus has adjusted to demand.

270. The alternation of periods of shortage and periods of surplus production is accentuated by the lack of adequate quantitative forecasting of demand and by lack of co-ordination in the measures intended to correct imbalances between supply and demand. As a result of the inertia of the production apparatus and the resistance to change, which is discussed below, a time-lag of from two to four years may occur between the time a lasting imbalance first makes itself felt and the time when it is possible to remedy it. During this time, the behaviour of the economic operators, which act independently of one another and often in extreme ways, distorts our view of the extent of the imbalance. 271. In periods of shortage, manufacturers explore all possible licit sources to make up their supplies. As regards opium this includes the countries which produce for export as well as those which produce exclusively for quasi-medical domestic needs or for domestic needs for the treatment of drug addicts. They also turn for supplies to countries which seize opium produced illegally. Offers of purchase at prices significantly higher than in normal transactions tend to encourage the erroneous opinion held by certain Governments that production of opium for export is a highly profitable business. It is a great temptation to become a producer of opium for export where it has been shown that there are serious obstacles to effective control.

272. When several suppliers in turn receive purchase offers which they cannot meet, each of them is prompted to increase his production by the amount of the offer. It is clear that if such a purchase offer is made again subsequently it cannot be filled by all suppliers at once unless they share it among themselves. But each of them will be encouraged to fill the entire order by the competition among them stimulated by the rise in prices resulting from the shortage.

273. The adjustment of production to a lasting modification of demand is difficult to achieve for technical and socio-economic reasons. Technical considerations predominate in activities where the intensity of the use of capital outweighs the use of labour (industry, mechanized agriculture). Socio-economic reasons predominate in traditional agriculture because of the intensity of the labour factor as compared with the capital factor.

274. Until 1970 poppy straw was considered a by-product of the cultivation of the poppy plant for the production of the seed and it has been maintained 36/ that owing to this secondary role it was able to act as a regulator and extra source of supply for raw materials for the manufacture of opiates, thus making room for some flexibility in adjustment to demand. However, the influx of rural populations to towns and the lack of manpower has completely altered the situation which prevailed in the 1950's and 1960's, and in the 1970's the alkaloid factories resorted increasingly to supplies of straw specially produced to meet their needs. Still more important, all the new factories established over the last decade are exclusively supplied with straw which has been produced for their needs, the seeds being a sometimes negligible by-product. The Turkish factory is a special case because of the importance of poppy seeds for the population as a whole. Hence an additional source of rigidity entered the picture during the 1970's and poppy straw has, like opium, become a product which is produced essentially for the purpose of alkaloid extraction.

275. There are certain limits to the extent that the areas under cultivation can be expanded or reduced. Cultivation of the poppy plant for opium production calls for a large amount of skilled manpower, especially at the critical time of the harvest, which lasts little more than two to three weeks. It is therefore not practicable except on small family farms, in general considerably smaller than one hectare. Expansion of the land under cultivation is almost always accompanied by a drop in overall output. The lack of skilled manpower also explains why in the past some Turkish farmers, who have produced poppy seeds from time immemorial, have not lanced the capsules. However, the need to group the areas under cultivation in the centre of the country in order to avoid the risk of diversion has deprived these farmers of an essential crop.

36/ Records E/CONF. 34/24, pages 37-41, E/CONF. 34/24/Add.1, pages 66-69, 148-153. 276. Resistance to a reduction of the areas under cultivation is even greater than to an expansion. Beyond the fluctuations in the areas under cultivation and in the number of licensed farmers, in India and Turkey there is a nucleus of farmers who for countless generations have grown this crop as their livelihood. There is therefore a limit to the extent to which areas under cultivation can be reduced, beyond which there is the risk of serious disruptions in the economic life of several thousands of citizens who do not have the possibilities for conversion offered by modern agriculture. The peasant who cultivates his fields by methods handed down from his forefathers does not have the same perspective as the modern farmer with the advantages of advance technology, knowledge of markets and economic projections.

277. The factors of rigidity in modern farming concerns are more akin to the problems found in industry. Capital invested in agronomic research and in the development of specialized equipment increases productivity and reduces the use of manpower. But such capital requires time to pay for itself; in addition, it is not always possible to convert it to use for other crops. Research aimed at improving yields of the poppy plant for instance does not necessarily benefit other crops.

The effects of imbalances on manufacture

278. In periods of shortage or surplus there are large disparities in market prices for a product of a given quality such as morphine or codeine. Such disparities are due to price differences between the raw materials, opium and poppy straw from various sources, which consititute the most important factor in the cost price of morphine and codeine. They are also caused by the fact that contracts concluded by manufacturers to obtain raw materials have a fixed period of validity which may continue to be binding regardless of economic fluctuations. They are, lastly, due to the co-existence of national markets, which with a few exceptions are regulated and an international market which is open to competition.

279. In the few cases where the national market is directly subject to the keen competition which prevails in the international market, there is major disruption. Over the past two years the slump in the price of codeine produced from poppy straw has forced some opiate manufacturers using opium as a raw material to close down. Market prices had come to be significantly lower (by almost half) than cost prices, excluding any profit margin. There was thus the spectacle of companies established for over a century (one of which was the first to extract morphine from opium on an industrial basis) shutting down.

280. The five morphine manufacturers in the Federal Republic of Germany have all been affected in this way. The quantities of opium which they processed annually, and which amounted to more than 70 tonnes in the past, dropped to 6 tonnes in 1979 and 1980. Some of these manufacturers are bound by contractual obligations to purchase opium; all of them have stocks of codeine which are unsaleable even at cost price. A temporary shutdown, if it were to last for a longer period, would render the equipment unusable and would force the skilled manpower to seek other employment.

281. Even in countries where access to the market is strictly controlled, there are strong pressures to modify established structures. To withstand competition, some manufacturers are forced to abandon the opium which they had been using until then in favour of poppy straw concentrate, and others have simply abandoned all alkaloid extraction. 282. As has already been noted, alkaloid manufacturers are not always able to adjust their prices to the prices of the international market, whether they still obtain their raw materials on the basis of contracts concluded when prices were higher, or whether they have already reached a break-even point. Their customers, the manufacturers of preparations, try to circumvent these constraints in order to gain access to the international market by manufacturing alkaloids themselves or by changing suppliers. These tensions are exacerbated by commercial operators whose business it is not to concentrate on one particular product, but to make a passing profit when the opportunity arises. The national authorities thus receive applications for licenses from enterprises which are attempting to engage in a trade in which they have previously shown no interest.

283. The granting of licenses under these conditions does not seem compatible with the general interest. On the one hand, the authorities must protect long established manufacturers with which they have had regular dealings and which have ensured a steady supply to the market in difficult circumstances, while at the same time maintaining an effective control. If they should be squeezed out by new arrivals who might well lose interest in these operations at the next reversal in the trend, this would leave a vacuum which it would be difficult to fill.

284. Moreover, the complexity of the regulations which apply to these operations necessarily sets a limit to the number of firms that the authorities can effectively supervise. In a country where three firms have hitherto supplied the entire market, more than twenty applications for licenses have been filed with the authorities. Under these conditions, it is hard to see how the authorities can continue to carry out their many duties: supervising people and buildings, keeping registers, allocating quotas, etc.

285. While there is already effective control of all the movements of opiates, the same cannot be said of Schedule III preparations. These preparations may pass from one country to another without there being any need to apply the system of import certificates and export authorizations, unless the national legislation in question is stricter than the international treaties. Some exporters have here found a way of penetrating markets to which otherwise they would not be able to gain access.

The effects of imbalances on consumption

286. In periods of shortage, there are those who try to increase supply, while others try to bring about a reduction in demand. The costs incurred in the research, launching and marketing of a preparation are recouped gradually throughout the life of the preparation. This presupposes adequate supplies and relative price stability, without which medium-term forecasting is impossible. The imbalances described above especially when they have the effect of interrupting supply, cannot possibly be favourable to an expansion of demand. Research on substitutes is intensified, and substitutes which are easily obtainable are preferred even if they are less efficacious and their cost prices are higher. It follows that a slump in codeine prices does not necessarily bring about a recovery of consumption, as other products may have already taken over. Prices of raw materials

287. It is not possible to determine precisely the prices of raw materials generally, and it is necessary to differentiate among raw materials. The bulk of the commercial transactions involving opiates are concluded by mutual agreement. It is only in the case of opium and of preparations distributed at retail that the prices can be a matter of general knowledge. The details of an individual transaction are known only to the buyer and the seller, who have nothing to gain by divulging them, since each is waiting to see whether he might be able to gain an advantage for the next transaction. We shall confine ourselves here to drawing a few general conclusions from the indicative data furnished by the various Governments.

288. The prices of opium in dollars per unit (10 grammes) of morphine are given in the Table below. These prices are fixed once a year by the Indian Government after the harvest in the spring. As a rule, 1 kg of opium contains slightly less than 10 units of morphine, according to the titration method of the British Pharmacopoeia. A fairly accurate idea of the price of 1 kg of opium can be obtained by multiplying the prices given in the following Table by 10. The natural codeine and thebaine present in opium are not taken into account in this method of determining the prices, although they are of course taken into account in determining the cost prices and in comparing the prices of raw materials.

Table

Prices of Indian opium for export

$ US FOB per unit Indian rupees of morphine constant value 1971 1.80 5.973 1972 2.40 7.531 1973 2.40/2.67 6.36/7.382 1974 2.67/3.20 6.059/7.262 1975 3.20/4.90 7.110/10.886 1976 4.90 12.616 1977 6 13.908 1978 6 12.735 1979 6 11.863 1980 6/4.5 10.346/7.759

289. During the 20 years leading up to 1970, the price of 1 kg of opium in current US dollars was extremely stable, ranging between $12 and $15. During the past decade, the price has steadily increased, reaching $60 in 1977. In 1980 it fell back to $45. When converted into Indian rupees, and adjusted by means of the consumer price index, the price of opium has fluctuated between 6 and 13.9 rupees over the past 10 years. These prices, for export from India, ought in principle to cover the entire costs of production, collection, packaging, storage, transport within India, administration and control at all levels. 290. The price of opium is the same for all buyers, whatever amount they purchase. This system is not unfavourable to the small manufacturers, most of whom are already at a disadvantage on account of their smaller output. A practice of varying the price according to the amount purchased in the long term would favour a trend towards concentration in the industry by eliminating the small manufacturer.

291. In periods of shortage, the sale of opium to the various manufacturers has been pro-rated on the basis of their past purchases. Here too, this practice is neutral as regards its impact on economic structures. On the other hand, a distribution of opium according to the mechanism of prices would benefit those who are able to pay most and would entirely deprive the others of supplies. Sooner or later, this would result in reduced demand, because it would force some manufacturers to turn to substitutes.

292. As for poppy straw, its price varies according to the quality of the straw and the economic conditions prevailing in the producer country. When farmers are chiefly interested in producing poppy seed, the area under cultivation is adjusted accordingly and the extent to which it varies is dictated by the fluctuations in the price of seed. A plentiful seed crop leads to a drop in prices and a reduction in the areas under cultivation. Conversely, a rise in the price of seed leads to an increase in the areas under cultivation. The supply of straw is virtually independent of demand. However, although supplies are not regular, the price on the other hand is relatively reasonable, as the straw is only a by-product.

293. Manufacturers have endeavoured to stabilize their supply by offering farmers free seed, guarantees to purchase the entire crop, higher prices, technical advice and specialized equipment for hire. These measures improve the situation although they do not alter it, as farmers derive their incomes from two closely related crops. An increase in the production of straw entails a corresponding increase in the production of seed, a decline in seed price and consequently a fall in the farmer's total income.

294. The only way of simplifying the problem is to regard straw as the chief product and to organize production accordingly. This is easier in countries where poppy seed plays no part in the national economy. However, the price paid to the farmers by manufacturers must be adequate in relation to other agricultural products. The economic incentives referred to in the previous paragraph are necessary particularly at the beginning, when farmers are to be involved in growing a crop which is new to them. An attempt must be made to achieve high yields in order to safeguard profitability.

295. The current price for unincised poppy straw probably lies somewhere between $300 and $1000 per tonne. This wide price range is not surprising when it is considered that, depending on where it comes from, 1 tonne of poppy straw may contain from 1 to 8 kg of morphine. 296. It is important to compare the market structure for straw to that for opium. In accordance with the provisions of the international treaties, India has at its disposal an agency which has a monopoly over the purchase of opium. In the straw-producing countries, an identical situation exists de facto in most cases, except that the monopoly is often exercised by a manufacturer under state control. Australia has two manufacturers and in India collection and sale of incised straw are organized by private firms.

297. The opium harvested in India is intended principally for export, whereas for straw the eventual purchaser is in most cases to be found in India itself, owing to transport costs. In producer countries attempts are being made to reduce the costs by setting up factories for extraction near where the straw is grown and at least four manufacturers now compress the straw to reduce its volume to one-third. When it comes to international transport by land, sea and again land, costs are so high that the cost price of the straw increases substantially.

298. Land transport is extremely expensive and shipment by sea is used whenever practicable. However, the distance of the poppy straw cultivation sites and the factories from the coast entails at least two trans-shipments. Internal transport costs in the producing country, which are included in the selling price, are borne by that country. The high cost of transport explains the fact that there is only one manufacturer who is entirely dependent on supplies from abroad. Whereas some countries resort to imports to supplement their supply, the bulk of which is locally produced, the Netherlands import their entire straw requirement.

299. The international straw market is thus much smaller than the market for opium. This market is extremely susceptible to economic fluctuations. The price of Turkish straw fell very rapidly from $1900 a tonne in 1975 to less than $400 a tonne in 1980 (prices valid for quantities of several thousand tonnes). As a rough indication, shipment by sea of 1 kg of morphine contained in opium costs $15, while the cost of shipment of the same quantity of morphine contained in straw comes to $60. Manufacturers of morphine whose factories are located where the straw is produced thus have quite an advantage over those who are obliged to import straw because they do not have to pay the high cost of transport.

Cost of alkaloid extraction and conversion

300. Manufacturers of opiates operate under greatly varying technical and economic conditions, and these have an effect on output and manufacturing costs. The nature of the equipment, its age, the scale of operations and the degree of skill of the personnel especially affect output. Economic factors, such as the costs of capital, labour, chemicals, electricity, taxations, etc., play a part in increasing the difference in costs. However, differences in cost prices have only very limited effects when each manufacturer sells his products on a market over which he has exclusive rights. To guarantee constant supplies, several countries have elected to establish their own national industry and to reserve all or part of the domestic market for it. 301. On the other hand, differences in cost prices are vitally important when manufacturers sell their products in the competitive international market. The need to be competitive forces manufacturers to pare down all cost elements, particularly the manufacturing costs, over which they have more control. Lastly, competition operates a process of selection among manufacturers and those who continue to supply the market have comparable costs, even if these costs are not identical in structure.

302. An example of different cost structures arising from extraction techniques is the use of organic solvents instead of water. These solvents are expensive and their recovery is not complete at the end of each cycle, so that supplies must be renewed. However, they make it possible to extract a higher percentage of alkaloid and thus allow savings to be realized on raw materials.

303. Opium is a more highly processed product than straw and a priori its high alkaloid content should mean lower extraction costs. However, its processing calls for much more manpower than the processing of straw. Factories for the extraction of alkaloids from straw are nowadays completely automated, with materials circulating in various receptacles arranged in a continuous circuit reducing human intervention to the minimum. Monitoring of the various operations is carried out electronically from an instrument panel. Consequently, the cost of alkaloid extraction may as a general rule be considered roughly the same, irrespective of whether it is opium or poppy straw that is being processed.

304. Moreover, the alkaloid extraction and conversion costs of the manufacturers who supply the international market are in the last resort comparable. The cost of manufacturing codeine phosphate can be estimated at between $200 and $300 for the equivalent of 1 kg of anhydrous morphine base.37/ This does not include the cost of the raw material, which must be added to obtain the total cost price.

305. These estimates are valid only for codeine phosphate manufactured entirely by one firm. When the manufacturing cycle is interrupted, for instance at the stage of the concentrate or morphine, and the remainder of the process is taken over by another firm, other cost elements intervene. An intermediate product which is sold must conform to certain standards, and the processes of drying, homogenization, quality control, weighing and packaging must therefore be carried out, all of which are dispensed with in the case of a continuous manufacturing cycle until the final stage is reached. In addition, the profit margin of the first manufacturer becomes a cost element for the second.

306. Lastly, the second manufacturer does not necessarily resume the process where the first left off, owing to the type of equipment used. Over the last few years, many manufacturers with opium-processing equipment have had to use poppy straw concentrate, which they process with the same equipment. The cost of extraction under these conditions is not substantially lower than when opium is used to start with, especially in the case of concentrate with a low morphine content. In conclusion, manufacturers who import semi-finished products have higher manufacturing costs than those who manufacture finished products starting out from the raw material.

37/ Approximately 740 g of anhydrous morphine base are required to make 1 kg of codeine phosphate. 307. The cost of manufacture is only one element in the cost price, the other being the price of the raw materials which are included in the final product. The paring down of manufacturing costs to the minimum and their levelling out as a result of competition means that differences in cost price from one manufacturer to another can be explained above all by differences in the prices of raw materials, i.e. opium and straw from various sources. An indication of the price of raw materials has been given earlier in this chapter. Two observations will suffice here. Firstly, straw, which is only a by-product of poppy plant cultivation for the purpose of obtaining seed, and the price of which per tonne is low, is not necessarily the most profitable, as it is the morphine content which is the determining factor. Secondly, the price of straw cultivated essentially for the purpose of alkaloid extraction has greatly increased over the last few years, yet its morphine content has risen even more rapidly so that its profitability has increased in spite of the rise in prices.

Competition between raw materials

308. The specialization of extraction equipment prevents one raw material from being directly replaced by another, except to a certain extent for opium and concentrate of poppy straw, as we have seen above. There is no equipment for processing both opium and poppy straw without differentiation. Competition between the raw materials therefore takes place indirectly, through the semi-finished products (poppy straw concentrate) or finished products (morphine, codeine).

309. The fact that the price of opium sold on the international market is fixed, at least for the duration of the agricultural season, whereas the prices of straw and of opiates are determined by negotiation between the buyer and the seller for each individual transaction, has the following consequences. In periods of shortage, opium has been distributed to the manufacturers, pro-rated on the basis of their previous purchases at a fixed price. On the other hand, poppy straw and opiates sold on the international market are purchased by customers willing to pay the highest price. The rise in the freely fluctuating prices of opiates means that opium is extremely profitable for buyers. In periods of surplus production, competition between sellers of opiates causes the freely fluctuating prices to fall below the fixed price of opium.

310. The price mechanisms explain the fluctuation in Indian opium exports. A manufacturer who is able to process both opium and poppy straw concentrate will purchase opium when it is in short supply and will try to supplement his supply with concentrate. In times of surplus production, he will prefer to buy concentrate.

Prices of opiates

311. The alkaloid extraction and processing operations belong to the domain of the chemical industry, whereas the manufacture of preparations falls within the sphere of the pharmaceutical industry properly speaking. Some firms engage in both types of activity. In this context, "prices of opiates" means not the prices of preparations but the prices of alkaloids extracted, processed and sold in bulk to the manufacturers of preparations. The prices of codeine phosphate are the best indicators of market trends, as this product outranks all other opiates as regards volume of sales. 312. There are two price categories for codeine phosphate depending on whether it is sold on domestic markets or on the international market, where competition is keenest. It would, however, be an exaggeration to attribute price fluctuations exclusively to competition. For instance in one large consumer country which is supplied by a single manufacturer, prices have traditionally been lowest in comparison with all other countries, except those which are completely open to foreign competition. Even in the latter, during periods of economic boom, prices have been much higher than in the country in question. Economic mechanisms are not the only factors which govern prices; there is also the whole area of health policy to be taken into consideration, and this is a decisive argument in favour of better regulation of the opiates market.

313. Over the past decade, domestic prices for codeine phosphate in current money have doubled and in some cases tripled. In 1971 and 1972 domestic price differences were relatively small, 1 kg of codeine phosphate being worth between $300 and $400. Towards the end of the decade, the gap widened with prices ranging between $700 and $1000 disregarding certain extreme cases.

314. Prices on the international market differed little from domestic prices in the early 1970's. Subsequently they rose more rapidly than domestic prices until 1977-1978, reaching a peak of $US 900, and then rapidly declining to $300 in 1980-1981. After 1978, domestic prices sometimes declined very slightly and in some cases continued to rise.

315. Codeine phosphate is therefore now sold in the international market at the same price as ten years ago, in spite of the definite increase in the cost of raw materials and in manufacturing costs. The price of $300 for 1 kg of codeine phosphate is approximately equivalent to $430 for 1 kg of anhydrous morphine base. One has only to compare the price of the latter with the cost of raw materials and manufacturing costs to conclude, as all the manufacturers have done, that the price of codeine phosphate is at present abnormally low.

Sales prices for opiates contained in preparations

316. Opiates purchased in bulk by the manufacturers of preparations are themselves the basic material from which the preparations are made. But less cumbersome equipment is required for the latter than for alkaloid extraction or processing and manufacturing costs are probably lower. However, other factors, such as the cost of packaging, marketing and distribution, intervene and help to push up the cost price. The pharmaceutical industry stresses the high cost of research and development, which will not necessarily be recouped by the new products alone. Lastly, the final price paid by the consumer is inclusive of the profit margins of all the middle-men, producers, manufacturers and distributors. It is a widely accepted view that the cost of the raw material contained in a preparation accounts for only a small fraction of the final cost price to the consumer. And yet it is above all on the prices of the raw materials that competition exerts a depressing effect. CHAPTER X

CONCLUSIONS AND RECOMMENDATIONS

CONCLUSIONS

317. The Board hopes that its Study and the conclusions emerging therefrom will stimulate a constructive dialogue among Governments aimed at re-establishing and maintaining an equilibrium between the supply of and demand for opiates required for medical and scientific purposes.

318. In accordance with its mandate under the 1961 Convention and the Council's Resolutions, the Board has carried out bilateral consultations with the principal producing, manufacturing and consuming countries toward this end. In this endeavour the Board sought to collect data over and above that provided under the treaties to permit a comprehensive appraisal of all aspects of the situation, to understand the positions of these countries and to help each of them to have a full appreciation of the positions of the others as well as of the overall picture. The replies of nine Governments to questions posed by the Board, together with statistics, are contained in the Annexes.

319. Beginning in 1979 the bilateral consultations, among other factors, led to a promising initial result when Australia, France, India and Turkey each agreed voluntarily to reduce its raw materials production significantly. The Board believes that further progress toward remedying the current serious over-supply problem and achieving a balance between supply and demand could be further advanced by additional consultations between the countries principally concerned, under the aegis of United Nations institutions.

320. Such efforts in turn require adequate knowledge of the factors affecting both supply and demand in order to provide the basis for rational decisions. This knowledge must be available to the large number of decision makers involved in production, manufacture and consumption. This enables co-ordinated actions to be taken, avoiding the kind of incompatible results occurring in recent years.

Forecasting

321. One basic element concerns the forecasting of requirements for opiates. The 1961 Convention provides for the submission by Governments of annual estimates of such requirements. However, by the time these annual estimates can be published, decisions concerning acreage to be sown for the relevant crop year have necessarily already been taken. Therefore medium-term estimates are essential to permit producing countries to adjust cultivation to demand.

Evolution of consumption

322. Adequate knowledge of the evolution of opiates' consumption is necessary for realistic forecasts. Consumption, which steadily increased from 1950 to 1973 began to grow more slowly beginning in 1974 because of temporary supply dislocations. Although supplies were abundant by the end of the 1970's, consumption did not revert to its earlier growth rate. A country-by-country study shows that a more modest growth rate can be anticipated over the period 1981-85 than in the period 1950-73. A more in-depth analysis of future consumption by market research experts would be desirable so that realistic forecasts can be established, enabling producing countries better to match their production to consumption.

Evolution of production

323. The temporary difficulties in the early 1970's concerning the supply of opiates raw materials for export precipitated over-reactions. This led to substantial over-production of such materials, particularly of poppy straw, and resulted in the accumulation of excessive stocks of both opium and poppy straw. At the end of 1980 stocks of opiates, excluding poppy straw, stood at a level more than double the quantities of opiates consumed annually. Despite producers' voluntary reductions in acreage,38/ production continued to exceed requirements. In fact, improved yields partly offset acreage reduction in most areas.

Possibilities for regulating production under the treaties

324. The system for regulating production, as provided in the treaties, is based on annual estimates furnished by Governments. Regarding opium, production is limited directly in so far as possible to the amount of the estimate, and is further indirectly limited since stocks should not exceed the level estimated.

325. Governments are required only to furnish estimates of areas to be cultivated in poppy, whether for the production of opium, seeds, or poppy straw. They are not required to provide specific estimates and statistics of production or stocks of poppy straw for the manufacture of alkaloids. Among the reasons why these data were not required is that when the treaties were adopted it was believed that the risk of diversion of poppy straw was insignificant and furthermore that it constituted only a supplementary raw material. Today it in fact constitutes at least as important a raw material as opium.

326. Papaver bracteatum, which is about to be produced in commercial quantities as an opiate raw material, is not covered by the international treaties since there was no expectation at the time they were concluded that this plant would be so used.

327. Since estimates and statistical data do not cover production and stocks of all the different opiate raw materials, it is impossible to estimate and regulate the overall production of these raw materials. Governments will need to consider how the gaps should be filled. The required information, at the first stage, can best be obtained by requesting countries to supply data voluntarily. Subsequently the requirements for such submissions could be formalized by amending the treaties. However, to fill the treaty gaps will not in itself rectify the current problem of over-supply.

International trade

328. The international trade in opiates at the end of the 1970's had two dominant aspects, namely, an unprecedented growth in the trade in poppy straw concentrate, which in some cases replaced opium, and a heavy slump in

38/ See Chapters III and VII. morphine and codeine prices. This brought about a sharp fall in opium exports from India, the sole exporter, resulting in the further growth of opium stocks. Indeed, India's exports to Europe were drastically curtailed. To avoid further dangerous disruptions in the international market, the Commission made a number of recommendations which were adopted by the Council.39/ Pursuant to these recommendations, the United States, a major importing country, decided that at least 80% of its supplies of opiate raw materials would be imported from Turkey and India. Two other major importers, namely, Japan and the USSR, continued to import exclusively from India.

Stocks

329. The accumulation of stocks of raw materials, mainly in India and Turkey, tends to depress the market, places a heavy financial burden on these two countries, and imposes an additional undesirable strain on their control systems. In view of the substantial reductions in production already made by India and Turkey, it would appear difficult to envisage the gradual absorption of stocks by further such reductions on their part. Their stocks could of course be reduced by an increase in exports to their previous levels, by better distribution of stocks among producing and manufacturing countries and by the rebuilding of "special stocks".40/

Industrial capacity for extraction of morphine

330. Estimated conservatively, the industrial capacity for the extraction of morphine from opium and poppy straw exceeds requirements by at least 50%. The construction of new poppy straw processing factories and the expansion of existing factories have tripled the amount of morphine which can be manufactured from straw, and it is now possible to cover total consumption requirements without even resorting to opium. The existence of excess capacity is a factor of instability strongly influencing prices.

Control

331. The maintenance of effective control over narcotic drugs requires full co-operation by all States, by all segments of national administrations, and indeed by all involved in the production, manufacture, processing and distribution of such drugs. To achieve effective control, Governments in the past have been willing to take action beyond that strictly required under the letter of the international treaties. Moreover, manufacturing enterprises and distributors, for their part have voluntarily applied stricter regulation than was required by their national authorities. This attitude demonstrated a sense of responsibility stemming from the realization by all concerned that narcotic drugs are not ordinary merchandise. The present serious situation caused by the vast imbalance between supply and demand and the potential for more dangerous dislocations calls for further expansion of voluntary co-operation.

39/ Resolutions 1979/8, 9 May 1979; 1980/20, 30 April 1980; and 1981/8, 6 May 1981. See Annex B. 40/ Defined in Article 1, 1(w) of the 1961 Convention. 332. Some have contended that since control over licit trade is functioning generally satisfactorily at present, there would be no risk in letting the free play of market forces redress the balance. Such a laissez-faire thesis runs counter to the principles of control embodied in the treaties and which have served as the basis for international behaviour for more than seven decades.

333. In the name of the principle of solidarity, countries, not themselves suffering from serious drug abuse problems, have accepted the burden of establishing and maintaining cumbersome and costly controls over licit cultivation and production. In the same spirit these countries have also devoted their limited resources to fight against illicit cultivation, production and trafficking.

334. The laissez-faire attitude neglects to take into account the heavy responsibility that certain countries bear vis-a-vis their many farmers, licit producers for generations, who have derived their livelihood from poppy cultivation. The international community could not remain indifferent to the serious economic and social dislocations that would necessarily result from substantial reductions in cultivation in these countries. This would be true even if such reductions were spread over several crop years. The attitude of laissez-faire would in fact place the burden of reducing stocks and balancing supply and demand mainly on these countries.

335. Moreover, from a purely economic point of view, the hope that a balance can be restored by market forces alone is not justified by past experience; the cycle of shortage and surplus can only be halted by concerted action. It is not at all certain that the present crisis has run its course; there may be still greater disturbances ahead. If the principal raw material producers should embark systematically on a price-cutting policy, there might well be serious consequences even for those with protected markets. Such a policy which would be harmful for all countries concerned would be even less justified, bearing in mind that the prices of finished opiate products have ensured an adequate return to manufacturers and distributors.

Characteristics of the opiate market

336. One must appreciate that there are both national markets and an international market for opiates. The national markets are with few exceptions, strictly controlled in the light of two distinct types of considerations, one relating to public health and welfare, and the other to economic factors. Governments in the exercise of state sovereignty, adopt such arrangements as they think best for trade in opiates, as for economic activity in general. The international market on the other hand, is subject to the measure of regulation and control, which States have accepted under treaties in the interest of the public health and welfare, and the supervision of which States have entrusted to international agencies - the United Nations, WHO, and the Board - to ensure that certain controls specified in the treaties are respected. In the economic sphere, however, the international market is free except where particular groups of States have concluded agreements on customs and other economic matters. 337. The economic aspects of the opiate markets cannot be entirely separated from the control aspects, however. Substantial economic disturbances in the international market, such as have occurred in recent years, cause problems which extend beyond the strictly economic sphere. If, for example, a supply shortage were to occur, products essential for public health would be lacking, and the Board is responsible for ensuring adequate supplies for medical needs. If on the other hand there were an over-supply so that prices collapsed and the licit market were no longer profitable, there would be a danger of diversion of licit supplies to the illicit market. Even if this danger were not realized, some production might be given up which would prove later to be needed by the international community. The international market in opiates cannot therefore be treated as an ordinary market left entirely to the interplay of economic forces.

Short-term problems and structural problems

338. In the present situation in the international market, adjustments of supply to demand will continue to be made through the price mechanism, unless other measures are taken. Fluctuations in demand and supply are sometimes moderate, and supply and demand remain elastic; a balance is then re-established reasonably quickly and the problem was short term. However, there may be an over-reaction on the supply side leading to an imbalance in the opposite direction. Thus the current over-supply was a result of over-reaction to earlier supply difficulties. But these imbalances could also be caused by more fundamental changes in the composition of demand or supply. Examples might be the decline of codeine in favour of a new synthetic product or the use of a new raw material such as Papaver bracteatum. Developments of this kind have been described as structural problems. It is not always easy however to determine whether disruptions which are beginning to emerge in the international market are short term or structural problems. The judgment whether a situation at a given time falls into one category or the other has profound implications for international policy on narcotic drugs. Whatever the nature of the problem, rapid, reliable and complete information is of cardinal importance for all the Governments and private enterprises involved.

International policy on narcotic drugs

339. To date the international policy concerning dependence-producing drugs which can create public health problems has been to establish international control, to promote national controls, and to facilitate action to combat drug abuse. In a policy designed to restore and maintain a balance between supply and demand, it is necessary to take into account economic considerations. Such a policy may need to envisage reserving a share of the market for those countries longest established as producers for export. It will also be necessary to determine to what extent greater medical assistance in developing countries would increase medical requirements for opiates.

340. If the imbalance between supply and demand is believed to be a short term problem, action should give priority above all to the dissemination of rapid, reliable and complete information. If, however, the imbalance being encountered is believed to be a structural problem, market organization measures might be considered, entailing, for example, export quotas, the establishment of reserve stocks and other measures of the same kind, in widespread use under international agreements on "basic commodities" or "raw materials". It is at the level of the highest Government authorities, acting individually and collectively through international agreements, that such assessments and decisions would have to be made in opiates.

RECOMMENDATIONS

341. To deal with the problems identified in the preceding paragraphs, courses of action available for consideration by Governments include the following: a) voluntary actions consistent with the objectives of the treaties; b) further amendments to supplement certain provisions of the 1961 Convention as amended by the 1972 Protocol; and c) possible arrangements designed to organize the international market.

Voluntary measures

342. A series of United Nations Resolutions, the texts of which are annexed to this Study, recommend that Governments take certain voluntary measures aimed at restoring and maintaining a world-wide balance between the supply of opiate raw materials and the demand for opiates for medical and scientific purposes. These measures call for the provision of additional information to the Board; support for the traditional supply countries and prevention of the proliferation of producing and manufacturing sources for export; and, the restriction of production by major producing countries which have set up additional capacities in recent years.

Information

343. The first need is for more reliable, more timely, and more comprehensive information to enable the Board to monitor the movements in supply and demand, and for Governments of producing and manufacturing countries to plan their outputs accordingly.

344. Opiate raw materials: In summary, the Board needs the same information on other opiate raw materials as the Convention now requires for opium, notably:

- For poppy straw: estimates and statistics of production and stocks, for the manufacture of opiates.

- For Papaver bracteatum: estimates and statistics of production, of utilization for the manufacture of opiates, and of stocks and quarterly statistics of imports and exports.

345. Medium-term forecasts of opiate consumption: The estimates to be furnished to the Board pursuant to the 1961 Convention should reflect more accurately real needs and over-estimation should be avoided. In addition, Governments should voluntarily provide realistic medium-term forecasts of consumption. Such forecasts could cover a period of 5 years. 346. Action: The Board invites Governments to indicate in timely manner whether they are prepared voluntarily to supply the information outlined in paragraphs 344 and 345 above, as already envisaged in United Nations Resolutions. If the overall response to this appeal is affirmative, the Board will take the necessary administrative action to collect and publish this information.

347. To focus on voluntary submisssions in the first instance is the most rapid way to provide the Board with information essential to its comprehensive knowledge of the situation world-wide. Such information would also directly benefit Governments, particularly of producing and manufacturing countries. At an appropriate time and in the light of the experience gained with the voluntary system, Governments may then wish to consider possible amendments to the 1961 Convention designed to formalize the voluntary practice. Priority may need to be given to amendments relating to Papaver bracteatum, which at present is not controlled by the treaties; this question is discussed in paragraph 357 below.

Raw material production and processing facilities

348. Voluntary action, which could take the form of expanded consultations among Governments and with the Board, could facilitate producing countries' planning for acreage reduction or expansion of cultivation. Such voluntary consultations could also facilitate manufacturing countries' decisions in regard to expanding or cutting back processing facilities. To be meaningful such consultations could be based on expert analyses of the opiate market, including the possible impact on that market of the emergence of synthetic raw materials as well as synthetic opiates and non-narcotic substitutes.41/

Consumption

349. In studying projected market possibilities due account should be taken of the potential needs for opiates in developing countries. Such needs could increase as better primary health care becomes available, and as opiates, particularly codeine, are indicated as anti-diarrheal and anti-tussive remedies. The World Health Organization can play a major role in assessing such potential medical needs in developing countries.

Stocks

350. A problem requiring priority attention and voluntary action by Governments relates to the excessive stocks of opium and poppy straw which have accumulated in producer countries. The objective should be to reduce such stocks to levels commensurate with normal reserve requirements. Maintenance of these excessive stocks imposes too heavy a burden on the main producing countries. Therefore, to alleviate this burden, these stocks should be shared among producing, manufacturing and consuming countries. This could be done, following the recent example of a major importing, manufacturing and consuming country, by encouraging imports by manufacturers to rebuild commercial inventories. In addition, major consuming countries which have drawn down their "special stocks" could reconstitute them, and other countries which have hitherto not maintained such stocks could constitute them.

41/ See paragraphs 354-356 below. Reduction of supply

351. The serious problem of over-supply discussed in the Board's annual reports over the last several years has engaged the attention of the Commission on Narcotic Drugs, the Economic and Social Council and the United Nations General Assembly in recent years, and these organs have made a number of recommendations for actions by Governments. In the first place, an appeal was addressed to Governments of all importing countries to support India and Turkey, which, as traditional supplier countries, have been the longest standing producers for export of opiate raw materials for medical and scientific purposes. In the second place, major producing countries which have recently set up additional capacities for export were urged to restrict their production programmes to meet mainly their own domestic requirements.

352. As stated earlier in this Study, one major importing, manufacturing and consuming country, responding affirmatively to these recommendations, has decided that at least 80% of its supplies of opiate raw materials are to be imported from the supplier countries referred to in the Resolutions, namely, Turkey and India. Two other major importers continue to obtain their supplies exclusively from India. These countries' actions can serve as an example for other importing countries to assist, in solidarity with the international community, in the effort to reduce the current excessive stocks and restore a balance between supply and demand. For this purpose and to avoid further dangerous dislocations, other importing countries should consider having recourse to their traditional sources of raw materials supply.

353. However, the current levels of over-supply and of stocks are such that consideration will need to be given to further reductions of cultivation. Reductions could perhaps be made at a more rapid pace by countries which have more recently embarked on production of opiate raw materials, which utilize mechanized agricultural methods, and which have diversification possibilities. Regarding the longest standing producers, these countries use labour intensive agricultural methods which involve a very large number of farmers, and diversification possibilities are not easily applicable. In the face of these constraints, these countries nevertheless have already made substantial reductions in production: India having reduced its production by approximately 45% and Turkey by 67%, over two years. For these countries to make further adjustments so soon thereafter could precipitate serious economic and social difficulties, and it is understandable that the Governments must adapt the pace of their future actions accordingly. If stocks cannot be reduced or otherwise disposed of, some further measures might be necessary.

Scientific and medical developments

354. All producing countries, when planning production in the medium and long term, will wish to give careful attention to the progression of science. This progression could lead to the availability of alternative raw materials, and the replacement of certain opiates by synthetics. 355. On the other hand, producer countries in their long term planning will also need to keep in mind developments which could lead to increased use of opiates as health care in developing countries spreads and requires such drugs.

356. As noted elsewhere in this Study, the Board plans to refer in its annual reports to major developments affecting supply and demand. In this connection it proposes, through continuing co-operation with the Narcotics Laboratory of the Division of Narcotic Drugs, to keep abreast of scientific developments and report any such developments which would appear likely to affect supply and demand. Similarly, the Board proposes, through continuing collaboration with WHO to keep itself informed about possible increases in demand for opiates in developing countries, and also to report these developments.

Papaver bracteatum

357. As noted previously, this poppy species is not only a subject of research but is likely soon to be used commercially as a raw material for opiates. As also mentioned previously, Papaver bracteatum is not controlled by the international drug treaties. A priority should be to amend the 1961 Convention to apply to Papaver bracteatum controls similar to those which apply to Papaver somniferum cultivation and opium production. Several formulations of draft amendments could be envisaged. Perhaps the approach which could lead to the most timely action would be for the Commission, on the initiative of a Party, to reach a consensus on the text of an amendment capable of being accepted by the Parties pursuant to the simplified procedure available in Article 47 (2) of the 1961 Convention. Pending the entry into force of such an amendment, the control referred to above should voluntarily be applied by Governments.

358. To control Papaver bracteatum does not solve the problem of the relationship of its production to the over-supply of narcotic raw materials. For this plant to be commercially cultivated without reference to the current situation would exacerbate the already serious problem of over-supply and cause further dislocations. Therefore, since raw materials for the manufacture of all opiates are at present abundantly available, countries should exercise the utmost restraint and refrain in these circumstances from embarking on commercial cultivation. In solidarity with the international community, any country now planning the cultivation of Papaver bracteatum, should also consider reducing the production of this new raw material.

Possible organization of the international market

359. One way to seek to achieve and maintain a balance between supply and demand would be to conclude an international agreement to organize the international market by, for example, establishing export quotas. Since this approach has already been suggested by one Government and discussed by the Commission, the Board mentions this option. However, this question is properly a matter for Governments to judge, and the Board therefore refrains from taking a position. 360. The Board intends, in accordance with its responsibilities under the 1961 Convention, to continue carefully to monitor the situation regarding supply and demand. As noted previously, it proposes to keep Governments regularly apprised of major developments and to maintain its dialogues with the countries principally concerned with a view to assisting them as they may desire.

361. Governments, for their part, in solidarity with the international community, are advised carefully to consider the suggestions set forth in this Study and to co-operate with the Board and one another with a view to taking concerted action aimed at achieving and maintaining a balance world-wide between the supply and demand of opiates.

ANNEX A - STATISTICAL TAPLES Table 1 Consumption of codeine kilogrammes Note: This table lists the countries that consumed more than 1000 kg or more in at least one year during the period under consideration

1/ Separate statistics for this country are not available. The figures for 1981 to 1985 are projections made either by governments or when in parentheses by the Board Table 2 Codeine Consumption per Million Inhabitants kilogrammes

Note: The figures represent the annual average consumption per million inhabitants based on a period of 5 years. Only countries for which this average reached 50 kg at least once are listed. Table 3 Consumption of Dihydrocodeine kilogrammes

Note: Listed below are the countries which consumed more than 100 kilogrammes in at least one year. Table 4 Consumption of Ethylmorphine kilogrammes

Note: Listed below are the countries which consumed more than 100 kilogrammes in at least one year. Table 5 Consumption of Pholcodine kilogrammes

Note: Listed below are the countries which consumed more than 100 kilogrammes in at least one year. Table 6 Consumption of Morphine kilogrammes

Note: Listed below are the countries which consumed more than 100 kilogrammes in at least one year.

Table 7 Consumption of Opium kilogrammes Note: Listed below are the countries which consumed more than 100 kilogrammes in at least one year.

Table 8 Total Production of Opium tonnes Table 9 Poppy cultivation and opium production in India Table 10 Poppy cultivation and poppy straw production in Australia Table 11

Poppy cultivation and poppy straw production in France Table 12 Poppy cultivation and poppy straw production in Turkey

Table 13 Poppy cultivation and poppy straw production in Spain Table 14 Production of poppy straw for the manufacture of alkaloids tonnes of equivalent morphine Table 15 Manufacture of morphine kilogrammes

For each country, line 1 represents the amount of morphine manufactured from opium; line 2 represents the amount of morphine and CPS manufactured from poppy straw; line 3 represents the total amount of morphine manufactured.

Table 16 Capacity of morphine manufacture kilogrammes For each country, line 1 represents the capacity to manufacture morphine from opium; line 2 represents the capacity to manufacture morphine (including CPS) from poppy straw; line 3 represents the total of lines 1 and 2. Table 17 Opiate requirements which have to be met by imports Tonnes of morphine equivalent Table 18 Surplus production of opiates available for export tonnes of equivalent morphine

Table 19 Total exports of opium by producing countries kilogrammes Table 20 India: Exports of opium for the manufacture of alkaloids tonnes Table 21 Turkey: Exports of opium for the manufacture of alkaloids tonnes Table 22 Total exports of poppy straw for the manufacture of alkaloids

Line 1 represents kilogrammes of equivalent morphine. Line 2 represents percentage of export market. Table 23 Turkey: Exports of poppy straw for the manufacture of alkaloids Line 1 represents tonnes. Line 2 represents kilogrammes of morphine equivalent. Table 24 India: Exports of poppy straw for the manufacture of alkaloids Line 1 represents tonnes Line 2 represents kilogrammes of equivalent morphine Table 25 USSR: Exports of poppy straw for the manufacture of alkaloids

Line 1 represents tonnes Line 2 represents kilogrammes of equivalent morphine

Note: Imports of 350 tons in excess of USSR declared exports were declared by the Netherlands in 1970. Table 26 Yugoslavia: Exports of poppy straw for the manufacture of alkaloids

Line 1 represents tonnes Line 2 represents kilogrammes of equivalent morphine

Table 27 Iran: Exports of poppy straw for the manufacture of alkaloids

Line 1 represents tonnes Line 2 represents kilogrammes of equivalent morphine Table 28 Total exports of concentrate of poppy straw Kilogrammes of equivalent morphine with percentages of total annual exports by country Table 29 Netherlands: Exports of concentrate of poppy straw Kilogrammes of equivalent morphine

Table 30 Australia: Exports of concentrate of poppy straw kilogrammes of equivalent morphine

Note: 1979 Figures include 288 kg morphine exported to Brazil. Table 31 France: Exports of concentrate of poppy straw kilogrammes of equivalent morphine

Table 32 Poland: Exports of concentrate of poppy straw kilogrammes of equivalent morphine Table 33 Hungary: Exports of concentrate of poppy straw kilogrammes of equivalent morphine

Table 34 Yugoslavia: Exports of concentrate of poppy straw kilogrammes of equivalent morphine Table 35 Total exports of morphine kilogrammes Table 36 Hungary: Exports of morphine kilogrammes Table 37 Netherlands: Exports of morphine kilogrammes Table 38 Czechoslovakia: Exports of morphine kilogrammes

Table 39 France: Exports of morphine kilogrammes Table 40 United Kingdom: Exports of morphine kilogrammes

Table 11 Poland: Exports of morphine kilogrammes Table 42 Switzerland: Exports of morphine kilogrammes

Table 43 Yugoslavia: Exports of morphine kilogrammes Table 44 Germany, Federal Republic of: Exports of morphine kilogrammes Table 45 Italy: Exports of morphine kilogrammes

Table 46 Romania: Exports of morphine kilogrammes

Table 47 USSR: Exports of morphine kilogrammes Table 48 Total exports of codeine by countries exporting an average of more than 1 tonne per year kilogrammes Table 49 United Kingdom: Exports of codeine kilogrammes Table 50 Netherlands: Exports of Codeine kilogrammes Table 51 Hungary: Exports of codeine kilogrammes Table 52 USSR: Exports of codeine kilogrammes Table 53 Germany, Federal Republic of: Exports of codeine kilogrammes Table 54 Poland: Exports of codeine kilogrammes Table 55 Australia: Exports of codeine kilogrammes Table 56 Denmark: Exports of codeine kilogrammes Table 57 France: Exports of codeine kilogrammes Table 58 Czechoslovakia: Exports of codeine kilogrammes Table 59 Yugoslavia: Exports of codeine kilogrammes Table 60 Belgium: Exports of codeine kilogrammes Table 61 Net codeine exports of manufacturing countries kilogrammes Table 62 Total demand versus production of alkaloids ANNEX B - RESOLUTIONS

1979/8. Maintenance of a world-wide balance between the supply of narcotic drugs and the legitimate demand for those drugs for medical and scientific purposes

The Economic and Social Council,

Recalling the provisions of the Single Convention on Narcotic Drugs, 1961, relevant to limiting the cultivation, production, manufacture and use of narcotic drugs to an amount required for medical and scientific purposes,

Noting that in recent years there has been a considerable increase in morphine producing capacity for export, leading to a situation of substantial over-production of opiates,

Having considered the report of the International Narcotics Control Board for 1978 on world requirements and supply of narcotic drugs for medical use,

Noting with serious concern the Board's assessment that, unless there is a large and unforeseen increase in demand between 1978 and 1982, morphine manufacturing capacity will be, on average, 50 per cent greater than requirements,

Recognizing that it is essential to bring about the proper balance between global supply and demand,

Talcing note of the continued reliance placed by the world community on countries constituting the traditional sources of supply for its medical needs of opiate raw materials and the positive response of those countries in meeting the world requirements and their contribution to the maintenance of effective control systems,

Bearing in mind that the treaties establishing those systems are based on the concept that the number of producers of narcotic materials for export should be limited in order to facilitate effective control,

1. Calls upon importing countries, in so far as their constitutions and legal authority permit, to support the traditional supply countries and give all possible practical assistance in preventing the proliferation of producing and manufacturing sources for export;

2. Urges the Governments of major producing countries which have set up additional capacities in recent years to take effective measures to restrict their production programmes so as to restore a lasting balance between supply and demand and to prevent drug diversion to illicit channels;

3. Requests the International Narcotics Control Board to continue its efforts to make realistic projections of supply and demand in opiates and to continue its dialogue with the Governments concerned to ensure that the provisions of the relevant Conventions are strictly adhered to by the producing, manufacturing, exporting and importing countries;

4. Requests the Secretary-General to transmit the text of the present resolution to all Governments for their consideration and appropriate action.

15th plenary meeting 9 May 1979 Resolution E/1980/20

Maintenance of a world-wide balance between the supply of narcotic drugs and the legitimate demand for medical and scientific purposes

The Economic and Social Council,

Recalling the relevant provisions of the Single Convention on Narcotic Drugs, 1961, to limit the cultivation, production, manufacture and use of narcotic drugs to an amount required for medical and scientific purposes,

Mindful of its resolution 1979/8 of 9 May 1979,

Bearing in mind that the maintenance of a world-wide balance between the supply of narcotic drugs and the legitimate demand for those drugs for medical and scientific purposes constitutes an important aspect of the international drug abuse control strategy and policies,

Having considered the report of the International Narcotics Control Board for 1979 on the world requirements and supply of licit narcotic drugs,

Noting with concern the Board's assessment that a situation of substantial over-production of opiates will prevail between 1980 and 1983,

Taking note that special consideration should be given to those countries which had made heavy investments and set up costly systems of control to meet the international community's medical and scientific requirements,

1. Urges the Governments of importing countries which have not already done so to take effective steps to support the traditional supplier countries and to give to those countries all the practical assistance they can to avoid the proliferation of sources of production of narcotic raw materials for export;

2. Urges the Governments of major producing and manufacturing countries which have set up additional capacity in recent years for export to take effective measures to restrict substantially their production levels, so as to restore a lasting balance between supply and demand and to prevent drug diversion to illicit channels;

3. Requests the International Narcotics Control Board to undertake a detailed study of the situation and to recommend a concrete programme of action for achieving a lasting balance between the demand for and the supply of narcotic drugs for legitimate purposes;

4. Requests the Secretary-General to transmit the text of the present resolution to all Governments for their consideration and appropriate action.

30 April 1980 Resolution 1981/8. Maintenance of a world-vide balance between the supply of narcotic drugs and the legitimate demand for these drugs for medical and scientific purposes

The Economic and Social Council, Recalling the relevant provisions of the Single Convention on Narcotic Drugs, 1961, to limit the cultivation, production, manufacture and use of narcotic drugs to a quantity required for medical and scientific purposes, Recalling Economic and Social Council resolutions 1979/8 of 9 May 1979 and 1980/20 of 30 April 1980 and General Assembly resolution 35/195 of 15 December 1980, Bearing in mind that the maintenance of a world-vide balance between the supply of narcotic drugs and the legitimate demand for those drugs for medical and scientific purposes constitutes an important aspect of the international drug abuse control strategy and policy, Having considered the report of the International Narcotics Control Board for 1980 on the world requirements and supply of narcotic raw materials for medical and scientific purposes, in particular the observations made in paragraphs 58 and 60 of the report,

Noting the observations of the Board that maintenance of excessive stocks in some countries has cast heavy additional financial and other burdens on those countries, 1. Appeals to the. Governments of all importing countries to support the countries referred to in paragraph 58 of the report of the International Narcotics Control Board for 1980, which, as traditional supplier countries, have been the longest-standing producers for export of narcotic raw materials for medical and scientific purposes; 2. Urges the Governments of major producing countries that have recently set up additional capacities for export to restrict, as recommended in paragraph 60 of the report of the International Narcotics Control Board for 1980, their production programmes to meet mainly their domestic requirements; 3. Requests the International Narcotics Control Board to continue a dialogue with the Governments concerned in regard to expeditious implementation of the resolutions on the subject so as to restore a lasting balance between supply and demand; 4. Requests also the Secretary-General to transmit the text of the present resolution to all Governments for their consideration.

6 May 1981 Resolution 35/195

International co-operation in drug abuse control

The General Assembly,

Recalling once more the resolutions on the problem of drug abuse control adopted in recent years by the General Assembly, the Economic and Social Council, the Commission on Narcotic Drugs, the World Health Organization and other relevant organizations,

Recalling in particular General Assembly resolution 34/177 of 17 December 1979, in which the Assembly pointed out the importance of international co-operation in drug abuse control,

Recognizing the growing threat caused by the spread of drug abuse, its serious impact on human health, its adverse effects on social development (social disintegration, increasing criminality), economic advancement and national security in a. number of countries,

Aware that illicit traffic in drugs and the profits accruing therefrom to traffickers and criminal organizations pose a threat to the socio-economic veil-being of many countries,

Rex-erring to the relevant provisions of the Single Convention on Narcotic Drugs of 196l, the Protocol of 1972 amending the Single Convention on Narcotic Drugs of 196l and of the Convention on Psychotropic Substances of 1971, which form the basis of all international drug abuse control efforts,

Noting with satisfaction the positive results that have been attained in a number of countries in the fight against drug abuse and in the control of drug trafficking,

Concerned that none the less many of the objectives of drug abuse control, set out in international conventions on narcotic drugs and in the resolutions and documents of the Commission on Narcotic Drugs and other international bodies concerned with this question, have not yet been achieved,

Realizing the necessity of further concerted efforts by the international community, particularly by the United Nations, in addition to national measures, to resolve the problem of drug abuse, in particular by the reduction of the illicit supply, demand and traffic,

Conscious of the need for a five-year continuously updated international programme of action in drug abuse control, as called for in General Assembly resolution 32/124 of 16 December 1977 and Commission on Narcotic Drugs resolution 8 (XXVIII) of 23 February 1979 and 5 (S-VI) of 20 February 1980, which should be supplemented by a long-term strategy (long-term programme),

Noting the report on narcotic drugs,

1. Takes note of the resolutions and decisions adopted by the Economic and Social Council in its first regular session of 1980 on the subject of narcotic drugs, elaborated on the basis of the report of the Commission on Narcotic Drugs on its sixth special session, and urges all agencies and organizations concerned with the implementation of the resolutions referred to in the preamble and all States and organizations whose assistance has been requested to take the necessary measures so that the contemplated programme for practical and dynamic drug abuse control can be completed and implemented at the earliest possible date; 2. Repeats its appeal to all. States which have not yet become parties to the Single Convention on Narcotic Drugs of 1961, the Protocol of 1972, amending the Single Convention on Narcotic Drugs of 196l, and to the Convention on Psychotropic Substances of 1971, to take the necessary steps to accede to these conventions and thus ensure their universal application;

3. Invites all Governments to collaborate closely with the International Narcotics Control Board, the Division of Narcotic Drugs and the other concerned bodies in the United Nations system, particularly by supplying them with the necessary information so that they may fulfil their tasks both pursuant to the provisions of the narcotics conventions and in accordance with their purposes;

4.. Urges all States to take suitable steps to implement Economic and Social Council resolutions 1979/8 of 9 May 1979 and 1980/20 of 30 April 1980 with a view to achieving and maintaining lasting balance between demand and supply of opiates and to avoid the possibility of diversion of licit production to illicit channels;

5. Invites States concerned to take appropriate measures to discourage the powerful economic interests which are propagating a false and deceitful image of drug use with the aim to increase the number of drug-abusers and to legalize the abuse;

6. Underlines its appeal to all Governments to increase their financial support for the United Nations Fund for Drug Abuse Control, so that it may forward the enhancement of measures for the reduction of the illicit supply, traffic and demand for narcotic drugs, and calls particularly upon States which require assistance in crop-substitution or law enforcement programmes to present suitable projects to the Fund and other international funding bodies or projects for bilateral development assistance;

7. Underscores the need of producing countries to receive greater assistance from interested Governments and concerned international organizations to facilitate drug abuse control, including crop-substitution policies or law enforcement programmes;

8. Calls upon all States to co-operate in a suitable fashion to prevent the uncontrolled or illicit cultivation, production, export, import, transit and consumption of narcotic drugs or psychotropic substances, and to take suitable measures to prevent the misuse of chemical substances for the production of drugs;

9. Calls upon the Commission on Narcotic Drugs to present, at the next regular session of the Commission, the completed international programme for drug abuse control so that such a comprehensive, co-ordinated global strategy can be translated at the earliest possible date into actions seeking to interdict narcotics trafficking, eradicate the illicit production and demand, educate citizens throughout the world regarding the dangers of drugs and treat and rehabilitate those individuals who have become dependent upon or addicted to drugs;

10. Calls upon the Economic and Social Council to give once more particular attention to these questions at its next regular session;

11. Calls upon the Secretary-General to transmit the present resolution to all Governments.

96th plenary meeting 15 December 1980 RESOLUTION ADOPTED BY THE GENERAL ASSEMBLY

33/l68. Narcotic Drugs

The General Assembly,

Recalling the relevant provisions of the Single Convention on Narcotic Drugs, 1971, 1/ of that Convention as amended by the 1972 Protocol Amending the Single Convention on Narcotic Drugs, 1961, 2/ and of the Convention on Psychotropic Substance 1971, 3/ which form the main basis of all efforts in international drug control,

Bearing in mind the numerous resolutions adopted by the General Assembly, the Economic and Social Council and the World Health Organization on the subject in recent years as well as the relevant recommendations of the Fifth United Nations Congress on the Prevention of Crime and the Treatment of Offenders, 4/

Aware of the comprehensive and valuable work of the Commission on Narcotic Drugs and the International Narcotics Control Board as the main technical and treaty organs entrusted with specific functions in order to ensure and supervise the proper implementation of the Conventions and Protocol and to foster the most efficient international drug control,

Preoccupied by the persistence of serious health, social and economic problems of drug abuse for individuals, young persons and older ones, and for societies as a whole,

Noting with great concern the detrimental effects of the continued international drug traffic,

Reaffirming the responsibility of Governments as well as the collective responsibility of the international community to regulate and limit the cultivation, production, manufacture and use of drugs to quantities required for medical and scientific purposes, in accordance with the above-mentioned treaties,

Convinced that measures to reduce illicit demand for narcotic drugs and psychotropic substances, including prevention through proper information and education, treatment and rehabilitation, must be taken concurrently with measures of adequate control to reduce illicit drug supply and traffic,

Also convinced that co-ordinated efforts by all competent agencies and organizations concerned with the fight against illicit drug traffic should be intensified to bring about even better results in the interception of illicit drug traffic,

Considering the response to paragraph 5 of General Assembly resolution 32/124 of 16 December 1977 given by the Commission on Narcotic Drugs concerning the launching of a meaningful programme of international drug abuse control strategy and policies to be considered by the Commission at its twenty-eighth session in February 1979,

1, Reiterates its appeal to all States not yet parties to the Single Convention on Narcotic Drugs, 1961, the 1972 Protocol Amending the Single Convention on Narcotic Drugs, 1961, 5/ and the Convention on Psychotropic Substances, 1971, to take steps to accede to these instruments in order to achieve their universal application and requests the Secretary-General to transmit this appeal to all Governments concerned;

2. Invites Governments to co-operate fully with the International Narcotics Control Board and to supply such information as may be necessary to enable it to make meaningful long-range studies and projections designed to promote the maintenance of a world-wide balance between the supply of narcotic raw materials and the legitimate demand for medical and scientific purposes; 3. Supports the Board's appeal to States to improve their reporting machinery, with the assistance of the Board, so that they may provide full and prompt information to the Board, thereby enabling it to perform effectively its functions under the relevant treaties; 4. Urges Governments to support the work of the Commission on Narcotic Drugs, to provide complete data and information to the Secretary-General in their annual reports and individual seizure reports as required under the relevant treaties and in response to the Secretary-General's request, to inform him also without specific requests of any new developments, trends and measures discernible in the drug field which could be of importance or relevance to improved international drug control; 5. Invites Governments, in co-operation with competent bodies of the United Nations and specialized agencies, to increase their joint efforts to eradicate illicit or uncontrolled cultivation of narcotic plants and illicit or uncontrolled manufacture of psychotropic substances in order to ensure a continuing equilibrium between licit supply and licit demand, and to avoid unforeseen imbalances caused by sales of seized and confiscated drugs; 6. Calls for more extensive and effective efforts of Governments in co-operation with competent bodies of the United Nations and specialized agencies in order to facilitate appropriate designing and implementation of programmes aimed at eradicating illicit demand for and illicit marketing of drugs and at furthering exchange of experience and information among scientists and experts from various nations who are actively engaged in this field; 7. Reiterates its appeal to Governments for increased and sustained contribution to the United Nations Fund for Drug Abuse Control and to all international and multilateral organizations and institutions to co-operate with and to support financially the United Nations efforts undertaken through drug control programmes; 8. Requests the Commission on Narcotic Drugs to undertake at its twenty-eighth session the finalization and implementation of the comprehensive programmes of international drug control strategy and policies and requests the Secretary-General to assist the Commission in the implementation of this programme, the progress of which should be monitored by the Commission to ensure that, if necessary, appropriate adjustments in the programme can be made to enable it to meet new requirements of international drug control which might arise out of new developments concerning the various aspects of the drug problem; 9. Requests the Economic and Social Council to give at its first regular session of 1979 due consideration to these questions.

90th plenary meeting; 20 December 1978

1/ United Nations, Treaty Series, vol. 520, No. 7515, p.151. 2/ United Nations publication, Sales No. E.77.XI.3, p.13. 3/ United Nations publication, Sales No. E.78.XI.3, p.7. 4/ United Nations publication, Sales No. E.76.IV.2 and corrigendum, para. 28. 5/ See Official Records of the United Nations Conference to consider amendments to the Single Convention on Narcotic Drugs, 1961. vol. I (United Nations publication, Sales No. E.75.XI.7), part three. ECOSOC Res. 1978/11 World requirements of opiates for medical and scientific purposes * The Economic and Social Council, Bearing in mind its resolution 2067(LXII) of 13 May 1977 as well as recommendation l(XXVII) adopted by the Commission on Narcotic Drugs at its twenty-seventh session, 1/ Having considered the section of the report of the International Narcotics Control Board for 1977 dealing with the supply of raw materials for the licit manufacture of opiates, 2/ Noting the Board's assessment that data made available in 1977 indicate that there is currently over-production of raw materials for the licit manu­ facture of opiates, Convinced that successful voluntary co-operation between the countries concerned and the Board with a view to preventing over-supply is possible within the framework of the existing conventions and treaties, keeping in mind the traditional sources of supply under properly controlled conditions, Aware of the serious adverse consequences of over-supply which might result in economic dislocations for the traditional producers and potential danger for international control efforts,

Reaffirming the collective responsibility of the international community to regulate and limit the cultivation, production, manufacture and use of drugs to quantities required for medical and scientific purposes, Bearing in mind that the sale of seized narcotics by Governments, except in extraordinary circumstances when world-wide supplies prove inadequate to meet requirements of opiates for medical and scientific purposes, can have the effect both of contributing to the world-wide over-supply of narcotics and of creating dislocations in the international market price for these materials, Aware that the sale of these seized narcotics as a regular practice by Governments, although not in contravention of the international treaties, may circumvent the intention of these treaties, 1. Calls attention to the recommendation of the International Narcotics Control Board that countries producing raw materials for the licit manufacture of opiates should pay the closest attention to the current over-production of such raw materials when determining their future production plans; 2. Calls upon the Board to take effective measures to co-ordinate the voluntary co-operation of the Governments concerned and to report to the Commission on Narcotic Drugs the results achieved in balancing supply and demand; 3. Calls upon Governments to give careful consideration to the implica­ tions of regular sales of seized narcotics for the control efforts of the international community, particularly in the present situation of over­ production of the raw materials. 15th plenary meeting, 5 May 1978.

1/ See Official Records of the Economic and Social Council, Sixty-second Session, Supplement No. 7 (E/5933 and Corr. 1 and 2) chap. XVI, sect. C. 2/ E/INCB/37 (United Nations Publication, Sales No. E.78.XI.2), paras. 121-133.

* Adopted as recommended to the Economic and Social Council by the Commission on Narcotic Drugs in its draft resolution III (E/1978/35-E/CN.7/621, chap. I), with minor amendments. ECOSOC Res. 1978/12 Long-term projections for legal opiate supply and demand * The Economic and Social Council, Recalling its resolution 2067(LXII) of 13 May 1977 and the material furnished by Governments in response thereto, Noting that, in recent years, the International Narcotics Control Board has made studies designed to enable it to evaluate the current world-wide requirements of opiates for medical and scientific purposes and the position in regard to their supply, Recognizing that a careful balance between supply of and demand for licit opiates is important in establishing adequate international control,

Noting with satisfaction that Governments of countries producing poppy straw have voluntarily reported the quantities produced, thus making possible total estimates of opiate production for the international trade, Believing that more detailed and longer-range studies and projections would enable the Governments concerned with the production of narcotic raw materials to establish their production plans to meet world-wide requirements while avoiding over-supply, Noting with satisfaction that the Board is planning to consult informally with the Governments concerned to determine the best means for proceeding with such studies and projections, 1. Invites Governments to co-operate fully with the International Narcotics Control Board and to supply such information as may be necessary to enable it to make meaningful long-range studies and projections designed to promote the maintenance of a world-wide balance between the supply of narcotic raw materials and the requirements of opiates for medical and scientific purposes; 2. Expresses the hope that countries producing poppy straw for export will continue reporting voluntarily on production levels. 15th plenary meeting, 5 May 1978. RESOLUTION ADOPTED BY THE ECONOMIC AND SOCIAL COUNCIL

/on the report of the Social Committee (E/5966_)_/

2067 (LXII). Restriction of the cultivation of the poppy

The Economic and Social Council,

Recalling recommendation 1 (XXVII) on restriction of the cultivation of the poppy, 1/ adopted by the Commission on Narcotic Drugs at its twenty-seventh session,

1. Endorses recommendation 1 (XXVII) of the Commission on Narcotic Drugs:

2. Requests the Secretary-General to transmit to all Governments the opinions and proposals submitted during the debate on these issues at the twenty-seventh session of the Commission on Narcotic Drugs and the sixty-second session of the Economic and Social Council;

3. Invites Member States to submit, through the Secretary-General, comments on this issue to the Commission on Narcotic Drugs at its next session and to the International Narcotics Control Board.

2059th plenary meeting 13 May 1977

C. Recommendation

1 (XXVII). Restriction of Cultivation of poppy

The Commission on Narcotic Drugs, considering the changes in production of opiates in the world and particularly the potentially adverse economic and social effects of possible over-production in countries where poppy is already cultivated for licit purposes and drawing the attention of all Governments to the views expressed during the debate at its twenty-seventh session on legitimate world requirements of opiates, recommends the Secretary-General to transmit to all Governments the opinions and proposals expressed during the debate on these issues during the Commission's twenty-seventh session, and urges Governments of countries which up to now have not cultivated poppy to give those views the most careful consideration in taking all decisions on issues related to starting the cultivation of Papaver bracteatum for commercial purposes.

855th meeting 24 February 1977

1/ See Official Records of the Economic and Social Council, Sixty-second Session, Supplement No. 7 (E/5933), chap. XVI, sect. C. 2 (XXIX). Voluntary reporting of statistics on the cultivation of Papaver bracteatum and the manufacture of thebaine derived drugs obtained from Papaver bracteatum

The Commission on Narcotic Drugs,

Recognizing that Papaver bracteatum, the thebaine poppy, is not now controlled under the Single Convention on Narcotic Drugs, 1961, or that Convention as amended by the 1972 Protocol,

Being aware that Papaver bracteatum represents a potentially important commercial source of thebaine,

Realizing that there may be a demand for thebaine in the near future that may exceed the supply obtainable as a by-product of opium or concentrate of poppy straw production,

Concerned that without some form of reporting the statistics on Papaver bracteatum cultivation and of the thebaine extracted from it the Board will be unable to perform its function of monitoring the narcotic supply and demand situation effectively,

1. Urges Parties engaged in the cultivation of Papaver bracteatum for the production of thebaine or thebaine derivatives to voluntarily report to the Board statistics on the area cultivated and production;

2. Also urges Parties which already have an obligation to furnish the statistics required under article 20 of the 196l Convention in connexion with thebaine to voluntarily complete these statistics by indicating the quantities of Papaver bracteatum used to produce thebaine;

3. Recommends that the Board consider what steps are necessary to adequately monitor Papaver. bracteatum production and utilization, and plan to implement those steps;

4. Requests the Secretary-General to bring the present resolution to the attention of Governments.

2-11 February 1981 CND Res. V(XII) Control of the manufacture of natural and synthetic drugs The Commission decided that the following resolution should replace resolu­ tion I of its eleventh session. 2/ The Commission on Narcotic Drugs, Recalling resolution I passed at its eleventh session inviting the Govern­ ments of countries where opium alkaloids are manufactured to control with par­ ticular care the output of morphine and of drugs derived from morphine, 2/ Recalling also resolution III adopted at its eleventh session in which the Commission made certain recommendations to Governments concerning the problem of synthetic narcotic drugs, 3/ Considering that it is desirable that similar care should be exercised in respect of the manufacture of all narcotic drugs, Invites all States Members of the United Nations and members of the speci­ alized agencies in whose territories narcotic drugs, whether natural or synthetic, are manufactured: 1. To review their arrangements for preventing the possibility of diver­ sion of legally manufactured drugs, whether natural or synthetic, into the illicit traffic; 2. Unless they have already done so, to communicate to each other, through the Secretary-General of the United Nations, either in their annual reports or otherwise, an account of their present control methods, so that the experience of each may be of service to all; 3. To limit to the strictly necessary minimum the number of firms in the country permitted to manufacture narcotic drugs, whether natural or synthetic; 4. To control with particular care the manufacture of narcotic drugs, both natural and synthetic. April/May 1957

2/ Official Records of the Economic and Social Council, Twenty-second Session, Supplement No. 8 (E/2891). annex II. resolution I. 3/ Ibid., resolution III. E/1981/24, E/CN.7/668 - Extract from Annex II

Achievement of a balance between demand for and supply of narcotic drugs and psychotropic substances for legitimate purposes

11. During the 1970s, a period of shortage, in which the supply of raw materials for opiates failed to keep pace with the rapid expansion of demand, was followed by a period of surplus, as Governments took special steps to increase supplies and demand slowed down or levelled off. It was important that the measures for increasing supplies should be co-ordinated in order to close the gap between supply and demand without tilting the balance in the opposite direction. However, Governments over-reacted to a temporary short­ fall in supplies and oversupply resulted. In the absence of consultation, co-ordination and continuing exchange of information among Governments, such cycles of underproduction and oversupply can be expected to recur. The imbalance with regard to licit opiates is also occurring with psycho­ tropic substances.

12. Narcotic drugs. The Council, by its resolution 1980/20, has requested the Board "to undertake a detailed study of the situation and to recommend a concrete programme of action" for achieving a lasting balance between supply of and demand for narcotic drugs for legitimate purposes. The Board and Governments have agreed on certain principles which will continue to govern consultations on the subject, namely, that all Governments have a collective responsibility and should show solidarity; that effective control should take precedence over economic interests and commercial considerations; that production and manufacture should be limited to medical and scientific requirements; and that the legitimate interest of traditional producers should be respected.

13. In pursuit of this policy it is desirable, as recommended in the Board report for 1980, that countries which have recently begun or expanded production and manufacture of opiates for export should restrict their produc­ tion and manufacture mainly to their own domestic consumption requirements and, with regard to exports, that they exercise restraint to the maximum extent in order to avoid displacing long-established producers in markets on which they have depended for so many years. It is also desirable that import­ ing countries obtain their requirements of such materials from traditional supply countries. In addition, intermediary trade in opiates should be kept under proper control.

14. Re-establishing equilibrium. The first and overriding objective is to re-establish the balance between supply and demand on a realistic basis, while avoiding the recurrence of a situation where supplies are not adequate to meet legitimate requirements. The Board will assist Governments in their efforts to achieve that goal by making available an analysis over a representa­ tive period of the evolution of cultivation, production, exports, imports, consumption and any development of synthetic narcotics, so that they may draw the necessary conclusions. In addition, the Board will hold consultations with the principal countries involved as producers, exporters or consumers in an effort to promote a consensus on such measures as may be needed. 15. Maintaining equilibrium. Once equilibrium has been achieved, it will be necessary to devise effective plans and procedures for maintaining it. Based on information provided by Governments, the Board will continue to monitor the evolution of the market, to publish trends and to make long-term projections of world supply and demand. Consuming countries, particularly the principal consumers, should develop long-term projections of their require­ ments, which can be made available to producing countries to aid them in planning acreage and production. Similarly, producing countries should make available information on current and future production plans. The Commission will continue to provide a forum for periodic consultations between producing and consuming countries and with the Board. The Board is at the disposal of Governments, in accordance with the treaties, to oversee such arrangements as Governments may determine to be desirable for ensuring adequate supplies while avoiding oversupply. Governments should keep under review the treaty coverage, for both control and reporting purposes, of all sources, agricultural or chemical, of production of opiates for medical and scientific use.

ANNEX C - COUNTRY STATEMENTS Original English

AUSTRALIA

Cultivation

1. Although the poppy was cultivated in Australia as early as 1870, and was grown on an experimental basis for the production of morphine from poppy straw during the Second World War, experimental work leading to the current commercial cultivation in Tasmania began only in 1960. A major United Kingdom manufacturer (MacFarlane Smith, later a subsidiary company of Glaxo Holdings), motivated by its concern about the uncertainty of supply of gum opium, established trial plots in various states of Australia and New Zealand. Attention was focused on Tasmania because the climate and growing conditions were found to be particularly suitable, and trial plots were grown there from 1960 to 1963.

2. In 1964 the Tasmanian Government approved the Glaxo Company proposal to proceed with commercial cultivation with a view to opiate alkaloid manufacture. Pilot commercial production sowings were gradually increased until 1969-1970 when it was decided to move to full commercial production. At this time the Company built facilities in Tasmania for crop handling and storage. Extraction of alkaloids from Tasmanian poppy straw began at the company plant in Victoria on the mainland in 1971.

3. In 1971, at a time when a tight supply situation was anticipated for opiate alkaloids, Abbott Australasia, a subsidiary of Abbott Laboratories USA applied for permission to cultivate the poppy in New South Wales. In that year the Commonwealth and State Governments decided for security reasons to confine poppy cultivation in Australia to the island state of Tasmania. Accordingly the Tasmanian Government granted Abbott permission to proceed with experimental work in that state. This led to a firm proposal by Abbott to establish a second industry, and in 1975 Tasmanian Alkaloid Company was established as a joint venture between Abbott Laboratories USA and Ciech of Poland. (The Polish company withdrew in 1980, leaving Abbott the sole owner.) An extraction plant was established in Tasmania which began operation in 1976. Because of the lead time required an expanded production planned in time of short supplies came to market in a period of oversupply.

4. Tasmanian climate, soil and topography have proved to be ideal for poppy growing. The climate is temperate maritime, without extremes of temperature, and with generally ample and well-distributed rainfall. There are adequate water resources for irrigation if necessary. The soil is fertile and well-structured, of acceptable chemical content and with good natural drainage. Relatively flat to moderately undulating land facilitates the precise operation of sowing, spraying and harvesting equipment.

5. Since its commencement in 1970 commercial poppy cultivation has expanded from less than 1,000 hectares to about 9,000 hectares in 1979 (table 10, annex). Of 80,000 hectares of land in Tasmania occupied by principal crops (cereals for grain, crops for greenfeed or silage, vegetables, poppies and other) 20,000 hectares is regarded as ideally suitable for the efficient production of poppies. Australian authorities consider a maximum of 5,000 hectares of good land in reliable areas is available annually for poppy cultivation, based on the rotational practice followed of one crop of poppies every four years. However, there are additional areas, giving reduced yields per hectare, which could be brought into production if required. A harvested area of 3,400 hectares is projected for 1981.

Production

6. Poppy straw production (table 10) increased from 378 tons in 1970 to a high of 7,665 tons in 1979. A decrease to 1,179 tons in 1980 is explained by the policy with respect to stocks. In general straw production is maintained at a level corresponding to estimates of market demand. End- of-year stocks are kept at the minimum level consistent with manufacturing requirements in the January/March period. An unexpected accumulation of stocks in one year will result in the reduction of cultivated area and production in the succeeding year in order to utilize the accumulations. Straw stocks as at 31 December 1980 were 544 tons.

7. A feature of the industry in Tasmania has been the high percentage of morphine in the poppy straw and the high yields of morphine per hectare. These achievements are the result of research into plant breeding, agricultural techniques and extraction techniques. The yield of morphine which began at 0.38 per cent in 1971, increased steadily year by year to 0.68 per cent in 1979 and is projected at 0.74 per cent in 1980 and 1981. The poppy straw yield per hectare has varied between 553 and 948 kg and is projected at 794 kg for 1982 (table 10).

8. The Australian share in total alkaloid production rose from 1 per cent in 1971 to 17 per cent in 1979. Manufacture of concentrate from poppy straw (table 15) corresponded initially to domestic consumption requirements and was maintained at about that level during the first five years. The manufacture increased, however, in 1976 to 8 tons (AMA), more than twice Australian annual consumption, doubled again in 1977 and again in 1978, and reached the highest level of 33 tons in 1979. These increases were consistent with the planned development of the industry to reach a commercially viable output. It declined to 27 tons in 1980 and is projected, for 1981 and 1982, at an upper limit of 30 tons or less, depending on the confirmed contractual obligations.

Exports

9. Australian exports of poppy straw concentrate increased from 6 tons in 1977 to 26.5 tons in 1979, mainly to the United Kingdom and Poland and fell to 18.5 tons in 1980. Exports of codeine (table 48, annex) which had not exceeded 2 tons annually through 1974, rose to over 6 tons in 1977 and averaged over 5 tons from 1976-1980. The United Kingdom, Canada and Malaysia were the principal importers. In 1980, considering only the exports of the three principal suppliers of alkaloids to the world market, Australia contributed 17 per cent compared to 59 per cent for India and 24 per cent for Turkey.

Control

10. Control of all matters relating to the cultivation, production and transport of poppies and poppy straw is the responsibility of the Poppy Advisory and Control Board chaired by a representative of the Department of Health Services in Tasmania and having as members a representative of the Federal Department of Health, of the Tasmanian Department of Agriculture and of the Commissioner of Police in Tasmania. Poppy cultivation is confined to the island state of Tasmania and is carried out by growers in small rural communities all known to the police who have formed an oil poppy growers association.

11. Under Tasmanian law, no person may grow or cultivate the poppy or have in his possession any part of the poppy plant except the seeds unless duly authorized. A licence to grow poppies is issued to a grower only after he has contracted to grow the crop and to dispose of the whole crop when harvested to a licensed manufacture. The granting of a licence is also subject to the police having no objection. The licence application must he accompanied by an exact map grid reference of the grower's residence and the proposed site of poppy cultivation. Inspections are made of licensed growers by field officers of the Poppy Board, and include regular inspection of growing poppy crops, inspection of currently and previously licensed farms to insure against regrowth after harvesting. Liaison is also maintained between the Board's inspectors and staff, growers, company field officers and Agricultural Department officers, by regular inspection of crops in company of these officers and by visits to the growers. Between flowering and harvest, field inspections are intensified and the local police visit poppy-growing districts. The fields of poppy, which have been checked to verify compliance with the licence, are not secluded but visible to all members of the local community going about their normal business.

12. Harvesting and crop transportation operations are also closely controlled. The capsule/seed mixture collected by the harvesters is mechanically transferred from the harvesters' hoppers on to trucks fitted with seed-tight containers or bins, for transport to the factory. The bulk bins are inspected from time to time to ensure that there are no defects which could cause seed spillage. As a consequence very little regrowth from seed spillage en route to the factory has occurred. Any regrowth which does occur is destroyed. On arrival at the factory the trucks enter a security area for tare weighing of the capsule/seed mixture and samples are taken by the company concerned in order to assess the value of the consignment for the purpose of payment to the grower. The load is then mechanically transferred to secure storage.

13. Security during manufacture is the responsibility of each of the two extracting companies under government supervision. All the crop grown under contract with the Glaxo Company is delivered to the seed separation and crop storage plant in Tasmania licensed by the Commonwealth and State Departments of Health. There is no further control over the seeds, which are cleaned and packed for sale for culinary purposes or oil extraction. The poppy straw is compacted, packed and shipped to the extraction plant in Victoria on the mainland. The movement of compressed straw is under strict security via container ship and secure road transport. The Company is subject to regular inspection and is required to keep records of total weight of crop received and straw obtained. The security at the extraction plant includes security fencing, an alarm system, a concrete storage vault and closed circuit television. The Federal Department of Health licenses the extraction plant under the Federal Narcotic Drugs Act, approves in conjunction with the Federal and State Police Departments the security arrangements and makes monthly inspections. 14. Tasmanian Alkaloids is licensed by both the Federal and Tasmanian Governments to manufacture poppy straw concentrate at its extraction plant in Tasmania, subject to the requirement to maintain detailed records on crop receipts, straw processed, and alkaloid manufacture and storage, and the approval of security and storage arrangements. Federal and State inspectors operating as a team regularly inspect records and stock and check security requirements. Security at Tasmanian Alkaloids includes security fencing, controlled access, high security area with an alarm system, and flood lighting, which meets criteria set on the advice of State and Federal police.

15. The movement within Australia or for overseas shipment of concentrate or other alkaloids is subject to stringent security measures, including armoured vehicles and armed guards for ground movement, special arrangements for air transport, and supervision by armed federal police and secure storage at airports upon trans-shipment. All movements are covered by comprehensive documentation.

16. The costs of State Government and industry control and security are estimated at approximately $A 647,000 1/ annually, as follows; $A 150,000 by the Tasmanian Department of Health, which devotes one-half of the Pharmaceutical Service Branch's budget to control, security and other aspects of the poppy industry; $A 197,000 by the Tasmanian Police Force, which devotes about 500 man days to the operation annually; and $A 300,000 by the industry. Commonwealth Government costs, mainly by the Federal Department of Health and Federal Police are approximately $A 26,800 annually.

Economic and social importance

17. Since commercial production began, up to 900 farmers annually in nearly all rural areas of Tasmania have derived some economic benefit from growing poppies. Most poppies are grown on single owner-operator farms of up to 100 to 150 hectares in area. Tasmania has a population of 410,000. There are about 6,000 farms. Of a total rural land area of 2,230,000 hectares, 80,000 hectares or 3.6 per cent are used for cropping. The maximum area ever seeded to poppies has been 9,000 hectares.

18. The poppy crop has become an integral part of almost all types of rural production in Tasmania. Poppy has become a cash crop alternative for single crop producers, and has made them more competitive. For farmers who have many alternatives, poppy is an additional crop which presents a challenge and holds a promise of good, sure income. Poppies have contributed to the annual gross income of farmers in a range of agricultural enterprises as follows: mixed cropping enterprises - mainly potatoes, green peas, green beans, root crops and brassicas, combined with cereals, store cattle and fat lamb production: 10-15 per cent; grazing enterprises - wool sheep, fat lambs and beef production, and crops of wheat, barley and oats: 10-15 per cent; dairy farms, with crops of green peas, potatoes and forage: 15-20 per cent; mixed livestock and crop enterprises: 5-15 per cent; orchards and viticulture: up to 40 per cent. In the 1978-1979 season poppies returned to Tasmanian farmers $A 7.5 million out of a total rural income for Tasmania of $A 262 million. Payments to growers of poppy straw represented 12 per cent of their gross income in that season.

1/ Exchange rate: $A 1.00 = $US 1.18 (October 1981). Research

19. Techniques and expertise have been developed at considerable cost to produce the high yields of poppy straw per hectare and morphine per kg of straw. The Tasmanian Government has expended more than $A 500,000 in research and development on plant breeding and cultivar evaluation, weed control through chemical herbicides, water requirements, fertilizer selection, placement and application, optimum time of harvest studies, pests and disease control, and plant establishment. This is exclusive of research and development by the two manufacturing companies on seed selection, chemical weed control, development of suitable harvesting machinery, improvement of alkaloid extraction methods and other aspects.

A controlled agro-industry

20. As a result of natural advantages, government and industry research programmes and agricultural extension services, poppy growing in Tasmania is intensive agriculture, employing scientific techniques, using mechanical methods, including costly special machinery, and requiring a minimum of manual labour. The agricultural and manufacturing sectors of the industry are integrated, with government participation for control purposes. Poppy crops are grown by farmers under contract to the manufacturers. The total area which a licensed manufacturer may contract out is governed by his annual manufacturing quota, issued by the Federal Department of Health. It is necessary, therefore, for the companies to be in close consultation with the Department and the Poppy Board concerning projected manufacturing levels, in order to be able to organize the sowings, which occur in the calendar year prior to that in which a manufacturing quota operates. The grower undertakes to supply the whole of his crop to the manufacturer, and the manufacturer agrees to buy the whole crop from the grower. The fixed contract price includes payment for both straw and seed so that the entire product passes to the manufacturer for processing and marketing. The contract is subject to the grower receiving a licence to grow from the government.

Manufacturing

21. The total value of poppy straw concentrate produced by the two manufacturers in 1979 was $A 16.5 million of which about 90 per cent was exported. Of total alkaloid production, 53 per cent is exported as concentrate and 47 per cent is manufactured into codeine in Australia, of which 72 per cent is exported and 28 per cent is consumed in Australia.

22. Glaxo Australia Pty. Ltd. is a wholly-owned subsidiary of Glaxo Holdings UK Ltd. It has a poppy processing, seed separation and capsule preparation plant in Tasmania and an alkaloid extraction and codeine production plant in Victoria. It has 101 permanent and 36 temporary employees in these two facilities. The capital investment is $A 3,600,000. The manufacturing capacity is 30 tons (AMA). In 1979 Glaxo made payments to growers of $A 2,600,000, for salaries and wages of $A 1,600,000, and for goods and services required locally of $A 1,800,000. Glaxo supplies the Australian market for bulk codeine and also transfers the concentrated poppy straw it produces to MacFarlane Smith Ltd. United Kingdom as part of the latter's raw material source for the manufacture of codeine. Glaxo also markets poppy seed in Australia, the USA and Europe and to local seed crushers for vegetable oil. By 1979 the total value of its production was $A 9.5 million of which $A 7.5 million was exported and $A 2.0 million was marketed in Australia. 23. Abbott Australasia Pty. Ltd. and Tasmanian Alkaloids Pty. Ltd. are wholly-owned subsidiaries of Abbott Laboratories, Chicago, USA. Tasmanian Alkaloids contracts for poppy crop in Tasmania to produce concentrate of poppy straw and poppy seed. Abbott Australasia converts concentrate of poppy straw into codeine and other derivatives in its factory in New South Wales.

24. Capital investment in the alkaloid operation totals $A 7.2 million. Manufacturing capacity of the extraction plant is 24 tonnes of AMA as concentrate of poppy straw. In 1979 the combined operations employed 90 people full time and 60 on a temporary basis. In that year there were payments to about 600 growers totalling $A 5.5 million.

25. Abbott Australasia supplies the Australian market for bulk codeine, and also exports both codeine and CPS. Tasmanian Alkaloids markets poppy seed in Australia, USA and Europe and supplies seed to local seed crushers for vegetable oil.

September 1981 Original French

France

INCB study on poppy growing and the production of opium or poppy straw

It is recalled that, in France, the poppy grown is the nigrum variety of the species Papaver somniferum L., which does not provide opium, but only straw. Opium is imported.

1. AREA OF CROPS AND PRODUCTION

1.1. Growing areas authorized and sown ) ) 1964-1980 1.2. Area harvested, production and yield)

For these two headings, please refer to document PH.5/1.7/TF 1/MC-C of 14 January 1981, with its summary table and annex, which are attached to the present document.

1.3. Projection for 1981-1984 concerning growing areas to be authorized and expected production

Taking into account domestic requirements and those arising out of firm export contracts, it is expected that there will be an area of 4,000 to 5,000 hectares each year, with a production of green poppy amounting to 10-11 quintals per hectare (or 4 quintals per hectare in the case of dry poppy). It should be noted that, in August 1981, the harvest prospects for the year amount to a maximum of 2,500 tonnes, with a content which may fall short of expectations owing to climatic contingencies, which have reduced production.

2. STOCKS

2.1. Current level

2.2. Expected level

As of 31 December 1980, the stock of straw was 3,836 tonnes. Given continuous extraction, optimum management of straw stocks would call for two types of ensilage as at 1 September of the year in question, namely: a buffer stock of 2,000 to 3,000 tonnes corresponding to 4 to 6 months' requirements, and the harvest stock (5,500-6,000 tonnes).

As regards imported Indian opium intended for supplementary extraction requirements and for basic galenical preparations, it is also desirable to have both a buffer stock and a revolving stock. On 31 December, there were 20 tonnes of crude opium in the strong rooms.

2.3. Cost of maintaining stocks

The cost of storage essentially comprises two components:

(a) Financial costs: 18 per cent a year of the value of the stock for the buffer stock; 9-10 per cent a year of the value of the stock for the revolving stock.

(b) Technical costs, e.g. for rental, handling and maintenance of silos: 3-4 per cent a year of the value of the stock. 3. EXPORTS

3.1. Current and forecast exports

France exports straw only in negligible quantities for herbalist use in the form of size-sorted capsules produced by a specialized enterprise having no connection with production for extraction.

On the other hand, there may he exports of poppy seeds or oil. Lastly, our country exports semi-finished processed products (concentrate, technical morphine) or finished products (mainly codeine phosphate) and also, either in bulk or in packaged form, medicaments containing the substances in question.

The chemical products and concentrate are exported under firm contracts concluded at market price which may he subject to revision. The world price is currently tending to decline owing to available world stocks and prices which are tantamount to dumping by certain operators.

3.2. Price policy

At present, it is not possible to define a price policy because the concept of cost price differs under different economic systems. It is reasonable to consider that the minimum is avoidance of selling at a loss.

4. DETAILED DATA ON CONTROL AND RELEVANT COSTS

4.1. Issuing of licences to grow poppies

There is no licence in the sense of article 23 of the Convention of 1961 as amended, but there is a control system in the sense of article 25.

In the case in point, FRANCOPIA, a private company which is the only one to have received authorization from the Minister of Health, concludes contracts with growers every year. The documents specify the area to be sown and the location of the plots.

4.2. Control of areas

This takes place through comparison with land-register information, making it possible to check the area before sowing. Subsequently, the area harvested is checked by measurement of the land. The relevant information, collected by 12 representatives of the firm operating locally with auxiliary personnel, is sent to the Ministry of Health, which sends a copy to the Ministry of the Interior for its information.

In any event, while the territorial distribution is left to the discretion of FRANCOPIA, the total area of the plots which it is planned to assign to poppy growing for the opiates industry does not exceed the estimates sent to the Board. In practice, it falls short of these estimates because some growers are in default.

4.3. Supervision during the growing season

The 1,500 plots of the thousand growers are under permanent supervision by the representatives of FRANCOPIA, each of whom operates in an area contained within a circle with a radius of 25 km. They visit each plot 6 to 10 times during a growing season. These representatives carry out supervision and provide technical advice. Thus, anomalies can he detected. Physical presence is an important factor in on-the-spot control and in the achievement of good quality in the product to he harvested.

4.4. Supervision during harvesting - gathering

The representatives mentioned above are on the spot, and once the land has been measured, supervise operations although there is in practice virtually no danger of diversion in a country like France, given the type of poppy grown. A harvesting technique is used which combines mowing and mechanical concentration in gathering into one operation. Thus, the crop harvested can easily he weighed and its dispatch to collection centres guaranteed.

4.5. Transport

Transport to the collection centres takes place in lorries belonging to the co-operatives which have assumed responsibility for operations from the preceding stage of cutting and gathering.

4.6. Storage

Storage is in sealed tamper-proof silos which are electrically controlled. These are located and managed in one of the main cereals-storing centres belonging to the National Union of Cereal-Farming Co-operatives. Ensilage takes place under inert gas.

4.7. Exports

See item 3.1. There are no exports, or very few, and they are in any event subject to the authorizations provided for by article 31 of the Convention.

4.8. Research

Research relates to selection, agricultural technique and storage.

(1) Selection. This aims at obtaining varieties of oil poppy which are suited to climatic conditions, are of average and uniform height and are resistant to lodging, frost and disease. It is also sought to maintain strains which are low-growing and do not lend themselves to incision.

Alkaloid-rich strains are also sought with a view to improving yields.

(2) Agricultural technique. Study of more effective pesticides, adaptation of fertilizers, choice of soils, usefulness of harrowing, etc.

(3) Storage. Study of the various parameters of good preservation: humidity, stabilization through inert gas, temperature, packing, etc.

5. GROWING OF THE OIL POPPY FROM THE POINT OF VIEW OF THE GROWER

5.1. Usefulness

The grower looks upon this crop as traditional. He knows about poppy oil. Purely from the point of view of agricultural technique, this is the starter crop in a rotational system, since the straw serves as a good preparation of the soil for the following crops, in particular wheat. 5.2. Income

The grower's income per hectare must be comparable to that for other crops grown in the areas concerned. The price paid to farmers is derived from an annual weighted average of nine other commonplace European crops. Should the real amount fall short of the income expected as a result of a shortfall in the harvest, the grower receives no compensation, and there is no guarantee that he will wish to continue.

In addition, the grower receives a supplement in respect of his grain production.

5.3. Use of by-products

(1) Straw. This is returned to the soil and provides it with organic fertilizers while maintaining its physical structure.

(2) Seeds. These are generally sent to oil mills operating on a contractual basis. The seed is of second quality (oil quality) rather than of top quality (bakery quality). There is an abatement on poppy oil of 20 per cent as against rape-seed oil, and it receives no community support. In practice, it is sold at a price which is lower than the world average for vegetable oils.

The market for these seeds is so subject to contingency that oil processors do not purchase them and process them into oil only on a contractual basis. The oil is marketed by FRANCOPIA, and if there are no customers, it can be processed into fatty acids.

5.4. Labour and equipment required

Owing to mechanization, the amount of labour required is small - approximately the same as is required to grow wheat. The equipment required is the same as that generally used for industrial-scale crop-growing in our part of the world: precision sowers, mechanical hoers, combine harvesters, pesticide sprayers, etc.

5.5. Finance

Growers are paid by FRANCOPIA in cash very quickly after the harvest. The payment is transferred to them through the agricultural co-operatives, and this allows for information and control, somewhat lessening the likelihood of diversion.

5.6. Limitation of the size of plots

On the whole, the plots are between 4 and 6 hectares in area. This is the optimum size for handling the control problems encountered by the representatives of FRANCOPIA through visual inspection and land measurement.

Plots that are too large are more difficult to cover and to subject to surveillance except in certain situations where they can be visually inspected from above and in their totality. On the other hand, scattered plots which are too small are not as easy to subject to surveillance and there can be too many losses at the edges of the fields. 5.7. Total area

The choice of the size of plots makes it possible to minimize losses at the edges of fields and to optimalize yield per hectare. Thus, the areas cultivated can he adjusted to requirements.

A second criterion is mitigation of climatic contingencies. This calls for a distribution of the areas cultivated over different regions of the country. An effort is now being made to reduce the concentration of growing in the eastern part of the country.

6. OIL-POPPY PRODUCTION FROM THE POINT OF VIEW OF THE PUBLIC AUTHORITIES

6.1. Socio-economic importance

6.1.1. The French authorities consider it a public-health necessity that the oil poppy should be grown in the country with a view to extraction of morphine alkaloids. The essential purpose of this growing is to meet the needs of the population in respect of analgesics and cough remedies, which are looked upon as indispensable in medical treatment. It is also intended to meet the same requirements expressed by countries turning to us for this purpose.

Recourse to a national source of raw materials was made necessary by the periodic interruptions in supply in the past resulting from conflicts (1939-1945), poor harvests in Asia (1974-1977), commercial practices (1967-1973) or events in a country which depress opium imports (discontinuation of licit growing of opium in Turkey; cessation of exports from Iran).

There is no way to guarantee that such contingencies will not again arise in future, and it is natural that the public authorities should take precautions against the risks of too great a dependence on foreign suppliers.

Paradoxically, the same argument can to some degree be put forward in the inverse situation of abundance, as is currently being proven by the example of petroleum in the sphere of energy.

6.1.2. In the agricultural sphere, growing of the oil poppy helps to reduce disparities in levels of rural development in the French regions. It is suitable for smaller farms, brings in additional income and is a technically very useful starter crop. In this connection, incentives to drastic reductions in crops, which lead to losses in income, are locally poorly received.

6.1.3. Internationally, France has always indicated its support of the United Nations policy advocating use of straw rather than opium owing to the reduced danger of diversion into illicit channels. The green-poppy process is, from this point of view, more secure than the ripe-poppy process.

It is also considered that excessive concentration of world production zones is not the best way to ensure steady supply.

6.1.4. It is considered that this production, and also the manufacture and marketing of the resulting products, should take place in accordance with the international treaties. The goods concerned cannot, therefore, be fully abandoned to the free play of market forces. Our country, for its part, applies a policy of reduction of areas sown, absence of speculative stocks and adjustment of production to real requirements.

6.1.5. The socio-economic importance of this production should be evaluated in the context of conditions prevailing in a country where multi-crop agriculture is practised, since this situation differs from that of other countries where poppy growing is sometimes the only basis for the life of a region.

6.2. Number of growers

Approximately 1,000 farms are involved (850 to 1,100 depending on the year).

6.3. Number of inhabitants dependent on the crop

Approximately 6,000 to 7,000 persons (1,000 families having five members, plus the labourers and wage-earners at collection centres and silos) are partly dependent on this crop.

6.4. Contribution to the gross national product and to foreign exchange earnings

The actual contribution to the gross national product cannot be determined, but it is small. The crop helps to achieve a savings of foreign exchange of approximately 50 million francs.

6.5. Optimum use of land and labour

As was indicated under point 6.1.2., this is a supplementary use in the context of multi-crop operations for smaller farms.

6.6. Economic and social effects of increase and reduction

There is no question of substantially increasing production. On the other hand, an unreasonable reduction would put an end to reliability of supply and make it impossible in practice to resume supplementary growing in case of need, since the growers would refuse.

6.7. Possibility of introducing substitution crops

The introduction of substitution crops does not present a technical problem. The difficulties are of a human nature, as indicated above.

7. DATA ON MANUFACTURING

7.1. Capital invested

7.2. Amortization

The factory for concentrate belongs to a private company which provided the capital, saw to the amortization and assumed the financial risks. The installations have now been amortized. 7.3. Processing capacity

The capacity is between 6,000 and 7,000 tonnes of poppy straw.

7.4. Products manufactured

Poppy straw concentrate with a content of 45-75 per cent in morphine and extraction and semi-synthesis alkaloids (codeine, ethylmorphine, morphine, thebaine and derivatives).

7.5. Prices

7.6. Markets

The prices tend to be aligned with those of the international export market. Markets are limited, since domestic consumption is stable and external requirements are developing very slowly.

8. OTHER CONSIDERATIONS

8.1. Agro-industrial integration in the field with which we are here concerned is a quality factor. It makes it possible to master all the stages in the process from production through manufacture to sale.

8.2. The cost of control of production accounts for approximately 15-17 per cent of the price of indigenous poppy, quite apart from expenditure in respect of State control and factory control.

OCTOBER 1981 DECEMBER 1980 STATISTICS FOR CULTIVATION AND PRELIMINARY PROCESSING OF POPPY IN FRANCE, 1964-1980 COMMENTS

Columns 1-4

A distinction is drawn between areas sown and areas harvested. The areas sown are smaller than those indicated in estimates provided to the Board (contracts not concluded, farmers defaulting).

The quantities harvested are expressed in tonnes of straw after drying, and the yield per hectare refers only to French poppy, all of which has since 1971 been green.

Columns 5 and 6

Column 5 shows net weight of dry straw (indigenous and imported) having undergone preliminary processing during the year, in other words weight after crushing, sifting and removal of unusable fines.

Column 6 clearly shows the development of the extraction process:

- 1964-1965, the concentrate stage was skipped to go on directly to morphine;

- 1966-1969, a semi-continuous process was used, one stage in which was the "miscella", or pasty concentrate, which was not separated, but was added to the opium-extraction juices;

- Since 1971, concentrate has been isolated in continuous operation in apparatus independent of the opium-extraction circuit.

This column indicates the quantities of concentrate obtained during a year, regardless of the content in anhydrous morphine base (indicated in column 8). In addition, the weights are different from the quantities reported in the statistics furnished to the Board because manufacturing is continuous and materials undergoing processing must be taken into account.

On 1 January of a given year, extraction juice from the preceding year (A) remains in the apparatus, and on 31 December juice from the current year (B) remains. Between these extreme dates (C), if the volume of juice remaining in the apparatus is known, and its density and morphine content can be determined by analysis, the initial and final amounts of material in processing are calculated in terms of morphine. The quantity of concentrate relating to the year is the result of C - A + B, while that isolated, weighed and declared is constituted by fraction C.

This method makes it possible to control the process as a whole and to undertake studies of yield. In the strict sense of the term, these materials in processing are no longer straw and are not yet concentrate.

One last comment should be made. As long as the miscella and the concentrate were only an internal and intermediate stage in morphine extraction, no estimates and no statistics were submitted to the Board. These were prepared in 1972 and from 1974, at the time when exports began. To sum up, the earlier statistics served only the purposes of internal control. Columns 7-9

Column 7 is only an accounting contrivance used to standardize the statistical expression of concentrates with varying levels of morphine content (45-75 per cent).

Column 8 indicates the quantity of morphine present in the quantities of concentrate shown in column 6.

Column 9 evaluates the yield by comparison with weight of straw having undergone preliminary processing. There is no need to take into account an amount of straw in processing because the extractor loads relevant to the initial and final amounts in processing are identical and therefore balance each other out. Original French

HUNGARY

Statement by the Government of the Hungarian People's Republic in connection with the study prepared by the Board on the supply and demand for raw materials used in the manufacture of opiates

It was Janos Kabay, a young Hungarian pharmacist, who first drew attention to poppy straw, the raw material for the extraction of alkaloids from this plant. Janos Kabay worked out a method in 1925 for making morphine from the poppy, and in 1927 he founded the Alkaloida factory.

Poppy seed is an item in the popular diet, and the poppy plant with dark seeds has been cultivated for centuries in Hungary. The seeds are used in making cakes. For that reason the poppy cannot be replaced by other crops in our country.

It is the consumer demand for poppy seeds which determines the amount of poppies grown. In Hungary poppies are insignificant in comparison with other crops. Most of the poppies are grown on the large holdings of state farms and agricultural co-operatives, while the rest are grown in kitchen gardens and as cover crops.

The Kabay process for making morphine is not merely of great economic importance through its use of waste materials. From the standpoint of public health in general and narcotics control in particular, it plays a still more important role: the omission of the "opium" phase has made it possible to manufacture morphine and other poppy alkaloids from a non­ narcotic material under proper control.

Opiate manufacture made considerable progress after the foundation of the Alkaloida factory. By 1958 the Hungarian People's Republic was already the world's sixth producer of crude morphine. In recent years the quantity manufactured has varied between 6 and 12 tonnes (see annex, table I).

Our country's exports of poppy alkaloids began to expand in 1942. In 1958 the Hungarian People's Republic accounted for 24.6 per cent of the world's morphine exports, coming in second place behind the Netherlands, which had 50.8 per cent. In codeine exports our country was third, with 15.5 per cent. In ethylmorphine Hungary was second behind the United Kingdom, with 29 per cent. In recent years Hungary has been exporting 4.5 to 9 tonnes of poppy alkaloids a year (see annex, table IV). Because of our export commitments we have from time to time been obliged to make up for a shortage of poppy straw by importing raw materials (see annex, table III).

In view of the fact that the supply of opiates exceeds the demand, the Hungarian People's Republic - as stated by our delegation at recent sessions of the United Nations Commission on Narcotic Drugs - has not increased its morphine production capacity, and the amount of opiates produced (in terms of morphine) has not exceeded 12 tonnes (see annex, table I).

Domestic consumption is about 20 per cent of output (see annex, table II).

The Hungarian People's Republic is considered by the Commission on Narcotic Drugs to be a traditional producer and exporter of opiates (poppy straw, alkaloids and concentrate).

October 1981 Table I

Manufacture of morphine and poppy straw concentrate

Morphine

Quantity of poppy straw used in Morphine manufacture Yield Year kg kg %

1971 8 098 3 412 335 0.24 1972 10 105 3 788 150 0.27 1973 10 870 4 317 300 0.25 1974 6 046 2 389 1+90 0.25 1975 6 766 3 301 540 0.20 1976 6 333 2 857 800 0.22 1977 8 650 3 134 000 0.28 1978 9 770 3 1+95 800 0.28 1979 12 411 4 970 500 0.25 1980 11 030 5 124 500 0.22

Poppy straw concentrate

Quantity of poppy straw Poppy straw concentrate used in production Year kg kg

1972 2 000 50% 340 400 1976 4 091 90% 1 656 800 1977 3 855 90% 1 253 1+00 1978 5 592 90% 1 808 300

Table II

Domestic consumption

Codeine Ethylmorphine Dihydrocodeine Morphine Year kg kg kg kg 1971 2 189 627 110 18 1972 1 422 581 77 16 1973 1 791 531 105 22 1974 1 537 635 108 15 1975 1 948 682 76 17 1976 1 836 583 129 20 1977 1 569 699 75 16 1978 1 571 383 87 14 1979 1 578 408 118 16 1980 1 445 435 99 16 Table III

Imports of poppy straw and opium

Poppy straw Opium Year kg kg

1971 2 000 095 1972 97 477 180 1973 - 6 000 1974 1975 98 298 1976 4 256 326 1977 4 262 118 100 1978 3 696 452 60 1979 1980 - 80 14 407 766 6 1+20

Table IV

Exports of opiates (excluding small quantities of dihydrocodeine, ethylmorphine and thebaine exported)

Poppy straw concentrate Codeine Morphine Year kg kg kg

1971 - 2 146 2 451 1972 2 000 50% 4 485 2 708 1973 - 4 232 4 423 1974 - 2 305 1 143 1975 - 3 273 476 1976 4 091 90% 1 851 956 1977 3 855 90% 3 31+3 953 1978 5 542 90% 4 509 210 1979 - 8 781 502 1980 - 5 190 25

Original English

INDIA

Cultivation and Production:

1. India has long been established as the principal producer of narcotic raw materials for the world's requirements of alkaloids for medical and scientific needs. During the twenty years, 1958-78, the annual Indian production of opium and the stocks carried have ranged between 1,000 tonnes and 1,600 tonnes. The area under poppy cultivation has accordingly been traditionally planned to meet these requirements. Always the major producer of opium for the extraction of morphine, India, as from 1974, has become the sole opium producer for legitimate purposes. During at least the ten years preceding 1974, the Indian exports of opium on an average represented about 61 per cent of the total world opium consumption for manufacture of alkaloids which was on an average of the order of around 1,038 tonnes per annum.

2. During 1970s, responding to the increased world requirements of opium for the manufacture of alkaloids, upward adjustments in the area under poppy cultivation were effected by introduction of structural changes in the cropping patterns in the contiguous areas. Between 1970 and 1978, the area increased in phased manner from 38,279 hectares to 66,338 hectares and the production from 794 tonnes to 1,646 tonnes. India has followed the policy of limiting increases in the area of poppy cultivation compatible with its ability to enforce adequate controls. Considerable financial outlays on research on opium production technology and stricter enforcement resulted in the steady upward movement of average yield reaching a level of 31.8 kg per hectare in the crop year 1980-81. Marketing difficulties in the later years of the decade have resulted in substantial additions to stocks.

3. Faced with the problem of burgeoning stocks, India has been obliged to reduce the acreage under cultivation from 1978 onwards. In 1981 an area of 36,827 hectares was licensed for poppy cultivation for an estimated opium production of 900 tonnes. Because of good weather conditions and strict enforcement measures, the total production of opium was however 1,126 tonnes at 90° C (Provisional). Compared to 1978, the reduction in area was about 44 per cent and in production of about 32 per cent.

This reduction was achieved by raising the qualifying yield for eligibility to be licensed for poppy cultivation and decreasing the area allotted to individual cultivators. The Government consider that it cannot reduce acreage or production below this level without affecting the most efficient growers and provoking an unacceptable dissatisfaction in the growing areas.

4. India's share in the world production of alkaloids has ranged from 24 per cent in 1966 to 61 per cent in 1974 (Table 15, annex A). From 1964 to 1971, this represented opium production alone. From 1972 to 1979, it also included incised poppy straw which was exported for processing abroad. The Indian share stood at 93 and 83 per cent in 1978 and 1979, respectively. Exports

5. Indian exports of opium over the entire period are shown in Table 20 (annex A). During the period 1971 to 1977 the Indian exports were between 815 and 1,085 tonnes; since 1977 they have been steadily declining. In 1980 they fell to 730 and in 1981, accordingly to the present estimates, they may not exceed 500-550 tonnes.

6. Exports of incised poppy straw are given in Table 24 (annex A). The first such exports began in 1972 and increased during that period of temporary supply difficulties to a high of 13,114 tonnes in 1976, equal to 31.5 tonnes of morphine equivalent. Since 1976 they have been declining, coming down to a mere 49 tonnes in 1980. This export is a private enterprise subject to regulatory controls of the State.

Stocks

7. Indian opium stocks, which have historically constituted about 40 per cent of total world stocks of opium, represented at the end of 1979, 80 per cent of such stocks. Between 1960 and 1970, the stocks varied between 337 and 882 tonnes. During the next decade, the stocks declined sharply coming down to 162 tonnes in 1974. The stocks, however, have risen steeply thereafter to about 1,900 tonnes at the end of 1980. The Government of India considers that it should maintain, as a maximum, stocks not exceeding one year's requirements for exports and domestic consumption. The existing stocks are almost twice this level.

Prices and costs

8. India has been meeting the world requirements of opium for scientific and medical purposes at very reasonable prices and not on commercial terms or merely for economic gain. The export price of opium during the earlier 1960s was about $US 15.5 per kg (for 10 units of morphine) and following a general rise in prices and the cost of production, the export price gradually rose to $US 60 per kg during the years 1977-79. Even in situations of extreme world shortage of opiate raw materials, during the mid-1970s, India met the world requirements at stable prices. However, during the period following 1979, despite the worldwide inflation, the prices of opium had to be reduced drastically to an uneconomic level namely from $US 60 per kg to $US 42.50 (with a rebate of 25 per cent over the average quantities purchased during the two years preceding 1981-82) viz. a reduction of about 29 per cent to 46 per cent.

Control

9. Under the Indian Constitution, cultivation, production, manufacture and export of opium is the responsibility of the Central Government. The State Governments are primarily responsible for control over possession, transport, sale and interstate movement of opium. The Opium Act of 1857, the Opium Act of 1878 and the Dangerous Drugs Act, 1930 are the principal enactments under which control over opium is exercised. 10. The Central Agency charged with the responsibility of supervising poppy cultivation and the collection and export of opium is the narcotics commissioner, who has three deputy narcotics commissioners for each of the three states in which poppy cultivation is authorized. The area responsibility is subdivided into divisions each of which is headed by a district opium officer, who with the assistance of field and preventive staff, exercises control over poppy cultivation from the time the seed is sown until the opium is delivered by the growers and despatched to government opium factories.

11. Each year the narcotics commissioner determines in advance the areas to be brought under poppy cultivation, with reference to the existing stocks in the government factories and the quantity of opium estimated to be required for export and for domestic consumption. The area so determined is secured in districts in the three states of Madhya Pradesh, Rajasthan and Uttar Pradesh. Particulars of tracts where cultivation may be undertaken are notified annually in the official gazette. Cultivation except in the notified areas is prohibited. In notifying the areas, the Government restricts cultivation to the most productive, contiguous, compact tracts so that the field and supervising staff may exercise effective supervision.

12. In order to cultivate the opium poppy, a grower must obtain a licence from the district opium officer. Each request for license is screened and the grower's eligibility is determined by a set of licensing principles, which are reviewed and announced yearly. These principles aim at eliminating uneconomic and undesirable cultivations and unproductive tracts through establishing a minimum qualifying yield. Growers who are implicated in any offence under the opium laws or against whom there is evidence of collusion with smugglers are denied licences. Appeals against denials of licence are decided by the deputy narcotics commissioner. Every cultivator is issued an individual licence. In addition, a joint licence is issued to the village headman who is appointed in each growing village from among the cultivators having the highest average yield, and who receives a commission for supervisory assistance. The joint licence gives details of all the individual licences in the village.

13. Field staff of the Narcotics Department measure the area licensed for cultivation and supervisory staff check the measurements to insure that no grower cultivates an area in excess of that licensed. The Narcotics Department field staff in the growing areas and State Excise, Police and Revenue staff outside the growing areas verify that there is no unauthorized cultivation. All Government and village officials are required to give information to the authorities about any illegal cultivation, whereupon a police, excise or opium officer will attach the illegal crop. Anyone found cultivating poppy without license is punishable by imprisonment up to three years with or without fine. Frequent inspections are made of the standing crop.

14. Preventive squads of the Narcotics Department assisted by State Excise and Police Department officers make surprise checks in growing villages and on highways leading from growing areas. Intelligence units for watching out for traffickers are set up inside and around growing areas. The Narcotics Intelligence Bureau co-ordinate the intelligence and preventive activities. The Bureau organizes the exchange of information with State Government enforcement officers and Customs Department officers.

15. During the period of lancing, each cultivator is required to show his daily collection to the village headman, who has it weighed and enters the quantity in the village joint licence. The Narcotics Department field staff also make on the spot surprise checks of produce throughout the harvesting season.

16. The district opium officer establishes a schedule for the purchase and weighing of opium. Purchasing centres are set up and cultivators are notified to bring their produce to the centre on specific dates. At the centre, opium is classified according to moisture content, and simple chemical tests are made to detect common, adulterants. The produce of each cultivator is classified and weighed separately and packaged with other opium of the same class for the transport to factories. The price payable to each grower is then determined and 90 per cent is paid to him on the spot. Suspected and adulterated opium is sent separately to the factories, and payment is deferred until the chemical analysis report is received. The remaining ten per cent of the purchase price is paid upon the receipt from the factory of the final analysis report.

17. Amounts of opium weighed and purchased are packed on a daily basis in bags, sealed, marked with gross and tare weights, and stored in secure and guarded warehouses at night. When the quantity is sufficient to form a wagon or truck load, it is despatched to the factory under armed police escort. At the factory each bag is weighed and the weight recorded in the presence of the escort, whereupon it becomes the accounting responsibility of the factory manager.

18. At the government factories the opium is stored in different vats according to the grade. Records are kept for each vat, showing the total quantity stored, withdrawals and the closing balance by date. Warehouse doors and windows are provided with iron bars and wire netting. At the close of each working day, the warehouses are double locked and sealed. Armed guards are on duty day and night.

19. Opium after manufacture and processing at factories is exported by sea from Calcutta and Bombay and by air from Delhi. Each railway consign­ ment is loaded in the presence of factory officers and railway representatives. After loading the railway car is secured by factory locks and by the factory and the railway seals. It is then sent by rail to port/airport under an armed escort from the factory. At the port, the consignment is delivered to the shipping company and taken to the ship under Customs and Narcotics Department escorts. The consignments for air shipment also are taken under adequate departmental security from the railway station to the airport where they are kept in separate and heavily guarded godowns pending airlifting. The consignment is guarded until it is finally loaded in the aircraft.

Cost of Control

20. An elaborate system of controls exercised on the cultivation of opium poppy and other related operation right from the sowing stage to its final collection by the government agencies has necessitated huge financial outlays for the Government. The total estimated annual cost is worked out to about $US 20 million. About 3,400 officials are exclusively engaged in the work relating to controls in the growing areas, in addition to the manpower utilized from the State Police, Excise and Drug Control Agencies. The officers of the Narcotics Department are provided with motor vehicles to increase their mobility, arms and other equipments are provided for the purpose of increasing the striking capability in the preventive operations. A proposal to provide a telecommunication cover for the Narcotics Department involving a financial outlay of about $US 0.3 million is also under the consideration of the Government.

Economic and social importance

21. Cultivation of opium poppy is considered as an important source of resource mobilization. Almost the entire product is exported to as many as 22 countries to meet their medical needs. Thus, opium is considered as an important foreign exchange earner for the country. The total export earnings from opium amounted to $US 63 million in 1977-78.

The opium poppy has been traditionally an important cash crop in the poppy growing states in India. In a few regions, it is the only cash crop available to a large number of cultivators. The cultivation of opium poppy provides a source of livelihood for about 3.7 million inhabitants directly or indirectly. The bulk of the opium poppy cultivators belong to the weaker section of the rural population living in the interior and backward region of the states of Uttar Pradesh, Madhya Pradesh and Rajasthan. The individual plots being small in size - average holding being a quarter of a hectare - it is not possible to employ farm machinery for various connected operations like preparation of fields, sowing, weeding, thinning etc. Mechanized irrigation facilities are not available in many of the poppy growing areas. Accordingly, from the beginning to the end, the crop requires considerable labour inputs at various stages. Agricultural finance in the growing areas is at primitive stage and rural credit institutions have not fully reached out to help the bulk of the cultivators. Opium poppy cultivation, thus, is an important source of income generation in the backward rural areas. The payment to growers amount to about $US 43 million on the basis of the figures 1977-78. The aggregate value of opium and the other related products namely, poppy seeds and poppy heads is estimated to amount, in the aggregate to about $US 76 million which is equal to about 20 per cent of the gross income of the backward poppy growing districts.

22. The current over-supply and the resultant contraction of acreage has caused severe socio-economic difficulties in India. During the last few years, as many as 75,000 families have been totally deprived of their income as a result of the reduction effected in the total area under poppy cultivation. Further, about 170,000 families have suffered loss of income from this cash crop for the reason that their licensed holdings have been steeply reduced. About 700,000 seasonal labour employed for lancing and collection operations have also been deprived of their seasonal employment in the rural areas, thereby increasing the pressure on the employment situation in the urban areas. The local economy has also been severely affected on account of the fact that income estimated at $US 18 million has been withdrawn from the local population on account of reduction in the licensed production. 23. The profitability of the Government opium and alkaloid works undertaking has also been severely hit on account of a sharp fall in exports and the resultant accumulation of stocks from about 285 tonnes in 1976 to 1,917 tonnes in 1980. Substantial funds estimated to be about $US 80 (eighty) million have been locked up in current stocks incurring interest charges of the order of $US 12 million per annum. The cost of controls viz. storage, security and other preventive control is estimated to be about $US 20 million per annum. On the other hand, the foreign exchange earnings have recorded a sharp fall from the level of $US 63 million in 1977-78 to $US 41 million in 1979-80 and about $US 22 million in 1980-81 (estimated).

September 1981

POPPY CULTIVATION FROM GROWER'S STANDPOINT CHART SHOWING GROWER'S INCOME, INPUT AND OUTPUT FOR POPPY AND ALTERNATIVE CROPS

(ON THE BASIS OF ONE HECTARE CULTIVATION)

INPUT OUTPUT NET INCOME CROP Rs. Rs. Rs.

Opium Poppy (Opium Seeds, Strew and Other) 6,325 10,470 4,145

Sugar cane 7,200 9,300 2,100

Wheat 1,815 4,200 2,385

AGGREGATE VALUE OF PRODUCTS (63,685 HECTARES)

(BASE YEAR 1977-78 Rs. IN MILLIONS)

Opium 344

Poppy Heads 49

Poppy Seeds 191

Others 26

TOTAL: 610 or $US 76 million

Exchange rate: 8.6 rupees = 1 US dollar (October 1981) OPIUM PRODUCTION FROM GOVERNMENT STANDPOINT

SOCIO-ECONOMIC IMPORTANCE (BASE 1977-78)

(a) 1. Number of growers 245,161

(b) 2. Number of inhabitants dependent on production of opium for livelihood 3,677,415

(c) 3. Contribution to G.N.P. of the poppy growing areas 20%

Original English

POLAND

With reference to the letter No. INCB 125/5 POLA of 31st June 1981, the Polish Ministry of Health and Social Welfare kindly forwards the following information:

1. Cultivation of poppy

Poppy straw obtained out of domestic cultivation of Papaver Somniferum is the basis of alkaloid production in Poland. The area of cultivation amounts to about 10,000 to 20,000 hectares. Papaver Somniferum is cultivated all over the country; mainly by private farm owners. Smaller quantities are also cultivated by state owned farms. Authorized state institutions sign contracts for the cultivation of poppy and are committed to purchase poppy seeds and straw. The main purpose of the cultivation is to obtain poppy seeds which are used for consumption. Poppy straw is regarded as waste material. The estimated annual harvest of poppy straw amounts to 5,000 to 6,000 tons. Due to the climate in Poland, the poppy straw obtained from the cultivation of poppy contains a small percentage of morphine; from 0.2 per cent to 0.25 per cent.

2. Production

Production of alkaloids (morphine, codeine, ethylmorphine) began in Poland in 1934. The Pharmaceutical Company "Polfa" in Kutno is the only producer of alkaloids, poppy straw being the basic material for their production. In previous years, when there were two possibilities of exporting codeine alkaloids were also manufactured from opium imported from India, and in the years 1977-1979 from poppy straw concentrate imported from Australia. It is anticipated that after excessive use of the reserves of the concentrate of poppy straw, the production will be again based on the domestic poppy straw. The output capacity of the factory in Kuton amounts at present to about 5,000 to 6,000 tons of poppy straw out of which about 10,000 kilograms of morphine can be obtained.

3. Usage

The consumption of alkaloids in Poland for medical purposes amounts to about 50 kilograms of morphine, about 1,200 kilograms of codeine (in this - about 900 kilograms for preparations) and about 50 kilograms of ethylmorphine per year. No considerable increase in the use of the above mentioned alkaloids is anticipated. On the other hand, in view of the fact that new synthetic drugs are being used, the usage of morphine will slightly decrease. The reason for the decrease in the usage of codeine is the introduction of a rule that doctors are also obliged to issue prescriptions for codeine tablets with copies.

4. Reserves and imports

In the previous years the total amount of poppy straw purchased from farmers was intended for the needs of production and at the end of the year no reserves of poppy straw were left. At the end of 1980 the reserves of morphine amounted to about 1,575 kilograms. The reserves of the concentrate of poppy straw, containing 50 per cent of morphine decreased from 21,134 kg in 1979 to 13,038 kg in 1980. The supplies of about 70 per cent of the concentrate of poppy straw from Australia in the years 1977-1979, through the Polish-American Company Alkaloid Tasmania with a simultaneous decrease in exports resulted in a considerable increase in the reserves of inter­ mediate and final products. Due to excessive reserves as well as due to the prevailing on the world markets outbalance of supply over demand the Polish-American Company had to be dissolved. This caused that from 1980 the import of the concentrate of poppy straw was stopped.

5. Exports

Poland has been an exporter of alkaloids since 1952. In the beginning the exports included codeine; later they also included intermediate raw materials like the concentrate of poppy straw and raw morphine. In 1980 the exports of codeine amounted to about 4,535 kg. It was mainly exported to the German Federal Republic, Bulgaria, Czechoslovakia, Switzerland, the Netherlands and Mexico. It is anticipated that further possibilities of exporting codeine still exist.

Conclusions

1. In the nearest future legal ordinances will be elaborated relating to the monopoly in medical poppy cultivation. These ordinances will aim at limiting the poppy cultivation only to cultivations included in the contracts between farmers and authorized institutions. The farmers will be obliged to sell the poppy straw only to the authorized institutions which on the other hand will be under obligation to purchase all the poppy straw cultivated in the country.

2. Poland will produce alkaloids from opium on the basis of own materials (poppy straw) for the country's own needs as well as for export.

3. No increase in the use of alkaloids produced from opium for medical purposes is anticipated.

4. The excessive reserves of narcotic drugs will be regulated in the nearest future. Original French

ROMANIA

DATA

for study by the International Narcotics Control Board on opium-poppy cultivation and on the production */ of opium or poppy capsules —

1. Area under cultivation and production

Cultivation areas authorized and sown during the period 1964-1980:

1964 5,400 ha 1965 5,600 ha 1970 6,400 ha 1975 6,500 ha 1976 8,200 ha 1977 9,500 ha 1978 8,1+00 ha 1979 7,900 ha 1980 8,454 ha Harvested area, production and yield per ha in 1980: Cultivated area: 8,454 ha Poppy capsules (dried): 1,562 tonnes

Average production per ha: 185 kg

Projects relating to the area intended for poppy cultivation and production anticipated for the period 1981-1984:

Anticipated for the years: 1981 1982 1983 1984 Area (ha) 10,1+1+0 12,300 12,300 12,300 Total production of dried capsules (tonnes) 2,810 3,450 3,630 3,800 Average production per ha 270 280 295 310

*/ In the Socialist Republic of Romania poppy capsules are not used for the production of opium. They are used for obtaining morphine. 2. Stocks

The annual production is delivered in its entirety to the enterprises producing morphine and its derivatives.

No stocks of poppy capsules are accumulated in the State agricultural enterprises.

3. Export

The Socialist Republic of Romania has made no provision for the export of poppy capsules.

4. Data on control and related costs, from the issuing of cultivation licenses to export, by operations and organizations

Poppy cultivation is carried out by State enterprises under licences issued annually by the Ministry of Health; control of the cultivated areas, surveillance during the growing period and control of harvesting, transport and research are carried out by the competent bodies under the laws in force.

5. Poppy cultivation from the point of view of agricultural operations

The poppy is cultivated only in areas authorized by the Ministry of Health and the value of the output obtained is very low compared with the total agri­ cultural output of the State cultivation enterprises.

6. Production of opium or of poppy capsules from the point of view of State authority

Poppy cultivation and the preparation of the capsules are carried out by State enterprises and the resulting products are used solely in the health sector.

7. Data on production

Not applicable.

October 1981 Original Spanish

SPAIN

REPLIES TO THE QUESTIONNAIRE SENT BY THE UNITED NATIONS INTERNATIONAL NARCOTICS CONTROL BOARD ON THE OCCASION OF THE VISIT TO SPAIN OF ITS REPRESENTATIVES

Madrid, 20 January 1981 REPLIES TO THE QUESTIONNAIRE SENT BY INCB ON THE OCCASION OF

THE VISIT TO SPAIN ON 21-23 JANUARY 1981 OF ITS DELEGATION

I. INTRODUCTION. CULTIVATION OF THE OPIUM POPPY AND MANUFACTURE IN SPAIN OF POPPY STRAW CONCENTRATE

These activities are now being carried out in Spain by ALCALIBER, S.A., an enterprise declared to be of preferential interest by the Order of the Ministry of Industry dated 12 December 1977.

ALCALIBER, S.A. has held the concession for these activities since 1974, and prior to that time had already been authorized to engage in experimental growing.

These decisions of the Spanish Government reflected the need our country felt to have available a raw material vital to the pharmaceutical industry.

They were justified by Spain's deficit position in the market for narcotic drug raw materials, which gave rise to serious difficulties with respect to the acquisition of opium and poppy straw concentrate.

This situation reached a climax in 1970-1975, when what are now known as the traditional suppliers considerably reduced their supply to our country while at the same time substantially raising their prices, and thereby causing particularly serious distortions in our supplies, which negatively affected the development of health-related activities.

This gave rise to serious difficulties for the national health system, which had to forego all its reserve stocks. It has not yet recovered from this situation.

Serious efforts were made to seek new suppliers, which were found mainly in Poland - albeit in the context of unusual prices and long-term purchase-commitment conditions - while at the same time negotiations with India were intensified with a view to an increase in the opium quotas.

It was possible to obtain this only because maximum Indian supply coincided with declines in demand on the part of the traditionally more favoured purchasers.

To sum up, the shortage of supplies, the steady rise in prices and the unreliability of supplies, not to mention the recommendations of United Nations specialized bodies themselves, were the essential motivation for the support by the Spanish Government of the action taken by ALCALIBER, S.A. to ensure national self- sufficiency in respect of this essential raw material.

II. HISTORY OF SPANISH POPPY CULTIVATION

The poppy was a promising crop in Spain, suited to the agronomical characteristics of the country. Throughout the country, various species of poppy grow wild, and have traditionally been used in household remedies. As can be seen from the report of the Royal Academy of Pharmacy for 1762, the Spanish State has since that year been promoting poppy cultivation, particularly in the Andalusian provinces. More recently, beginning in 1940, the current Spanish manufacturers of narcotic drugs, ABELLO, S.A. and UQUIFA, SAE. undertook trial growing of the poppy in other areas of the country, especially León, Valladolid and Lérida. These trials continued for several years until they gave way to extensive growing at the end of the 1950s.

Difficulties of economic origin common to all Spanish activities during those years caused poppy growing to be interrupted, but it was resumed in 1972 by the present company, ALCALIBER, S.A., which was of course formed by ABELLO, S.A. and UQUIFA, SAE.

Poppy growing, then, is not new in Spain although it has never been carried out for export, and this only reinforces the very important fact that there has never been a single diversion in use exceeding the limits laid down by legislation in force.

1. POPPY CULTIVATION AND PRODUCTION OF POPPY STRAW SINCE 1964, ETC. A. POPPY CULTIVATION

Area Area Tonnes Yield Year sown harvested of straw (kg/ha)

1972 TRIALS 1973 TRIALS 1974 104 60 20 333 1975 250 121 30 248 1976 1 150 700 120 172 1977 2 060 980 340 347 1978 3 200 1 799 810 476 1979 2 997 1 783 796 446 1980 3 200 2 153 942 438

2. MANUFACTURE OF POPPY STRAW CONCENTRATE, BY YEAR

Morphine Yield Year Tonnes of straw (kg) (%)

1977 7 MANUFACTURING TRIALS 1978 490 1 111 0.23% 1979 1 200 4 900 0.41% 1980 850 5 165 0 .61% The forecasts for the coming four years are based on movements in Spanish requirements; harvest results, the area harvested not having increased in the current crop year; and the development of domestic markets.

3. PROJECTED DOMESTIC CONSUMPTION OF CODEINE, 1980-1984

Domestic consumption, both of codeine and of other alkaloids, is of course determined by the demand of the health-care market and by the amounts in the possession of licensed retail dealers, as these are the only channels of consumption of these substances.

Codeine requirements for health-care purposes are now clearly becoming stabilized by comparison with the situation in the past five years (see form C/S), since there have been no serious outbreaks of influenza, which would have strongly influenced demand.

Therefore, domestic consumption over the coming five years can be expected to be stable, barring seasonal contingencies, therapeutic "fashions", etc., which can hardly be forecast.

4. CURRENT AND PROJECTED INVENTORIES AND POLICY IN THIS RESPECT

Inventories as of 31 December 1980 amounted to 4,460 kg.

The policy of the State in this respect envisages normal domestic supply and the establishment of a reserve stock equivalent to 21 months' consumption.

5. MANUFACTURING CAPACITY

Spanish manufacturing capacity in respect of codeine ensures self-supply, provided that the required raw material is available.

As regards manufacture of raw material, the facilities used for manufacturing poppy straw concentrate are designed to process, if necessary, up to 1,500 tonnes of straw a year.

6. CONTROL SYSTEM AND RELATED COSTS

The Spanish control system is by its very nature complex and delicate. We assume that the same is true in the other countries which are parties to the international treaties.

In Spain, a number of State bodies participate in this control.

Since this is primarily a health-related matter, the Service for the Control of Narcotic Drugs and Psychotropic Substances of the Ministry of Health and Social Security bears the main responsibility with reference to the licit traffic and also to many aspects of the illicit traffic (analysis, co-ordination, custody, etc.). In addition, this Service ensures permanent liaison with the United Nations in matters of its specific competence. In short, it fulfils the role which is assigned to it as a special agency of the Spanish State for narcotic drugs and psychotropic substances, as specified in article 17 of the Single Convention of 1961 and article 6 of the Convention on Psychotropic Substances of February 1971.

In the context of their respective competences, a number of units of the State Security Forces of the Ministry of the Interior and those specializing in matters of contraband and tax evasion of the Ministry of Finance play a part in control.

From the time when a crop is sown until its harvest and transport to appropriate storage facilities, Government agents, in this instance the Civil Guard, control operations, preventing any hypothetical contingencies, in permanent co-ordination with the Control Service of the Ministry of Health.

Once the processing of the raw material has been started, the Service uses its own factory inspectors to control all parts of the process, and also the results achieved.

The alkaloids subject to international control are then marketed under a State monopoly through the Health Administration (Control Service of the Ministry of Health). This same body controls establishments producing, distributing and dispensing pharmaceutical specialities and the persons authorized to prescribe and use them.

We believe that these brief notes have indicated the way in which the State is active in all areas of control of narcotic drugs and psychotropic substances, thereby observing the guidelines laid down by the United Nations through its competent bodies (Commission on Narcotic Drugs and International Narcotics Control Board).

The cost of this control machinery is very difficult to assess since it is operated by the State and is spread over a number of governmental bodies, and since there is no specific chapter covering drug control in the general State budgets.

7. ECONOMIC AND SOCIAL IMPORTANCE OF POPPY CULTIVATION AND THE ALKALOIDS INDUSTRY FOR THE SPANISH ECONOMY

In the light of the explanation in the introduction of the reasons for initiating these activities, it will be immediately understood that these are primarily health- policy considerations.

None the less, while viewing the replies against the background of an industrialized economy such as Spain's, and hence one which it is difficult to compare with economies where these activities could be said to have implications for the Gross Domestic Product, we could reply to the questions in this section as follows: - Number of growers

There are approximately 100 plots which are in turn part of farms of very different sizes, and for this reason it is difficult to estimate the number of growers. We can state that, at one stage or another, around 3,000 persons are involved in this work.

- Value of agricultural product

The value varies depending on harvest quality, annual movements in the prices of competing products and the characteristics of the farming year.

In Spain, growing takes place on the basis of a high level of skill and technological input.

Poppy growing is therefore an alternative for farmers who, because of agricultural and commercial requirements, need substitutes for oil-plant or sugar- plant crops.

In the area where poppies are grown, they fulfil a genuine economic and social function, as is indicated by the very fact of the introduction of growing.

The value of the agricultural product for crop-year 1979-1980 amounts to 200 million pesetas.

- Investment of capital in industry

With reference only to establishment costs and industrial investments, capital investment amounts to 400 million pesetas.

- Value of manufactured product

The figures for 1980 indicate a total of 360 million pesetas.

We would not want to end without referring to the positive implications which ALCALIBER, S. A. has had on the specific balance of payments of the sector for the import of raw materials for drugs manufacture. This fact alone justifies its existence, since the imports of poppy straw concentrate, which in 1977 accounted for foreign exchange expenditures of around 310 million pesetas, have been completely eliminated.

8. FUTURE PLANS REGARDING IMPORTS OF OPIUM OR CONCENTRATE

There are no specific plans in this respect, since our future actions will necessarily be determined by developments regarding requirements in respect of domestic consumption. None the less, it can be expected that we will resort to foreign markets, since the domestic production of poppy straw concentrate does not now meet domestic demand. 9. REGULATION OF THE DOMESTIC MARKET AND PRICING

In Spain, the prices of the raw materials for drugs and their derivative products are not free. The State fixes these prices through agreements with the concessionary enterprises, in which all the economic factors in the prices in question are appropriately valued.

The most recent price for poppy straw concentrate has been $830 per kg morphine.

Madrid, January 1981

Original English

TURKEY

Cultivation

1. The opium poppy has been cultivated in Turkey since antiquity and Roman times. In modern times, the Turkish Government steadily reduced the cultivated area in an effort to achieve better control. In 1940 the poppy was cultivated in 42 out of 67 provinces. The number of provinces where cultivation was authorized was reduced in 1962 to 35, in 1964 to 25, in 1968 to 18, in 1969 to 9 and in 1970 to 7 provinces. By 1971, the Turkish Government considered that it had limited poppy cultivation to the minimum and could not reduce cultivation further without seriously under­ mining social and economic stability in the area because of the poor economic characteristics of the remaining seven provinces.

2. In 1971, the Government of Turkey in view of the exaggerated reports on the diversion of opium from legal cultivation to the illicit market and taking into account the concerns of the international community, decided to prohibit opium poppy cultivation in Turkey from the autumn of 1972. The United States Government agreed to assist Turkey in meeting the problems which the ban on cultivation created, including financial compensation to the poppy growers and aid in the agricultural and industrial development of the former poppy-growing regions.

3. The Turkish Government promptly came under strong pressures from the political parties, the national press and the farmers to raise the ban on cultivation. The Government found that the importance of poppy cultivation for the people in the region had been underestimated, and it was confronted with a rising social resentment among the people affected by the ban. The cultivation of substitute crops proved difficult because of poor soil and adverse climatic conditions. The Government also noted that while the Turkish economy was sustaining losses from the suppression of poppy culti­ vation, other producers were profiting from a rising demand for opiates for pharmaceutical purposes and were replacing Turkey as sources of supply.

4. On 1 July 1974, the Turkish Government lifted the ban on poppy culti­ vation in six provinces and a portion of a seventh, subject to the strictest control measures. At the same time the Government announced it would welcome co-operation and technical assistance from international organizations and friendly countries in strengthening the control system. The United Nations responded to this invitation, and the United Nations Fund for Drug Abuse Control sent a first mission to Turkey in August 1974. Based on consultations with the United Nations missions and upon their recommendation, the Government of Turkey prohibited the incision of poppy capsules, and conse­ quently the production of opium, and adopted the poppy straw process for the production of opiates. Under the plan proposed by the United Nations missions and adopted by the Government, Turkey would build a factory for the extraction of alkaloids and until the factory could be put into operation, would export for processing abroad the unincised poppy capsules. Opium production

5. Turkey had produced opium for the pharmaceutical industry for many years as one of the authorized producing countries under the 1953 Protocol, and as a country which had produced and exported opium for ten years prior to 1 January 1961 under the Single Convention of 1961. From 1964 to 1972, when the ban on opium poppy cultivation became effective, Turkey had pro­ duced from 60 to 149 tonnes of opium per year and an average of 102.4 tonnes per year. (Table 8, annex A)

Poppy straw cultivation and production

6. While Turkey was producing opium, Turkey was also producing and exporting poppy straw for the extraction of alkaloids (Tables 12 and 19, annex A). When poppy cultivation was resumed in 1974, after the revocation of the 1971 ban, in the first year (1975), 20,000 hectares were licensed and sown, but only 8,500 hectares were harvested for a production of 5,800 tonnes of poppy straw. The area licensed was increased in 1976 to 53,000 hectares and in 1977 to 99,000 hectares. Poppy straw production expanded accordingly to 14,200 tonnes in 1976 and to 36,000 tonnes in 1977. Thereafter area and production were reduced. The yield averaged 633 kg per hectare. (Table 12)

7. In 1979, the area licensed and sown was reduced to 31,000 hectares, and 18,000 hectares were harvested for a production of 12,000 tonnes of straw. In 1980, 30,700 hectares were licensed and 18,400 hectares were sown for a production of 13,735 tonnes of straw. The current policy is to license a maximum of 40,000 hectares for an estimated production of 20,000 tonnes of straw, equivalent to the anticipated annual requirement of the new alkaloid factory. In view of the accumulation of stocks, which stood at 66,000 tonnes at the end of 1980, the area of cultivation will be kept at 30,000-32,000 hectares and production will be limited to between 13,000 and 14,000 tonnes. Acreage and production will continue to be so limited until stocks can be reduced to 20,000 tonnes, and thereafter will be adjusted to meet factory operating requirements and to maintain stocks at that level. Each grower is limited to 3-5 decares according to the land situation.

8. The Turkish share in the total production of alkaloids was composed of both opium and poppy straw production from 1964 to 1972, and of poppy straw production alone from 1975 to 1979. In 1973 and 1974, Turkey had no pro­ duction of either opium or straw during the ban on poppy cultivation. From 1964 to 1972, average annual production was 30.7 tonnes (morphine equivalent) equal to 18 per cent of total production; from 1975 to 1979, production averaged 69.3 tonnes annually, equal to 36 per cent of total production.

Exports

9. Turkey's exports of opium (Table 21, annex A), from current production and stocks, were on the average 147 tonnes per year from 1964 to 1972. After 1972 exports would have been entirely from stocks, since opium pro­ duction ceased in that year. Exports of poppy straw (Table 23, annex A) from 1964 to 1972 averaged 7,795 tonnes annually. In 1973 and 1974 no poppy was grown and in 1975, the first year of the resumption of cultivation, only 50 tonnes were exported. From 1976 to 1980, average annual exports were 8,803 tonnes. Control

10. Poppies may be grown in Turkey only for the extraction of alkaloids and under individual license. Lancing of the capsule is prohibited. The Soil Products Office (TMO) issues licenses and has the monopoly of the purchase and export of the poppy capsules. There is a comprehensive control system extending from planting through growing and harvest to the collection of the capsules, storage and export.

11. Under the License Law of 1971, poppy growers in the seven provinces where cultivation is authorized, apply annually for licenses to the Soil Products Office (TMO). Applications are carefully reviewed; taking into account the economic and social standard of the grower, the possibility of his growing other crops, and the location of fields for control purposes. The TMO has in its possession a detailed land survey of the poppy growing areas. The TMO issues or rejects applications at its discretion and establishes the size of authorized plantings at from 1 to 5 decares for a family. Once licenses are issued the TMO inspects the fields and marks out the authorized cultivated area. In spring the TMO again inspects the fields, destroys any excess cultivation, and continues to check the fields until harvest. Before the grower can begin harvesting, he must have written permission and TMO experts must verify that no capsules have been incised. Any grower who breaches the licensing rules is tried and punished and deprived permanently of the right to grow poppies. In addition there are continual checks on the plots by law enforcement officers, surveillance by helicopters and light aircraft, use of undercover intelligence teams to guard against possible illegal cultivation and marketing, and a mobiliza­ tion of all intelligence operations during the harvest season to prevent trafficking.

12. The producers are required to obtain permission from the TMO for breaking the dried straw. The harvested straws are separated from the seeds under inspection and then brought by the producers to the TMO. The purchase procedure is completed at purchase stations.

13. The TMO employs 800 field controllers in addition to office personnel. The Rural Guard has 3,600 men on duty solely for poppy control. Other officials, including local police and village head men are engaged in control operations. Joint travelling teams of the TMO and the Rural Guard are equipped with vehicles and intercommunication systems.

14. The total annual expenditure made for control of the cultivation is estimated to be the equivalent of 15 million dollars.

United Nations assistance

15. Turkey which had United Nations support in changing from production of opium to that of poppy straw has had continuing United Nations assistance in establishing and improving the control system. At the invitation of the Turkish Government, the United Nations Fund for Drug Abuse Control (UNFDAC) repeatedly sent official missions to Turkey, beginning in August 1974, to discuss the poppy straw process, the control system and United Nations co-operation and assistance. UNFDAC has financed and the Division of Narcotic Drugs has executed programmes to provide technical assistance, training, transport and communications equipment, and an aerial surveillance capability, all designed to improve and strengthen the control system. The Turkish Government has detected no single case of lancing of capsules since the resumption of poppy cultivation in 1974, and there has been no evidence of trafficking of any opium produced in Turkey after that date.

Economic and social importance

16. The area where opium poppy cultivation is permitted in Turkey is generally mountainous and rough and consists of agriculturally poor land where irrigated agriculture is not possible. The total population in the cultivation areas is about 3 million. Opium poppy cultivation has vital importance for the population of the area. The basic product of the population of the area is the opium poppy. The opium poppy is used for numerous purposes. Its seeds are used for making bread and cookies, oil and oilcake, in the paint and the soap industries. When the poppy plant is in its green stage, its leaves are used as vegetables, salad and medicine. Its dry stems are used for heating.

17. The fact that the poppy can be grown in any kind of land easily is an important advantage. It is very difficult to find a substitute crop because of the poor quality of the land and the climatic conditions in addition to its having become a part of daily life in the area. The traditional attachment of the farmers to the opium poppy is great. The poppy provides an income of 3,500 TL 1/ per decare, which totals 1 billion 400 million TL for the inhabitants of the poppy-growing regions. No other crop that can be grown in the area would bring this income.

18. The income of the area population has been greatly decreased and the people have become poorer since the Turkish Soil Products Office has adjusted the production level according to the capacity of the alkaloid factory. The TMO, in its planning is making an effort to minimize the loss to the poor producer by giving priority to producers who are owners of poor and rough lands. In spite of this, the economic situation of the producer is increasingly deteriorating as compared to the years when opium was produced. Prohibition of opium production has resulted in unemployment, in the closing of paint and soap industries and in recession in animal husbandry.

19. A large reduction of acreage has been made in the seven provinces where cultivation is permitted by the Government, and the average number of licenses has been reduced from 280,000 to 120,000. As only one license is given to each producer for a single field, the number of the licenses and the producers are the same. The average annual income of the producer from opium poppy production is about 7,000-8,000 TL ($US 60-65).

1/ Exchange rate: 120 TL = $US 1 (October 1981). 20. The Government is giving great importance to the evaluation of the opium poppy producers. The 1980 poppy straw purchase price was 35 TL per kg and the average price has arrived at 32.96 TL. As a result of the expenses for harvesting, packing and storage, one kg of straw costs 38 TL to the TMO. Export prices for poppy straw have declined from $1,900-2,000 per tonne in 1975 to $480 per tonne in 1979 and $300-310 per tonne in 1980.

Potential manufacture

21. The final objective of the change from the production of opium to poppy straw has been the establishment of an alkaloid factory in Turkey to process Turkish straw into poppy straw concentrate and morphine derivatives. The United Nations recognized this to be an essential con­ dition of the Turkish commitment to the poppy straw process, assisted Turkey in finding a contractor to build the factory, and encouraged Turkey to bring the factory into operation as soon as possible. In the circumstances the factory constructed by the German alkaloid manufacturer Knoll was completed in 1980 and began to operate on an experimental basis in June 1981. Starting of operation was delayed because of the need to import some intermediate chemical substances and to complete the quality control laboratory and the maintenance and repair workshops.

22. The factory consists of an extraction plant and derivative products plant. The extraction unit will produce 90 tonnes of morphine hydrate by processing 20,000 tonnes of poppy straw with a 0.5 per cent morphine content (through three shifts and 90 per cent yield) annually. It is proposed that 55 per cent of production will be exported as concentrate and 45 per cent will be processed into derivative products which include pure codeine, codeine phosphate, ethyl morphinechloride and morphine chloride. The factory has a storage capacity for 6,000 tonnes of poppy straw. The investment cost of the alkaloid factory including the extraction and derivatives plants was approximately 4 billion TL ($US 33 million). The depreciation period is ten years, and the economic life is estimated at thirty years.

23. Studies have been undertaken for the establishment of a research centre on increasing the morphine content of the poppy straw through seed improvement. When the factory starts commercial operation, first the stocks will be absorbed and the production of poppy straw will be adjusted to the capacity of the factory. In order to economize on transport and storage of the poppy straws, pressing of poppy straws will start to be experimented soon. All security measures have been taken in the factory concerning the transport and the firms involved. Reliable security measures such as card system, double control on passages, internal tele­ vision system and rapid communication with the security forces have also been taken in the factory.

Original English

YUGOSLAVIA

Brief information on poppy growing and production of opium from poppy heads or dry poppy stems.

Poppy is one of the oldest and traditional crops grown in the region of Macedonia for the production of poppy seed and capsules.

Poppy capsules had not earlier been used and they were disposed of, or used as fuel for heating. Purchasing of poppy heads began in 1950/51 when it was only exported as raw material, and in 1967 extraction began in the facilities of Alkaloid-Skopje (hereafter referred to as Alkaloid).

The question of how long ago the poppy crop has been present in the region of Macedonia, is not known; by now, however, all reports of various authors date the beginning of growing this crop in the period of the establishment and rule of the Turks in the Balkans. One of these authors, Petkovic, indicates that poppy was brought into Macedonia from Asia Minor by the Turks, and that it was first grown in Kocani in 1850.

Hartman, who is quoted by Popov, dated the first endeavours for the introduction of the poppy crop in 1835 in the area of Stip. Some other authors state that poppy was first introduced in Kavadarci, etc.

It may be concluded that the poppy crop had almost at the same time been introduced and established in many areas. There is a possibility that Turks had introduced the incision of poppy capsules, while growing poppy for obtaining the seeds had earlier been known. This fact allows for the possibility that in the case of the authors who date the beginning of poppy growing in the first half of the nineteenth century, it is probably related to the production of raw opium, but not to the actual introduction of the poppy crop.

We would like to point out that the crop has been for a long time present in the region of Macedonia, and its importance in the production of opium and seed surpasses the limits of typical agricultural production, since it provides fundamental raw materials for the pharmaceutical industry and the food industry (edible oils).

There are no credible records on earlier acreage under poppy culti­ vation. Finding adequate and convenient conditions, the crop rapidly spread out into a wider region, so that in the second half of the nineteenth century Macedonia was an important region where around 80 tons of raw opium were produced. In the period from 1900 to 1912 the mean production of opium was 95 tons a year. During the First World War, that is in the period from 1913 to 1919, the production of raw opium was 60 tons a year, which corresponded to an average of 6,000 to 7,000 hectares.

In the period between the two world wars, acreage under poppy annually averaged around 7,500 hectares, and had its minimum in 1921 when it was 2,494 hectares, and its maximum in 1930 when it was 14,110 hectares. The production of raw opium ranged from 25 tons in 1925 to 185 tons in 1928.

The exact data on the acreage under poppy cultivation in the period from 1964 to 1981 are the following: Purchased quantities Poppy straw/ Acreage of poppy capsules capsule plus Year in hectares without stems stem 30-40 cm

1964 2 350 1 537 500 1965 3 028 1 968 200 1966 1 050 682 500 1967 1 922 1 226 550 1968 1 454 995 100 1969 1 371 229 000 1970 1 240 691 000 1971 2 119 1 425 000 1972 1 964 1 066 124 1973 2 220 757 538 432 000 1974 3 704 758 581 213 000 1975 5 200 1 331 1*21 181 000 1976 10 199 2 583 377 239 000 1977 3 352 5 100 063 60 000 1978 2 035 1 623 060 60 000 1979 1 937 1 015 894 1980 1 430 1 005 842

Since projected acreage for the period from 1981 to 1984 is around 10,000 hectares, and our forecasts are around 3,500 and 5,000 hectares a year, we shall cover other requirements of alkaloids from the acreage under Papaver bracteatum.

Stocks: Present stocks are around 1,000 tons of poppy capsules and straw. Annual requirements for a full capacity production are 5,500 tons, but actual requirements are 350 tons a month, or, in that case 4,200 tons a year, and costs for their storage, local transportation, packing materials and workers' wages are around 1,100,000 dinars. 1/

The tied resources for average stocks are around 30,000,000 dinars, or at the existing prices, the annual total is 65,000,000 to 70,000,000 dinars.

The exports in the period from 1975 to 1981 are given in the tables below.

In 1981, as per our study of the calculation of the cost price, we shall, most probably, have no exports. The market is burdened with stocks that directly reflect on the product price. If in the near future, there is not realized a more economical production, having first in mind the prices of raw materials, exports can hardly be expected. The present price of codeine phosphate on the world market is US$270 per kg. In our opinion, having in mind also the other prerequisites going with the exports, an acceptable price for Alkaloid would be US$400 per kg.

Owing to the above market situation, the production has been reduced to quantities required solely for covering the demand of the Yugoslav market.

1/ Exchange rate: 38 dinars = 1 US dollar According to the Yugoslav regulations which, generally, are in accord­ ance with the international regulations for monitoring the drug traffic, the following is the foreign trade procedure:

After our conclusion of a sales contract with a foreign party, he applies to the Ministry of Health in his country for an Import Certificate. When he is granted this certificate he sends it to ALKALOID by registered mail. ALKALOID, after receipt of this certificate, applies, based on this document, to our Federal Committee for Health for an Export Certificate. At the same time ALKALOID attaches to its application also, the buyer's Import Certificate. After obtaining the Export Certificate, which has a limited term of validity, ALKALOID clears the goods through customs and delivers the same in accordance with the contractual terms and conditions of the sale. Then ALKALOID reports the shipment to the buyer which pro­ vides for the buyer's readiness for receipt of the goods.

Each quarter ALKALOID presents to the Federal Committee of Health a written report on the realization of the export licences. Through our business contacts abroad ALKALOID closely follows the market situation, i.e. actual prices, possibilities for deliveries and stocks, etc.

In the event of a favourable market situation ALKALOID can place on the market around 10,000 kg of codeine phosphate or other alkaloids.

Export of narcotics in 1975

Quantity Value in Product in kgs US$

Codeine phosphate 6 500 2 432 593.00 Codeine base 10 9 542.40 Codeine HCL 100 86 000.00 Morphine base 100% 50 29 100.00

Total: US$ 2 557 235.40

Export of narcotics in 1976

Quantity Value in Product in kgs US$

Codeine phosphate 6 446 4 454 350.00 Codeine base 638.70 623 236.67 Morphine base 100% 3 077.82 2 635 910.60

Total: US$ 7 713 497.27 Export of narcotics in 1977

Quantity Value in Product in kgs US$

Codeine phosphate 3 983 3 105 260.00 Morphine base 3 674 3 211 540.00 Ethylmorphine 30 26 810.00 Thebaine base 470 94 000.00

Total: US$ 6 437 610.00

Export of narcotics in 1978

Quantity Value in Product in kgs US$

Codeine phosphate 2 486 1 655 696.00 Codeine base 250.5 197 114.00 Morphine base 250.5 204 746.00 Ethylmorphine 43 29 025.00

Total: US$ 2 086 581.00

Export of narcotics in 1979

Quantity Value in Product in kgs US$

Codeine phosphate 5 166 2 0l6 204.73 Codeine base 1+50 268 160.00 Morphine base 91.250 49 002.00 Ethylmorphine 3 1 560.00 Codeine HCL 100 54 600.00

Total: US$ 2 389 526.73 Export of narcotics in 1980

Quantity Value in Product in kgs US$

Codeine phosphate 210 82 509.00

Ethylmorphine 3 1 449.00

Total: US$ 83 958.00

Control of poppy crop cultivation The poppy which is used for production of narcotic drugs can he cultivated in the areas which are determined for this purpose by the legislative authorities of the individual republic or autonomous province, based on the law. Poppy can be cultivated by a basic organization of associated labour, as well as individual farmers, based on the permission by the legislative authorities of the individual republic or autonomous province after each of the farmers has previously concluded a contract with an organization of associated labour, which is authorized for purchasing poppy.

The organizations of associated labour, collective farms and indivi­ dual farmers are obliged to submit within four months from the date of harvesting all quantities of each part of the poppy plant that can be used for the production of narcotics to the basic organizations of associated labour authorized for purchasing poppy. These organizations of associated labour are obliged to purchase within a determined period from the organizations, collective farms and individual farmers all quantities produced of those parts of the poppy plant that can be used for the production of narcotics.

The control of the parcels under poppy cultivation, including the control during growing and harvest, is effected by the organs for Internal Affairs, the Agricultural Inspection, and ALKALOID through its technical service in co-operation with the technical services of the organizations of associated labour that are producers of poppy.

Poppy harvesting is generally done by hand since we have not yet available appropriate machines for harvesting that can guarantee obtaining quality raw material.

The transport is made by trucks from the organizations - producers of poppy - by means of transportation that ALKALOID has available, as well as by other means of transportation. The costs of transportation of poppy capsules are covered by ALKALOID. Poppy capsules are stored in ALKALOID in storehouses or in the open.

Growing of poppy from aspects of income to producers

Effected production of poppy crop per one hectare is around 40,000.00 dinars expressed through income from the sale of poppy seed and capsules. The main product of the organizations' poppy growers is the seed, and its price has a direct influence on the total acreage that would he under poppy.

Since poppy is a crop that requires special agrotechnics where manual work is always dominant, there is always a shortage of manpower.

The financing of the poppy crop is done by ALKALOID through advance payments, presently from its own funds. At present, ALKALOID also takes over the risk connected with effects of frost on the crop, and all costs arising from such effects are paid to the organizations of poppy growers.

Although in the last few years, owing to low purchasing prices, a significant decrease of the acreage under poppy crop is noted, it is planned through an increase of the purchasing price to also increase the acreage under poppy to about 4,000 to 6,000 hectares.

Besides the organizations of associated labour located in regions suitable for growing poppy crop, where it is grown on larger parcels, also included in the cultivation are about 1,000 to 1,500 individual growers from the Socialist Republic of Macedonia and the Federal Autonomous Province of Vojvodina.

Poppy being a crop that is harvested much earlier than many other crops, gives possibilities for the introduction of a second crop on the same parcels, agricultural crops such as silage for cattle feed, and the poppy is also very good for pre-cropping during crop rotation.

Investments - Papaver somniferum

(a) Existing investments for the extraction of Capita papaveris, poppy straw and opium, are as follows:

Buildings 32 000 000.00 dinars Equipment 86 000 000.00 dinars

Total: 118 000 000.00 dinars

Writing off 76 000 000.00 dinars

Present value: 42 000 000.00 dinars

Amortization 11 000 000.00 dinars/year

Capacity

Poppy capsules 6 000 000 kgs/year

Opium 50 000 kgs/year

Products (narcotics)

Morphine Codeine Thebaine Ethylmorphine Pholcodine Dihydrocodeinon (and salts of these alkaloids on request) PAPAVER BRACTEATUM

This poppy species, if compared with Papaver somniferum, is a rather new crop. Its cultivation in our country began six years ago, and today we have already achieved some results in the introduction of the crop.

We have so far tested two collections of Papaver bracteatum coming from two different original regions, and these are: Arya-I, originating from the Avroz mountains in Iran and Arya-II, originating from the Mahabad mountains in western Iran. Papaver bracteatum of Arya-II type differs in our conditions from Papaver bracteatum of Arya-I type by its greater content of the alkaloid Thebaine, and its stem is more robust.

Here in Yugoslavia, or more exactly in Macedonia, this crop was brought in 1974/1975, from which also dates its testing in ALKALOID'S Research Station in Vozarci, near Kavadarci.

The yields vary depending on soil conditions. We have found out that this type of poppy can also in the vegetation period, both in the first and in the next years, be attacked by various diseases and pests, and we worked much on these problems.

The acreage we have under Papaver bracteatum is as follows:

First year of seeding 1980 about 83 hectares Second year of seeding 1979 about 28.5 hectares Third year of seeding 1978 about 6.6 hectares Fourth year of seeding 1977 about 0.12 hectares Fifth year of seeding 1976 about 0.12 hectares Sixth year of seeding 1975 about 0.02 hectares

Total: 119.33 hectares

Investments for the extraction of raw material originating from Papaver bracteatum:

Extraction about 250 000 000 dinars Resynthesis about 20 000 000 dinars

Total: 270 000 000 dinars

Average annual investment for planting in the first year of cultivation (500 hectares/year) 15 000 000 dinars

Total: 285 000 000 dinars

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