Several of the programs aimed at overcoming a serious crisis in the agricultural sector of Ukraine were severely criticized by the Ukrainian President at the all-Ukrainian conference on the strategy of development of the agricultural sector, February 8. This conference was held almost a year after a similar representative “peasant” forum. During this time almost nothing of what the President ordered then, was implemented. That is why everyone was looking forward to hearing what the President would say at the conference, what direction he would point to and whom he would punish for the collapse of agricultural sector.

I disagree with the President that the agricultural crisis of the 1990s was caused by lingering over the replacement of the kolkhoz (collective farm) system, which did not fit into a market economy. We successfully overthrew that system with no resistance. That is to say, we quickly changed the signboards on the kolkhoz buildings and that was it. Progress stopped due to many reasons. Firstly, the farmers were not properly prepared for the break with established tradition and did not understand the innovations. Secondly, every advocate of the progressive agrarian idea was interpreting the reformatory laws, decrees and resolutions in their own way and to their own benefit. Thirdly, some of these documents were imperfect or even erroneous. And then there are the fourth, the fifth, etc. reasons…

This is why ten long years passed from the Verkhonva Rada’s adoption of the resolution “On land reform” in 1990 till the beginning of the actual distribution of land shares in 2000 and five long years from the signing of the presidential Decree “On the distribution of land shares”. Even now there are numerous drawbacks in this sphere. Why must farmers go to court to assert their right to land, which was actually granted to them by the state?

It is pleasing that one of the first orders of the new “non-agrarian” Prime Minister Viktor Yanukovych was to establish order in land and property distribution. By now, 150 thousand people, illegally deprived of their rights, were given their land shares, 22 thousand - by court order. And what about the thousands of those who illegally received land certificates and the hundreds of civil servants brought to criminal responsibility for abuse of power in this sphere? Does this fact testify to the resistance of the kolkhoz system to the agricultural reform?

Reluctance and resistance are revealed in different areas of the agricultural reform. Moreover, instead of weakening they are growing stronger. The inadmissibility of the land cultivation on the river and lake banks and the need to preserve fertile soils have been emphasized every year. Did we stop the cultivation of ten million hectares of exhausted land as planned? Unfortunately, these plots are included in the shares of land to be distributed to farmers. Now the new owners of those plots will have problems with them. There is the way out of this situation: the party at fault, that is the state, must buy out those plots or conserve them and pay rent to farmers during the whole rehabilitation period. According to data from the Institute of Farming, we lose annually 600 million ton of soil including 20 million ton of valuable humus due to large-scale erosion resulting from excessive plowing. We will not count the billions of hryvnias lost because the harvest was less than it could have been.

We keep on ignoring international experience. Even countries with a very low level of land cultivation have reduced their arable land. For example, in the early 1980s the USA withdrew 26 million hectares of land from cultivation, thus reaching the level of 1910. The European Union, where the level of land cultivation is half that in Ukraine is planning to significantly reduce arable land by the year 2005. And the most importantly, as a result of these measure, instead of decreasing agricultural production is growing throughout the world. We too have had some positive experience. Having reduced by a quarter its arable land, the Borisphen cooperative farm in the Obukhiv district of Kyiv Oblast increased its harvest by one third and at the same time decreased its prime cost. The question is, however, where should the farmers go to sell their harvest? To the grain-exchange?

It is already the third year that the Agrarian Policy Ministry has been reporting an increase in number in grain-exchanges, trading houses, wholesale markets, etc. However the mere establishment of new institutions does not guarantee the effectiveness of the market. The market must have commodity flows sufficient to maintain profitable prices and firm sales. However the volume of the grain sold at Ukrainian grain-exchanges last year has reduced one and a half times as compared to the year 2001, whereas the sale of sunflower seed has fallen 20 times. At the same time the reserves of grain and sunflower seeds significantly exceeded those of 2001. The produce was sold right from the field, its quality and market price not taken into account.

Practically, the agricultural producers and their trading houses do not sell at the exchanges. Last year 26 district agricultural trading houses of the Vinnytsia Oblast sold as much as two thousand ton of grain at the grain exchanges, whereas the total harvest was almost two million tons. More than this, the price difference between the sales at an exchange and on the curb makes up about 30% and the loss of profit from the sales on the curb totals about one billion hryvnias. This sum is enough to buy more than a thousand combine harvesters or ten thousand tractors.

Last year at a similar conference the President gave detailed instructions on how to regulate the commodity flows adequately to the market and prices. Were his instructions carried out? The grain market fell. In July - September of 2002, grain was massively sold. The total volume reached 9 million ton and twice exceeded the index of 2000. As a result of such a “grain avalanche” its price immediately fell by 15 - 20 % and farmers lost in income1.2 billion hryvnias.

The fact that Ukraine is among the world’s five top grain exporters is poor consolation, since its export income does not rise, and, which is important, farmers do not get any of it. Smart moneymakers capitalize on the uncontrolled agricultural sector instead of doing business in it. About two billion “shadow” hryvnias are circulating in the agrarian sector. How soon will they be legalized?

Nobody carried out the three-year development program of organization of the agrarian market proposed by Leonid Kuchma and the specialized program of assistance to the national traders exporting agricultural produce. So it is not surprising that every time it tries to force the export of wheat, Ukraine faces the resistance of strong competitors, who use all possible political, economic and financial levels of pressure. At the same time, there were many inquires from foreign companies last year, who were interested in buying almost one million ton of rapeseed and rape oil. Whereas Ukraine exported only 50 thousand ton of rapeseed and no oil since the areas under the rape crop were twice reduced. Our potential is ten times greater than our current state and the world and European markets are wide open for this crop. So, what is the point of trying to get to the international market through the wall or the window, when there is an open door right next to it?!

As for the financial institutions, their doors are closed to the farmers as they were before. The farmer can only daydream about a long-term loan. If long-term loans account for 28.5% in the economy, in the agricultural sector they make up for only 6%. The high cost of short-term loans also frightens the farmers off. In 1999, the average rate of agricultural loans 1.3 times exceeded the discount rate of the National Bank, in 2000 - 1.8 times, in 2001 - 2.5 times, and in 2002 - 3.5 times. If the average loan rate in the economy makes up 19.5, in the agrarian sector it is 25.3%.

The one and only tax preference is the entire “harvest” of the all-Ukrainian agrarian forum. The president guaranteed that the fixed agricultural tax would remain effective after the 2004 presidential elections. There are more than enough arguments in favor of such a measure. Last year, revenues received as the fixed tax exceeded those of 1999 almost by 2.5 times, whereas the level of tax compliance grew from 37% to 88%.

Nevertheless no expected staff changes took place, although the high-ranking agrarians have been in leadership positions for a long time and and let the agricultural sector collapse righ in front of them. Great Britain, too, once lost its agriculture. Immediately before World War I it was so ineffective that it simply died. It was predicted that soon after this there would be an end to the entire state. Fortunately the state survived and the British government made the decision to provide support to the agrarian sector. It was revived based on new principles and by the efforts of new people and once again reached the level of the world’s leaders…

Thus, it is actually possible to revive agriculture even from a non-existence if there are the proper conditions. The President believes that Ukraine has all the necessary conditions. That is why he postponed decisions unfavorable to the agrarian leaders till next January - the next agrarian hearings.

The Ministry of Agricultural Production has developed 16 target programs, the Grain of Ukraine - 2003being the most important of them. I though it would be different from the previous programs at least because by the end of 2002 several of the top agrarian leaders were made corresponding members of the Ukrainian Academy of the Agrarian Science, but I was wrong. They set the clear and inviolable target - 37.8 million tons of grain - and provided a “scientific” basis to it, a plan of organizational and technological activities, desired but not feasible.

This Ministerial grain target needs to be corrected due to a number of reasons. The program was developed when three waves of December frosts had not yet killed a part of the winter crop. The January frost has already done its job and sharp temperature changes in February and March will completely cripple the half alive crop. Farmers will have to plant anew almost 1.5 million hectares. In addition, there are 0.5 million hectares of land remaining unplanted since the autumn. Consequently, the amount of planting to be done this spring will increase by 2 million hectares. Thus, it will be necessary to plant the total area of 21 million hectares and invest 8.2 billion hryvnias.

Such a financial and physical load does not occur every year. The destroyed winter barley crops also made a loss, whereas their sowing anew make for a double loss. The farmer will think hard as to what profitable crop to plant on the land damaged by winter frost to at least partially compensate the expense or whether to plant anything at all. Moreover, the price chaos on the grain market makes grain production less and less attractive.

Winter wheat crops also require additional financial injections; although the crops mostly survived through the winter some areas were nevertheless destroyed by the frost. To plant those anew is not a problem, the problem is different. If new spring wheat species are introduced to the damaged parts of the fields planted with winter wheat crop, the different grain types will ripen with 10-12 days difference, and this will automatically makes such a mixture forage. Under favorable conditions Ukraine harvests only 15-20% of winter wheat grain of a third class, but current natural cataclysms will necessarily “rob” it off several more percentages. Considering only the natural factors, the analysts of the APK-Inform information agency forecast a decrease in the gross wheat crop by 3.43 million ton to the level of 17.1 million. According to preliminary assessments, the total grain crop will be about 36.3 million ton.

This is without the consideration of other important factors, which will necessarily get in the way of the farmers. There is a need with additional seed grain to plant wide areas of frosted fields anew. The Agrarian Ministry assures us that there is plenty of it. However previously the state gave seed grain for a total amount of 500 million hryvnias for free, now the farmers will have to pay for it. Although spring is not far off, there is only 85% of conditional seed grain in the reserve. The budget lacks 10 billion hryvnias to complete the state seed insurance reserve to 100 %. The need for mineral fertilizers makes up 658 thousand ton, whereas the agricultural producers have collected funds for only 70.4 thousand, which make up only 11% of the necessary amount.

The increase in prices for mineral fertilizers, fuel and lubricating materials right at the height of the season has also become a common practice in Ukraine. The Agrarian bloc of the Cabinet of Ministers conducted talks with the heads of chemical enterprises, oil processing plants and banks and signed memoranda with them. These memoranda, however, are only a formality and do not entail any legal obligations. For example, last year meat and milk producers and the enterprises processing these products signed similar memorandum, nevertheless purchasing prices fell sharply over a month. Something very similar is happening now. Ukrainian producers of diesel oil agreed to stabilize prices during the spring planting season at a level of 1450 - 1550 hryvnias per ton in exchange of the government’s promise not to give benefits to the oil importers and to ensure timely payment of the purchased fuel, but fertilizer producers can not give such guarantees.

The growth in the price for mineral fertilizers during the spring planting season is caused by the presence of traders in the market. Only a few agricultural units established direct contacts with fertilizer producers, whereas the majority uses the services of the merchants. As a rule farmers buy ammonium nitrate in the heat of the season and traders capitalize on this. Last year four Ukrainian fertilizer producers increased the production of ammonium nitrate by 36 %, but nobody is planning to reduce the price, since this measure would cause the growth of the prime cost, in which case the Ukrainian fertilizers will not be able to compete with those imported chiefly from Russia. The situation will be relieved only after the Russian side finally introduces export duties on mineral fertilizers.

The situation in the banking and crediting sector is also dubious. On January 31, the Cabinet of Ministers, the National Bank and the Ukrainian Bank Association signed a memorandum on understanding and cooperation with the Ministry of Agrarian Policy. This is a good document: not to increase interest rates for the agricultural sector without sufficient reasons, to facilitate the conclusion of loan agreements… But this is only a declaration of intentions. In reality nobody hurries to do anything. The restraint of the banks could be due to the huge number of their debtors and overdue payments. A large bank has given a billion hryvnias loan to the agricultural sector and by the beginning of 2003 its interest due was 500 million hryvnias, which was not paid. The agrarian ministry gave distorted information, saying that last year farmers took less preferential loans than in 2001 because they had their own circulating assets. This, however, happened for a very commonplace reason: the farmers were sick and tired of the endless red tape with the reimbursement of their interest payments. The amount necessary for this season is 8.2 billion hryvnias. Last year local budgets provided certain financial assistance on a return basis to solve the urgent agricultural problems; this year such practice contradicts the law of Ukraine On the 2003 Budget.

The President’s proposal to introduce additional dues for grain traders and allocate the received funds for the re-equipment of the agrarian sector may easily turn counterproductive. The main burden will again be laid on the farmers who will have to pay the amount taken from the grain traders.

Given the above, the efficiency of the grain production will hardly reach last year’s level of 23%, which was the lowest production level during the years of Ukraine’s independence. The number of those who reported the successful fulfillment of the Grain of Ukraine - 2002, 16 oblasts, may also decrease. An early spring 2003 demands that we hurry to implement the new undertakings.