Ukraine's harvest exceeds expectations (08/18/02)

Ukraine's harvest exceeds expectations

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukraine's 2002 harvest should exceed expectations but will not break the record set the previous year when farmers collected nearly 40 million tons of grain, the most since the country declared independence. Even with some reforms, however, the country's agricultural sector continues to harbor deep-seated problems.

By August 5 Ukraine had collected 33 million tons of wheat, barley, corn, oats and rye, with experts predicting a total approaching 35 million tons before the harvest season ends in two weeks - a considerable achievement given a very dry summer season. While yields of corn, which requires rain, are down some, sunflower production has benefited. Ten oblasts have finished harvest work, with six of them having collected more than 2 million tons of grain each.

Yet, even with the continued recent success, Ukraine's agricultural sector still has a ways to go to complete structural reforms and reach a semblance of Western standards

"Things are proceeding as they do every year, and while some things have changed the same cyclical problems remain," explained Roman Shynkarenko, a consultant with the International Finance Corp., a non-governmental organization that is working with Ukraine on agricultural reform.

Mr. Shynkarenko explained that, contrary to what the government likes to say, there are still acute shortages of diesel fuel and harvest equipment, especially combines and tractors. He noted also that farms are still inadequately funded and still use poor-quality seed and insufficient amounts of good fertilizer.

"The problem here is that large structural reforms did not take place after some successful changes last year," said Mr. Shynkarenko.

He identified a lack of government will to stimulate the development of a financial support structure as the biggest problem. The agro-consultant explained that until banks are willing to provide long-term loans at affordable interest rates, the growth of the agricultural sector would remain stifled.

Although there has been much talk about establishing a land bank or a farmers' bank, that may not be the best approach, according to Mr. Shynkarenko, who said he believes the current banking system can support the needs of Ukraine's farmers if it provided normal Western-type loans.

He added that Ukrainian farmers could help themselves to an extent by learning to prepare proper business and marketing plans, which allow financial institutions to get a better handle on their potential for success and profit-making.

Nonetheless, the greatest barrier to proper financing for Ukrainian agriculture is the lack of a mortgage system and mortgage legislation, which would allow land to be used as collateral for long-term, low-interest loans. Until this occurs, Ukraine's agricultural sector will continue in financial crisis.

Mr. Shynkarenko pointed out that some farmers are attempting to alleviate the shortage of cash by constructively taking matters into their own hands and joining forces to form credit unions. Although an effective option, it would take time for capital to accrue sufficiently to allow the cooperatives to work normally.

Another problem that Ukraine's agricultural sector must overcome is the lack of distribution networks and avenues of marketing by which to sell its products.

Mr. Shynkarenko praised the development of the food processing industry in Ukraine as one of the few real accomplishments in the agricultural sector. However, it is not strong enough to sop up excessive demand and is far from sufficiently developed to steer farmers to produce new, better or simply more crops.

He unequivocally said Ukraine was again unprepared for a good harvest.

"The fact that we will only collect 33 million to 35 million tons of grain is not such a bad thing - less will be wasted," explained the agricultural expert, while admitting that a good portion of last year's harvest simply rotted in storage.

He said that the demand in the domestic Ukrainian market is for 18 million to 20 million tons of grain annually, which leaves 15 million to 17 million for export. The problem lies in that marketers, who have yet to develop confidence in projected harvests, do not attempt to sell the product until the harvest begins.

"We do not have access to large markets in Africa and Asia, and even if we did, we wouldn't be able to transport the grain there," said the IFC consultant, who explained that contracts for global export are generally made a year in advance, not right before the harvest begins to come in.

He added that Ukraine has not made a commitment to developing transportation infrastructures and that what it does transport is small, ineffective amounts. Mr. Shynkarenko blamed the government for not understanding where to make the investment.

"It is the system's fault more than any single factor," explained Mr. Shynkarenko, who blamed ever-changing legislation and unstable government policies on the annual uncertainty on the part of farmers regarding what to expect and how much to plant.

"We need a steady, consistent policy regarding agricultural markets," said the IFC consultant. "Companies need to be certain about what they should expect, and farmers need to plan their plantings. But if, for example, the government purchase price (for what it will buy) is not established until May, how can farmers accurately prepare their budgets?"

Mr. Shynkarenko added that if farmers received information on new types of seeds, fertilizers and herbicides regularly, as American farmers are provided by the United States Department of Agriculture (USDA) then they could also better prepare their plantings with a higher degree of confidence that they would turn a profit on their yield.

Mr. Shynkarenko agreed that pricing is a gamble in all countries, including the United States and Canada. However, he stated that the USDA issues various directives, analyses and recommendations that allow U.S. farmers to develop confidence in their planning and pricing strategies.

He said that Ukraine's Ministry of Agriculture must also dedicate more time to publicizing new and future tendencies in technologies and techniques to make Ukrainian farmers competitive in the future. He cited Canada as an example, where agronomists have been coaxing farmers away from seed crops to oil-yielding crops such as rapeseed and high-protein crops such as soybean.

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