Ukrainians worry about grain shortage despite government promise of stability (07/06/03)

Ukrainians worry about grain shortage despite government promise of stability

by Maryna Makhnonos
Special to The Ukrainian Weekly

KYIV - "No, we have no flour," said a middle-aged grey-haired woman who sells grains in Kyiv's central market. "The same goes for buckwheat," she added to another customer.

Following reports of this year's poor grain crop and of slight price increase, Ukrainians rushed into the markets during the past two weeks to stock up on flour, prompting anxiety despite officials' promises to stabilize the situation.

Representatives of the Ukrainian Bakers' Association called an urgent news conference in Kyiv on July 1, to explain the causes of the shortage and to calm their customers.

"The stir originated in little towns across the country due to the post-Soviet psychology," said Yevhen Lenh, deputy head of the UkrZernoProm grain company and a member of the Bakers' Association.

Grain prices increased about 2.5 times from 410 hrv per ton (about $82 per ton) last August to 1,050 hrv (some $210 per ton) in June, according to a press release by the state grain company, Khlib Ukrainy (Bread of Ukraine).

Prices for a kilogram of bread rose about 10 to 15 percent across the country, which resulted in higher costs to the public of between .10 and .15 hrv (several cents). The highest price increase by 18 percent was registered in Crimea, but local bakers said the increase came after last October's 15 percent deflation and that the actual increase could be estimated as 3 percent.

"Most of the population who bought flour in reserves grew up during Soviet era," Mr. Lenh told the news conference. "The inherited behavior played a role in most of the cases."

The bakers told the news conference that the 2002 grain harvest was not estimated correctly and was actually less than the declared 38.8 million metric tons [a metric ton is 2,204.62 pounds, while a short ton is 2,000 pounds]. To make matters worse, the cold spring followed by a drought made it obvious in June that 2003 grain and spring crop harvest would not be plentiful.

"This (harvest estimation) was the last drop of negative expectations ... that provoked this situation," Mr. Lenh said.

The bakers, whose association includes the country's top 400 baking plants and an other 600 minor bakeries, said market dealers used people's expectations as the basis for speculation, which is a normal market trend in such cases.

Meanwhile, the government attacked the dealers immediately with checks on their bookkeeping and threats of punitive measures in cases of speculation. As a result, many businessmen preferred to take flour off their counters to avoid problems with the authorities concerning price issues. However, inspectors could fine them for holding back foodstuffs.

Former Prime Minister Anatolii Kinakh, who heads the Industrialists and Entrepreneurs Union, criticized the moves saying that "instead of modern market mechanisms and creation of conditions to make supply bigger than demand, the fiscal and administrative measures are being applied."

According to the Interfax news agency, Mr. Kinakh said the country has a sufficient amount of grain. His comment followed similar remarks by President Leonid Kuchma aired on local TV news last week. The president assured the public that the situation will improve. Mr. Kuchma reminded viewers that Ukraine had survived an even more difficult situation without panic in 2000, when farmers had an even poorer grain harvest of 24.8 million tons (27.28 million metric short tons).

To solve the shortage, the president ordered the State Grain Reserve to sell some 2 million tons of grain in the next two months until the same amount of grain imports arrive. However, bakers claimed the reserve's officials are stalling on fulfilling the order, which strengthens rumors that the country doesn't have sufficient grain reserves despite the positive statistics cited.

"Of the promised 6,800 tons (7,480 short tons) we received only 1,000 tons (1,100 short tons) from the State Reserve," said Volodymyr Slabovskyi, director of a bakery enterprise and a representative of the Bakers Association's Crimean branch. "They do not provide us with the rest on various pretexts."

In another measure, the government initiated consultations with the National Bank of Ukraine to provide grain dealers with favorable credits to overcome the shortage without losses.

"It's a great mistake today to think that our economy, our business and agriculture won't be able to provide us with foodstuffs," said central banker Serhii Tyhypko, according to Interfax.

To keep bread prices stable, the government ordered bakeries to temporarily reduce their profitability. In some cases, the factories began to produce with little or no profitability, the Ukrainian Bakers' Association said.

At the same time Khlib Ukrainy was ordered to buy 1 million tons (1.1 million short tons) of grain from the 2003 harvest of feed and provisions.

Serhii Melnyk, state secretary of Ukraine's Agrarian Policy Ministry, asserted that this year's low harvest would not affect food supply in the 2003-2004 marketing year.

The government expects farmers to harvest some 28.8 million to 30.8 million metric tons (31.68 million to 33.88 million short tons) of grain this year. Ukraine's annual need in grain is estimated at 6.5 million to 7 million metric tons (7.15 million to 7.7 million short tons).

"I ask you, compatriots: do not buy flour, everything will be all right," Mr. Lenh appealed via TV cameras at the end of the news conference.

However, the more the media cover issues related to grain, the harder it seems to fight the public's negative perceptions.

Last weekend, this writer nearly put off plans to bake pyrizhky (a Ukrainian pastry). The woman seller in Kyiv's central market whispered that their boss doesn't allow them to sell flour from their surplus storage. However, she then asked if I could afford 2 kilos of flour for 6.5 hrv (about $1.2) - the price was almost twice as high as a month earlier.

Anxiously the seller went to the storage area nearby to settle the deal with a stock clerk. She walked along the counter and back to me, took money and voice lowered: "Go to the storage area and take the pack that he put on the refrigerator."

I followed the route and saw my pack of flour in its place, no soul was around, I took it silently and went away as a spy who just made a trick. During the Soviet-era times of chronic deficits, people referred to such transactions as "selling under the counter." And here it was happening again in 2003.

As I was leaving the market, I could hear many a villager expressing concern about their inability to buy grains and feed poultry and animals.

"Many of our citizens know perfectly the events of 1933 (the Great Famine/Genocide), and many of them personally overcame 1947 (post-war famine)," Kyiv Mayor Oleksander Omelchenko said on June 27 after announcing plans to supply the capital with enough grain.

"Today people are not sure. They are not convinced and are not directed officially by the state - they themselves create the shortages," Mr. Omelchenko said, according to Interfax.

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