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Grain Crisis Looms Across Southeastern Europe

  • Ron Synovitz



Prague, July 23 (RFE/RL) - Standing for hours in a bread queue continues to be part of the daily routine for many Bulgarians this summer. With a poor harvest predicted this fall, little relief is expected from shortages endured since last year.

Bulgarians may not be the only eastern Europeans facing bread shortages or the prospect of expensive grain imports in coming months. Harvest projections also are pessimistic for Russia, Belarus, Ukraine, Moldova, Romania, Serbia and Albania.

Some experts blame weather conditions for projected grain-yield declines of more than 40 percent in Serbia, Romania and Ukraine. Others attribute falling productivity across eastern Europe to a mix of corruption and politics that has kept some governments from pushing forward with free market reforms in the agriculture sector.

SLOW AGRICULTURAL REFORM HAMPERING GRAIN PRODUCTION

Rumen Dobrinski, a Bulgarian economist, says state price controls and bans on exports have kept grain prices so low in his country that farmers have had little incentive to plant.

Put simply, the low prices set by the monopoly state grain-purchasing body mean that farmers see little financial reward for working harder. And because farmers and millers make their own decisions on production levels, their response has been to produce less.

Dobrinski warns that without profits, farmers do not have the money to invest in new technology. He says this guarantees that production will continue to decline.

Dobrinski suggests that the Bulgarian government must deregulate the grain market to allow prices to reach world levels. At the same time, he says, bread prices would have to be subsidized so Bulgarians can continue to buy their daily staple.

The Albanian government in Tirana took a similar approach after last winter�s grain shortage forced the importation of thousands of tons of wheat from the United States, Romania and other countries.

Last month, Albania�s newly-elected government lifted state controls on bread and fuel prices. At the same time, the government announced a plan to supplement the income of all public sector employees and pensioners to compensate for any rise in bread prices.

Hasan Halili, Albanian minister-without-portfolio, argued that central control of bread prices hurts consumers in the long run. Halili said price controls are �an obstacle to wheat production� and that they also discourage private traders from importing wheat.

In the Serbian Republic, grain supplies reportedly are running low this month and a bread crisis is looming. The Belgrade daily "Nasa Borba" describes the situation at bakeries as �alarming.� The newspaper reports that neither wheat nor flour has been available in the markets.

Analysts say the Serbian grain shortage may be partially due to fiscal mismanagement and the mishandling of agricultural variables in the grain-growing Vojvodina region. But, as in Bulgaria, large amounts of grain also reportedly have been illegally exported. That�s because Belgrade�s price controls make it more profitable to sell the grain abroad on the black market.

Zoran Djindjic, leader of the opposition Democratic Party, suggested in a recent political advertisement that Serbian Prime Minister Mirko Marjanovic and his ministers have used their official positions to buy wheat at low prices and then sell it abroad for large personal profits.

Those accusations led to the filing of libel charges against Djindjic, with the state prosecutor claiming that he committed a �criminal offense against the reputation of the Republic of Serbia.�

UKRAINE AND ROMANIA PREDICT POOR HARVESTS

Meanwhile, commodities experts in Kyiv last month predicted Ukraine would have its worst harvest in 17 years. Earlier this year, Kyiv had projected a 36-million-ton harvest. Now it expects to bring in only 28 million tons, a dramatic reduction from the 50 million tons harvested in 1990.

Ukraine once produced 25 percent of the grain for the entire Soviet Union. But some analysts say Kyiv may be forced this year to import grain supplies--a move that would reduce funds for crucial energy imports and could put other economic reforms on hold.

Most of Ukraine's inefficient farming sector remains highly collectivized. Powerful parliamentary factions of communists and their allies have opposed any kind of land privatization. Socialist Party Chairman Olexander Moroz has said that the privatization of land owned by the collective farms would destroy Ukraine's economy.

But newly-appointed Ukrainian Prime Minister Pavlo Lazarenko told an international economic conference last month that private land ownership would be the next major step in Ukraine's economic reform program.

Britta Bjornlund, a U.S. agriculture department economist, says the pessimistic grain forecasts for Ukraine are being used by political forces in Kyiv that oppose agricultural reform. She says those forces may try to use the forecasts to argue for increased subsidies, price supports and export controls.

Bjornlund says Kyiv should quit stalling and start pushing ahead with market reforms in the agriculture sector.

In Romania, the Agriculture Ministry says crops on about half of the country's farmland have been destroyed by a combination of a rainy planting season and a summer drought.

Ministry Undersecretary Iulian Pusca told RFE/RL that Romania�s rye and wheat yields would be about half of last year�s 7.4 million ton harvest.

Bucharest also has been a grain exporter in recent years. The London-based Home-Grown Cereals Authority (HGCA) says Romania was the second largest cereal producer in eastern Europe last year.

Pusca said this year�s �calamities� would not force the country to import wheat, but he offered no comment on how Romanian exports would be effected.

In Moldova, too, the experts say weather conditions have destroyed 40 to 60 percent of this year's grain crop.

RUSSIA, BELARUS AND OTHERS EXPECT LOW YIELDS

Russia imported large amounts of grain last year after its worst harvest since 1963. The Russian Agriculture Ministry predicted in May that this year's harvest would be about 75 million tons--up slightly from last year�s 67 million tons.

But Vladimir Kadannikov, Russia�s first deputy prime minister, told the Federation Council recently that the country now has only 64 percent of the combine harvesters it needs.

In Belarus, once one of the world�s largest agricultural machinery producers, the lack of modern equipment could hamper this year�s harvest. The Prague-based Open Media Research Institute reports that Belarusian farmers bought only 68 new tractors and combine harvesters in 1995.

Further east, last year�s harvest was grim. The EU offered food aid totaling 60,000 tons of wheat to Georgia, Armenia and Azerbaijan, and transport aid for another 14,000 tons of rye.

Low bread production in Armenia last year drove annual consumption down to 113 kilograms per person compared to average bread consumption in former Soviet Republics of about 120 kilograms per person. Armenia�s Ministry of Agriculture and Food said the higher cost of grain from the world market must be passed on to consumers.

Meanwhile, the World Bank and the EU said last month they would lend Georgia about $27 million during the next five years to support the establishment of private agricultural cooperatives.

International humanitarian wheat deliveries to Georgia ended last month, forcing the country to buy grain on the world market. President Eduard Shevardnadze's advisor Temur Basila says these events necessitate the complete liberalization of bread prices.

Azerbaijan imports about 20 percent of its annual grain consumption of 1.8 million tons. An EU funded program, TACI's Regional Program for Agrarian Reform (RARP), aims to make Azerbaijan self-sufficient in grain production within a few years.

The program�s budget of $2.3 million for this year would help coordinate reform efforts related to grain production. Part of that money is going to a training center for banking. The goal is to prepare specialists in agrarian credit provision.

Last year in Kazakhstan, a severe drought reduced the grain harvest to about 9 million tons. But this year, the government has been predicting a bumper harvest of 20 million tons. That's because much of the country's vast growing area had good rainfall and grain fields are lush.

Still, some Western grain traders say that after five years with little or no money for pesticide or fertilizer, Kazakhstan's farmers would be lucky to bring in 15 million tons this year.

The Financial Times of London quotes U.S. grain trader Ben Benichi, who runs the Cargill-Dan joint venture in Kazakhstan, as saying that the country could easily produce 20 million tons of grain per year. But Benichi says modern methods and a better infrastructure are needed to improve distribution and reduce waste.

During Soviet times, a high proportion of Kazakhstan's crops either rotted in the fields, fell off the back of trucks bumping over mud roads, or was eaten by rats and birds as it sat in open grain depots.

The HGCA says that taken together, Eastern European countries produced about 85 million tons of grain last year--a little less than half the output in the 15 EU member countries.

Poland remained a net importer of coarse grains, but had a bumper wheat crop last year that allowed it to export to some former Soviet republics. And while total production fell in Hungary, an increase in quality resulted in a greater demand for Hungarian wheat in Russia and many parts of Eastern Europe.

The HGCA said that before this year's drought, Romanian harvests also had been increasing every year since 1989.

Nevertheless, these successes were not felt by many farmers. The International Grains Council points out that in Hungary, the lack of financing for seed, fuel and machinery forced many farmers to sell their grain early at relatively low prices. Private farmers in Romania, unable to store all their grain, also were forced to sell cheaply.
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