Accessibility links

Breaking News

U.S. Experts: Ukraine Grain Forecast too Pessimistic

Washington, July 10 (RFE/RL) -- A U.S. Agriculture Department economist says Ukraine's official forecast of a record low grain crop this year is unduly pessimistic and may be used in Kjiv to argue for avoiding needed reforms in agriculture.

Britta Bjornlund, with the department's Economic Research Service, says the Ukrainian forecast of a 28 million ton grain harvest this year is "significantly lower" than the U.S. forecast of around 34 million tons.

She told our correspondent that while a dry spring has reduced the expected harvest in Ukraine -- the U.S. lowered its forecast from 39 million tons to 34 million tons -- the situation is not all that bad. After all, she says, forecasting the harvest to be the lowest ever could be "advantageous" to those who want to increase support for farmers.

She says it allows those opposed to reforms to say: "look, our yields have really gone down, our production is down, we need to help our farmers, we need to increase subsidies, we need price supports, we need export controls," says Bjornlund.

What Ukraine really needs is to quit stalling and start pushing ahead on market reforms throughout the agricultural sector, she says.

Bjornlund and two other agricultural department experts, David Sedick and Mary Lisa Madell, have just completed a study of agricultural reforms in Ukraine. It says that Ukraine could be a major food supplier for the entire region, but is bogged down by the slow pace of institutional reform.

The study says that reforms in the agricultural sector in Ukraine have gone by fits and starts, leaving the entire industry caught between partially freed prices for inputs and continued government controls on crop sales; between a partial start on land reform and the unchanged collective farms.

It says that many of Kjiv's agricultural policies, "by limiting the exposure of the farm to market forces, actually impede needed improvements in farm management."

It says that despite some sweeping changes in livestock production, the "institutions of Ukrainian agriculture have remain relatively unaltered." The study says land reform and the creation of financially viable farms have "progressed slowly." For example, it says, while nearly all of the former collective farms in Ukraine have completed the formal change to private ownership, in fact most continue to be worked collectively and "neither the management team nor the management approach has changed for the majority."

Prices for grain remain set by the state, which continues to "control the profit and trade margins for wheat, flour and bread products."

The study says it was to be expected that crop yields would go down in the early days of reform because price liberalization would force farmers to use fertilizers and other inputs in a more economical manner. However, as is now happening in Russia, once market prices become reality, production should begin to resume.

"Although its independence in 1991 initially resulted in a decline in trade," says the study, "Ukraine has potential for expanding agricultural exports within the region."

Sedik (pronounced SEE-dick) says Ukraine has been exporting one to two million tons of grain to former soviet neighbors annually in recent years, and that won't change much this year either. "Even with this lower forecast," he told our correspondent, "we don't think Ukraine will be importing grain -- if anything, they'll be exporting one million tons, more or less, just like last year."

Bjornlund and Sedik agree that Ukraine's lowered grain crop this year is due "mainly" to poor weather -- hot, dry conditions in May and June when the wheat kernals were forming. However, they say, American experts have re-checked Ukraine's main grain growing areas and believe their forecast of 34 million tons this year -- a little below last year's 36.5 million ton crop -- is the better prediction.

Sedik says the lack of reforms in Ukraine will, long term, hold down harvests. He points to the fact that world wheat stocks are low right now, so world price are at very high levels. This encourages farmers elsewhere, including Russia, to plant more wheat. But because Ukrainian farmers still are not connected to the markets, they "don't have the incentive to increase the area of wheat" they plant.