ukrainian agricultural market regulation instruments: their … · 2020-03-18 · olga varchenko...
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Olga VarchenkoBila Tserkva National Agrarian University
IAFE-IVRI conference on “The Common Agricultural Policy of the European Union”
5-7 December 2017, Stare Jablonki, Poland
Ukrainian agricultural market regulation instruments: their effectiveness and directions
of improvement
$ 15,5 bln/$570 mln
of Ukraine’s total landmass of Ukraine’s export in 2016 of Ukraine’s GDP in 2016
The agricultural sector covers Agricultural products accounted for Agricultural production made up
Ukraine's place on the world food market1
13
67
Production ofsunflower
seeds
Production of sunflower oil
Exportof
sunflower oil
Export of wheat
Productionof barley
Exportof barley
Exportof corn
Productionof honey Production
of wheat
Production of corn
42,7million ha
70,8% 42,5% 1,6
by 4,5% morethan in 2015
8
Exportof rapeseed
Exportof soybean
4
%
What is agribusiness in Ukraine?
UAN 277bln/$10,2 bln
Індія1,58
СНД 1,2Інші0,75
Components of production potentialA) Land
Structure of agricultural lands of Ukraine1,millionha
Pasture5,4 Hayfields
2,4
Other2,3
Аrable32,5
Structure of owners of land under the moratorium,million ha
Other stateand communal lands1,3
Land (land share)27,7
State and communalagricultural land
10,5
Unclaimed land share0,02For agricultural commodityproduction (except for landshare)1,5
42,7million ha
of the territory ofEurope
The land fund of Ukraineis
5,7%of Ukrainian
territory
Agricultural landconstitutes
70,8%of the world's reserve of
chernozem (black soil) is located
On the territory ofUkraine
28%
1.7 million ha ofagricultural land are notsubject to themoratorium
Ukraine has about23 million private landownersand land users (about 90% ofthem are individuals) andabout 4.9 million users ofstate‐owned land
In Ukraine, 2.4 million haof land are controlledby foreigners (which ismore than the area ofIsrael)¹.
The price of land in Ukraine
It is allowed•to lease units;•to exchange for anotherequivalent unit;•to inherit;
Under the moratorium:
It is prohibited•to sell units and make anybodychange their designated purpose;•to add units to the share capital;
42,7 mill ion haof agricultural land
9 6%are subjectto the moratorium
27 mill ion hawere distributed
6,9 million land share owners, of whom:
1,6 million – over 70 years old;
1,4 million – died,0.5 mln of whomdid not have inheritors.
The land reform lasts for25 years
The moratorium is validfor 15 years
The moratorium wasprolonged:8 times
THE COMPARISON OF THE COST OF LEASE AND PURCHASE OF LAND IN DIFFERENT COUNTRIES
THE LAND REFORM IN UKRAINE2
181,3
708,8
672,1592,2
278,9
53,7
256,2
219,4227,3
123,863,739,3
33,627,927,0
25,916,8
14,610,3
1,41,1Lithuania
Russia
Latvia 1,4Bulgaria 4,6
Estonia 5,0Poland
Spain
Germany (west)
Denmark
Italy
Luxembourg
Ireland
Belgium
Netherlands Malta
Lease cost, $/year for 1 ha Purchase cost, thousand $/ha116
The price of land lease in Ukrainevaries from 20 to 170 dollars per hectarea year, depending on the region, the price of land.
Elements of the land market:o payment of rento purchase and sale of land leasing rightso purchase and sale of land for private households
0,6 8 10,0 5,0 0,2 5,0 4,4 0,01 16,3 44,4 0,02 4,4 60,450 30 9,9 47,0 22,0
591,5 5 300 6,1 2 900,0 330 1000,0 51,0 41,9 6,1 0,03 94,2 0,5 1,221 500,0 17 800,0
Import, k tons
Production, k tons
Export, k tons
5,0 465,9 200
Corn Wheat Potato Sugar Sunflower Milk Barley Vegetables Soybean Meat Rapeseed Eggs Oat Rye Grapes Millet Buckwheat Rice
beet seeds (other)
UKRAINIAN AGRICULTURAL PRODUCTS IN 2016
The main elements of the regulation of agricultural marketSubsidies and subsidies for the production and acquisition of resources.Decree Cabinet Cabinet of Ministers of Ukraine.Resolution of The Cabinet of Ministers of Ukraine "On Approval of the Procedure for Using the Funds Envisaged in theState Budget for Partial Compensation of the Cost of Agricultural Equipment and Domestic Equipment" provides 30 %compensation for the cost of agricultural machinery and equipment.Price regulation. In accordance with the Law of Ukraine "On State Support to Agriculture of Ukraine", the state regulatesthe wholesale prices of certain types of agricultural products, setting minimum and purchase prices.Tax incentive in the form of a fixed tax for the 4th group of payers, as well as a special regime for paying value added taxuntil 2016.Financial and lending support.On the basis of the Law of Ukraine "On the State Budget for 2017" in accordance with:o the program "Financial support of measures in the agro-industrial complex by reducing the cost of loans" provided
UAH 300 million;o the program "Granting loans to farms" – UAH 65 million.o Special support for specific courses and programs. So, in the State budget for 2017 the Ministry of Agrarian Policy has
provided expenditures on programs supporting the development of agro-industrial complex in the amount of UAN5448.1 million.
In particular:o "Financial support of measures in the agro-industrial complex" – UAH 60 million;o "State support for the development of hopping, landing of gardens, vineyards and berries, and supervision over them" –o 299.3 million USD;o "State support for animal husbandry" – UAH 170 million;o "Financial support of measures in the agro-industrial complex on terms of financial leasing" – UAH 3.8 million.o Economical subjects (entities, actors) in agriculture
After Ukraine’s entrance to WTO (World Trade Organization) there were the obligations not to exceed annually the level of aggregate measurement of support
(AMS) , which was fixed at the level of 3 043.3 million UAN.
o The right to support «de minimis» has been obtained. It’s not included in theoverall size of AMS on conditions that it doesn’t exceed 5 per cent of the costof the certain types of agricultural products and up to 5 per cent of the annualvalue of the gross agricultural production of the base period for non-productsupport programs.
o The possibilities of financing budget programs, which according to theprovisions of the Agreements on agriculture are applied to the «green box»,are not limited.
o Ukraine has no obligations to reduce domestic support which isprovided within the «yellow box» programs. The obligation only applies to thefailure to exceed the annual support level accumulated in the indicator ofaggregate domestic support.
o In 2017 5.5 billion UAH had been allocated to agriculture industry (in 2016 thecost of agricultural production is 544.2 billion USD).
Dynamics of domestic support to the agro-industrial complex at the cost of state budget and indirect support
mln UAN
3 876,3 7 175,83 061,3 1 854,8
1 792,8 1 217,4 71,80,0 550 350844,6 753,4
3 896,9 3 069,1
7 609,7 9 044,8 8 981,5
2 424,0 1 488,4 1 424,6
6 800 7 80011 800
16 300 16 70018 700 16 900
24 40050 000
15 100(прогноз)
2 200(прогноз)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
видатки загального фонду
видатки спеціального фонду (по надходженню)
непряма державна підтримка
AccumulationVAT19,8 bln UAH
fixed agricultural tax3,8 bln UAHgrant for milk, meat 0,8 blnUAH
-AccumulatinVAT46 bln UAH
fixed agricultural tax 4 blnUAH
AccumulationVAT12,9 bln UAH
flat tax of 4thgroup2,2 bln UAH
flat tax of 4thgroup2,2 bln UAH
9,9
12,8
17,0 16,714,6 15,3
5,86,3
7,58,2
6,1
3,5 3,94,2
6,5
10,48,8
10,6 11,1 11,4
17,9
19,3 18,7
26,0 26,9
30,9
38,2
42,0
2010 2011 2012 2013 2014 2015 2016
Експорт Імпорт Сальдо Частка у загальному експорті, %
Dynamics of the volume of export-import of agricultural production and its share in total export of the country
Total value added when exporting
32.2 mln.UAH
Production and export of grain (100 thousand
tons)
Total value added in the production of grain
164.9 mln.UAH
Barley (11 thousand tons)Material costs (without
depreciation) –1741 UAH / t
Added value at production -1454 UAH / t
Material costs for export –328 UAH / t
Added value in export logistics-
302 UAH / t
Wheat (23 thousand tons)
Material costs (without depreciation) –1667 UAH / t
Added value in production -
1700 UAH / tMaterial expense when
exporting -95 UAH / t
Added value in export logistics–
88 UAH / t
Corn (66 thousand tons)Material costs (without depreciation) -
1916 UAH / tAdded value at production - 1665 UAH / t
Material costs for export - 90 UAH / tAdded value in export logistics -
84 UAH / t
Milk production(260 thousand tons)
Purchase price of milk with VAT - 5336 UAH / t
Version 1
Total value added in the production and processing of grain for dairy products - 384.3 mln. UAH
The number ofadditionally createdworkstations in dairycattle breeding- 930seats
Version 2
Meat of pigs(18 thousand tons)
Purchase price of pigs withVAT (live weight) - 29617UAH / t
Total value added in theproduction and processingof grain for pig products –435.9 mln UAH
The number of additionallycreated workstations in pigbreeding - 440 seats
Options for the formation of value added (on the example of the grain-product chain)
As of January 1, 2017, in accordance with the requirements of
international standards in the food industry, the following quality
management systems are implemented:
ISO 9000 series: have been certified – 403 units, under
development and implementation – 46 units;
ISO series 14000: have been certified – 43 units, in the stage – 14
units;
HACCP: have been certified – 342 units, in the stage – 150 units;
State standard DSTU ISO 22000: have been certified – 552
units, in the stage – 128 units.
Among agricultural producers (44.9 thousand) there are up to three per cent of enterprises which
(according to expert judgment):
a) introduced Safety Systems (HACCP or DSTU ISO 22000: 2007 as a
part of the agro-food chain);
b) independently audited the production compliance with the minimum
requirements of the basic programs (ISO / TS 22002-3: 2011 The
program of obligatory previous measures for ensuring food safety.
13Vinnytsia obl.
6Volyn obl.
14Zhytomyr obl.
3Zakarpattia obl.
3Ivano‐Frankivsk obl.
36Kyiv obl.
11Kirovohrad obl.
0Luhansk obl.
11Lv iv obl.
10Poltava obl.
3Sumy obl.
318
Kharkiv obl.13Ternopil obl. Khmelnytskyi obl. 6
Cherkasy obl.
7Dnipropetrovsk obl.3
Chernivtsi obl.
12Chernihiv obl.8
Rivne obl.
7Zaporizhia obl.
17Kherson obl.
2Donetsk obl.
28Odessa obl. 5
Mykolaiv obl.8The total number of operators of organic production1
(including operators in transition)as of 01.2017
Organic productionOther
Total area and number of organic producers in Ukraine, k ha
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
164,4
239,5 240,0 242,0 242,0 249,9 270,0 270,2 270,2 270,3 272,9
393,4 400,8Average farm area, k ha
1,5 2 2,5 3 3,5Number of organic producers
31 69
69
70 72 80 92 118 121 142 155 164 175 182
2015
410421
2016
210 390
The area of organic lands in Europe in 2015, k ha
There were 390 organicproducers in Ukrainein 2016.
1 969Spain
Italy
France
German
y
Poland
Russia
Romania
Portugal
1 4931 375
1 089581
Austria 554Sweden 519
United Kingdom 496Turkey 486
Czech Republic 478Ukraine 410Greece
407385246241
ORGANIC PRODUCTION IN UKRAINE
The priority areasof the maintenance of farming:
Mechanisms which are proposed to be applied during state financial support to farms and agricultural cooperatives:
o provision of financial support on a competitive basis to farmers through a Ukrainian state fund of themaintenance of farming;
o partial compensation of the interest rate on bank loans which are borrowed in national currency;o financial support of agricultural servicing cooperatives;;o financial support of operations in the agro-industrial complex on terms of financial leasing;o government support by reducing the cost of insurance payments (bonuses);o partial reimbursement of the construction budget and reconstruction of livestock farms, complexes,
milking halls and meat-processing enterprises which are formed on a cooperative basis;o partial reimbursement for the cost of heifers, calves, cows of domestic origin and pedigree heifers,
dairy cows, breeding pigs and male pigs (class "elite"), sheep breeders, rams that were purchased forfurther reproduction
o partial compensation of the cost of agricultural machinery and equipment of domestic production;o partial compensation of the cost of landing and maintenance of perennial plantations;o provision of government guarantees for investment projects.
Financing rural development programs
Grants (co-financing) of business projects in the village:
o «green tourism»o bioenergyo organic farmingo production and processing of niche
productso handcrafts
Grant financing of consulting projects:
o management consulting services (financial, legal and other types of consulting)
o expansion and promotion of exporto support for the development of
self-regulating machineryo traceability, safety, qualityo education, extension of
the technology
Possible ways to achieve
1. Direct payments related to production:1.1. Payments for seeding of certain crops (per 1 ha)1.2. Payments depending on the amount of livestock (on the head)1.3. Payments depending on the value of realized production
Advantages:o stimulating the development of certain sectors
Challenges:o complexity of administration, control and inspections;o collection and spread of data, analysis, monitoring; o size limit within the bounds of WTO (yellow box);
Support for small-scale producers: available options
2. Direct payments which are non-connected with the production volume:
2.1. The same amount of payment to all program participantso fixed in advanceo proportionally to everyone and based on the available state budget
2.2. Depending on the area of the land in ownership / usage (but not morethan the determined amount «in one hands»)
2.3. Depending on the amount of income / sales of all products (but notmore than the determined amount «in one hands»)
Advantages:o the possibility of referring to the «green box» of the WTO;o minimal influence of manufacturers' decisions.
Challenges:o collection and spread of data, analysis, monitoring; o involvement of individuals to the program.
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