The significant profits of grain traders are in sharp contrast to the neglected infrastructure of the agricultural-industrial complex and its inability to meet domestic demand for fruit and vegetables
The Kherson steppes. The temperature is so low that a bottle of cool water freezes within seconds. A farm in the village of Hornostayivka, once part of the huge Druzhba (Friendship) kolkhoz, is suspiciously silent, undisturbed by the sounds of cattle or sheep. The farm lies in ruins. The few remaining buildings, once used for diary cattle, now serve as granaries. This is all the farm consists of. It is no different from the mass of similar farms all over Ukraine. Under such conditions, optimistic declarations of improvements in Ukrainian agriculture backed by statistics sound ridiculous.
The development of the agricultural-industrial complex in the last year was recently summed up by the Collegium of the Ministry of Agricultural Policy – needless to say, it was better than ever. Supposedly, the Heads of all Oblast Main Departments for Agricultural Development, researchers and other Collegium members, together with Minister Mykola Prysiazhniuk, have much to be proud of. “Last year, Ukraine became one of the top three grain exporters in the world, being the top exporter of barley and sunflower oil exports and the sixth largest wheat exporter,” reported Serhiy Kvasha, Director of the Department for Economic Development and the Agricultural Market. This sounds good, especially for exporters, even if they are very few.
As for smaller farmers, Mr. Prysiazhniuk has made it clear that “they cannot compete with large grain companies in terms of grain production, so it would be more expedient for them to focus on dairy and meat production”. With this, the minister essentially suggested that most market participants should start finding themselves special niches. The implication appears cynical, but realistic: there is nothing to gain in the grain segment, in view of the current selective approach to the state regulation of grain exports, monopoly on fertilizer production and other factors. At the macro level, of possible niches, key ones either have more modest achievements or are kept quiet, “blank spots” of sorts.
ROTTEN. LET’S IMPORT IT
According to official data, Ukrainian farmers fully met domestic demand for basic products in the 2011-12 marketing year. Supposedly, 90% of these them were grown in Ukraine. However, it should be made clear that in this case, the issue once more pertains to grain and sunflower seeds (Ukraine is expected to produce 3.45mn t of sunflower oil of which 84.05% will be exported). The only real achievement was the stabilization of sugar production at a level of 2.33mn t in 2011 - 50% more than in 2010.
THE BARNYARD. Livestock numbers decline in Ukraine
The fruit and vegetable production situation in Ukraine is the complete opposite. Surprisingly, Ukraine imported potatoes, tomatoes, cucumbers, carrots, beetroots and other root crops worth nearly USD 2.5bn last year. Even onions and cabbage were imported from Iran. This can be partly explained by ineffective supply chains between fields, farms and the consumer. Wholesale markets that have been operating in Lviv, Kyiv and Donetsk since 2011, with four more fruit and vegetable wholesale markets due to open in Odesa, Kherson, Zaporizhzhia and Mariupol this year, will only partially resolve the problem. Not all farmers rush to sell their products during the peak season, when prices decrease due to increased supply. They hold back produce until they can get more favorable prices, although this poses a problem, since there is sometimes nowhere to store it.
“Transporting these same fruits and vegetables to markets is not profitable…” says YuriyHerez, a Hornostayivka-based farmer. “The markets are far away and it’s impossible to make good money, given transportation costs. Traders sometimes come around to buy something but they’re always interested in specific goods and you can’t make long-term plans based on them. One day they want walnuts - walnut trees grow in every household now; the next, they don’t need nuts, but apricots. This makes planning extremely difficult. Threeyearsago, nobodywasbuyingapricotssotheyjustrotted awayandwerefedto livestock.”Meanwhile, apricots sold for UAH 18-20 per kilo in Kyiv which was quite pricey for a seasonal fruit in a good year. It’s worth noting in this context, that in 2011, Ukraine imported grapes, citrus fruits, bananas, pineapples and apples for a total of more than USD 0.5bn, and this is only based on official data. While Ukrainians are the major workforce in the apple orchards of Poland, Spain and Italy, those in the Hornostayivka District, once famous oblast-wide for their delicious apples, stand derelict, withered and neglected.
During his visit to Zhytomyr on 17 February, Mykola Prysiazhniuk announced the construction of vegetable storage facilities as a priority objective. He even promised businessmen that the government would cover 50% of the cost using various mechanisms, including the payment of their interest on bank loans. This approach, should it be implemented and the funds used for this very purpose, could be one way to overcome the problems currently faced by farmers. However, the problems in Ukrainian agriculture are much deeper: the irrigation system in many areas is ruined, making it impossible to produce the volume of vegetables required by entrepreneurs to ensure at least minimal financial stability. For example, Chervone, a small village in the Hornostayivka District, which once had a kolkhoz with its own water supply from the Dnipro, is now derelict. In the turbulent 1990s, its former owners dug up the pipes to sell them as scrap. Today, a few Turkish families are trying to organize vegetable production here. They say that they would be able to grow far more eggplants, peppers and onions, etc. if only they had their own water supply system.
SOURCE OF VITAMINS. Fruit and vegetable imports in Ukraine
TIGTHENING THE BELT
Even bureaucrats speak guardedly about the rapid development of stockbreeding in Ukraine. In 2011, output in this segment grew by 2.5%, mostly due to poultry and swine breeding. “The situation in dairy stockbreeding has stabilized despite… not entirely satisfactory indicators,” says Andriy Het, Director of the Department for Stockbreeding at the Ministry of Agricultural Policy. “Milk production has increased by 1.4% compared to 2010.” At the same time, according to State Statistics Service data, cattle stock in all farming sectors of Ukraine declined by 125,700 as of December 1, 2011, swine - by 455,900 and poultry - by 1.93mn. This negative trend is the result of many factors, such as low purchase prices, growing expenses, etc., but the lack of a proper infrastructure is often the most crucial.
The small village of Zeleniy Hai in the Kherson Oblast, is located near the only artesian well in the area, supplying water to the fields of the farm built on the basis of the former kolkhoz. The shortage of water prevents the growth of green fodder for cattle. Despite this, the farm’s owners are considering not using the well, which is too pricey for them. This could be yet another contribution, not only to the all-Ukrainian decline of livestock, but also to the devastation of small villages.
Meanwhile, Agriculture Minister Mykola Prysiazhniuk has promised special state support for farmers and individual farms,as “they are the most wide-spread in our country, and therefore apriority” in 2012. These “carrots” are not confirmed by the calculations of the Ukrainian Agribusiness Club, according to which, direct support to farmers will amount to only 33% of the total budget for agriculture. This is the lowest figure during the crisis years, 31% less than in 2011 in monetary terms.
Under such circumstances, it would be logical to transfer at least part of the responsibility for the agricultural infrastructure to the most successful companies in this branch, such as grain traders.
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