GLOBAL INFORMATION AND EARLY WARNING SYSTEM ON FOOD AND AGRICULTURE 

SPECIAL REPORT

COMMONWEALTH OF INDEPENDENT STATES (CIS): DEVELOPMENTS IN FOOD PRODUCTION AND MARKETING AND PRELIMINARY ASSESSMENT OF 1997 FOODCROP PRODUCTION AND 1997/98 CEREAL IMPORT REQUIREMENTS

15 DECEMBER 1997




I. INTRODUCTION

This report presents the findings of Missions fielded in mid-September 1997 by the FAO Global Information and Early Warning System (GIEWS) to the Commonwealth of Independent States (CIS) to assess the 1997 harvest outlook for foodcrops and the 1997/98 cereal import requirements. This year’s Mission was joined by an observer from the Economic Research Service of the U.S.Department of Agriculture, who provided important technical input on various aspects of the assessment, in particular for the livestock industry and the Russian Federation. Missions visited Moldova, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, Turkmenistan, the Ukraine and Uzbekistan. The findings of an FAO Mission in June/July to Armenia, Azerbaijan, and Georgia were updated with the assistance of in-country WFP staff in August and September. As regards Tajikistan, FAO in-country staff continuously monitor developments in this country’s agriculture and food supply situation. Information for the States not visited was obtained from the CIS Statistical Committee and directly from these countries’ statistical offices and crop monitoring specialists. Throughout its work, the Mission received invaluable assistance from grain traders, the statistical offices, specialized institutes for agriculture, ministries of agriculture, grain marketing organizations as well as from the staff of the EC TACIS projects, the World Bank and the United Nations Offices in the countries visited.

II. DEVELOPMENTS IN THE GRAIN AND LIVESTOCK ECONOMIES

2.1 Data Considerations

The Mission found that current statistical methods in the CIS countries continue to be not well suited to capture the ongoing changes in the economy, including those in agriculture. The methods are especially weak in the estimation of population, areas sown and harvested, level of output, prices, marketing, consumption and earnings.

2.1.1 The Importance of Smallholder/Household Production

Developments in the smallholder/ household plot sector can no longer be assessed properly with current statistical techniques. Recently conducted sample surveys in a number of CIS countries have highlighted the under-estimation of this sector, which accounts for a very significant, and growing, proportion of food production. Thus, crop yields in 1995 on private farms in Armenia and Georgia, where the bulk of agricultural production now occurs in these countries, were found, on the whole, to be comparable to the historical yields on the former state and collective farms. Despite their small size, these farms were found not to be operating at subsistence level but to market 30-40 percent of their main products, mostly directly to consumers for on the spot payment. In Kazakhstan, a sample survey of farms demonstrated substantial under-estimation of livestock production, with inventories as 1 January 1997 in the private sector (household plots), underestimated by 36 percent (cattle) to 85 percent (poultry). As livestock productivity on private plots has always been better than that on the large farms, these shifts away from collective farming impact also on the overall availability of meat, milk and eggs.

2.1.2 Data from the Large Collective or Corporatized Farms.

The discrepancies between actual and reported crop (grain) production may be less important than in the livestock sector, as grain continues to be produced mainly on large collective or corporatized farms, for which there is an established system of data collection. However, the reliability of data coming from the large farms is being undermined by the deficiencies in the grain production and marketing chain.

Strong motivation continues to exist at all levels of the grain chain to under or over report. Despite the variety of conditions in grain production and marketing among the CIS countries, the reasons for under-reporting grain output are similar and reflect mainly farmers’ need for cash, aversion to (re-) paying tax and debts, and disappearance of grain at various levels in the marketing system - local elevator, raion, oblast and higher levels of government - in countries where grain trade is still under partial control. In addition, lacking cash, farmers commonly pay for inputs and services in grain, before the grain enters the official marketing channels at the elevator.

At the same time however, and despite formal privatization of the farms, the tendency to under-report production/exports to maximize earnings continues to be counterbalanced to an unknown extent by over-reporting data for the area sown and/or production. This happens because regional officials in some countries are under considerable pressure to achieve hierarchically imposed area and/or production targets or risk losing a position of power. As a result, in some countries, such as Kazakhstan this year and Turkmenistan in 1996, under-reporting of yields continues to be offset (though to an unknown extent) by over-reporting of area sown. The uncertainty regarding the size of the areas sown to grains adds to the difficulty of estimating yields, thus making it almost impossible to accurately estimate the final harvest. In countries where the grain market is still firmly controlled, e.g. Turkmenistan or Uzbekistan, the data do not provide an adequate basis for solid supply/demand analysis.

2.1.3 Payment Mechanisms and Farm Indebtedness

The accuracy of agricultural production data is also linked to the financial situation on farm, the methods of payment for produce delivered to the state or the companies operating under the state’s umbrella and the whole complex issue of farm debt. Although production of wheat and rye of bread making quality should be, and is, generally currently profitable (with the exception of marginal lands in Kazakhstan where yields are very low) the problem remains of the debts accumulated by farmers in the past when production was unprofitable because of: (i) the then deteriorating terms of trade (though there are indications that during the last year the output/input price ratio has stabilized, and in some cases even improved); (ii) hyperinflation in 1992-95 (high inflation hurt farmers because they were usually paid well after the harvest with considerable delays); (iii) high social-welfare expenditures; (iv) large grain-producing farms usually also have a livestock component, which was (and still is) typically unprofitable and profits from grain production are often used to cover losses in livestock; (v) the increasing proportion of poor quality wheat in the harvest, which, though originally intended for use as food, had and still has to be used as feed; (vi) other inadequate management. The accuracy of production data is also affected by the practice in most countries for payments for produce delivered to the state (and its subsidiaries) to be made by transfer to special accounts (usually with considerable delays) from which all fiscal and other debts to the government are automatically deducted; in addition, such transfers are exposed to high taxation and freedom to withdraw money from these accounts is often restricted. As a result, farmers try to avoid grain-marketing channels that involve the banking system, and the volume of production that escapes these channels is difficult to estimate.

2.2 Agricultural Credit, Input Distribution and Grain Marketing

The way in which grain is marketed in the CIS is linked to the nature and manner in which credit is provided to the grain-producing economy. In most countries, the need to contain budget deficits has reduced government subsidies to the agricultural sector. At the same time, in the absence of a developed system of commercial law and lack of collateral, commercial cash credits involve high risks to lenders, thereby remaining very limited and unlikely to increase in the near future. This has led to the rapid growth in commodity credit, which occurs when lenders provide farmers with inputs and some working capital through the course of the growing season, and are paid back in kind after the harvest. Depending on the country, this type of credit is being provided either by the government, the private sector, or both. For example, such credit is practiced mainly by the government and its subsidiaries in Turkmenistan and Uzbekistan, by both the government and the private sector in many countries including the Ukraine, and this year solely by the private sector in the Russian Federation. In most countries the role of private trade in input sales is increasing, gradually replacing the state, with commodity credits becoming the dominant form of short term lending to grain producers in most countries [ In countries where smallholder farming predominates and farms typically finance production from own savings and by borrowing from friends and relatives to purchase inputs, commodity credit is not as prevalent. ] .

A problem with the current system of commodity credits in many States is that the local lenders of such credits face little competition, and they use their market power as lenders to obtain favourable terms from farms. The latter therefore end up paying higher real prices for the inputs they receive, and also suffer from lack of transparency in the terms of the loans. This sub-optimal credit situation for farms will continue until a well-functioning commercial legal system and reduced risk for creditors motivates private banks to lend to agriculture (particularly given that loans in other sectors of the economy bring higher, faster, and less risky returns). To a small degree in the Russian Federation and Ukraine, large industrial enterprises are investing in farms, thereby providing an infusion of funds. However, large-scale investment of this sort will not occur until farms genuinely restructure their organization, management, and incentive systems, thereby improving conditions for long term productivity growth.

In most CIS nations, there are many indications that private grain trade is developing and growing rapidly. Although the structure of the grain market is still evolving in many countries, operations at three levels are distinguishable: (i) the smallholder selling his grain to the local mill, or in countries where grain marketing is less liberalized, the small-scale, so-called "black cash" traders who usually deal with the grain not reported to the authorities; (ii) the regional traders, often representatives of the reorganised branches of the former grain procurement agency, who maintain close connections with the regional administrations, purchasing large quantities of grain using state money for the regional food stocks; and (iii) the commercial traders, who do not limit their activities to one region, export grain, and buy and manage elevators. This latter group’s share in the grain trade is growing. Oil, chemical, seed and equipment companies, along with grain traders, are deeply involved in commodity credit to the crop sector, which has become the main way for marketing inputs. These companies lack experience in marketing grain received in payment for input credit, and often turn it over to professional grain traders.

Commercial traders, who are involved in both importing and exporting grain and do not limit their trade to just one country, play an increasingly important role in grain marketing, their market share growing. These traders are currently creating the basis for a modern grain market in the CIS countries. Dissemination of price information among farmers is one visible result of their activities. Although it would be overly optimistic to say that farmers are aware of all relevant prices and developments in the grain market, as information available to them is still scarce and incomplete, market-oriented behaviour among farmers is starting to develop.

Mushrooming commodity credit has significantly reduced the volume of grain marketed through grain exchanges. Although lower inflation makes cash increasingly appealing for producers, barter trade (especially if commodity credit is considered a form of barter) is not diminishing but remains the dominant form of trade and exchange in grain. Grain in fact has become like money, functioning as a means of exchange, a unit of account and a store of value.

Despite some progress in grain marketing, regional barriers to trade are still widespread. Though in most countries (excluding Turkmenistan and Uzbekistan) there are few or no official restrictions on commodity flows at the national level, control of production and marketing has been transferred to regional authorities, which frequently adopt policies not in harmony with those of the federal government. Within a given country, policies on trade and marketing can differ substantially between regions. The reasons given by regional authorities to justify restrictions on commodity flows are usually linked to food security (procurement quotas), and protection of producers’ interests (determining the minimum price at which grain can be sold). Farmers are often required to meet procurement quotas before they can freely sell their grain. Moreover, restrictions on grain movement have often increased in intensity this year as regional governments sought to recover credits extended in previous years, as well as taxes and other arrears. Restrictions and barriers to trade have predictably increased corruption, thereby increasing transaction costs.

2.3 Development in Livestock Production

As a result of transition from a centrally planned to a market-driven economy, each of the CIS countries has experienced restructuring and contraction of both production and consumption of livestock products. In 1996, aggregate animal inventories and meat production in the 15 CIS countries decreased for the seventh year in succession. Since 1991, total inventories of cattle have decreased by 1/3 (with cows down 16 percent), pigs by about 50 percent and poultry by 45 percent. While the decline in cattle and cow inventories has been moderate in some CIS countries such as Azerbaijan and Turkmenistan (and in some, e.g. Armenia and Uzbekistan, cow numbers have in fact increased), pig and poultry inventories have fallen severely in each CIS country, the declines since 1991 ranging from about 30 to 85 percent depending on the country. However, recently conducted sample surveys showed substantial under-reporting of animal inventories in the household plots, where the bulk of livestock output throughout CIS countries originates. Therefore, the overall decline in the livestock sector is not as extreme as the official data indicate.

The main reason for the decline in output was that following price liberalization, terms of trade for the livestock sector worsened sharply, (i.e. input prices increased by a greater percentage than output prices, as all prices moved towards world prices, but input prices had a longer way to go). For example, between 1991 and 1996, farmgate prices for all meat in the Russian Federation rose by only about 25 percent of the increase in price for mixed feed. After several years of reform, the input-output price ratio began to stabilize at a new level in 1994-1995, (and improve in the Russian Federation and the Ukraine). However, as prices for energy and fuel are still kept below world prices in most countries, further price liberalization would result in additional worsening of agriculture’s terms of trade.

Another reason for the production decline within the livestock sector has been the integration of the CIS countries into the world market. The region is generally uncompetitive in livestock production vis-à-vis the world market, in terms of both price and quality. Poultry appears to be the least competitive, as evidenced by imports which have surged in the Russian Federation and have also increased significantly in Ukraine, Kazakhstan, Turkmenistan, and Azerbaijan. Imports of pork by the region have also grown substantially. The poor competitiveness of CIS producers results mainly from low productivity and high transaction costs, the latter the result of deficient physical and market infrastructure.

One way of responding to growing foreign competition has been that processors lowered the prices paid to domestic producers of primary output. Given the lower prices offered by the processing sector, along with delays in payment, livestock producers have increasingly been marketing to or bartering meat directly with consumers. In Kazakhstan, The Kyrgyz Republic, Moldova, Armenia, Georgia, and Azerbaijan, the share of meat either sold in farmers’ markets or bartered now exceeds 70 percent of total marketed production. In the Russian Federation, the share rose from 30 percent in 1994 to 44 percent in 1996, while the share in Belarus in 1996 was 38 percent, the lowest among the CIS countries.

The perishability of meat limits the amount of unprocessed product that can be marketed directly to consumers. As a result, alternative, small processing enterprises have recently emerged to increase processing capacity. Although production costs, and therefore the prices they charge for their output are high, they primarily serve small rural markets, which do not face as much competition from imports.

Feed is the main input and cost component in CIS meat production, and the declining feed conversion rates togther with the shortage of feed has resulted in falling animal productivity (unit of output per animal) with a consequent significant impact on the livestock sector. One of the reasons for declining feed conversion rates is that farmers have sharply reduced the use of costly mixed feeds, switching to cheaper, less concentrated feeds, poorly balanced with proteins and other supplements. However, in the Russian Federation and Ukraine, there are indications that both feed conversion rates and animal productivity are beginning to stabilize. The main reason is that with relative prices no longer moving against producers, the substitution mentioned above is coming to a halt.

Being virtually the only financially viable part, the private sector has been dramatically increasing its share in the livestock sector in all CIS countries. The private sector’s share in meat output far surpasses its share in livestock inventories. Thus, the 35 percent of private pig inventories in the Russian Federation in 1996 provided 65 percent of all pork produced; the corresponding numbers for Ukraine are 45 and 75 percent. The private sector has, increasingly, been acting as a buffer, slowing down but not yet offsetting the contraction in the livestock sector overall. However, private holdings (mainly small household plots) are reaching their limits in terms of productivity growth, as well as in growth of inventories and output. This is the main reason why any significant increase in efficiency will require substantial institutional reforms within the agricultural and food economy to strengthen incentives for the restructuring of former state and collective farms, to use inputs more efficiently, reduce costs, and/or to eliminate constraints on the expansion of the private sector.

Since 1991, meat consumption has fallen significantly in all CIS countries. The only exception is Georgia, where the drop in production ended in 1993, and by 1997 meat consumption far surpassed that of 1991. Per caput consumption of beef for the CIS region in 1996 was 40 percent lower than in 1991, while the corresponding figures for pork and poultry are 45 and 30 percent. And while consumption of beef and pork have declined continuously since reform began, poultry meat consumption began stabilizing in 1994 in almost all CIS countries, and is growing in some. These sharp drops should be interpreted with caution in view of the substantial underestimation of output in the household sector.

The main cause of the lower demand for meat has been the decline in consumers’ real income, and thereby purchasing power, following price liberalization and deterioration of real gross domestic product. Demand for meat products as opposed to demand for staple products (bread, potatoes) is fairly sensitive to changes in income. CIS consumer demand for poultry and other meats is anticipated to remain stable for the next couple of years, and then grow steadily over time as real gross domestic product, consumer income and purchasing power increase.

III. THE ESTIMATE OF PRODUCTION IN 1997

3.1 Grains

Strong motivation continues to exist at all levels in the grain chain to under- or over-report data. The reasons include farmers’ need for cash, debt and tax evasion, supplementing income or safeguarding a position of authority and were discussed at greater length in Section 2.

Authorities in some CIS states, (e.g. the Russian Federation, Ukraine), have acknowledged the problem of under-reporting, and are trying to improve the methods of crop reporting and estimation. In the meantime, some official estimates for grain output are being roughly adjusted by these countries for under-reporting. This also leads to conflicting data being issued by different branches of the same government (e.g. Ministry of Agriculture and the Office of Statistics) in a number of countries.

Bearing in mind the statistical difficulties and other uncertainties outlined under 2.1, the official estimates of the areas sown and production of grain in 1996 have been adopted by the Mission as a benchmark for comparison with forecasts for 1997 with few exceptions. Similarly, the Missions’ estimates for areas sown in 1997 were also based on the official area estimates unless there was a consensus of informed opinion to the contrary. The forecasts of yield and of total output in 1997 are Mission estimates which take into account official and trade reports and the agricultural situation in 1997 vis-à-vis that of the preceding years. The motivations for biases in the data are discussed in the country sections. In general, in the larger states, agricultural production of marketable produce tends to be underestimated, perhaps by as much as 10-20 percent in past years. It is likely that marketing grains through "unofficial" channels (i.e. not accounted for in statistics) will continue despite the more rigid measures introduced this year (as a result of governments and private sectors’ stepped up efforts at debt collection for inputs provided in recent years).

3.1.1 Areas Sown

The aggregate area sown to grains (cereals and pulses) for harvest in 1997 is estimated to have declined by less than 1 million hectares to 90 million hectares, entirely due to the sharp drop in the areas sown in Kazakhstan (Table 1). In all other countries the area sown to grains remained stable or increased. This was achieved despite: (i) frequently below market price returns to farmers for deliveries to the national or regional authorities; (ii) increasingly obsolete machinery and (iii) the high cost of commodity credit programs which, although perhaps inevitable under current circumstances, is a disincentive to production.

The areas sown to grains remained stable or increased in response to economic motivation and/or government directives. Foodgrain prices are higher and grain is more easily marketed and processed than some other commodities (e.g. sugar). In situations where payments are by bank transfers rather than cash, the disincentive continues to be overcome, at least in part, by using grain as currency. It is used as payment in kind to farm workers and for essential services, to feed the growing number of animals in the household/private sector and to raise much needed cash by means of unauthorized sales at discounted prices. In many states the national or regional authorities (who earn rents from the marketing of grain) continue to influence planting decisions to varying degrees. In a minority of states (e.g. Uzbekistan or Turkmenistan) the areas to be sown to food and feed crops are decreed by the central government and failure to meet the targets has a high cost.


Table 1 - Total Area Sown to Grains in the CIS, 1996 and 1997 ('000 hectares)
 
1996 Estimate  1997 Forecast  Percent Change 
1997 over 1996 
Total  of which: Wheat  Total  of which: Wheat  Total  of which: Wheat
Armenia  184  102  200  115  +8.  +13
Azerbaijan  632  461  655  520  +4  +13
Belarus  2 733  292  2 894  306  +6  +5
Georgia  362  124  440  152  +22  +23
Kazakhstan  17 187  12 280  14 625  11 000  -15  -10
Kyrgyz Republic  616  452  687  553  +11  +22
Moldova  818  335  908  340  +11  +1
Russian Federation  53 388  25 707  53 522  26 000  +1
Tajikistan  383  317  400  353  +4  +11
Turkmenistan  489  390  539  470  +10  +20
Ukraine 1/  12 506  5 892  13 857  6 316  +11  +7
Uzbekistan  1 741  1 329  1 742  1 423  +7
Total CIS  91 039  47 681  90 469  47 548  -1  0

The aggregate area sown to wheat remained stable at just under 48 million hectares, despite the fall of 1.3 million hectares in Kazakhstan. The area sown to coarse grains also changed little, at around 40 million hectares, with larger maize plantings offsetting smaller areas sown to oats, rye, and millet. Thus, at the aggregate level, the trend in recent years to increase the area sown to the more profitable foodgrains at the expense of feedgrains seems to have slowed down, as it has become more cost effective to increase grain quality rather than expand area. In most major countries, the proportion of wheat and rye in the area sown to grains remained stable or decreased. In all the smaller, food-deficit countries and Uzbekistan, however, the areas sown to wheat continued to increase at the expense of feedgrains, fruits, vegetables and forage crops, often to the detriment of the livestock industry. Plantings of rice and pulses declined, the latter due to poor planting weather. The area sown to rice has fallen marginally to 0.45 million hectares mainly due to poor water management and import competition and the pulse area declined by 9 percent to 2.6 million hectares.

3.1.2 Yields

Overall growing conditions for the 1997 crop year were very favourable until persistent rains from June onwards, throughout much of the harvest season, spoilt a standing crop which was markedly better than last year’s (1996 crop year). West of the Urals, a long autumn and mild winter favoured winter grain establishment and minimized crop losses by winterkill. A dry spell in parts of Ukraine in April/May adversely affected spring grain establishment (particularly that of pulses, planted first) but the onset of rains in June limited damage to the winter grains and benefited later spring plantings. Above normal rains, however, continued in the major cropping areas of Ukraine and the southern part of the Russian Federation (the North Caucasus, the southern Black Soil region, the middle and lower Volga Valley) throughout July into August, causing crop disease, loss of quality, lodging, localized flooding and generally impeding the grain harvest. East of the Urals, growing conditions were mixed; precipitation in the autumn and winter was below average and hot conditions in the spring caused moisture stress in some parts but thereafter regular rains benefited crops in most areas excluding Akmola and Altai Krai, and weather conditions during the harvest were good.

Better weather than in the 1996 crop year and less under-reporting of output were the main contributors to the 19 percent increase in aggregate grain yields but the larger use of fertilizers and pesticides also contributed, particularly in Ukraine and the Russian Federation. Nevertheless, average 1997 yield per hectare, although above the 1992-96 average, is still about 4 percent below that of 1986-90. In addition, grain quality, and in particular the ratio of milling to feed quality grain, has deteriorated steadily in recent years primarily due to the use of poor quality seed, the low level of input use, and poorer cultivation practices. The financial situation on most farms, in particular the shortages of both cash and collateral for the purchase of inputs and maintenance of equipment and poor incentives/management, remain at the root of these problems. Inadequate use of fertilizers has caused now-evident loss of soil fertility and an imbalance of nutrients in the ground. The reduced availability of operational agricultural machinery causes planting and harvesting operations to be protracted beyond the optimum times. In the irrigated areas of Central Asia, protracted cotton harvesting operations leave inadequate time for necessary but labour consuming activities such as "washing" excess salts out of the soil prior to sowing wheat. Similarly, farmers in marginal rainfed areas have planted seeds on unploughed land. Inadequate maintenance of the irrigation infrastructure has also been detrimental to yields.

3.1.3 Production

Based on harvest returns and crop conditions as of mid-October, the aggregate 1997 output of cereals and pulses in the CIS is provisionally estimated at 150 million tons (cleanweight), 18 percent above last year’s production, estimated by the Mission at 127 million tons (Table 2). All CIS countries are expected to harvest crops larger than or similar to last year. The bulk of the estimated 23 million ton increase in production reflects the recovery in the Russian Federation, Ukraine, and Moldova, following last year’s drought reduced crops. Outputs, however, are also expected to increase sharply in Georgia, the Kyrgyz Republic, Tajikistan and Turkmenistan, in response to somewhat better availability of inputs and incentives. Smaller increases are anticipated in Azerbaijan, (affected by floods) and Kazakhstan,reflecting financial constraints and dubious profitability at current yield levels in marginal areas as well as fuel and other input supply problems which led some farmers to plant seed on unprepared land.


Table 2 - Grain Production in the CIS, 1996 and 1997 ('000 tons)
 
1996  
Estimate 
1997 Provisional  
Forecast 1/ 
Percent change  
1997 over 1996 
Total  of which: 
Wheat 
Total  of which: 
Wheat 
Total  of which:  
Wheat
Armenia  328  201  337  220  +3  +9
Azerbaijan  1 095  800  1 155  925  +5  +16
Belarus  5 792  600  6 157  700  +6  +17
Georgia  688  177  820  300  +19  +69
Kazakhstan  11 237  7 678  12 173  8 700  +8  +13
Kyrgyz Republic  1 424  1 041  1 700  1 350  +19  +30
Moldova  1 898  720  3 014  1 200  +59  +67
Russian Federation  73 946  37 500  84 590  44 000  +14  +17
Tajikistan  543  450  600  530  +10  +18
Turkmenistan  535  453  741  650  +38  +43
Ukraine  26 118  15 000  34 940  19 000  +34  +27
Uzbekistan  3 561  2 742  3 918  3 120  +10  +14
Total CIS 1/  127 165  67 362  150 145  80 695  +18  +20

The Mission estimates that CIS wheat production could rise by 13 million tons (20 percent) this year to 81 million tons, thanks to higher yields. Wheat production in the Russian Federation and Ukraine alone are forecast to rise by 7 and 4 million tons respectively while all countries are expecting a larger harvest with marked increases forecast in Kazakhstan and Moldova. The aggregate output of coarse grains is also expected to increase, by nearly 10 million tons (or 18 percent), to 65 million tons as higher yields combine with a stable area. This year the area sown to maize increased in all three major producing countries. The 1997 paddy harvest could recover to 1.3 million tons (from 1.23 million tons) in response to better yields in the Russian Federation. The area sown to pulses has declined steadily since 1991 and output is likely to slip to 3.1 million tons in 1997 from about 3.3 million tons in 1996. These estimates are preliminary and should be used with caution. Harvesting of maize is still in progress in some countries and the biases in reporting the actual outputs in 1995 and 1996 add uncertainty. Where possible, this assessment indicates the likely magnitude of the under-reporting in 1996 in the country notes that follow.


Table 3 - CIS Countries: Forecast of Grain Production by Type for 1997 (‘000 tons)
 
Wheat  Coarse Grains  Rice  Pulses  Total Grains
Armenia  220  112  337
Azerbaijan  925  215  1 155
Belarus  700  5 007  450  6 157
Georgia  300  510  10  820
Kazakhstan  8 700  3 234  222  17  12 173
Kyrgyz Republic  1 350  331  14  1 700
Moldova  1 200  1 754  60  3 014
Russian Federation  44 000  38 640  450  1 500  84 590
Tajikistan  530  41  20  600
Turkmenistan  650  35  55  741
Ukraine  19 000  14 850  90  1 000  34 940
Uzbekistan  3 120  341  450  3 918
CIS TOTAL  80 695  65 070  1 308  3 072  150 145


3.2 Other Foodcrops

The bulk of production of basic foods other than grains is on household/subsidiary plots for domestic consumption and for direct sale at farmers’ markets for cash. Official statistics are a poor guide to developments in this sector. Indications are that the areas sown to potatoes and vegetables have remained stable. However, in European parts the cool and wet summer and inadequate money for agro-chemicals has been conducive to disease and both crop quality and output is estimated to have declined. In the Caucasus, hail and heavy rains in the spring also caused some losses. In Central Asia and also in the Caucasus, the area sown to vegetables has continued to decline in response to inadequate or inappropriate processing facilities and the sharp fall off in export demand. At the aggregate level, however, the area is estimated to have remained stable as plantings have increased in the larger countries. Potatoes, fruit and vegetables are staples whose importance in the diet has increased in recent years as bread prices were rising after the discontinuation of consumer subsidies.

The area sown to sugarbeet has fallen sharply mainly in response to poor returns relative to oilseeds and grains, and surplus supplies in Ukraine since access to the Russian market was limited by quotas and tariffs. Nevertheless, output is expected to be somewhat higher than last year’s drought-reduced crop but the sugar content is expected to be lower. The sunflower seed crop, affected by excessive rains, is also anticipated to recover only marginally from last year’s poor level. Indications are that the area sown to cotton has declined by only 1 percent and output could increase by up to 1 million tons in response to some improvement in the availability of fertilizers and incentives in Turkmenistan and Uzbekistan.

3.3 Livestock Production

This year an increased grain harvest throughout the region, and the high share of feed grain in wheat production (in the Russian Federation and Ukraine) will most likely lead to a decline in feed grain prices, as larger feed grain supplies are increasingly released towards the end of the autumn. Stabilization of feed costs should benefit the livestock sector, mainly pork and poultry, slowing down the contraction in 1997/98, as feed conversion rates are unlikely to deteriorate any further. It should also be mentioned that growth in feed conversion rates has been higher on household plots and family farms, mainly because the profit motivation of these producers is stronger. Since the share of total meat production from private producers has been rising in all CIS countries, continued improvement in feed conversion rates, and therefore animal productivity, is likely in the short term.

At the aggregate level, the short term outlook is for livestock production to continue to decline in 1997 but at a slower pace than witnessed in the years 1992-1995 and perhaps to stabilize around the turn of the century, provided the terms of trade for livestock producers in the larger states remain stable or improve. While livestock numbers (other than pigs) and output are stabilizing (and even growing) in a number of smaller states, namely Armenia, Azerbaijan and Georgia, inventories and output continue to decline in the larger states particularly Kazakhstan, Ukraine and the Russian Federation (Table 4). Aggregate numbers also mask the extent to which growth in livestock production in the private sector has buffered (but not offset) the much sharper fall in livestock numbers and output on the large farms. Moreover, recently conducted sample surveys show substantial under-estimation of animal inventories on household plots and this also impacts on the aggregate output of meat, milk and eggs.


Table 4: CIS: Livestock Inventories and Production in the Private Sector
 
1991  1996  1997 
All farms  Private Sector  % Private  All farms  Private Sector  % Private  All farms  Private Sector  % Private
INVENTORIES  (. . . . . . '000 head. . . . . . .)  (. . . . . . . '000 head . . . . . . . )  (. . . . . . . '000 head . . . . . . .) 
Cattle  111 223  24 037  22  81 035  28 894 1 36  73 823  na  na
of which Cows  39 903  13 241  33  35 909  17 210 1 49  33 713  na  na
Pigs  70 864  15 797  22  43 113  17 447 1 40  37 465  na  na
Sheep and Goats  140 175  37 928  27  80 869  40 989 1 52  68 792  na  na
Poultry  1 166 800  410 374  35  697 900 1 323 376 1 46  636 130  na  na
PRODUCTION  (. . . . . . . ‘000 tons . . . . . . . )  (. . . . . . . ‘000 tons . . . . . . . )  (. . . . . . . ‘000 tons . . . . . . . ) 
Meat  17 580  5 504  31  10 157  5 936  58  9 460  5 975  63
of which: 
Beef & veal  7 857  1 509  19  5 117  2 416  47  4 750  na  na
Pork  5 584  2 339  42  3 024  2 136  71  2 854  na  na
Lamb/goat meat  908  420  46  697  527  76  629  na  na
Poultry meat  2 993  1 114  37  1 110  579  52  1 040  na  na
Milk (Million tons)  96  29  30  68  37  54  64  37  58
Eggs (Billion units)  77  21  27  49  21  43  48  23  48
Source: Based on official data for 1991 and 1996; Mission estimates for 1997and Mission estimates
1/ Excluding Tajikistan

Based on animal numbers as at 1 January 1997 and developments in inventories and production in the first 6 months of 1997, as reported by the official statistics, aggregate output of meat in the CIS could continue to decline by about 7-8 percent in 1997, mainly in response to further declines in the largest meat producing countries (Table 5). At the forecast level, output in 1997 would be about 45 percent below output in 1991, but the extent of the drop in output could be exaggerated.

The decline in milk production is forecast to slow to about 5-6 percent, reflecting a continued fall in Ukraine and to a lesser extent in Kazakhstan and the Russian Federation. In the Russian Federation and Ukraine, about half of the production still occurs on the large farms where low productivity coupled with high handling and processing costs depress returns. In most other countries excluding Turkmenistan, current forecasts point to milk production stabilizing or increasing in 1997. At the forecast level aggregate milk production would be 33 percent less than output in 1991 although the extent of the decline is probably overstated.

There are indications that the decline in output and productivity within the poultry sector in a number of CIS countries is bottoming out. In the Russian Federation and Kazakhstan, the former state poultry complexes functioning under the old management style have been steadily deteriorating and in many cases have ceased to operate. However new poultry facilities are emerging, based on former state complexes, but with market-oriented management, and with sharply lower cost of production. Though not competitive with imported frozen poultry, these complexes cater mainly to small industrial centres and rural areas, providing primarily chilled meat, for which there is good demand. Developments in the poultry industry will have a positive effect on production of eggs, which could stabilize in 1998.


Table 5 - Livestock Inventory and Production of Livestock Products in the CIS, 1991-97
 
; ; ; ; ; ; ; ; ; ; ; ;
ARM  AZE  BEL  GEO  KAZ  KYR  MOL  RUS  TAJ  TUR  UKR  UZB  Total CIS
Livestock Inventory, 1st January ('000 heads) 
Cattle                           
1991  600  1 800  7 000  1 300  9 757  1 200  1 100  57 043  1 400  800  24 623  4 600  111 223
1996  500  1 600  5 000  1 000  6 562  869  700  39 700  1 147  1 200  17 557  5 200  81 035
1997  530  1 770  4 850  1 050  5 527  814  600  35 800  1 082  1 200  15 600  5 000  73 823
% change 97/91  - 12  - 2  - 31  - 19  - 43  - 32  - 45  - 37  - 23  50  - 37  - 34
Cows                           
1991  200  700  2 400  600  3 368  500  400  20 557  600  300  8 378  1 900  39 903
1996  300  800  2 100  500  2 975  471  400  17 400  532  600  7 531  2 300  35 909
1997  280  780  1 950  570  2 594  445  360  16 200  514  580  7 200  2 240  33 713
% change 97/91  40  11  - 19  - 5  - 23  - 11  - 10  - 21  - 14  93  - 14  18  - 16
Pigs                           
1991  300  200  5 100  900  3 223  400  1 800  38 314  200  300  19 427  700  70 864
1996  100  30  3 900  400  1 515  118  1 000  22 600  100  13 144  200  43 113
1997  77  30  3 700  480  1 073  83  960  19 500  50  11 400  110  37 465
% change 97/91  - 74  - 85  - 27  - 47  - 67  - 79  - 47  - 49  - 99  - 83  - 41  - 84  - 47
Sheep & goats                         
1991  1 200  5 400  400  1 600  35 661  10 000  1 300  58 195  3 300  5 500  8 419  9 200  140 175
1996  600  4 600  300  700  18 600  4 275  1 400  28 000  2 494  6 500  4 100  9 300  80 869
1997  600  4 670  200  350  13 900  3 457  1 500  23 600  2 235  6 600  2 950  8 730  68 792
% change 97/91  - 50  - 14  - 50  - 78  - 61  - 65  15  - 59  - 32  20  - 65  - 5  - 51
Poultry (millions)                         
1991  29  51  22  60  14  25  660  246  36  1 167
1996  13  40  14  20  15  423  na  150  14  6981/
1997  13  37  15  12  16  385  na  140  10  6361/
% change 97/91  - 68  - 57  - 27  - 31  - 79  - 87  - 35  - 42  na  - 46  - 43  - 72  - 45
Production ('000 tons) 
Total Meat                           
1991  85  154  1 065  137  1 524  230  303  9 375  86  100  4 029  492  17 580
1996  50  85  623  133  855  186  131  5 336  50  105  2 113  490  10 157
1997  51  89  600  145  765  192  130  5 000  46  97  1 900  445  9 460
% change 97/91  - 40  - 42  - 44  - 50  - 17  - 57  - 47  - 47  - 3  - 53  - 10  - 46
Beaf and Veal                         
1991  32  63  530  43  724  87  96  3 989  48  44  1 878  323  7 857
1996  31  43  277  52  450  87  39  2 630  26  48  1 048  386  5 117
1997  31  45  255  58  415  89  38  2 500  23  45  900  351  4 750
% change 97/91  - 3  - 29  - 52  35  - 43  - 60  - 37  - 52  - 52  - 40
Pork                           
1991  17  381  55  274  33  145  3 190  1 421  44  5 584
1996  273  39  110  28  63  1 705  789  3 024
1997  280  42  106  29  63  1 580  740  2 854
% change 97/91  - 71  - 89  - 27  - 24  - 61  - 12  - 57  - 50  - 83  - 89  - 48  - 86  - 49
Lamb & goat meat                         
1991  34  270  71  347  21  36  40  62  908
1996  25  15  176  54  230  18  50  32  83  697
1997  27  16  145  56  200  17  46  29  78  629
% change 97/91  - 22  - 21  - 33  100  - 46  - 21  - 42  - 19  28  - 28  26  - 31
Poultry meat                           
1991  26  48  141  26  185  29  56  1 751  10  654  60  2 993
1996  15  63  22  43  24  690  218  14  1 110
1997  16  58  27  37  24  650  200  1 040
% change 97/91  - 69  - 67  - 59  - 80  - 86  - 57  - 63  - 50  - 57  - 69  - 87  - 65
Milk (million tons)                         
1991  0.4  0.9  6.8  0.6  5.6  1.1  1.3  52.0  0.6  0.5  22.4  3.3  96.0
1996  0.4  0.8  4.9  0.5  3.5  0.9  0.7  35.8  0.4  0.7  15.9  3.4  68.0
1997  0.5  0.9  5.0  0.6  3.0  0.9  0.7  34.0  0.3  0.6  14.8  3.3  64.0
% change 97/91  25  0.0  - 26  0.0  - 46  - 18  - 46  - 35  - 50  20  - 34  0.0  - 33
Eggs (billion units)              
1991  0.5  1.0  3.7  0.6  4.1  0.7  1.1  46.9  0.5  0.3  15.2  2.3  76.9
1996  0.2  0.5  3.4  0.4  1.3  0.2  0.6  31.9  0.0  0.3  8.8  1.1  48.7
1997  0.2  0.5  3.5  0.4  0.9  0.2  0.6  31.8  0.0  0.2  8.6  0.9  47.8
% change 97/91  - 60  - 50  - 5  - 33  - 78  - 71  - 45  - 32  - 100  - 33  - 43  - 61  - 38

In the bigger countries, the livestock industry could begin to stabilize in 1-3 year’s time when the improvement (or, at least, stabilization ) of the livestock producers terms of trade, which began in the Russian Federation in 1995-96, spreads over the region. In several countries, eg. Belarus, Turkmenistan and Uzbekistan the industry is still shielded to a large extent from market forces and thus the need to restructure. As the state reduces its support in these countries sharp restructuring and adjustments in the future are likely. In addition, energy costs continue to be subsidized in many countries, also implying a further terms of trade adjustment. Moreover, the industry will require substantial investment in processing capacity, marketing infrastructure, and know-how to make it more competitive with imports. Nevertheless, growth in GDP and consumers’ purchasing power is expected to increase demand for livestock and stimulate livestock production, as has already occurred in a number of smaller states.

IV. DEVELOPMENTS IN THE SUPPLY AND DEMAND FOR BASIC FOOD PRODUCTS IN 1996/97 AND THE FORECAST FOR 1997/98 CEREAL IMPORT REQUIREMENTS

4.1 The Overall Situation

The sharp contraction in food supplies is bottoming out. Many countries are now experiencing growth in GDP, albeit from levels less than half that prior to the transition to a market economy. Food aid needs and the number of vulnerable persons needing targeted food assistance have fallen sharply. However, the situation in Tajikistan remains precarious, the humanitarian and reconstruction needs in the North Caucasus are daunting and there are residual humanitarian needs in all countries. The improved supply situation, however, masks the fundamental problem: the continuing high level of unemployment and under-employment in the region and the large number of people who barely manage on very meager earnings. Seven CIS countries, with a combined population of 53 million are now classified as Low Income countries with a per caput annual GNP of less than U.S.$ 1 465 (or U.S.$ 28 per week) and a disposable income which is significantly less.

The improvement in the food supply situation is due mainly to (i) continued adherence to macro-economic policy changes which have reined in inflation, (ii) the effects of the price and market liberalization which have stabilized the supply and demand for foods at substantially lower levels and (iii) the populations’ response to the drastic falls in income and food intake by various coping strategies. Since 1991 the output of potatoes, fruit, vegetables, meat, milk, eggs and grain in the private/household sector has increased sharply. Private food production and marketing, as well as imports, particularly of livestock products and processed foods, help to offset the declines in marketed domestic production from the large farms. They also provide competition for the high-cost domestic processing industry.

Food consumption patterns, which changed radically between 1990 and 1994 in response to lower real incomes and the removal of producer and consumer subsidies in most countries, appear to be stabilizing, mainly because real incomes are stabilizing. Indications are that the sharp cut back in intake of the livestock products characteristic in the first half of the nineties has slowed. In the Russian Federation, even the registered retail sales of income elastic items such as meat, sausage, butter, cheese, and eggs increased in 1996.

The initial economic shocks of the transition (and the loss of substantial budget subsidies from Moscow for many smaller countries) have been mostly absorbed. Adherence to policies keeping a rein on inflation helped to stabilize purchasing power, which, however, remains very low for a large proportion of the population in every country. Affordability rather than physical supply of food remains the main problem. Market prices for food are very high relative to salaries, reflecting structural inefficiencies in the production, processing, marketing, transport, banking and legal systems which will take years to address.

Although overall food supplies in the CIS remained adequate to meet effective demand there are large variations between countries and within countries. In Tajikistan, over 16 percent of the population need relief assistance to survive. Within countries, market reforms and the growth of the private sector has seen income disparities grow considerably. A small but growing proportion of the population can afford a highly varied diet, but the majority, in both urban and rural areas, still has to spend a large portion of income on staples. Not all sectors of the population have benefited from the reform process. While urban markets are increasingly well supplied with (often imported) foods, availability in poorly endowed rural areas or depressed regional industrial towns has deteriorated enormously in quality and quantity, while prices are often beyond the purchasing power of the (often unemployed or unpaid) inhabitants. Moreover, for most people in most countries, the transition has also entailed a fall in living standards other than food intake, particularly in the availability and quality of all essential social services including basic health care, education, care of the needy. Although reduced in size, all countries continue to have vulnerable groups, mainly households or individuals with inadequate income, productive assets, health or opportunity to be able to purchase an adequate daily diet and other essentials, be they pensioners, the disabled, refugees, IDP’s, single-parent families, large families or individuals dependent on institutions funded from tight budgets.

4.2 Supply and Demand for Cereals

Provided current harvest forecasts materialize, the steady contraction in cereal utilization since 1992 could be reversed in 1997/98. Cereal utilization is expected to continue to decline marginally only in Kazakhstan due to a reduced level of opening stocks and only a marginal improvement in the harvest. In Armenia, Georgia, and The Kyrgyz Republic - countries which are more advanced than most in land privatization and the liberalization of the grain market- this reversal already occurred in 1996/97. Even so, aggregate cereal utilization in the CIS in 1997/98 is estimated to be 91 million tons (35 percent) less than in 1992/93.

The bulk of the contraction in utilization in recent years has been in feed use of grains and to a much lesser extent due to reduced losses, particularly in the low-income food deficit states. In the larger states indications are that losses are increasing rather than decreasing due to the significant growth in the volumes of grain poorly stored on-farm to avoid official payment channels and the high charges levied by elevators.

It remains difficult to assess actual developments in human consumption of cereals as historical levels were inflated by a significant amount of waste and by the practice of feeding bread to animals. In some cereal exporting countries this practice has not been eradicated, due to the price differentials between concentrate feed and bread. The importance of bread, pasta and potatoes in the diet have undoubtedly increased, but official data show an increase in per caput consumption of bread and bread products only in Kazakhstan, (18 percent more than in 1991), where bread and meat are staples in the north and the Russian Federation (1 percent). In most other countries consumption of bread and bread products has, according to official data, declined. Data on flour production by the large mills are an increasingly poor indicator of total production as many small private mills are in operation and international trade in flour is substantial.

In 1996/97 estimated aggregate cereal supply contracted by about 13 percent, from 172 million tons to 151 million tons, mainly due to the substantially lower opening stocks and reduced imports. Cereal production declined by only 2 million tons (with 1996 production of cereals estimated to be 6 million tons more than the official estimates). Lower opening stocks resulted in part from the reduced imports in 1995/96 because of high international cereal prices but also because of the high storage costs in countries where grain elevators were privatized or charging commercial rates for storage, notably in the Russian Federation, Kazakhstan, several smaller states and, selectively, in Ukraine. The private trade not only keeps a minimum of stocks but is interested in a high turnover in the elevators. Further stock drawdowns occurred by the end of the year notably in Ukraine, Moldova and Turkmenistan after the poor harvests, and in Kazakhstan. Large imports by Uzbekistan in calendar year 1996 replenished stocks. In the majority of small countries stocks are thought to have remained fairly stable at low levels.

Aggregate imports of cereals in 1996/97 are estimated to have fallen by over 3 million tons to 8.5 million tons (including some 5 million tons of intra-CIS trade). Imports from outside the CIS declined by 1.2 million tons to an estimated 3.5 million tons, including 2.7 million tons of wheat, 0.5 million tons of rice and 0.3 million tons of coarse grains. Purchasing power and foreign exchange constraints limited the commercial imports of most countries and some programme food aid deliveries were replaced by direct budget assistance. Food aid deliveries fell to 0.5 million tons from 1.3 million tons in the preceding year. Total exports are estimated to have fallen by 2.4 million tons to 6.4 million tons and to include 1.4 million tons to countries outside the CIS, mainly wheat and/or barley to Poland, Israel, Saudi Arabia and Turkey. The region, which once imported over 25 million tons of cereals a year from the world market, is estimated to have been a net importer of only 2 million tons in 1996/97.

Reduced supplies in 1996/97 resulted in a further contraction in feed use grain by an estimated 12 million tons to 58 million tons. Human consumption of cereals is estimated to have increased very marginally. At the aggregate level other uses increased due to larger use for seed, increased storage losses and a sharp increase in the use of grains for distillation in Ukraine. The drop in supply was also reflected in a drawdown in stocks and a reduced volume of exports.

In 1997/98, total supply in the CIS could increase by 10 percent or 15 million tons to an estimated 166 million tons with a particularly abundant surplus availability of feed grains and rather tight supply of food quality grains. Human consumption of cereals could edge upwards from last year’s level of about 40 million tons. Seed use could also remain fairly stable as, on the one hand farmers use more of their own seed to minimize high input/credit costs and, on the other, more marginal land is taken out of production. Losses are likely to continue to increase due to efforts to maximize cash income (by keeping grain in inadequately equipped on-farm storage facilities). Greater industrial use of feedgrains is also expected. Feed use of grains is likely to increase for the first time since 1992/93, due to increasing livestock production through more intensive feeding, particularly in the pig and poultry sectors. However, effective demand for feedgrains remains limited by the continuing cut back in animals on the large farms. This is only partially offset by the limited growth in the number of animals on household plots, because the demand for their output is constrained by demand weaknesses. As the high costs associated with grain movement also depress export demand, an even larger volume of feed quality wheat is expected to be used for human consumption this year. In Ukraine, standards for food quality wheat have already been lowered. In the Russian Federation regional budgets are expected to constrain imports, while in Uzbekistan and Turkmenistan import demand is lower because of larger domestic harvests. Cereal stocks could also increase, particularly in areas where the governments still control elevators. Ukraine and Moldova (and to a lesser extent the Russian Federation) are expected to replenish stocks after last year’s poor harvests and because export potential exceeds export demand at current prices.

4.3 Forecasts of Cereal

Imports and Exports in 1997/98

Following the larger harvest, aggregate CIS cereal imports for 1997/98 are tentatively forecast at 7.1 million tons including intra-trade, some 1.4 million tons less than imports in 1996/97 (Table 6). This reflects reduced import demand for wheat for human consumption in Uzbekistan, after large imports and stock replenishment in 1996, purchasing power limitations which are likely to affect the quality of bread purchased by all but the better-off citizens, and reduced import demand for feedgrains in the bigger states. A large part of the contraction in cereal import demand is likely to be in imports from outside the CIS, which are forecast to decline from 3.5 million tons to 2.9 million tons. Intra-CIS trade in wheat is expected to fall by 0.5 million tons to 3.5 million tons, while that of coarse grains declines to 0.6 million tons due to reduced import needs by the Russian Federation.


Table 6 - CIS cereal import requirements 1997/98 with comparison for 1996/97 (‘000 tons)
 
1997/98 Import Requirement Forecast  1996/97 Estimated Imports 
Wheat  Coarse Grains  Total Cereals 1/  Wheat  Coarse Grains  Total Cereals 1/ 
of which from:  of which from:  of which from:  of which from:  of which from:  of which from: 
Total  abroad  CIS  Total  abroad  CIS  Total  abroad  CIS  Total  abroad  CIS  Total  abroad  CIS  Total  abroad  CIS
Armenia  330  325  340  335  345  342  355  352  3
Azerbaijan  425  210  215  435  215  220  475  255  220  485  265  220
Belarus  700  100  600  165  40  125  868  141  727  730  25  705  95  30  65  828  56  772
Georgia  400  388  12  405  393  12  500  485  15  505  490  15
Kazakhstan  15  15  16  16
Kyrgyz Rep.  97  65  32  15  15  116  68  48  106  20  86  17  17  127  23  104
Moldova  60  48  12  30  30  98  52  46  60  50  10  40  40  118  64  54
Russian Fed.  2 000  500  1 500  465  50  415  2 865  940  1 925  2 420  600  1 820  1 000  218  782  3 850  1 238  2 612
Tajikistan  295  135  160  299  137  162  252  93  159  258  97  161
Turkmenistan  550  100  450  559  103  456  500  92  408  29  28  531  122  409
Ukraine  100  100  15  15  155  136  19  58  50  107  89  18
Uzbekistan  900  350  550  46  19  27  960  380  580  1 275  700  575  33  20  13  1 320  730  590
Total Imports  5 857  2 321  3 536  752  114  638  7 100  2 900  4 200  6 736  2 712  4 024  1 232  307  925  8 500  3 526  4 974
of which from: 
Kazakhstan  2 430  270  2 714  2 500  581  3 093
Russian Fed.  567  70  646  472  19  503
Ukraine  429  190  621  922  235  1 157
Georgia  50  50  50  50
Moldova  108  108  20  20  40
Uzbekistan  10  11  10  11
Belarus  70  70
Other CIS  50  50  50  50
Total  3 536  638  4 200  4 024  925  4 974

The bulk of the cereal import requirement remains in the form of wheat for human consumption. Aggregate imports of wheat are forecast to decline by 0.8 million tons to 5.9 million tons, including 3.5 million tons of intra-trade, mainly from Kazakhstan, the Russian Federation and Ukraine. Wheat imports from outside the CIS are anticipated to decline by 0.4 million tons to 2.3 million tons and to be high quality wheat to upgrade local production. Imports of coarse grains are tentatively put at 0.8 million tons compared to 1.2 million tons last year. The bulk of this is expected to be mobilized from within the CIS, (Kazakhstan, Moldova, the Russian Federation and Ukraine) while some imports of maize are expected from outside the CIS. Rice imports, which have recovered rapidly in recent years, are forecast to remain unchanged at 0.5 million tons in view of increased output in the Russian Federation.

Imports of cereals are expected to be sharply lower than last year’s levels only in Georgia, Uzbekistan and in the Russian Federation. Somewhat larger exports are anticipated in Belarus and in Turkmenistan where difficulties with barter trade and foreign exchange availabilities kept imports somewhat below needs in 1996. Elsewhere imports are likely to continue close to or somewhat lower than last year’s levels in most countries.

The volume of exports of cereals outside the CIS is difficult to forecast. The export availability of feedwheat and feed barley is huge, about 15 million tons. However, keen competition on the world market, high grain handling charges, transport and the port infrastructure constraints is likely to keep actual exports at around 3.8 million tons, including 2.8 million tons of barley and the balance wheat.

The 1997/98 aggregate cereal import requirement of the low income food deficit countries (LIFDC) in the CIS (Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan), is estimated at 3.1 million tons, compared to actual imports of just over 3.6 million tons in 1996/97. Despite the increase in wheat production this year and the rapid evolution of private trade in the Caucasian countries and the Kyrgyz Republic, food aid deliveries to the LIFDC countries in 1997/98 could exceed those in 1996/97 (Table 7). EU assistance to economically weaker countries will continue to take the form of direct budget support and allocations from the United States could remain similar to last year’s levels. Disbursement of EU budget support is conditional to the implementation of specific reforms in each country. Food aid needs are expected to remain considerable in Tajikistan. In addition, the needs of the remaining vulnerable populations in all countries are essential for their well being and should not be overlooked.


Table 7 - CIS Cereal Imports: Total, Commercial and Food Aid
 
1995/96  1996/97  1997/98 (Forecast) 
Total  Com.  Food Aid  Total  Com.  Food Aid  Total  Com.  Food Aid 1/
Armenia  316  56  260  355  250  105  340  286  54
Azerbaijan  578  403  175  485  455  30  435  389  46
Belarus  987  987  828  827  868  867  1
Georgia  584  193  391  505  409  96  405  281  124
Kazakhstan  30  30  16  16  0
Kyrgyz Republic  248  94  154  127  108  19  116  38  78
Moldova  149  96  53  118  69  49  98  39  59
Russian Federation  6 187  6 147  40  3 850  3 797  53  2 865  2 825  40
Tajikistan  425  265  160  258  161  97  299  162  1372/
Turkmenistan  388  282  106  531  531  559  559  0
Ukraine  162  161  107  100  154  149  5
Uzbekistan  1 627  1 627  1 320  1 320  958  958  0
CIS TOTAL  11 681  10 341  1 340  8 500  8 043  457  7 097  6 553  544

V. COUNTRY SUMMARIES

5.1 Armenia

The 1997 output of cereals and pulses is provisionally estimated by FAO to be almost 340 000 tons, despite localized crop damage by floods and hail. This outcome is close to last year’s good harvest as somewhat lower yields have been offset by a sharp increase in the area sown, which reached 200 000 hectares by official estimation. Winter wheat plantings rose 13 percent in response to price incentives, and the leasing of an additional 16 000 hectares of state land to farmers. The Mission’s estimate of production is higher (by 10 percent) than official estimation as a sample survey of production on the private farms in 1996 provided clear evidence of substantial underreporting of the yield of wheat. The survey indicated that crop yields on private farms have remained, on the whole, comparable to historical (1985-93) yields on the former state and collective farms. As there are 330 000 private farms which cover 70 percent of arable land and 80 percent of vineyards, the official underestimation of yields in private farms is significant at the national level. The survey also indicated that the small, mostly mixed farms sell about one third of their produce commercially, directly to consumers.

With regard to other foodstuffs, the output of potatoes and vegetables could remain close to last year’s level but that of grapes and other fruit has likely declined following hail damage. The contraction in the livestock industry bottomed out in 1995. Based on official statistics, production of meat and eggs has stabilized at about half the level of output in 1991 while that of milk has not changed significantly. However, current statistical methods tend to underestimate output. Limited by the availability of feed, the outlook is for meat, milk, and egg production to remain stable or increase slowly.

The wheat/bread distribution chain has been largely privatized. The Government has retained control over a number of flour mills and subsidized bread is available for eligible people at state outlets. In 1997/98, domestic cereal utilization is estimated at about 672 000 tons, including 445 000 tons for direct human consumption for a population of about 3 million, feed (148 000 tons) and seed and other uses (79 000 tons). Against this requirement domestic production of cereals (excluding pulses) is estimated at 332 000 tons, leaving an import requirement of 340 000 tons, mainly wheat. A total of 54 000 tons of food aid has been pledged to date and the balance is expected to be imported commercially.

GDP has grown steadily since 1994 but living standards had been drastically eroded in the years immediately following independence. The removal of subsidies on basic foods and services coupled with deep cuts in social security benefits has hit vulnerable populations hard. The government estimates that some 400 000 people (out of a resident population of about 3 million) remain economically vulnerable. These include persons living in the areas which have suffered from earthquakes or civil strife, those living without access to productive land or the means to farm it in rural areas and those without the support of extended families, private remittances or informal sector earnings in urban areas. Some 300 000 people continue to be in need of targeted food assistance.

5.2 Azerbaijan

FAO estimates the 1997 grain harvest at 1.16 million tons, some 60 000 tons more than last year. This is somewhat higher than the official estimate (1.08 m.t) as with the ongoing privatization process many farmers are producing cereals and this output is not reflected in the official statistics. The area sown to wheat increased by 80 000 hectares, partially at the expense of barley, but flood damage in July caused some crop damage. Nevertheless average yields on the remaining area are higher than last year. Production of wheat is tentatively estimated at 925 000 tons, compared to 800 000 tons last year. The coarse grain harvest is estimated at about 215 000 tons, 64 000 tons less than last year reflecting the reduced area sown.

Production of potatoes in the private sector is increasing. By contrast, the 1997 cotton crop was adversely affected by the floods. Livestock production has been recovering since the cessation of hostilities around Nagorno Karabakh. Cattle and cow numbers have increased sharply and poultry numbers have stabilized, but pig numbers are being cut back further. Output of meat, milk, and eggs is forecast to increase further in 1997. At the forecast level, milk production is only marginally less than in 1991 while that of meat and eggs is sharply less. Imports of poultry are increasing.

Per caput consumption of basic foodstuffs has stabilized. Following the successful privatization of the State Bread Corporation earlier this year a Strategic Cereals Reserve is to be created this year with the assistance of the EU. For this purpose the country will receive 35 000 tons of food aid in wheat to provide a revolving fund for imports as well as cash funds (from counterpart funds from past food aid deliveries) for local purchases. The domestic cereal requirement in 1997/98 is estimated at 1.5 million tons, (human consumption needs just over 1 million tons and feed and other uses 0.5 million tons). Given cereal production of 1.145 million tons (excluding pulses) the country would need to import 435 000 tons of cereals. The bulk of this is expected to be imported commercially but relief food aid for targeted distribution to the vulnerable populations will continue to be necessary. Confirmed food aid pledges to date amount to 46 000 tons. In 1997/98 the country will continue to receive direct budget support from the EU. Disbursement is conditional to the continued implementation of reforms in the agricultural sector. The country has made major progress with financial stabilization but poverty remains widespread and there are still some 850 000 refugees and internally displaced people as a result of the conflict over Nagorno Karabakh. The vulnerable populations continue to struggle with limited access to basic foodstuffs and minimum salaries/ benefits, which are far too low for survival.

5.3 Belarus

The total 1997 cereal and pulse harvest is forecast at 6.2 million tons, clean weight, 365 000 tons more than last year. The higher output reflects better yields following a 25 percent increase in fertiliser application. The area sown to grains increased by 6 percent, reaching almost 2.9 million hectares. Wheat output is estimated to be about 17 percent higher compared to last year, reflecting a 5 percent growth in sown area and better yields, while coarse grain output is likely to remain fairly stable.

In 1997/98 imports are estimated to increase marginally to 0.9 million tons as the country is expected to take advantage of cheap feedgrain supplies in the neighbouring countries. Imports are likely to be sourced mainly from the Russian Federation, Ukraine and Kazakhstan. Declaring food self sufficiency one of its main goals, the government is increasing support to agriculture, providing subsidies not only through direct financial transfers, but also indirectly through the price system, where fixed producer prices do not reflect costs of production. These measures have resulted in improved performance of the livestock sector, with meat production expected to remain at last year’s level, while milk output should increase by 2 percent, and egg production by 3 percent. However, efforts to defend and maintain the existing production structure delay the restructuring of production and consumption (which also benefit from subsidies) along market-driven lines, and also require costly subsidies by the government.

5.4 Georgia

Agricultural production is recovering strongly as relatively high prices for produce and reasonable crop yields achieved by smallholder farms make this type of farming profitable, despite the many constraints. Smallholders farm about 50 percent of the arable and perennial crop land and, in addition, lease under-utilised state farm lands, thereby increasing their productive base. A farm survey carried out jointly by the government and the World Bank in April-May 1996 indicated that the crop yields obtained by smallholders in 1995 remained comparable to the long term (1985-1994) official average yields, particularly for cereals. Although farm products are used primarily for household consumption, about 30-40 percent (depending on the product) of all their output is sold, mostly directly to consumers. Farmers have few problems with outstanding payments.

The 1997 cereal and pulse harvest is estimated at a record 820 000 tons including 300 000 tons of wheat, significantly larger than last year. The area sown to wheat increased by 50 000 hectares and despite considerable crop losses due to late frosts, spring hail and excessive rains, yields also increased. This was mainly due to better availability of seeds and fertilizers and incentives for farmers. Maize, officially reported planted on 230 000 hectares, is also expected to have better yields. Maize meal also forms an important part of the diet. The outlook for other foodcrops is also encouraging but the processing industry remains a major bottleneck to the expansion of output of fruit and vegetables.

Even in the pre-reform period, livestock production (mainly cattle and sheep) was conducted predominantly in the private sector. Mainly for this reason, privatization and related restructuring in the sector have been implemented without major disruptions to production (except for the pig industry, where the bulk of inventories were held in large state-owned complexes). This, coupled with a natural endowment which favours maize production, is a reason why the contraction of the livestock sector bottomed out ahead of other CIS states (around 1993), and by 1996 livestock production surpassed the 1991 level. Poultry production has become almost exclusively concentrated in the private sector, and is swiftly rebounding.

Per caput consumption of basic foodstuffs is recovering. The abolition of the state-subsidized bread rationing system in 1996 led to a sharp increase in both wheat production and imports by the private sector while government imports fell substantially. In 1997/98 the domestic cereal utilization is forecast at 1.2 million tons, including 0.7 million tons for human consumption and the remainder for feed, seed and other uses. Domestic production of cereals (excluding pulses) is forecast at 0.8 million tons, leaving an import requirement of 0.4 million tons. The bulk of this is expected to be bought commercially. Food aid will continue to be required to meet the needs for relief distribution to the most vulnerable populations. So far, food aid allocations, including those carried forward from last year, amount to 0.12 million tons. In addition the country will continue receive direct budget support from the EU.

Economic recovery is well underway with agriculture-led GDP growth of 10 percent in 1996. However, unemployment remains high and the years of civil strife and hyperinflation in the wake of independence have created a considerable number of vulnerable people including the internally displaced. There remain large pockets within the population that have not benefited from the economic recovery. In particular, those people unable to generate income (the elderly, the disabled, the unemployed and inmates of social institutions) or those who live in remote, poorly endowed areas, remain food insecure. However, the number of people needing relief assistance has fallen sharply in the past year (WFP’s target population has decreased from 300 000 to 170 000 this year).

5.5 Kazakhstan

Uncertainty regarding not only the yields, but also the area sown to grains casts doubt on the reliability of production forecasts. Former state farm and raion authorities (akims) are under considerable pressure to achieve hierarchically imposed official area targets. Despite the formal privatization of the state farms (80 percent of land is privatized), farm managers can still be removed or incriminated for illegal activities. Under current conditions grain production is barely profitable in marginal areas, which constitute up to 50 percent of the area currently sown. Even in productive areas the high taxation rate on grain delivered to silos adversely affects the farmers’ incentives to produce. In addition, the cost of commodity credit is high, partly reflecting risk (due to the very high default rates).

Based on extensive discussions with grain traders, many of whom also finance inputs for production, the Mission tentatively estimates the 1997/98 area sown to grains at 14.6 million hectares - nearly 1 million hectares less than the official estimate - and the 1997 harvest at 12.2 million tons, 8 percent more than last year’s level. The area sown to grains is estimated to have fallen by 2.5 million hectares but growing conditions have been better than last year in most areas excluding Akmola and average yields are higher.

Early indications are that production of potatoes and vegetables, grown mainly on household plots, will remain close to the last year’s level. Good yields for oilseeds are forecast to offset the 33 percent decrease in the sown area. Domestic production of sugar is expected to fall sharply.

Since the beginning of reform, livestock numbers and production have contracted very sharply which, coupled with a decline in animal productivity, has entailed a sharp drop in production of meat, milk and eggs. However, the first national sample survey conducted recently within the framework of a technical assistance program (NASS/USDA), showed substantial under-reporting. Compared to official data, animal inventories on 1 January 1997 were substantially higher: cattle and sheep numbers by about 25 percent, pigs + 51 percent, and poultry + 35 percent. The survey indicated that data for the state sector was accurate to within 3-5 percent either above or below, but that livestock inventories on household plots are much higher than officially recorded, with the largest discrepancy in sheep, goats, and poultry although pig and cattle inventories were also higher. (Livestock in the private sector accounts for 80 percent of sheep and goat inventories, 70 percent of cattle, 80 percent of pigs, and 60 percent poultry). As a result, the overall decline in the livestock sector was not as drastic as the official numbers indicated e.g. since 1991 cattle numbers fell by one third and not 43 percent, pig numbers by 52 percent instead of 67 percent and poultry by 65 percent instead of 80 percent. Moreover, indications are that the absolute number of cows has increased rather than decreased over this period.

A recent positive development is the beginning of private investment in large-scale former state-owned poultry complexes. Poultry production seems set to increase, but its share in total meat production is still very small, and is not expected to change the overall downward trend in meat production in the short and medium term. There are indications that the terms of trade for agriculture stabilized in 1996 and showed some improvement in 1997.

There are few legal restrictions on the marketing and exports of cereals. Nevertheless regional authorities impose numerous restrictions on the outflows of grain to ensure various payments including meeting procurement targets, debt repayments (equivalent to 1.2 million tons of cereals in 1997) and taxation. The marketing chain for grain remains fluid. Producers either sell grain to government authorities, to creditors (who in many cases are also grain exporters), or sell grain (sometimes directly from the field) through intermediaries, who combine small quantities into commercial lots for onward sale to the larger companies. The system of recommended minimum prices has been abolished as they stalled exports in 1996/97. However, the Grain Union has again recommended export prices for grain, which are substantially higher than world prices, but not mandatory.

The volume of feed use will depend on export demand for Kazakh quality wheat, which is expected to be good, and the input/output price ratio for livestock producers. Given cereal and pulse production of 12.2 million tons and a human consumption requirement of 2.4 million tons, cereal exports in 1997/98 are tentatively forecast to remain just under 3 million tons, mainly wheat to other CIS countries. Relatively low cereal opening stocks, low import demand for barley in the neighbouring countries and little progress in opening markets beyond the CIS are expected to reduce coarse grain exports to 0.4 million tons. The quality of the grain is generally good and the Russian Federation is buying aggressively.

Cereal exports in 1996/97 are officially reported at 2.6 million tons: the actual level, however, is higher, as evidenced by import data from the Russian Federation. The traders’ estimates of the volume of illegal grain flows range from 0.4 million to 1 million tons. The Russian Federation remains the major market, but Uzbekistan, Turkmenistan, Belarus, Tajikistan and The Kyrgyz Republic accounted for almost 30 percent of estimated exports in 1996/97.

5.6 Kyrgyz Republic

About 60 percent of the cultivated land has been distributed to residents or members of the former collective and state farms but 40 percent of the land is still controlled by large collective or corporatized farm structures.

The area sown to cereals increased by about 12 percent despite shortages of all the major inputs. Growing conditions this year were markedly better in the south than in the north. In the south good precipitation in the spring and early summer favoured crops after a relatively dry winter. In the north, unseasonably hot weather in May stressed crops. Nevertheless, yields are better than last year’s. The 1997 grain harvest is officially estimated at 1.7 million tons, 19 percent more than last year and above the official target (1.65 million tons). Output of wheat could rise to 1.35 million tons in response to an increase of 100 000 hectares in the area sown at the expense of barley and fodder crops.

Production of potatoes and vegetables are expected to increase but the area sown to sugarbeet has fallen sharply in response to shortcomings and difficulties in processing and marketing. At the aggregate level, the sharp reduction in animal numbers is bottoming out and there is some evidence of stabilization in the poultry sector. Animal productivity is increasing in the private sector and the forecast is for the aggregate output of meat, milk, and eggs to increase further in 1997.

Wheat production has more than doubled since 1991 and the country has an exportable surplus of wheat in 1997/98. Cross border trade with Uzbekistan (for fuel and inputs) is significant but appears to be partially offset by commercial imports from Kazakhstan. In 1997/98 the domestic cereal utilization is estimated at 1.7 million tons including 0.7 million tons for human consumption, 0.7 million tons for feed and the balance for other uses, mainly seed. Imports are estimated at 0.12 million tons, and include 78 000 tons of food aid already pledged to assist Tajik refugees and other vulnerable people in the country. This year also, the country will receive direct budget support from the EU with disbursement conditional to the implementation of specific reforms.

5.7 Moldova

The first phase of land reform increased the area of household plots and distributed land ownership rights in the form of undifferentiated land shares to nearly 1 million beneficiaries, mainly the former state farm workers. Although the state owns only 4 percent of land, the individual sector manages less than 20 percent of agricultural land (14 percent household plots and 4 percent independent private farms). The rest continues to be controlled by largely unrestructured collective and corporatized large farm structures.

The 1997 cereal and pulse harvest is expected to increase by one third, reaching 3.0 million tons. The area sown increased 11 percent despite severe financial constraints limiting access to all major inputs. Some inputs are provided as credits in kind often using the upcoming harvest as collateral, but fertilizers remained in short supply. Better weather, particularly in terms of the quantity and distribution of rainfall, was the main factor in the sharp recovery from the drought reduced 1996 harvest (1.9 million tons). Wheat production could increase by 67 percent to 1.2 million tons mainly reflecting better yields. Output of coarse grains is tentatively forecast to increase by 55 percent to 1.75 million tons in response to a sharp increase in both the areas sown and yields.

With regard to other foodcrops, production of sugarbeet and potatoes is expected to increase but vegetable and sunflower production were affected by excessive rains in the summer. Livestock production is not generally perceived to be profitable and animal numbers continue to be cut back sharply in 1997. However aggregate developments mask the slow but steady increase of livestock (other than pigs) in the individual sector, which tends to be underestimated by the official statistics. Current data point to a stabilization in meat production but further declines in milk and egg production in 1997.

The country was a net importer of cereals in 1996/97 but is expected to have an exportable surplus in 1997/98. The government still intervenes in cereal pricing, marketing and trade and operates a state order system to meet the grain needs of key budget groups and for re-distribution to deficit areas. This year again, restrictions have been imposed on the movement of grain until the state order and other commitments have been fulfilled. Thereafter, grain may only be exported under licence from the Ministry of Economics, which also sets indicative export prices for grains below which firms are prohibited from exporting. These prices are often set above market prices in Ukraine and the Russian Federation. As a result, registered exports are expected to remain small, around 0.3 million tons at most and feed use of grains and stocks are likely to increase.

5.8 The Russian Federation

The Mission estimates the 1997 grain harvest at 85 million tons, including about 44 million tons of wheat (of which less than 20 million tons is food-quality wheat). The area sown to grains remained fairly stable, with slight decreases in the areas sown to winter wheat and barley more than offset by increases in spring sowing. The tendency in the last several years of shifting grain production from feed to food grain is drawing to a close. Though food wheat production has been highly profitable, the proportion of this profitable grain in the harvest is diminishing as a result of inadequate use of pesticides, herbicides, and improved seed. This year this trend has been aggravated by excessive rains in some regions and serious pest infestation in the major food wheat production areas. As a result the proportion of feed wheat in the total wheat harvest is estimated to be over 50 percent (compared to 17-20 percent last year), reaching 90 percent in Rostov oblast - one of the major food grain producing areas.

With regard to other crops, the potato harvest could be somewhat less than the last year given the reduction in the area sown. Production of vegetables will most likely stay at the same level. The area sown to oilseeds has decreased this year by about 7 percent but yields are better.

Several factors are expected to slow the contraction of the livestock sector in 1997/98. Larger forage supplies per animal this year and an increased grain harvest with an unexpectedly high proportion of feed wheat should contribute to lower domestic feed prices, stabilising feed costs for producers. Although statistical indicators point to a further decline in the livestock sector, there are indications that the poultry sector is on its way to recovery. A similar development could occur in the pork sector, in 3-4 years time. Private plots will continue to play a crucial role in production of meat, milk, and eggs, increasing their large share in production, half of the meat and milk produced in the country, and more than 30 percent of eggs.

Until recently the bulk of cash credit to agriculture came from the state. In 1996/97, the government has reverted to allocating funds in the form of soft loans (rather than commodity credits) and further diminished its amount. The reduced state credit has to a large extent been compensated by the expansion of commercial commodity credit (in form of fuel, seeds, fertilizers, and chemicals) with the result that banks, oil, and other companies are now heavily involved in grain trade.

There are indications that the grain market is becoming more structured with three types of traders distinguishable: (i) the small-scale so called "black cash" traders who usually deal with the grain output not reported to the authorities; (ii) the regional traders, often the former branches of Roskhlebprodukt, (the former national procurement joint stock company) who maintain close connections with the regional administrations, purchasing large quantities of grain using state money for the regional food stocks and (iii) the commercial traders, who do not limit their activities to one region, export grain, buy and manage elevators. This latter group’s share in the grain trade is growing as companies who lack experience in marketing the grain received in payment often turn it over to professional grain traders.

Despite the federal law prohibiting any restrictions on inter-regional commodity flows, regional barriers to trade persist. They are being stepped up this year as the regional governments have been made responsible for the commodity debts incurred by farmers in 1996. Though the federal procurement target has been abandoned, almost every region in the country determines such a quota and usually outflows of grain are prohibited until the this target is met. Sometimes minimum prices are also set, to ensure farms cover their debt. Often these restrictions are translated into hidden costs in the grain chain and an artificial increase in prices.

In 1997/98 domestic utilization is estimated at nearly 80 million tons, including nearly 21 million tons for human consumption and the balance for feed and other uses. Given the harvest forecast and the large proportion of feed-quality grain therein, it is likely that feed use of grains will stabilize despite better forage supplies and the continuing cut back in animal numbers. Losses are forecast to grow as a result of a shift to on-farm grain storage.

Cereal exports (including intra-CIS trade) in 1996/97 are officially reported at about 0.9 million tons and imports at 2.9 million tons (including 0.4 million tons of rice). Actual imports are likely higher (reflecting inter alia flows through Belarus and unregistered sales of quality wheat from Kazakhstan), which could bring 1996/97 imports to the level of 3.8 million tons.

In 1997/98 the high proportion of feed-quality grain in the harvest implies excess of domestic supply and a large exportable surplus for these grains. However export opportunities for feed grain are limited by ample supplies and low prices on the international markets, by the high domestic costs associated with grain assembling, handling and transportation and also by the limited facilities at the ports. Cereal exports (including intra-CIS trade) in 1997/98 are tentatively estimated at 3 million tons, roughly divided 65/35 between barley and feed wheat unless Polish demand for feedgrains is larger than expected. Extra-CIS trade is tentatively forecast at 0.4 million tons of wheat and 1.9 million tons of coarse grains (barley).

Cereal imports are forecast at 2.9 million tons, including 2 million tons of wheat, 0.4 million tons of rice and some coarse grains. Imports from abroad are, again tentatively, forecast at 0.9 million tons, including 0.5 million tons of food quality wheat, 0.4 tons of rice and a small quantity of maize.

5.9 Tajikistan

Sporadic eruptions of civil strife and the dire economic situation in the country make reliable and systematic information very difficult to collect and data on the supply and demand for food remain extremely tentative.

The 1997 grain harvest is estimated by FAO and the EC-TACIS in-country staff at about 0.6 million tons, even higher than the good 1996 harvest now officially estimated at 543 000 tons. The area sown to wheat increased further at the expense of coarse grains, fodder crops and to a lesser extent cotton. Growing conditions this year were better than last year. Grain yields vary hugely depending on the quality of the land, (irrigated, salinated or not) and on the farmers’ access to inputs. The average yield of wheat in two project zones where the farmers were supplied with a full package of inputs were 2.95 tons and 2.25 tons respectively this year. However, these zones are not representative of the country and a national average yield of 1.5 tons per hectare has been adopted. Although low, (and likely representing yields after production expenses have been paid in kind), it reflects a situation in which every available piece of non-state owned land, whether suitable for cropping or not, has been sown to wheat.

Output of fodder crops and to a lesser extent most other foodcrops is estimated to have declined as an increasing amount of land was diverted to wheat. Output of cotton, the main cash crop, is expected to recover from last year’s poor level but to remain below average. Production of meat, milk and eggs in the state sector has virtually collapsed and official data also indicate reductions in household livestock production but this is not corroborated by nutrition surveys, which suggest that one household in two may own at least one productive animal.

Nevertheless, the food supply situation remains precarious as a result of intermittent civil strife and widespread unemployment, underemployment, inadequate land tenure and increasingly ineffective social security provisions. The findings of the first nation-wide food vulnerability assessment - carried out by the EC this year- are that 16.4 percent of the population are food insecure and cannot afford an adequate diet without targeted assistance. This percentage varies somewhat between regions, but is fairly evenly divided between rural and urban areas.

Even with the higher cereal production in 1997, the country could face a foodgrain deficit. The size of this deficit depends crucially on the resident population, estimated by the UN at 5.5 million but possibly 1.8 million lower. Estimating feed and other uses (mainly seed) at 140 000 tons, and per caput cereal consumption of 360 grams per person per day, the requirement for human consumption would be 740 000 tons for a population of 5.5 million. Against this domestic requirement, cereal production (excluding pulses and with rice in milled equivalent) is estimated at 583 000 tons, leaving an import requirement of virtually 300 000 tons. However this requirement would be reduced if a lower population assumption is used. The commercial import capacity is unlikely to exceed last year’s level, estimated at some 160 000 tons, leaving a food aid requirement of 137 000 tons under the higher population scenario. Some 90 000 tons have already been pledged to date. The humanitarian relief needs for the vulnerable population will remain large. In 1997/98 the country will receive direct budget support from the EU, conditional on carrying out reforms in the agriculture sector, as well as assistance to better target humanitarian relief.

5.10 Turkmenistan

The reorganisation of the former state farms into a collection of individual lease holding farms and somewhat better incentives for individual farmers has contributed to an estimated 38 percent increase in cereal production in 1997. The area actually (as opposed to reportedly) sown to cereals increased by 50 000 hectares to 539 000 hectares. That sown to wheat increased at the expense of coarse grains, fodder crops and cotton. Growing conditions were better than last year, but the input supply situation remained difficult. A major contributing factor to the sharp increase in wheat production to 650 000 tons was the introduction of a contract system of farming for smallholders backed up by credit for essential inputs and services.

On the former state farms, 90 percent of the irrigated land has been leased to individual farmers, with the intention to grant ownership in a few years time provided the leased land is farmed well. Lessee farmers receive up to 30 percent of the agreed contract price for output as working credit and benefit from a 50 percent subsidy on inputs and services, but have to meet official targets for wheat and cotton and deliver all production of these crops to the official purchasing authority. Although lessee farmers remain subjected to one input supply and two purchasing monopolies, they receive credit and payment for produce on individually held accounts. Payment for wheat deliveries has been prompt this year, and participation in the contract production scheme is expected to increase sharply next year. The aggregate area to be sown to wheat is expected to rise to about 500 000 hectares in 1997/98 from 470 000 hectares this year as leased land, not managed adequately in 1996/97 will be re-allocated to other lessees, thereby increasing the number of small farms.

Agriculture remains dominated by wheat, cotton, and livestock farming (sheep, goats, and camels). The cotton harvest has suffered from adverse weather conditions (spring floods and a cool August), shortages of machinery, continued low availability of fertilizers and inadequate maintenance of the irrigation system. Output is likely to remain well below average but better than last year. Output of melons and other fruit are expected to decline, in response to limited marketing opportunities and the loss of export markets.

Following the poor 1996 grain harvest and the sharply higher prices for cereals, livestock production has declined over the whole spectrum. Official data indicates that animal numbers, which, with the exception of pigs and poultry had increased steadily between 1992-1995, were reduced, and in the case of pigs, halved. Output of milk and eggs fell by about a quarter and meat production also declined. In an attempt to halt the decline in livestock production the sector is being reorganised under the auspices of the state-financed Livestock Authority. Sheep, goats, and camels are being compulsorily regrouped on large, specialized farms in an attempt to increase productivity. Compulsory deliveries of meat and milk have been discontinued and the prices of these commodities have been liberalized.

The food supply situation remains mixed and precarious in disadvantaged areas. Overall, the availability and choice of food has improved but a lack of purchasing power limits access and there are many infrastructural constraints. In urban areas, milk remains in short supply while in rural areas the wheat supply situation remains tight even after the harvest. People in depressed industrial areas and infertile rural areas are experiencing difficulties. Persons having an income below 120 000 manats, or U.S.$ 24 per month, are defined as vulnerable, and total 3.4 million according to official sources. These continue to receive flour, meat, milk, butter and tea on ration cards but the subsidy element is being steadily reduced. Both the number of vulnerable people and the subsidy on flour, (a subsidized price of 25 manats per kilo as compared to the market price of 1 700 manats per kilo) remain large. A household budget survey has been carried out but the results have not yet been disseminated.

Annual domestic cereal utilization has decreased to about 1.2 million tons per annum including direct human consumption of 626 000 tons, other uses (mainly seed) of just under 170 000 tons and feed use of around 386 000 tons. Cereal stocks were drawn down in 1996/97 and are to be replenished this year. Against the total requirement of 1.42 million tons, domestic availability (stocks and production of cereals) are estimated at 863 000 tons. Allowing for some stock replenishment, this leaves an import requirement of nearly 560 000 tons for 1997/98. This is expected to be covered commercially, mainly in Kazakhstan and Ukraine but about 100 000 tons could be imported from outside the CIS.

5.11 Ukraine

The Mission estimates the 1997 cereal and pulse harvest at 35 million tons, substantially larger than the drought reduced 1996 output, the recovery reflecting a sharp increase in the areas sown, better weather and increased use of inputs. The Mission’s harvest forecast is about 2 million tons higher than current harvest reports indicate to allow for under-estimation of output. The area sown to cereals is estimated to have increased by almost 2 million hectares, rising to 15.3 m.h. but crops on at least 1.5 million hectares have been lost due to winterkill and persistent rains in the summer and autumn, which caused the grain harvest left in the fields to germinate and rot and also a general deterioration in the quality of the crop.. In addition, there is uncertainty about the proportion of the maize area which will be harvested for grain rather than for silage. The 1997 output of wheat is provisionally estimated at 19 million tons, significantly more than output last year, (estimated by FAO at 15 million tons), mainly in response to markedly better yields for winter grains. That of coarse grains is forecast at 14.9 million tons, 50 percent more than FAO’s estimate for 1996, due to a 24 percent increase in the area and better yields. Output of paddy is expected to increase to 90 000 tons but dry conditions in the spring severely affected pulses and reduced the harvest to about 1 million tons.

Average yields of all grains have remained well below potential due to shortcomings in farm management and crippling shortages of cash and collateral for timely purchase of inputs. Virtually all inputs are obtained via commodity agreements (for grain) with the state or private traders. As farmers give priority to obtaining supplies of fuel and fertilizer and not to herbicides/pesticides, weed and pest infestations are an important reason for the poor yields.

With regard to other crops, excessive moisture in the summer has adversely affected the output of potatoes and vegetables and reduced their storage life. The sugarbeet crop benefitted from better precipitation but, shortages of working capital and fuel as well as poor weather delayed the harvest and kept yields low. Output of sunflowers is expected to increase only marginally from last year’s drought reduced level.

Livestock inventories continue to dwindle due to persistent, sharp cut backs in the state sector. On household plots, numbers of cattle and cows fell by 7 percent after the poor harvest last year (compared to a 20 percent decrease in the public sector). Poultry production in the private sector appears to be stabilizing and even growing, but has not been able to offset falling output in the public sector. Pig inventories have stabilized in the private sector but are still rapidly falling in the public sector. In 1997 output of total meat is expected to decrease by about 10 percent, milk by 6-7 percent, and eggs by around 2 percent.

Most farms have formally reorganised, but over 80 percent of the land continues to be farmed under old style collective farm management. The state remains heavily involved in trade and marketing and its dominance is bolstered by regional authorities’ freedom to ban the movement of grains until the federal and regional state orders are filled, its control of the grain silos, priority access to the inadequate railway and port facilities and an increasing amount of costly and time-consuming certificates and services which can only be provided by the state. Despite the sizeable exportable surplus of grains in 1997/98, estimated at 5-6 million tons, all these constraints coupled with keen competition from Hungary and the Russian Federation, could limit the country’s exports this year to about 1.6 million tons. To utilize the feed-quality grain surplus, quality standards have been lowered by the government: grade IV wheat has been declared food quality. Waste, stocks and industrial use of grains are all expected to increase. This year, following the imposition of import duties on alcohol by the Russian Federation, the Ukraine is likely to increase the manufacture of feed concentrate for export.

The customs data for 1996/97 indicate that cereal exports totaled 1.6 million tons including nearly 1.3 million tons of wheat. Actual exports are estimated to be somewhat higher in part as flows to Belarus and some official dealings are not included.

5.12 Uzbekistan

The 1997 grain harvest is forecast to reach almost 4 million tons. This is 10 percent more than output in 1996. The area sown remained stable at 1.7 million hectares of which nearly 1 million were irrigated. The average yield on irrigated land increased in response to abundant spring rains and the somewhat better availability of fertilizer, but that on rainfed land was poor as the dry autumn adversely affected crop germination. Shortages of some types of fertilizer and machinery as well as delays and omissions in field work (wheat is planted after cotton is harvested, leaving little or no time for washing the soil) have kept output of small grains (mainly wheat and barley) - nearly 3.4 million tons - well below the target of 4.3 million tons. Whereas the state farms have difficulty in meeting their production target (4 million tons) production of grain on household plots has exceeded the target by one third. Output of vegetables and potatoes are expected to increase. The cotton harvest is still underway; indications are that the cotton production target of 4 million tons may be met.

Despite the government’s effort to achieve self-sufficiency in livestock products by means of subsidized feed and administrative restrictions on the slaughter of the animals, production in the sector has been decreasing since 1996. The major reasons are a lack of producer incentives and persisting shortages of feed as the forage crop area has been decreased steadily in favour of wheat. Though the cattle population remains at the 1991 level, and the number of cows is even higher, the productivity of animals, especially on state farms, is extremely low, and animals are kept in dire conditions. Productivity in the private sector (mainly household plots) is higher and it supplies the bulk of the beef and milk produced in the country. Both pig and poultry sectors have contracted drastically partly due to cultural preferences but mainly due to the critical shortage of feed, which the country can no longer afford to import. The output of meat and milk are forecast to decline further as output in the state sector contracts and becomes almost completely confined to household plots, where production is expected to increase somewhat but will not offset the decrease in the state sector. However, these private holdings (average size 0.2 ha) will soon be reaching their limits in terms of their carrying capacity as well as productivity growth. Farmers’ marketing opportunities are limited by numerous regional controls, which constrain their access to urban markets. The outlook for poultry and egg production is unclear; the government intends to allocate scarce resources of feed to poultry production.

Aggregate direct food consumption of cereals and other foodstuffs is limited by low purchasing power. Agricultural policy continues to emphasise self-sufficiency in grain and other basic foodstuffs irrespective of natural endowments and comparative advantages. The foreign exchange rate, prices and cash flows continue to be regulated, creating artificial shortages and a parallel economy. Over 90 percent of land has been privatized but farmers are not free to determine their crop mix or their marketing outlets

In rural areas grain supplies remain very tight as the cereal delivery quotas have to be met irrespective of whether the production target is achieved. Incomes are also low as only farms that have fulfilled their quotas are allowed to sell any remaining surplus in the open market, where prices are higher than in the state channel and paid in cash. All sales to the purchasing authorities and processors are paid, with considerable delay, in bank transfers, to mostly inaccessible accounts. In 1997 40 percent of cotton and 50 percent of grain are subject to compulsory procurement at fixed, low prices. Grain production in excess of the procurement target is purchased at a higher (50-60 percent) contracted price.

In 1997/98, domestic utilization of cereals is estimated at 4.7 million tons, including 3.5 million tons for human consumption, and 0.7 million tons for other uses. Despite the shortage of both concentrated feed and area on which to plant fodder, the feed use of grains is estimated to have fallen from 2 million tons in 1992/93 to 0.5 million tons in 1997/98. Given the 1997 grain harvest of 3.75 million tons (rice in milled equivalent) and no change in stocks (which were replenished by 1 million tons between 1 January 1996 and 1 January 1997) cereal imports in 1997/98 are estimated at 0.96 million tons, mainly wheat for human consumption. Some 0.6 million tons are expected to be sourced in Kazakhstan and the Russian Federation (to complete a 1996/97 barter contract for cotton), and the balance to come from outside the CIS. Even when the self sufficiency target is met, the country will continue to need to import a quantity of high quality wheat to mix with local varieties for bread production.

For 1997/98, it is planned to sow 1.65 million hectares to grains, of which 1.4 million to wheat and barley and the balance to rice and maize. The irrigated area sown to wheat and barley is to remain stable at 1 million hectares but the rainfed area is to be reduced further to 310 000 hectares. Aggregate output is targeted to reach 5.1 million tons including 4.2 million tons of wheat and barley. Achievement of this target will depend crucially on more timely and balanced supplies of fertilizers and an upgrading of the irrigation system and the machinery park. In the medium term it is hoped to increase yields so as to reduce the area sown to wheat and barley to 1 million hectares and increase the forage crop area.
 
 

 

This report is prepared on the responsibility of the FAO Secretariat with information from official and unofficial sources. Since conditions may change rapidly, please contact Mr. Abdur Rashid, Chief, ESCG, FAO, (Telex 610181 FAO I; Fax: 0039-6-5705-4495, E-Mail (INTERNET): GIEWS1@FAO.ORG) for further information if required.
The Special Alerts/Reports can also be received automatically by E-mail as soon as these are published, subscribing to the GIEWS/Alerts report ListServ. To do so, please send an E-mail to the FAO-Mail-Server at the following address: mailserv@mailserv.fao.org, leaving the subject blank, with the following message: 
    subscribe GIEWSAlerts-L 
To be deleted from the list, send the message:-L 
    unsubscribe GIEWSAlerts-L

TOC Return to menu