II. Developed country regions

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Central and eastern Europe

This section reviews the status of economic and agricultural reform in Central and Eastern Europe and focuses more closely on four selected countries that have had quite different experiences in their attempts at economic and agricultural reform: the three Baltic republics, which have moved decisively towards reform since regaining independence; and Ukraine, one of the countries in the region that has been most hesitant in embarking on thorough reform.

Regional overview

Economic performances in the countries in transition in Central and Eastern Europe and the former USSR are showing increasingly differentiated patterns. Past years had seen an almost universal contraction in production, as countries struggled with the initial shocks following the beginning of the reform process and the severe contraction In intraregional Made. A much clearer relationship it now emerging between economic performance and the scope and intensity of economic reform as well as the continuity and consistency of stabilization policies. In 1993, Poland recorded positive real growth for the second consecutive year, with real GDP increasing by 4 percent. Also in the Czech Republic, economic reforms and macroeconomic stabilization are beginning to translate into positive economic growth; the rate of change of real GOP turned positive In 1993 (0.5 percent) for the first time since the beginning of market-oriented economic reforms. The positive growth performance in both countries is expected to be consolidated in 1994.

The most spectacular economic upturn in 1993, however, was staged by Albania which recorded an expansion In global output of no less than 11 percent, following a severe contraction from 1989 to 1992. Albania is thus beginning to see the first highly visible results of its successful macroeconomic stabilization and decisive steps to reform the economy, although unemployment reportedly remains extremely high.

In the other economies of Central Europe, a recovery in economic activity has not yet occurred, although GDP is estimated to have stabilized in Slovenia in the course of 1993 and the slide in real output may be approaching the end in Hungary, Slovakia, Bulgaria and Romania, thanks to progress in macroeconomic stabilization, particularly in the former two countries.

In the former USSR the short- to medium-term economic outlook is significantly bleaker. The three
Baltic republics have moved decisively towards economic reform and economic stabilization, and their economic growth is expected to resume in 1994. However, output in the other former Soviet republics is continuing to decline, with limited prospects for a turnaround in the short to medium term in the face of ineffective macroeconomic policies and hesitant economic reforms.

Regional agriculture is still struggling with the impact of the economic reform process and the need for adjustment. Agricultural production in the region (excluding the former USSR) increased in 1993 for the first time since 1989, although by a modest 2.1 percent. The pattern of agricultural production in 1993 differed, however, between crop and livestock production. Crop production increased by an overall 13 percent, as production picked up significantly from the severely drought-affected level of 1992 in the two major producing countries, Poland and Romania. However, in spite of the recovery in 1993, crop production in the area is still 16 percent below the level of 1989, the sharpest declines being in Hungary, Bulgaria and Albania.

Livestock production in Central and Eastern Europe in 1993 continued the slide that has been ongoing since the peak production level of 1990, declining by a further 9.8 percent following contractions of 7 to 8 percent in each of the previous two years. The cumulative contraction in livestock production since 1990 amounts to 23 percent, somewhat more pronounced than that of crop production. The patern of continuously declining livestock production, common to all countries in the area, probably represents permanent structural response to the shift in relative prices resulting from price liberalization and the sharp reduction in subsidies. Indeed, Iivestock products in most countries tended to be heavily subsidized prior to reform, and consumption levels were thus artificially inflated relative to dim prevailing in countries at similar income levels. The contraction in demand for livestock products has been further accentuated by the decline in income levels, as such demand tends to be relatively income-elastic.

Although reliable indices for aggregate agricultural production in the former USSR have so far not been compiled, agricultural production in 1993 appears to have declined in most of the former Soviet republics. Agricultural production declined sharply in the Russian Federation (-7 percent) and Kazakhstan (- 14 percent) while, in Ukraine, the estimated decline was in the order of 2 to 3 percent.

As regards economic reforms affecting agriculture, the countries in Central and Eastern Europe are still proceeding with differing speeds and to some extent in different ways, although the basic areas of reform are fundamentally the same across the region. After the initial thrust of price and trade liberalization, the various countries are now proceeding with the more complex issues of land reform, privatization and demonopolization (see The State of Food and Agriculture 1993 and 1992).

In addition to the policy developments and reforms in the above-mentioned areas, new agricultural policies of a more protectionist nature are emerging in some of the more advanced transitional countries. immediately following the initiation of economic reforms, agricultural policies in the transitional countries became highly liberal, as prices and international trade were deregulated and subsidies eliminated or reduced. Subsequently, in many countries pressures for support and protection have been mounting. Some of the countries that are more advanced in the economic reform process have already introduced agricultural market regulation systems, to some extent inspired by the Common Agricultural Policy (CAP) of the EC or other Western models.

Much will depend. on how such market regulation regimes are operated but there is a risk that they will become permanent market price support mechanisms, as has been the case in most OECD countries. The transitional countries have the opportunity of avoiding this policy mistake, which has proved costly for the Western economies and would likewise impose heavy costs on the newly emerging market economies. Market price support policies, by raising prices above levels that would prevail in free market conditions or above world market levels, distort production and consumption decisions. Not only may they induce significant budgetary costs, they also represent an implicit taxation of consumers and impede the promotion of efficiency in agricultural production.

The background to the introduction of market price support and protection mechanisms is the weakness, inefficiencies and lack of competitiveness of the agricultural sector, Including its current adjustment difficulties, in the transitional countries. Beyond this general justification, two specific rationales for such measures would appear to be: first, the need to protect domestic agriculture from the competition of heavily subsidized Western agricultural exports and to penetrate

Western markets through export subsidies; and, second, to adapt agricultural policies to the EC's CAP in view of possible future European Union (EU) membership. As regards the former, even though OECD agricultural support and trade policies are undoubtedly damaging to the transitional countries, attempting to counter these policies by similar mechanisms may represent a misuse of scarce funds which could possibly be put to better use in improving domestic farm efficiency and competitiveness as well as physical and institutional infrastructure

As for the latter, it may be noted that the CAP is a moving target. At the future date of accession of any of the transitional countries to the EU, the policy is likely to have been reformed further in the direction of greater market orientation. More important, however, the food sectors of the new market economies will be better equipped to benefit from free access to the vast EU market if, in the meantime, efficiency and competitiveness of the sector has not been hindered by market support, protective barriers and export subsidies

Another protective policy in some of the transitional countries has been the introduction of export restrictions with a view to increasing supplies to the domestic market. This type of policy may provide a relief to short-term domestic supply problems and help protect low-income consumers. Nevertheless it tends to be self-defeating in the medium to long term, as it depresses domestic prices and thus reduces incentives for expanding agricultural supply.

Estonia, Latvia and Lithuania

The three Baltic republics, Estonia, Latvia god Lithuania, have made significant progress in their transition to a democratic, market-oriented system, Despite sharp drops In national income and trade flows during the period following their 1991 independence, prospects appear favourable for economic recovery over the next two to three years, given continued adherence to sound monetary and fiscal policies and progress in privatization. However, economic stabilization in the other former Soviet republics would also be positive for the Baltic republics' prospects for recovery.

The agricultural sector

Although agriculture has traditionally played a sizeable role in the Baltic economies, the sector's share in aggregate output has been declining over the last few years. Indeed, while the share of agriculture in GDP in 1989 amounted to 18 percent in Estonia, 20 percent in Latvia and 27 percent in Lithuania, according to preliminary OECD estimates, the share in 1993 had declined to 8 percent for Estonia, 14 percent for Latvia and 20 percent for Lithuania. The share of labour employed in the agricultural, fisheries and forestry sectors has declined slightly from previous levels, ranging from 15 percent in Estonia (11992 data) to 19 percent in Lithuania in 1993.

The agricultural economies of the Baltic states are oriented towards livestock production, particularly for dairy products, reflecting climatic and geographic conditions that limit crop cultivation. The share of livestock in total Baltic agricultural production ranges from 60 to 70 percent in value terms. While the share of livestock production relative to crop output in Lithuania and Latvia has remained relatively stable, the livestock sector's share of total agricultural output in Estonia has declined over the last three to four years. Prior to 1990, livestock production in Estonia represented nearly 70 percent of total output whereas, in 1992, the share was 60 percent.

The primary livestock products produced in the Baltic states are beef and veal, pork and dairy products. While Baltic livestock output accounted for only 3 to 6 percent of the former USSR's total, on a per caput basis the Baltic republics produced twice as much as the Soviet average. Moreover, livestock productivity was higher than in the other Soviet republics.

Traditionally, the Baltic republics were net it exporters of most livestock commodities. However, after being incorporated into the USSR, their livestock sectors were further specialized to provide meat and dairy products for the other Soviet republics. In return they received feedgrains, either imported or produced within the USSR.

Limited by a short growing season and cultivable land area, Baltic crop production consists primarily of cereals (winter wheat and rye, spring barley), feed crops, potatoes, vegetables and sugar beet (Latvia and Lithuania only). A small amount of flaxseed and rapeseed is also grown. While wheat is primarily used for human consumption, most of the Baltic states' coarse grain and oilseed production is utilized to feed livestock. The Baltic states are net cereal importers, mostly of coarse grains.

Agricultural production has declined in all three countries since 1990. A particularly sharp contraction took place in 1992 when the cereal harvest was affected by drought. A partial recovery occurred in 1993 in Estonia, where agricultural production increased by 9 percent,- and in Lithuania, where agricultural production increased by 8 percent, while agricultural production declined by a further 19 percent in Latvia.

While cereal production recovered somewhat in 1993 (particularly in Lithuania), the drop in 1992 severely affected the Baltic states' struggling livestock sector. There were significant drops in all animal inventories, largely owing to increased costs for mixed feed (in part the result of decreased grain supplies from domestic output and interrepublic deliveries) and lower consumer demand for livestock products, particularly in the former Soviet republics to which the Baltic states previously exported.

Economic reforms

The economic transition of the Baltic agricultural sector has been characterized by the following main reforms. price liberalization, land privatization and trade liberalization. The Baltic states have to some extent followed similar paths in introducing and implementing these measures.

Price liberalization. Under the Soviet system, farmgate and retail prices were set by the state. Massive subsidies were provided to both consumers and producers to keep state-set prices low relative to actual costs. Price reform began in the Baltic states in 1990-1991 and, to date, most producer and consumer prices have been fully liberalized or decontrolled to a large extent.

Estonia was the first Baltic republic to liberalize retail prices, beginning the process in 1990 when the prices of paper products, furniture, vegetables and potatoes were fully decontrolled. During 1990-1991, the government liberalized most retail prices and, at the end of 1991, the retail prices of only 10 percent of the consumer basket remained under the state pricing system, while 30 percent was subject to some level of state regulation. In 1992 retail prices were further liberalized and, in October of that year, retail prices of flour, cereals, bread and sugar were fully decontrolled.

Producer prices in Estonia also increased significantly during 1990-1992, but generally by less than the input prices facing farmers. Producer prices are set through negotiations between regional producers and processors, with minimal, if any, intervention by the state.

Lithuania and Latvia have moved more slowly in liberalizing prices. In 1 991 producer and consumer prices in both countries were allowed to increase within state-set margins. During 1991-1992, price liberalization proceeded in both Lithuania and Latvia.

By the end of 1992, Lithuanian retail prices for most products had been fully liberalized, with the exception of energy, public services, communications, alcoholic beverages and tobacco. In addition, the Lithuanian state procurement system was replaced in 1992 by a price support mechanism, which was supposed to cover farmers' production costs. However, by mid-1992 these support prices had to be indexed to take rising costs and retail price inflation into account, and additional subsidies were provided for farmers when output prices fell below the support price. These subsidies were a significant burden to the budget and were phased out by the end of 1992 as part of overall price deregulation. In mid-1993, support prices were announced for major crops and were set to reflect world prices. Cereals received the highest support prices; however, it appears that insufficient funds to buy cereals at the so price led to state purchases that were lower than planned. Most farm output prices are currently negotiated between producers and buyers.

At the end of 1991, Latvian farmgate and retail prices were almost fully liberalized, although minimum support prices for certain agricultural products and profit margins for processors and retailers were established. By the end of 1992, most retail price controls were abolished, except for cereal products, and less than 8 percent of retail goods and services remained subject to state control. Farmgate prices in Latvia are now largely determined by producers and processors. One exception is for cereals, of which a certain amount is purchased by a state grain bureau at minimum guaranteed prices, which for 1994 are near world prices. The Latvian Government allocated 2.9 million lati ($5.1 million) from the 1994 state budget for these purchases.

Price liberalization has greatly affected agricultural production and consumption. Many producers, particularly of livestock products, found themselves in a severe price-cost squeeze situation, as input prices increased more quickly than the prices producers received for their output. Prices for agricultural inputs such as fertilizers, diesel fuel and lubricants sharply increased as the higher cost of producing these products with petroleum purchased almost at world prices was passed on to end users. While farmers faced higher input prices, farmgate prices were constrained by weak consumer demand and the monopsonist behaviour of processors. However, the higher prices forced farmers to economize on Inputs by using them more efficiently.

For consumers, the primary effect of price liberalization was reduced purchasing power, since retail price increases outpaced wage increases. This contributed to a shift In consumption away from income-elastic commodities such as meat and dairy products, to more inelastic goods such as bread, potatoes and vegetables. For example, in 1992 per caput consumption of meat, milk, eggs, fish, sugar and vegetable oil in Latvia declined by 20 to 50 percent from 1988 levels, while consumption of grain products and potatoes remained stable or increased slightly However, these declines were also partly the result of reductions in the substantial consumer subsidies which, during the Soviet period,- had resulted in a higher per caput consumption of some products, particularly meat, than in other countries with a comparable per caput income.

Land privatization. At the turn of the century, agricultural production in the Baltic republics was organized in the form of small, private family farms which averaged around 10 to 25 ha. However, when the Baltic republics were incorporated into the USSR after the Second World War, land was expropriated and private farms were transformed into large state and collective enterprises. In 1990 a typical state or collective farm in the Baltic republics consisted of 3 000 to 4 000 ha, smaller (significantly so in the case of state farms) than the Soviet average of 15 000 and 6 000 ha, respectively. Total employment on state and collective farms in the Baltic republics averaged around 350 workers per farm in 1990, approximately 100 workers less than the Soviet average but with a significantly higher ratio of workers per hectare owing to the different characteristics of the Baltic enterprises which were more oriented towards livestock production.

By the late 1980s, a notable share of the Baltic republics! total agricultural production (crops and livestock) had shifted from the state sector to the private sector, which at that time primarily consisted of small, subsidiary plots and gardens, Indeed, before the breakup of the USSR, Soviet agricultural production in this -private; sector averaged 25 percent of total agricultural output on all farms, while in the Baltic republics it ranged from 21 percent (Estonia) to 31 percent (Lithuania) Private sector production of vegetables, potatoes and some livestock products in particular was significant.

The Baltic states were among the first to expand the legal basis of the newly emerging private sector. Beginning in 1989, prior to independence, land privatization was initiated in all three Baltic republics, WM the enactment of Vie Law on Peasant Farms. This law was designed to circumvent ownership constraints under Soviet law and to provide the basis for developing private farming operations. However, a true land market could not be created by this law, as Soviet legislation permitted only usufruct land rights, meaning that land could be inherited but not sold or traded.

Subsequent legislation in each of the Baltic states during 1990-1992 expanded and solidified property rights.

The second step in the process of decollectivization was land restitution, whereby previous owners and their descendants were awarded first priority in receiving land. This component, intended to address certain political issues and to stimulate private ownership, led to bureaucratic delays and a lack of confidence in landownership rights, given that there were competing claims and unclear procedures for awarding ownership. The process of restitution was also complicated by the fact that land privatized under the 1989 Law on Peasant Farms could not be restituted to former owners. Another issue that has not been fully resolved is the form of compensation for previous owners who choose not to reclaim their land. Difficulties in setting land values in the absence of a functioning land market, along with concerns over substantial budgetary outlays, have further complicated land restitution in the Baltic states.

The third element of Baltic land privatization is the reorganization or liquidation of state and collective farms. The decollectivization of these farms generally occurred through the issuance of privatization vouchers or through auctions, with present workers given ownership shares in relation to the number of years they had worked on the farm. This process has led to the formation of new enterprises of various categories, including joint-stock companies, limited liability companies and cooperatives. Despite the restructuring of these farms, there has been little improvement in overall productivity and economic management. In part, this stems from the continued uncertainty of land rights during the process of restitution. There has also been little coordination among the processes of restitution and decollectivization, such that conflicts over land and assets have occurred between private landowners and shareholders of reregistered state and collective farms.

The fourth step to take place in land privatization will be the de facto privatization of subsidiary and garden plots. Generally located on state and collective farms, these plots were allowed during the Soviet period for agricultural workers to supplement their personal consumption. During the Gorbachev period, output from these plots could be sold in farmers' markets, generally at higher prices than those charged in state stores. In all three Baltic republics, the size of these plots was allowed to increase from 0.5 ha, and the average size of private plots currently ranges from 2 to 4 ha. In Lithuania, it is planned that these plots will be fully privatized by mid-1994.

A problem that all the Baltic states are facing in the creation of private farms is farm size. On I January 1993, nearly 170 000 private farms had been formed in the three Baltic states, comprising more than 2 million ha, slightly less than 30 percent of total agricultural area. The average size of these farms ranged from 9 ha in Lithuania to 25 ha in Estonia, which is significantly smaller than the former state and collective farms but very close to that of the farms that existed during the Baltic states' previous independence earlier this century. Nonetheless, there is recognition by the Baltic governments that the creation of such small landholdings is not entirely healthy, as certain economies of size that were developed in the state and collective farm system are lost with the creation of small family farms. Moreover, machinery and other inputs designed for larger farms are often less effective in these smaller landholdings. Structural policies to encourage larger farms are being implemented in all three Baltic states, such as offering landowners land for housing construction in urban areas in compensation for farmland.

BOX 10: BALTIC FISHERIES


The fisheries sector is an important component of Baltic agriculture. The combined coastal area of the three states totals nearly 4 400 km, ranging from 3 800 km in Estonia to 99 kin in Lithuania. Latvian and Estonian statistics indicate that the fishing industry accounted for 1 to 2 percent of total GDP in 1992. The number of employees in the three Baltic fisheries sectors in 1991 totalled 30 000 in Estonia, 29 000 in Latvia and 15 000 in Lithuania. At the end of 1993, there were 40 000 people employed in the distant-water fishing sector (including the associated industry) but this number is probably declining.

From 1970 to 1976, Baltic fish catches grew dramatically from 1.1 million to 1.7 million tonnes, an increase of more than 50 percent. After 1976, annual fish production declined to around 1.5 million, remaining steady until 1989. During the period 1970-1990, Latvia held the largest share of the Baltic fish catch, generally 35 to 45 percent of the total.

After 1990, the catch began to decline, recording particularly sharp drops in 1992/93. Preliminary data for 1993 put the total Baltic fish catch at around 0.42 million tonnes, with the Latvian and Estonian catches at 0.15 million tonnes each and Lithuanian output at 0.12 million tonnes.

The breakup of the USSR and the restructuring of the Baltic economies are the primary reasons for the significant decline in Baltic fish catches. During the Soviet period, the Baltic deep sea fishing fleet was significantly expanded, ending the predominance of coastal fishing which is traditionally practised in the Baltic area. Around 70 percent (Estonia and Latvia) to 90 percent (Lithuania) of Baltic fish catches came from areas outside the Baltic Sea, primarily from areas in the Atlantic Ocean. However, since the USSR's dissolution in 1991, the deep sea fishing fleet has been facing major difficulties, partly through loss of access to Soviet deep sea fishing rights which require new fishing licences, but primarily because of the new profitability requirements as well as the discontinuation of subsidies and logistic and financial support in general, leading to substantially decreased catches. For example, 1992 Baltic fish catches in the Atlantic and Pacific Oceans were down by 50 to 100 percent from 1991 levels. Left with an oversized fishing fleet, reduced access to deep sea fishing grounds, decreases in both subsidized energy supplies and export demand from the former USSR, the Baltic states were forced to reduce or idle much of their fleet, resulting in lower catches. Privatization of the fisheries sector has also disrupted fishing activities to some degree.

Given the economic conditions in the Baltic republics, it is unlikely that the volume of catches will increase substantially from the lower levels of the 1990s, as reduced fishing area, ongoing privatization and strong competition in the world market will probably continue to constrain any significant growth in the short to medium term. in 1992, for instance, 75 percent of the catch was composed of low-value small pelagics. With this type of catch, it is difficult to operate with a profit and catches will thus tend to decrease further.

Coastal fishing may be expanded during this period, while growth in freshwater aquaculture could also occur, particularly in Latvia where extensive freshwater areas have not yet been fully developed. However, the increase in coastal fishing without regulations and regular monitoring could, and probably has already, lead to environmental degradation and lower fish yields. The Lithuanian region of the Courland Lagoon, one of the richest fishing areas of cod, sprat and herring, has already been affected by industrial pollution, and fish yields in that area have been halved from historical levels. However, the Baltic states have begun to adopt international fishing regulations and accounting standards to reduce the risk of environmental damage.


Trade liberalization. The Baltic trade regime that has evolved since independence in 1991 can generally be characterized as liberal, with relatively transparent trade barriers and controls. Unlike in the other former Soviet republics, most Baltic foreign trade activity takes place in the private sector, with limited state involvement. In addition, there are few if any constraints on foreign exchange earnings, such as surrender requirements on export proceeds.

The Baltic export policies are for the most part characterized by moderate taxes, with no subsidies and very few quantitative restrictions. The Baltic import regimes are also relatively free from quantitative restrictions and consist of uniformly imposed tariffs and taxes. There are very few import controls, most of which are for health and security reasons. Baltic import tariffs generally range from 5 to 20 percent. By the end of 1992, several Estonian import taxes were converted to excise taxes. Generally speaking, Lithuania and Latvia have instituted more import tariffs on agricultural goods than Estonia. In March 1994, efforts to liberalize agricultural trade between the Baltics were hindered by Lithuania's and Latvia's rejection of an Estonian proposal to eliminate import tariffs on agricultural goods.

The three Baltic states have also established independent currencies which have full (Latvian lat) or current account (Estonian kroon and Lithuanian lita) convertibility. Lithuania and Latvia established central banking systems and a floating exchange rate when they established their currencies, although Lithuania recently pegged the lita to the US dollar to improve its stability. Estonia established a currency board when it introduced the kroon, pegged to the German mark. The introduction of these new currencies has helped to facilitate trade with developed countries, but Baltic export competitiveness has diminished somewhat as these currencies have appreciated in real terms. Further, while the early exit from the rouble zone allowed the Baltic states to take control of monetary policy and insulate their economies from the inflationary environment of that zone, it also contributed to the sharp reduction in Baltic trade with the other former Soviet republics.

Main policy issues and outlook

The general outlook for the Baltic agricultural economies is one of continued restructuring, as these countries move towards becoming full-fledged market economies. Continued progress in privatization and growth in private sector economic activity are expected in all three Baltic states. In addition, the IMF expects economic growth to resume in 1994, following four years of contraction. Estonia is generally considered to have the best prospects for economic growth in 1994, given its strong economic performance at the end of 1993. Nevertheless, Baltic economic recovery will be dependent on the continuation of sound fiscal and monetary policies and, to some extent, on the rate of progress made by the other former Soviet republics in their transition to market economies.

Given this setting, the following outlook for agriculture can be offered:

Ukraine

Ukraine has been one of the region's most conservative countries in implementing economic reforms. Aggregate output continued to decline steeply in 1993, while inflation has been running high (at around 2 500 percent in both 1992 and 1993, according to the OECD). To counter the declines in output, the government has been subsidizing enterprises and farms. Prospects for economic recovery appear poor in the absence of more decisive economic reforms and stringent macroeconomic policies.

The agricultural sector

Agriculture plays a very large role in the Ukrainian economy, accounting for 33 percent of Ukraine's net material product (NMP) in 1993 and employing about 20 percent of the workforce. Agriculture and food account for about 9 percent of Ukraine's total exports and 6 percent of total imports.

Ukraine has some of the richest soils for agricultural production in the former USSR and in the world. About 54 percent of the country is in part of the chernozem soil zone, which Ukraine shares with the Russian Federation. These deep black soils have a humus layer of 40 to 50 cm or more in depth and abundant mineral and organic nutrients. Ukraine is divided into three agroclimatic bands running from southwest to northeast: the forest zone has acidic soils and an annual precipitation of 600 to 700 mm; the forest-steppe zone has plentiful chernozem soils and an annual rainfall of 450 to 600 mm; and the steppe zone, mostly chernozem, has 350 to 450 mm of annual precipitation.

Ukrainian agriculture is practised predominately in the southwest and south. The southwestern region (including Kiev and western Ukraine) forms the heart of Ukrainian cereal, sugar beet and cattle production and related food processing industries. The southern economic region includes the dry steppes near the Black Sea and the Crimean Peninsula. This area is also dominated by agriculture and agriculture-related industry, including viticulture and such crops as wheat, sunflowers, vegetables, fruit and rice.

As a result of the country's rich soils, crop yields in Ukraine are quite high compared with other former Soviet republics and rival or exceed United States yields, except for maize. Moreover, Ukrainian crop yields regularly exceed those of the Russian Federation by 50 to 100 percent.

Livestock products currently make up 53 percent of the value of total agricultural production in Ukraine (in 1983 rouble prices). The main meats produced are beef and veal and pork, which account for 49 and 35 percent, respectively, of total meat production by weight. Crops make up the remaining 47 percent of total agricultural production value in Ukraine (in 1983 rouble prices). The main crops are cereals, sugar beet, sunflowers, potatoes, flax and vegetables. The main cereals cultivated are winter wheat and spring barley.

Agricultural production in Ukraine, along with the GDP, has been falling since 1990; agricultural production declined by about 2 percent in 1993 after larger declines in 1991 and 1992.

The structure of agricultural production has also changed since 1990, as the demand for and the production of livestock products has fallen relative to crops. This is a consequence of the drop in real incomes and rise in the relative consumer prices of livestock products following price deregulation and the reduction of consumer subsidies for livestock production in 1992. Indeed, under the Soviet regime, consumer subsidies stimulated consumption of meat and other livestock products, leading to a per caput meat consumption in Ukraine and the USSR in 1990 that was considerably higher than that of other countries with a similar per caput GDP. Thus, livestock production as a portion of total agricultural production in Ukraine decreased from 57 to 53 percent between 1991 and 1992 (in constant 1983 prices).

Ukraine has regularly produced an exportable surplus of agricultural products, except for cereals. Net cereal exports have depended on the harvest, normally ranging from about +0.5 million to +2 million tonnes in good years to -0.5 million to -1.5 million tonnes in bad years (with average production in the period 1990-93 lying in the range of 40 million to 45 million tonnes).

Trade statistics are relatively poor and frequently contradictory. However, trade both with former Soviet republics and other countries appears to have fallen off sharply in 1991, 1992 and 1993. Ukraine has been a net importer of about 0.5 million to 1.8 million tonnes of cereals for the past three calendar years (1 .8 million tonnes in 1993). Ukraine is normally a net exporter of sugar, almost exclusively to former Soviet republics. Whereas as recently as 1990 these exports totalled about 3.5 million tonnes, in 1993 Ukraine exported less than 1 million tonnes 4 sugar. It was also traditionally a net exporter of livestock products, exporting nearly 2 million tonnes of milk and 650 000 tonnes of meat in 1990, mostly to other former Soviet republics. By 1993, however, net milk exports had shrunk to 300 000 and meat to less than 100 000 tonnes. In addition, in 1993 Ukraine had net exports of fruit, vegetables and eggs.


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