For Ukraine the passed year was the time of the big disappointments and hopes as well. These two feelings used to change each other during the passed 365 days. We chose the most important things happened in 2014 which impacted on the development of agriculture of Ukraine and all the country as well. Despite the tough development, the agrarian sector was able to save the growing rates. So Ukraine remained an agrarian country.
Political crisis
The passed year 2014 was complicated for Ukraine due to the events which faced immediate and unexpected development. When in the end of 2013 there had been the first acts of protest in Kiev due to the delay of the signing of the Association Agreement between the EU and Ukraine, no one could ever suggest there will be power shift, territory inviolability breach, permanent armed stand-off in Donetsk and Luhansk oblasts and the long-running economic recession. The agriculture being the part of economics had faced the circumstance of the political crises as well.
The first event which was not expected was that Ukraine lost control over the Crimea. What did it mean for agriculture? First of all Ukraine lost the access to the deep water ports of the peninsular which impacted on traders who had to redirect the agricultural commodities batches onto the ports of the inland of Ukraine, and Odessa oblast in particular. However it is necessary to remember that annually Crimea ports used to ship nearly 5 mln tonnes of grain which is not the critical as the experts stated. But the traders were more awared about the possible delays in the Azov sea ports work. In general, they are still current in relation to Mariupol sea trade port due to its close position in the conflict zone of Donetsk oblast. But still the port continues to work to date.
The conflict on the territory of Donetsk and Luhansk oblasts negatively impacted on the Ukrainian grain and oilseed markets development. However, most of the problems were not with the crop but with the grain infrastructure – destroyed railways and highways, grain stores and other – caused the enterprises work suspension. Besides, due to the heightened risks a lot of transporters refuse to deliver agricultural commodities from Donetsk and Luhansk oblasts let alone the territories located in anti-terrorist operation zone. The ones who provide the services price-in the heightened risks into their cost.
Authorities renewal: unexpected decisions
In February, after the authorities renewal there was formed the new Cabinet of Ministers headed by Arseny Yatsenyuk. The Minister of Agrarian Policy and Food of Ukraine was headed by Ihor Shaika, the Ministry of Economic Development and Trade – Pavel Sheremeta, the Ministry of Finance – Aleksandr Shlapak, the Ministry of Infrastructure – Maksim Burbak.
In the end of May there had been early presidential election, and on June 2, 2014 there was announced the winner – Petr Poroshenko, who became the president of Ukraine. Meanwhile the early parliamentary election was on October 26, 2014 under the result of which the manning of Verkhovna Rada significantly changed.
As the speaker there was appointed Vladimir Groisman, meanwhile Arseny Yatsenyuk – headed the Cabinet of Minister again.
The final Government was formed finally on December 2, 2014: as the head of the Minister of Agrarian Policy and Food of Ukraine there was appointed Aleksey Pavlenko, the Minister of Economic Development and Trade – Ayvaras Abromavichus, the Minister of Finance – Natalya Yares'ko, the Minister of Infrastructure – Andrey Pivovarsky.
A.Pavlenko, the Minister soon after he has been appointed in December promised to present his new strategy of the Ministry development for 2015-2020.
Ukraine – EU
In the beginning of March, 2014 the Government decided to renew working on the Agreement of Association with the EU being delayed on November 21, 2013 by the Cabinet of Minister of Nikolay Azarov. On March 21, 2014 in Brussel the representative of Ukraine and EU signed the political part of the Association, and on June 27, 2014 after the presidential inauguration – the economical one. Meanwhile the September decision on the one year delay of the implementation of the economical part of the Agreement, in particular the status on the Free Trade Zone exploitation, which had been accepted after the three-side consultations in the format of Ukraine-EU-Russia. For full coming into force the document had to be ratified by all the parliaments of 28 countries-participants of the EU, but still the regime of the autonomous trade preferences imposed by EU for the Ukrainian commodities to be in force through to the end of 2015. According to the data of the State Statistics Service, in January-October Ukraine increased by 57% the supplies to EU of veg and animal fats-and-oils, and by 39% - grain exports.
Ukrainian agricultural producers received the quotas for supplies of wheat, corn, eggs, meat products and other. According to the data of the Prime-Minister of Ukraine in October, 2014 Ukraine has fully used the quotas for wheat and corn exports to EU.
Deregulation
The authorities' representatives used to talk about deregulation a lot, but the less was done.
The changes which could really be the deregulation is the cancellation of the Ministry of Agrarian Policy and Food of Ukraine the grain store technical regulation approval.
In July the Parliament of Ukraine canceled the way of the grain national resources formation and relayed the function on the Agrarian Fund. The change allowed to reduce the number of the barriers on the grain transportation over the country.
Meanwhile P.Poroshenko signed the Law on the State Land Bank liquidation, and in September the Cabinet of Ministers issued the Act on the Bank activity shut down.
Note, according to the estimation of the experts, the economical effect on the deregulation in the agrarian sector is expected at the level of 10 bln UAH which would help the industry in the situation when the state is not able to provide with the direct support.
Economical crisis
In 2014 due to the too long political crisis there was the economical one. The current challenges demand the reforms realization in order to stabilize the economics of Ukraine. But it will be in the future; meanwhile we are talking about the past. What is the economical result Ukraine is entering 2015 with?
First of all is the national currency devaluation. Thus in the budget for 2015 the national currency rate is 17 UAH/ USD, which is double higher of the last year rate – 8.8 UAH/ USD. And it is the official course let alone the Interbank Currency Exchange or the black market. The currency devaluation caused the deficit and the limitation measures presentation by the National Bank of Ukraine. Besides the inflation temps also speeded being followed by the significant decrease of the household purchasing power.
In the agrarian sector the foreign currency significant rise caused the imported material and technical resources prices increase causing the prime-cost increase and the production profitability decrease of the plant products. At the same time the global grains and oilseeds market conjuncture was unfavorable due to the low prices first of all. Besides it impacted the processing industry as well.
Cost-cutting drive: on/ off
The logical finish of the so instantly developing events on the political and economical arena was the state budget for 2015. As the Prime-Minister of Ukraine specified by this document there is cost-cutting drive coming into force. The same is for the Ministry of Agrarian Policy and Food of Ukraine. Thus, the costs for the Ministry were reduced to 3.092 bln UAH in 2015 as opposed to 7.668 bln UAH in 2014. Besides there was decreased the number of the state programs for the industry support previously financed from the budget. In general there were not changed costs for the Agrarian Fund of Ukraine. In particular the Government to allocate 100 mln UAH under the budget program “Agrarian Fund costs for the complex of measures for the storing, transporting, processing and exports of the objects being under the state price regulation of the Intervention Fund” 1.4 mln UAH for the intervention fund formation by the Agrarian Fund, and also the material and technical resources purchasing for the agrarians needs. Meanwhile in the budget there was remain unchanged the funds allocation for the financial support of the events in the agro-industrial complex under the condition of the financial leasing. The allocated sum totaled 3.818 mln UAH.
Business loves silence
It has being repeated by the experts and the market participants all over the year. Thus, due to the unfavorable economical and political conditions in 2014 there had been talks on the possible cancellation of the preferential regime of the agrarians’ taxation. So what are these rules?
In 2015 there remains the current regime of the preferential taxation of the VAT for agricultural producers. Of course it is the positive factor because it is the indirect state support positively acting unlike a lot of the various stated programs on the industry support. Besides, the Cabinet of Ministers is to save the preferential regime of grain exports through to January 1, 2018 and not to impose VAT for agriculture.
However in the registered Governmental Draft Law “On the changes introduction into the Tax Code and some other Laws of Ukraine (on the Tax reform)” it is offered to unite in the certain group the agricultural commodities producers paying the taxes on the simplified scheme. At the same time they plan to eliminate the fixed agricultural tax. This ti be realized within the Tax reform.
Crop
If 63.1 mln tonnes of the crop harvested in 2013 were the record ones, the 2014 rate at the level of 64.1 mln tonnes in the bulk weight is need to be called as the real achievement of the agrarians. Especially if to take into account the Crimea losses, and also in Donetsk and Luhansk oblasts. Note, in October, 2014 the Ministry of Agrarian Policy and Food of Ukraine presented its outlook at the level of 60.5 mln tonnes. However despite the high volumes, the grain quality issues came to the foreground. More precisely the ratio of the milling and feed grain.
According to the data of the analyst of APK-Inform Agency Andrey Kupchenko, the share of milling wheat (1-3 grade) in crop-2014 (23.2 mln tones) is nearly 43% or 10 mln tonnes in the absolute terms. Besides, barely all the milling wheat volumes can be used for flour producing due to the substandard milling conditions. Thus the milling wheat share is 60% from the general volume of the wheat production (6 mln tonnes).
According to the analyst, the milling wheat has become more precious commodity which realization will be held to the last. At the same time there is the Ukrainian wheat active exports. According to the data of the Ministry of Agrarian Policy and Food of Ukraine as of December 26, 2014 the agrarians have exported 8 mln tonnes of wheat, with the food grain share of 50%.
Thus very little supplies of the qualitative milling wheat in the formed crop 2014 in bulk with the active exports and the realization holding by the agrarians caused the insufficient offers of the grain and prices constant increase.
According to the official data, in 2014 corn crop reached 27.5 mln tonnes, meanwhile the average yield – 6.02 t/ha, which is lower compared to the last year rates (by 2.6 mln tonnes and 0.23 t/ha respectively).
Thus, in 2014 oilseeds harvest totaled 16 mln tonnes: sunflower – 10.1 mln tonnes, soybean – 3.7 mln tonnes, rapeseed – 2.2 mln tonnes. The oilseeds quality the same as the grains one brought some worries for the agrarians. Thus, sunflower quality in the beginning of the season was not high: yield was at the level of 0.5-0.9 t/ha, moisture content – 5-7%, oil content – 39-44%. But with the harvesting campaign going the qualitative parameters improved: moisture – 6-9%, oil content – 43-47%. In 2014/15 season soybean quality was rather high (moisture – 10-11%, oil content – 37-41% on dry basis).
According to the estimation of APK-Inform, in 2014 rapeseed harvest reduced by 100 thsd tonnes compared to the last year rate due to the planted areas decrease. Qualitative parameters were rather good and did not exceed basic ones. Just only in the beginning of the harvesting campaign the certain producers reported the excessive moisture content of the oilseeds – 10-15% due to the unfavorable weather conditions in the third decade of June.
As for winter grains planting for crop 2015, as of the end of December, 2014 there had been planted 8.9 mln ha, up 7% of the planned areas. The major problem the agrarians faced during the winter planting campaign was the productive moisture content deficit in the top soil. The conditions for winter rapeseed planting were mostly unfavorable. Despite the rains passed in the second decade of August, the moisture was soon dried out by the high temperatures which negatively influenced the rapeseed seedings condition.
Agri-holdings: to survive
After the events passed in 2014, the large-scale agrarian holdings may have the more number of economical problems unlike the medium- and small-scale ones. The reason is the large-scale agricultural holdings bear the larger debt load which is difficult to be solved in the current situation. Besides, as a rule the large-scale companies obtain loans in the foreign currency, so under the conditions of its devaluation it worsens their situation.
This was the complicated and unpredictable year 2014. Of course, there happened much more, but in the material we presented the most important of them. Note, the situation change caused the barriers for the Ukrainian enterprises free activity, including the agrarian ones. What will be the year 2015? It is possible to suggest – also complicated, the same as the previous one, but Ukraine has obtained the certain experience of the risks and challenges overcoming. So if there are accepted the correct decisions it is possible to expect the situation stabilization.
Alina Styozhka, Maya Scherbina, APK-Inform Agency
