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TRENDS IN AGRICULTURAL MARKETS AND POLICIES IN UKRAINE

TRENDS IN AGRICULTURAL MARKETS AND POLICIES IN UKRAINE. by Olga Melyukhina OECD, Directorate for Food, Agriculture, and Fisheries. Berlin, 5 May 2006. Outline. OECD-FAO Agricultural Outlook Recent agricultural and policy trends in Ukraine Main challenges and constraints.

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TRENDS IN AGRICULTURAL MARKETS AND POLICIES IN UKRAINE

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  1. TRENDS IN AGRICULTURAL MARKETS AND POLICIES IN UKRAINE by Olga Melyukhina OECD, Directorate for Food, Agriculture, and Fisheries Berlin, 5 May 2006

  2. Outline • OECD-FAO Agricultural Outlook • Recent agricultural and policy trends in Ukraine • Main challenges and constraints

  3. Agricultural Outlook 2006-15:Main Assumptions • Macroeconomic setting – sustained optimism • robust output growth, most dynamic in large developing economies; contained inflation • Current agricultural policies continued • but uncertainties: DDA outcome; bilateral trade; new US Farm Bill; policy changes in BRIC • Other uncertainties • disease outbreaks; impact of biofuel

  4. Agricultural Outlook: Trends in Commodity Markets • Developing and transition economies increasingly shape world demand and trade • Moderate trade growth – trade barriers persist • Cereals: trade strongly driven by livestock expansion; biofuel becomes important factor, but impacts are difficult to predict • Oilseeds: strong demand for oil and meal; high rates of trade growth, China main driver

  5. Agricultural Outlook: Trends in Commodity Markets • Sugar: trade increasingly dominated by Brazil; Russia, EU, and China largest importers • Dairy: demand growth mainly in dev and transition econ, prices firm, OECD countries remains main trader • Meat: prices to stabilise after disease shocks; main consumption and production growth in developing countries, which expand their exports and absorb 2/3 of import increase

  6. Agricultural Outlook: Focus on Ukraine Ukraine emerges among important non-OECD exporters • Coarse grains → EU and North Africa and Asia • Oilseeds → diversification from sunflower; oil exports • Dairy: butter and SMP → Russia and other CIS

  7. Agricultural Situation in Ukraine

  8. Ukraine’s Agricultural Trade USD mln

  9. Commodity Composition of Ukraine’s Agricultural Exports $ 4 310 mln $ 3 473 mln Other Meat Confectionery Beverages Dairy and eggs Sunseeds+oil Cereals

  10. Ukraine’s key exports by destination

  11. Support Policies • Border protection: simplified and lowered • Series of “commodity” laws • 2000: Sugar Law / sugar quota • 2001: Grain Law / intervention purchases • 2004: Meat Law and Milk Law / minimum prices • 2005: Grape and Grape Wine law • Tax concessions • Fixed Tax (as % of land value) until 2010 • VAT subsidy • Processor VAT refunded to milk and meat producers • Subsidised credit and debt restructuring • 2005: Law on State Support to Agriculture

  12. Ukraine’s Producer Support Estimate

  13. Progress in WTO accession • In 2005 – active harmonisation of national legislation with WTO requirements • Bilateral protocols signed with majority counterparts (US recently, Australia and Colombia ?) • Issues remain • AMS amount (treatment of tax exemptions) • Base period 1994-96 vs 2000-02 • VAT regime (10% domestic vs 20% on imports)

  14. Main Challenges and ConstraintsSustaining Agricultural Growth • Development of infrastructure, information, and risk management systems • Improvement of standards and quality • Land and labour mobility • Terms & availability of credit • Investment and modernisation • More policy stability • Resolving mismatch between emerging market regulation and WTO commitments

  15. Main Challenges and ConstraintsEasing Social Pressures • Agricultural growth is necessary, but not enough • Social policies • Integration of small-scale farming into markets • Rural economy diversification • Enhanced labour mobility • Investments in human capital: health, education, and extension

  16. THANK YOU! www.oecd.org

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