The rates of Ukrainian agrarian sector are not bad in recent years and affect favorably country's GDP. However, the situation is not perfect, considering gain price crash on foreign markets and recent trade conflicts with Russia.
In an interview with minister of agrarian policy of Ukraine Mykola Prysiazhniuk, ForUm asked about further development of the situation on food market, about tasks of the Ministry and consequences for food price policy after the signing of the Association agreement with the EU.
- Mykola Volodymyrovych, considering the latest events, we would like to talk about trade war with Russia. Does the Ministry plan to introduce additional inspections or to add the list of quality criteria for Ukrainian products?
- In my opinion, our relations with Russia have not reached the status of "trade war" yet. I support the idea that any product exported in a country must meet the norms and standards of this country. We should remember this, understand and accept.
The food market of our state is controlled at the legislative level. There are specific measures how to limit or ban import of food products on domestic market. Every country has such measure and the right to apply them.
As for the quality of Ukrainian production, together with European institutions we are preparing the launch of HACCP system in Ukraine. Hazard analysis and critical control points (HACCP) is a systematic preventive approach to food safety and biological, chemical, and physical hazards in production processes, and designs measurements to reduce these risks to a safe level. In this manner, HACCP is referred as the prevention of hazards rather than finished product inspection. The HACCP system can be used at all stages of a food chain, from food production and preparation processes including packaging, distribution, etc.
It is hard to say whether this system will catch on, but if we want to enter foreign markets, we must do our best. All enterprises working for export will be obliged to apply the system. We have worked out a draft bill on food safety, and I think in 2014 we will introduce the new control system. However, it does not mean that foreign markets will become wide open for use, but at least we have proper arguments on the quality, which would not allow to limit our products in other countries.
- Following the claims to Ukrainian cheese, meat and confectionary, what other products may appear in the risk zone?
- Well, there are regulatory actions and non-regulatory actions, which may be used by a country in the course of bilateral trade. As for the first ones, we now apply all measures to protect ourselves from African swine fever, raging in Russia and Belarus. For this reasons other countries can ban or limit import of agricultural production.
Speaking about non-regulatory actions, none of the products is secured. In this case, we should take into account the structure of import of a product in a country, product's share in this structure, as well country's capabilities to increase domestic production of this product. However, I hope this list of products is already exhausted.
- But in theory it still may happen, right?
- It may. We have free trade area with Russia, and at the same time 300% duty for sugar and 200% for caramel. Who agreed these exceptions? You know, we work by the principle might is right (smiling - ed.)
- What is the situation with purchasing prices for milk, considering trade conflicts with Russia?
- Proceeding from forecasts I can safely say that the prices for milk will not go down. There is a number of reasons for this. Firstly, domestic consumption of milk grows. Secondly, we are entering foreign markets with out butter and cheese. Thirdly, following the initiative of rural development we are working on formation of procuring cooperatives, which will store up maximum volumes of milk and deliver it to city consumers after processing.
According to the program, there will be procuring mobile stores, equipped with coolers, a lab and washstand to sell milk on tap. Thus, we will increase the price for producers, but reduce it for consumers. The pilot project was launched a year and a half ago in Volyn region. When last year the average purchasing price for milk was critically low - 1.8-2 hryvnias per liter, in Volyn region it made 3 hryvnias. Moreover, milk price for consumers made only 5 hryvnias, not 7-8 as countrywide.
From October 1 we will launch the project in Kyiv. Kyiv city state administration allotted 20 spots where farmers will sell their products. Apart from milk, the mobile stores will sell vegetables and meat products, all certified.
- Should Ukraine get prepared to food price rise in case of signing the Association agreement with the European Union?
- Absolutely not. After entering the WTO our market has already been liberalized, and we have nothing to fear. We do not expect inflow of imported food products. On the contrary, we will have more opportunities to supply our production on European market. According to forecasts, food and processing industry of Ukraine will become more interesting for investments, as we produce trice more raw materials than consume, and the quality of raw materials is high.
- Some words about food situation on domestic market. This year the grain yield is heavy, but some mass media reports it is rather negative, because we do not have modern storage facilities, plus grain purchasing price crash on the market. What does the Ministry of agriculture do to settle the situation?
- I do not share the position that heavy yield is a negative event. Heavy yield means food supply security and strong position on foreign markets. We've been fighting for foreign markets for 20 years, and finally we are becoming a reliable player and trendsetter of grain trade. In fact, we have no other choice. A country which producers more than consumes must fight for foreign markets. Moreover, our Foreign Ministry must support us in this fight, protect and promote, just like other countries do for their companies on Ukrainian territory.
This year the grain market is unpredictable. Analysts speak about price fall, and it is true. Nobody can tell how long the fall will last and whether the price has already reached its minimum. What we can do is to preserve those foreign markets we have already conquered, look for new ones and resist the competition.
- What markets are top priority and most promising for Ukraine?
- There are near markets, far markets, promising markets and inaccessible markets. Venezuela, for example, is a large importer of agricultural production, but it is inaccessible for us due to competition and logistics. We also cannot go to Australia, as it is a country-exporter as well.
Our traditional markets include CIS. Last year we almost reached the top position among exporters to the EU. Then there are Black Sea countries and Middle East. Our production also goes to north Africa and Persian Gulf countries.
Other countries within our reach include China, South Korea, Bangladesh, India, Japan. These markets are very promising for us, and we are competitive there. The Ministry has defined about 30 promising counties, which markets we must enter.
- You said that heavy yield is an advantage for the country. In recent years the yields were more than high, but price for bread does not go down. Why?
- Baking industry has its peculiarities, as it has one foot in the soviet ways of doing business and one foot in the modern market-based economy with the state in the middle worrying about stable prices.
Moreover, prevalence of gigantic bread-baking complexes, which supply bread to three-four regions at once, strike at the root of competition. There are several regions, which have about 350 bakeries of all types and levels each. Governors of these regions do not worry about bread prices, as the competition among these bakeries does allow to rise prices. But there are regions with these monstrous baking complexes, which keep working on old equipment and have high prime costs of bread. 30% of the price of a ready loaf of bread includes agricultural production, and the rest is a combination of costs for energy carries and others.
- About 5-7 years ago beef cost less than pork, and people were buying it more often. Why has the situation changed? Pork steak now costs 60 hryvnias per kilo, and beef steak - UAH 62. What does the Ministry do to at least even the prices?
- It is a matter of culture of consumption, being changing lately. Ukrainians traditionally prefer pork and poultry, but the Ministry has initiated a number of measure to increase cattle stocks and beef production. Our further task is to promote export of live stocks, in particular bulls.
Many countries, including Persian Gulf, import live sheep, and supply fresh meat to consumers on the site. We will also follow this practice and will reduce export duties for live weight of sheep and bulls by 20%.
- From July 24 Ukrainian stockbreeder were allowed to supply poultry to the EU. Do you have any information about how successful the process is going?
- As of today the exporters are still preparing for supplies, agreeing on conditions and signing the contracts. We hope to produce about 1 million 200 thousand tons of poultry this year. In 2010 we imported about 300 thousand tons of poultry, but this years the import has dropped to 80 thousand tons. In 2010 we did not export anything, but this year the export will make about 100 thousand tons. Following the gain, sunflower oil and cheese, poultry is becoming export-oriented.
- At the beginning of September Ukraine stores late potato, but this year rainy weather interfered with the works. Will it influence the prices in winter?
- On average Ukraine harvests 20-22 million tons of potato annually and consumes only 6 million tons. Now you understand what reserve we always have, thus no problems are expected. Price policy will not be affected. Last year the prices for potato were low. This year the prices has flattened out and satisfy both consumers and producers.
Our primary task is to organize procuring cooperatives, form trading lots and enter foreign markets, as well as to change potato varieties in the private sector.
- In many regions of Ukraine the agricultural lands suffer barbaric exploitation: crop rotation is not observed, herbicide and fertilizers are misused. How can the situation be changed?
- Well, these are negative consequences of market-based economy. Everybody says the land is a subject of sale, but forgets to add that there are certain obligations which come with this item of goods. land owners must follow the production process and keep up fertility. We have a serious discussions with agricultural holdings, which argue that crop rotation is wrong and contradicts economy principles. The discussions have lasted for two years, but I think the Ministry has found a way to force landowners to care about fertility.
Last monitoring of land fertility in Ukraine was held in 1957. Since then nobody has ever control the state of national agricultural lands. The National Academy of Science jointly with the Institute of fertility is working on a national program.
The draft bill on land fertility is almost finished. At the beginning we won't demand crop rotation, but will oblige landowners or farmers to keep up the fertility. The draft bill provides for fines, but we stand for peaceful principles. Personally, I believe than after 20 years of permitted abuse of land we cannot press on farmers to build up the soil in one day. But we will demand gradual recovery. Moreover, we will recommend landowners to break up contracts with farmers who abuse the soil.
- In the whole world small farmers are the basis of agricultural industry and the state takes care about them first. In Europe farmers can argue with EU leadership and spill milk on the road if they do not like the conditions. In Ukraine, though, media always writes about problems small farms have to face daily. So, what is the real situation with Ukrainian farmers and what are the measures to support them?
- Rural areas do not do fine if the economy of the country does not do fine. Our farmers stay between private industry and agricultural holdings. The law on farming is friendly enough, but for the moment I cannot say how effective its measures will appear.
One of the principle positions of the state regarding the rural development is not to interfere with large agricultural holdings, as they are our export potential and anchor for investments. The second task is to support farmers and medium producers. To preserve Ukrainian rural areas, modernize them and promote living there we initiate formation of family farms.
It is also necessary to create an economic platform for preservation and development of Ukrainian rural areas using not only the land, but also natural resources, minerals, advantages of geographical locations, traditions and human capacities.
- Do you plan on recovery of agriculture on soil, contaminated after Chernobyl disaster?
- We are working on it. Investors have already come to Ivanovski district of Kyiv region, and in 5-6 years we may start cultivating these lands. Test results say that the soil has naturally repaired itself and is ready for use: cultivation of industrial crops for example.
Tetyana Matsur, photos by Viktor Kovalchuk
Спасибо за Вашу активность, Ваш вопрос будет рассмотрен модераторами в ближайшее время