1. Directorate for Food, Agriculture, and Fisheries 1 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES OECDOCDE TRENDS IN AGRICULTURAL MARKETS AND POLICIES IN UKRAINE by Olga Melyukhina OECD, Directorate for Food, Agriculture, and Fisheries Berlin, 5 May 2006

2. Directorate for Food, Agriculture, and Fisheries 2 Outline OECD-FAO Agricultural Outlook Recent agricultural and policy trends in Ukraine Main challenges and constraints

3. Directorate for Food, Agriculture, and Fisheries 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. Directorate for Food, Agriculture, and Fisheries 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. Directorate for Food, Agriculture, and Fisheries 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. Directorate for Food, Agriculture, and Fisheries 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. Directorate for Food, Agriculture, and Fisheries 7 Agricultural Situation in Ukraine

8. Directorate for Food, Agriculture, and Fisheries 8 Ukraine’s Agricultural Trade USD mln

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

10. Directorate for Food, Agriculture, and Fisheries 1010 Ukraine’s key exports by destination

11. Directorate for Food, Agriculture, and Fisheries 1 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. Directorate for Food, Agriculture, and Fisheries 1212 Ukraine’s Producer Support Estimate

13. Directorate for Food, Agriculture, and Fisheries 1313 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. Directorate for Food, Agriculture, and Fisheries 1414 Main Challenges and Constraints Sustaining 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. Directorate for Food, Agriculture, and Fisheries 1515 Main Challenges and Constraints Easing 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. Directorate for Food, Agriculture, and Fisheries 1616 THANK YOU! www.oecd.org