REVIVING INDIVIDUAL FARMING: Opportunities and Dangers

For the third year in a row, Ukraine’s agricultural sector has been losing money. This has been caused mainly by the stable tendency toward increased disparity in prices for agricultural outputs and inputs (in the last seven years this gap has increased over four times) and exorbitant interest rates for bank loans, which have suspended all development of agribusinesses.

While until 1990 loans to the agricultural sector accounted for 40% of all lending, last year it was under 2%. This entailed a sharp decrease in the purchase of the means of production by farms. As a result, the number of tractors and harvesters in the agricultural sector fell by approximately one-third from 1990, and the number of automobiles by 10%. Due to the lack of working capital, the application of mineral fertilizers has decreased eight times, and organic fertilizers four times.

All this has led to soil depletion and decreased its natural fertility. In other words, now we have every reason to expect poor yields for all crops.

Hence, food consumption by our citizens has fallen below the minimum physiological norms. Per capita annual meat and meat product consumption is now 39 kg versus 68 in 1990, milk and dairy produce 245 kg (373 kg); eggs 172 (272); sugar 28 (35); vegetable oil 8.2 (11.6); potatoes 122 (131 kg), and even bread, macaroni, and cereals 128 kg versus 141 kg.

It might have been even worse had the private agricultural sector not picked up momentum. Despite economic hardships, at the cost of manual labor and enormous efforts it had enhanced the efficiency of land use and increased output. Unfortunately, the trend in the private sector is set not by the private farmer, who cannot overcome the pressure of taxes and bureaucratic tyranny, but by part-time personal subsidiary farms, which have become the backbone of the private agricultural sector.

Currently we can establish the existence of an over 11 million army of such farms. This is an independent economic mode of country life. However, today there are even more problems than yesterday. The provision of part-time subsidiary farms with inputs is at the zero level. Then how can one increase the market value of their products? Obviously, it is necessary to reorient existing procurement organizations, processing companies and agricultural service entities towards such farms. Further support should be given to the development of cooperatives to purchase, store, process, and market agricultural products, to provide agricultural services to the population, and to organize wide-ranging trade both on the market and through outlets.

Here are some arguments in favor of such transformations. In 1991 the part-time personal subsidiary farms produced on 6.5% of all arable land 30% of Ukraine’s gross agricultural output; in 1994, on 9.6% of arable 43% , and in 1996 on 14% of arable their output accounted for over half. In 1997, given a curtailment in the public sector output, subsidiary farms had a 29% increase compared to 1991 and reached 56% in terms of total production. This was due to the fact that in 1991, 1.7 million families received parcels of land attached to their homes and used them for farming.

From 1991 on, the cattle stock in the private sector has increased from 3.5 million to 3.9 million head last year, while its share in the total has grown from 15% to 33%. The number of cows in the private sector currently exceeds that in the collective one. The number of pigs, sheep, and goats has been increasing just as rapidly. This has made it possible for part-time subsidiary farmers to produce in 1998 1.8 million tons of meat (69% of the total produced), 8.5 million tons of milk (69%), 5.2 billion eggs (63%), 15 million tons of potatoes (97%), 4.6 million tons of vegetables (84%), and 0.9 million tons of fruit and berries (82%).

Thus, in our difficult economic situation these farms do not only settle the issue of food for subsistence but also supply a significant share of their produce to the market, making a considerable impact on the prices of basic foodstuffs.

For instance, in the six months of this year, 900,000 tons of meat (live weight) has been bought from the population (33% of the total public procurement), 388,000 tons of milk (16%), 14 million eggs (2.2%), and 12.3 tons of wool (40% as wool fiber).

We predict that on the whole the output of part-time subsidiary farms will this year account for 60% of the Ukrainian agricultural sector’s total production. Thus we have every reason to say that now such farms become principal commodity producers in the agricultural sector. In the future their role will increase even more.

Nonetheless, analysis shows that due to a decrease in the absolute number and aging of the rural population, the load on its able-bodied segment is increasing significantly. People of working age in rural areas account for only 49% of the total population, compared to 59% in towns and cities. On the other hand, the number of disabled people in the countryside is 1.5 times higher than in urban areas. But nobody envies those who are able to work, either. Compared to other sectors, the peasants’ wages are the lowest.

Thus, the people are forced to run their subsidiary farms under extremely intensive conditions, diverting a certain portion of their funds into the repair of agricultural machinery and as payment for various production services. This testifies to the striving for commodity production and is a significant incentive to expand production.

A specific feature in the development of part-time subsidiary farms is that they enhance output without significant investment, credits, or funds from the state budget. Given this fact, peasants with a parcel of land (five hectares on average), should have the chance to use a portion of it for their subsidiary farm. But, unfortunately, most of them have neither working hands nor the financial capability to do so, although some young people and families with many children do. The average area of the homestead land attached to such a farm is now 0.37 hectares. The low demand for acquiring additional land is explained by the lack of machinery and implements that would make it possible to cultivate more land. This is due to the impossibility of getting loans to purchase equipment and other necessary inputs. On the other hand, the utilization of agricultural machinery makes such part-time farms more vulnerable to price rises and interruptions in energy supplies, especially since such farms are now disregarded by the state as well as by agricultural service institutions and organizations.

This is a basic mistake, for under current conditions, the products of the private sector have shown themselves competitive on the domestic market. Per one hectare of arable land part-time supplementary farms have produced on average UAH 3740 vs. UAH 318 by the public sector enterprises. Currently a considerable percentage of part-time personal subsidiary farms has assumed a clear-cut commodity orientation, which testifies to the rebirth of individual peasants as a class. However, if society should fail to ensure this class’s cooperation with specialized service organizations, that will result in its liquidation yet again.