Staking on small farms

Distributing agricultural budget pie for this year, the state will provide the priority rights for farmers and individual farms. This was announced by Mykola Prysiazhniuk, Minister of Agrarian Policy and Food of Ukraine during the 12th Congress of the Association of Farmers and Private Landowners of Ukraine. “We have now developed three forms of managing the agriculture sector. Those are large-scale production enterprises, farms, and individual farms. My personal position is that we should not destroy any of those forms. However, the state, and we insist on this, will give practically all the budget funds that will be allocated from the budget in 2012 to farmers, collective farms, and individual farms because those forms are most common in our country and, therefore, are of high priority for the state,” he said.

The minister defined farms as households that keep 10 or more cattle heads and individual farms are households that keep three and more cattle heads. According to the minister, even without subsidies Ukrainian agriculture remains one of the most profitable among neighboring countries and the European Union, and the main credit for this should be given to our Ukrainian individual farmers. Prysiazhniuk also said that in the past year Ukrainian agro-industrial complex managed to increase the volume of foreign trade and expand the geography of international relations. “Last year Ukraine exported agricultural products worth of 2.8 billion dollars to the European Union, of which corn was only 30 percent. And the export trade balance with Russia was 3.5 billion dollars. This indicates that our products are in demand and are winning foreign markets. We now have to continue working in the same direction,” noted Prysiazhniuk. “Subsidies will further expand the geography of spreading Ukrainian agricultural products.”

Will the state’s actions make lives of small farmers easier? What programs will be financed in the first place? The Day asked experts and market participants these questions.

COMMENTARIES

Leonid KOZACHENKO, president of the Ukrainian Agrarian Confederation:

“Farms and individual farms are those categories to which the state should provide more financial support. Due to various reasons they are the least competitive nowadays. However, the funds allocated by the state for the agro-industrial complex are not enough to radically change the situation in the sector of small farms. The guaranteed financing for agriculture in 2012 is almost one billion hryvnias. There is also a special fund that has nearly six billion hryvnias reserved. But one should not expect that all of this money will be provided by the state. The experience of the last few years shows that the special fund is filled with the additional revenues to the budget. And this year it is not expected to have a lot of such revenues.

“In my opinion, the government should, first of all, facilitate the renewal of productive assets of such manufacturers. It should not allocate subsidies for reduction of the cost of mineral fertilizer or gasoline. Small farmer cannot get a loan from a bank for purchasing equipment because he has no liquid collateral and the volume of the products he produces is too small to be a guarantee for a bank. Thus, there should be a state program for three to five years with a guaranteed budget support. In this case the equipment manufacturers will have more confidence in small farmers. The problem of providing financial support should be solved as soon as possible because in 10 years the number of such farms will be reduced by 2,500.

“However, along with allocating funds for development of small farms the ministry and other agencies must strengthen the control over the budget money provision. In the whole chain of budget funds movement there are many questions that need to be resolved to get them. That is why farmers often simply refuse to receive the subsidies because our system operates according to a principle ‘to give, but to keep hold of.’ Everything begins from the bottom where a ‘kick-back’ is required to get subsidies. After the farm received state aid the second phase begins: the farm is checked by five or six different commissions (tax inspection, Ministry of Finance, firefighters, sanitary station, etc.). Such inspections do not end with having a cup of tea or coffee.”

sMykola MARKEVYCH, president of the Association of Farmers and Private Landowners of Ukraine:

“We must support small farmers with subsidies per hectare. This may be the form in which every farm will receive the subsidy for the first 100 hectares. Or another option is possible when farms with 2,000 to 3,000 hectares of land will not be subjected to receive this subsidy because they have more financial capacity for survival. This year’s budget does not provide for such type of subsidies.

“There is Farms Aid Fund that has been operating directly for farmers since the 1990s. Today its financial reserves to support farmers contain 28 million hryvnias. It is extremely little. In 2008, the crisis year they had 170 million hryvnias. The total amount of financial support required for small farmers is 700 million hryvnias. As long as there will be programs for large holdings and corporations, there will be no funds for small business because the big ones consume 99.9 percent of all the resources. Today, in my opinion, the state’s concern about farming is insufficient and unsatisfactory. A farmer is not protected because corporate raid is flourishing at the local level due to the imperfect judicial system. Everyone wants to earn something from a farmer.”

Aleks LISSITSA, president of the association Ukrainian Club of Agrarian Business: