Producers Asked to Wait

“This year’s crop of grain is reportedly not worse than last year. With due account of the last year’s paradox (good harvest — oversupply — problems of direct producers), what has been done to avert a wide price gap this year and further on?”

“The market is, above all, demand and supply. If we have oversupply, this will undoubtedly trigger the price mechanism. So, to influence these factors, we have taken a number of organizational measures. There is a presidential decree on agrarian market reformation which calls for establishing a state agency for regulating the food market. We suggest today that the budget provide money for this kind of agency.

“Besides, it is clear that an owner produces and sells things to a similar owner. The two subjects of entrepreneurship affect purchases and sales. Traders want to buy grain cheaper in order to sell it abroad at a higher price. And you are naturally right that the commodity producer will be at a loss to a certain extent. We advise our producers to exercise restraint while making sales. We don’t want them to throw their produce onto the market and thus bring down the price. A more or less stable price will be formed in the course of a year. If we take last marketing year’s price, we will see it does not differ much from the price being formed today. And, taking into account that the grain price will rise in December, January, and February (trade is going on all year long because grain is not a perishable item), farmers should wait. I must say many commodity producers do just this: if the price has been held down, they do not hasten to sell as much as they could. In other words, they think twice before going to the market.”

“Yet, it is not that simple to do so. Agricultural enterprises have to refund loans...”

“Undoubtedly, the price policy can only be influenced by means of budgetary money. I don’t mean non- refundable subsidies. This money could ‘remove’ the output surplus by applying the governmental economic mechanisms (for example, food market agents). In case of a shortage, they could be thrown onto the market. This should not be avoided. The state should also concern itself with entrepreneurs, earning additional budget revenues through certain investments in the purchase and sales of produce. These are the conditions the market dictates.”

“Given the budget situation, will the Ministry of Finance be able to find money for such operations? Incidentally, there are some reports that this year the agro-industrial complex (AIC) is being credited by banks worse than last year...”

“I find it difficult to comment whether or not the Ministry of Finance will find some. At any rate, the draft budget submitted to Verkhovna Rada shows the attitudes of all ministries. Any comments would be unsuitable for the time being. Parliament is still working on the budget, and a lot will depend on the results of this work. But it should be remembered that when one raises the question of additional expenditures in any budget, one must think about how to fill it. We all try to take as much as we can from the budget but we should not forget about its revenues.

“As to whether the banks are interested, the loan repayment rate in the AIC is about 80%, a very high figure even in comparison with European countries. On the other hand, our budgets envision compensation in case loans are not paid back. I think the AIC has already proved that those who take loans repay them. All that must be improved is medium- term and long-term crediting. In that case the AIC will gain an opportunity to make investments, which will improve quality and bring down costs. Besides, Ukraine is conducting active negotiations about WTO membership. So we must think over the competitiveness of our producers.”

“Next year’s budget provides for an essential EBRD loan for AIC development. What is this money supposed to be spent on? What sectors or businesses will get priority?”

“It is too early for me to comment on this loan. I would like to say this: any loans, domestic and foreign alike, should not be squandered but aimed at retooling production facilities. This is the ministry’s standpoint.”

“Sugar producers (practically all enterprises of whom were recently forced to suspend work) complain not only about bad weather, which complicates the picking beet-roots, but also about the absence of sugar price regulation mechanisms. They fear a collapse. Your comments?”

“This is not true. I don’t know where you got this information from. Such dialogs should be conducted face-to-face. It is the same story with sunflowers. When the sugar-making season begins, there undoubtedly is some surplus sugar which must be quickly sold. This raises such questions. Today, the price regulation mechanism is clearly governed by quotas. The ministry distributes these quotas among the factories, with a whole lot of factors being taken into consideration. Yet, sugar producers have to think about technical upgrading and increased sugar output. While in today’s Europe the output of sugar is up to 85-90%, in this country it barely reaches 75%. I want to say that there are price regulation mechanisms even today. There are such things as declared prices and relevant laws and resolutions... But there also are some difficulties. Still, factory owners must think about retooling. As for the price of sugar, this should be under constant scrutiny, not just at a certain moment.”

“Still, is the price of sugar going to drop?”

“I wouldn’t say it is very much. The market situation is not expected to trigger essential fluctuations provided, of course, there is no force majeure. Our current calculations show there should be no major price leaps. The latter are sure to occur if people begin to receive sugar for in-kind payment. Legal entities are in a more difficult situation, while the sugar that will come to the market from individuals is unlikely to change in price.”

“Does the Ministry of Agrarian Policies feel the pressure of bread producers now that the Antimonopoly Committee (AMC) has redoubled efforts to bring down bread prices in the regions?”

“There should be an integrated approach to this issue. You cannot just up and slash the price of bread. There is a long series of factors to be reckoned with. It is necessary to find out well before bread has been baked whether or not the same company is the owner of flour-milling plants, as well as to know the conditions under which grain is being supplied to the mill and flour to the plants. Who, what organizations and enterprises are dealing with this? All this is up to the AMC. I don’t want to assert anything, for there are price commissions at the Cabinet and in the regions, and there is the AMC. Let us wait for them to draw conclusions.”

“Have the potential monopolists already been turning to the ministry?”

“As a rule, bakeries are private and joint-stock companies not accountable directly to the ministry.”

“Word has it that Ukraine may cut its exports of milk. The budget provides for high-quality milk subsidies. Who is going to be subsidized?”

“As for budgetary subsidies, we must wait until the budget is adopted. Then we will comment on this. As for export cuts, I must say there should be no problems if exporters work honestly on both the domestic and foreign market. Those who indulge in fraud will, of course, face the music. There are irreegularities everywhere, but I think everything will be OK.”