2.5.12. AGRICULTURAL PRODUCE AND FOODSTUFFS

In January-December 2000, Ukraine's turnover of foreign trade in agricultural produce and foodstuffs totaled USD 2.26 bln. having lost 1% against the previous year. The figure includes USD 1.35 bln. from export operations (-2%) and USD 0.91 bln. from import, which stood virtually unchanged. Positive balance yielded USD 445.6 mln., which is USD 469.5 mln. down from 1999. Import outpaced export 1.49 times against 1.52 times in January-December 1999.

The weightiest supplies were bound to Russian Federation (some 45% in total export turnover), Belarus (6%), Switzerland (5%), the Netherlands (4%), as well as Turkey (3%), France (3%), and Germany (2%). Shipments to Spain, Algeria, Moldova, and Poland also yielded substantial currency earnings.

The most sizable import to Ukraine derived from Russian Federation (some 10%), the Netherlands (10%), Germany (10%), Belgium (6%), Turkey (5%), Brazil (4%), Hungary (4)%, and France (4%). Estonia, Norway, Poland, USA, and Kazakhstan also contributed large shares.

It should be noted that the portion of exports of agricultural produce and foodstuffs within total turnover of goods fell from 12% in 1999 to 9.3% in 2000. Imports were also on downturn from 8.9% to 6.1% respectively.

Throughout 2000, certain articles increased their shares in total exports of agricultural produce and foodstuffs as compared to 1999. Hence, the share increased from 12.2% to 14.4% for meat and by-products, from 4.5% to 10.2% for milk and dairy products, from 10.0% to 14.5% for oil crop seeds and other seeds, from 8.2% to as high as 17.8% for animal and vegetable oil and fats, as well as from 1.6% to 4.6% for cocoa and products. At the same time, notable drop occurred in the portions of cereals (from 36.8% to 9.1%) and product of flour-milling industry (from 2.7% to 1.0%).

As regards import turnover of agricultural produce and foodstuffs, the share of cereals leaped from 2.2% to 13.0%, products of flour-milling sector increased from 1.9% to 3.9%, and portion of cocoa and products grew from 6.7% to 7.8%. At the same time, reduction happened in the share of meat and by-products (from 11.0% to 2.5%) as well as animal and vegetable oil and fats (from 8.4% to 6.7%), etc.

The greatest positive balance of foreign trade in agricultural produce and foodstuffs in 2000 was obtained by the following groups:

- Meat and products (USD 172 mln.);

- Oil crop seeds, other seeds, fruit, and corn (USD 167 mln.);

- Vegetable and animal oil and fats (USD 180 mln.);

- Milk and dairy products (USD 126 mln.).

Groups that revealed negative balance were:

- Tobacco and artificial substitutes of tobacco (- USD 67 mln.);

- Fish and lobsters (- USD 62 mln.);

- Coffee, tea, mate, and seasonings (- USD 47 mln.).

Commodity exchange transactions contributed 0.3% to total exports of agricultural produce from the country and accounted for the same 0.3% in import turnover (1.8% and 0.6% respectively over 1999).

Import of agricultural produce and foodstuffs to Ukraine in 2000

Ukraine-bound supplies of agricultural produce and foodstuffs over 2000 shrank by USD 329 ths. or 0.04% against the year 1999, thus, remaining almost at the same figures.

Main agricultural commodities, which yielded substantial currency expenses over 2000, were:

- Fish and lobsters;

- Edible fruit and nuts;

- Coffee, tea, mate, and seasonings;

- Cereals;

- Animal and vegetable oil and fats;

- Sugar;

- Cocoa and products;

- Tobacco and artificial substitutes of tobacco.

Except for the two groups, which are cereals and corn, other aforementioned groups are traditional articles in imports to Ukraine. Observing the trend in Ukrainian import of sugar over the recent three years, conclusion evolves that raw sugar turns into another traditional export article for Ukraine.

Supplies of fish and lobster to Ukraine over the recent 6 years grew 1.8 times. Comparison of the year 2000 to 1999 reveals stability of growth tendency. In 2000, physical imports of the mentioned group added 14.3%. As ever before, the largest share in supplies of the mentioned commodity falls for frozen fish, in particular, herring. In 1999, expenses for import of the article reduced by 11.1%. Yet, mainly it is not because conjuncture on the market for these products was favorable for importers, but rather because contracts were under-priced to avoid high taxes. Considering reducing yield of fish and other sea products in Ukraine, the mentioned group of commodities will still account for a bulk share in total turnover of groups 1-24 under the Commodity Nomenclature for Foreign Economic Relations.

Traditional import articles for Ukraine are fruit and nuts, which are not harvested in the country. Thus, the greatest portion in import supplies of the mentioned goods falls for bananas, citrus fruit (fresh and desiccated), as well as grape (raisin), and various nuts. In 2000, physical imports of these products added 14.2%. At the same time, spending for purchase of the goods slashed by 8.4%. Throughout 2000, imports of nuts increased 1.4 times as compared to the previous year. This was mainly called forth by growing production of sweets in Ukraine and, consequently, increasing portion of nuts, which require processing, within total imports.

Due to rapid development of confectionery and margarine manufacturing and absence of similar production in Ukraine, the country has recently boosted demand for raw materials for the mentioned producers, namely, palm and coconut oils as well as confectionery fats. This has effect on shipments of animal and vegetable oil and fats to Ukraine. Over 2000, their physical imports somewhat fell by 19.6% and purchase expenses decreased by 12.9%. This took place due to reducing import of coconut oil. Imports of the latter in 2000 diminished 1.8 times as compared to 1999. At the same time, the share of confectionery fats added 43.5% in total physical imports of the mentioned group and margarine's portion was also on increase by 11.1%.

Besides, throughout 2000 supplies of cocoa and its products, which are used as raw confectionery materials, reported growth trend. Physical imports raised 1.2 times and spending expenses for also were 1.2 times up. Conjuncture on the market for cocoa and products was quite favorable for Ukrainian importers of the mentioned goods as reduction in prices was traced throughout 2000.

As ever before, in 2000 Ukraine imported sizable amount of tobacco and its artificial substitutes. Absence of natural and economic conditions to crop substantial raw materials for Ukrainian tobacco industry, which recently increased production facilities, is a key reason for expanding import of such products. Over 2000, physical shipments of the mentioned group to Ukraine dropped a bit (-15.3%). A 5.2% decrease was traced in spending for imports of the raw materials. Smaller reduction in spending as compared to drop in physical imports may be explained as follows. As compared to 1999, Ukraine-bound import of tobacco with unbroken stem, which is significantly cheaper than tobacco with partially or completely removed stem, reported notable reduction.

Coffee, tea, and seasonings contribute weighty share to shipments of agricultural produce to Ukraine. An obvious trend has recently evolved toward growing imports of tea and coffee to the country. At the same time, the year 2000 was marked with certain stability in tea imports. As compared to 1999, supplies of tea lost 2% only, thus, almost did not change. Simultaneously, imports of went up by 19% fostered by rather lose prices on the market for the commodity (global prices reported an ever-low record over the recent decade). By and large, physical import of these commodities increased by 7.8% with expenses growing by 10%.

Recession in Ukrainian sugar production, increasing demand for the commodity from food-processing enterprises, particularly of confectionery industry, opportunity to load processing enterprises during shoulder season, as well as favorable conjuncture on the global market for raw sugar (low prices) maintained large import turnover of both raw sugar and white sugar. At the same time, as compared to 1999, imports of the commodity dropped by 3.9%.

Even though rice used to hold a bulk portion in imports of cereal to Ukraine, in 2000 wheat and corn moved to the first place. For global market, Ukraine-bound imports of these crops, especially wheat, became real sensation. The reason was low wheat crop in the country, which had effect on imports of almost all cereals. As compared to 1999, physical imports of cereals to the country throughout 2000 increased 9.5 times, whereas spending advanced 5.9 times. The difference between growth rates of physical imports and currency expenses is due to partial compensation of expenses for cereals' purchase on account of reduction in global prices for rice. In general, conjuncture on the market for cereals in 2000 was quite unfavorable for importers. Prices for cereals, in particular for grain, were higher than in 1999.

Ukrainian export of agricultural products and foodstuffs in 2000

In 2000, Ukrainian export of agricultural products and foodstuffs dropped by 2% or USD 24.2 mln. This is the poorest result over the recent 5 years. Looking back at this period, continuous reduction of currency earnings can be traced from USD 3.1 bln. in 1996 down to USD 1.35 bln. in 2000. As a whole, in 2000 markets for many of the commodities under review (meat, grain, and fodder) featured rather favorable conjuncture and higher prices as compared to 1999. Besides, in the second half of 2000, after a long-term recession, which lasted from 1998 till the first quarter 2000, prices for sugar skyrocketed, and the second half of 2000 revealed similar trend for dairy products. Nonetheless, conjuncture on the global market for oil crop seeds and oil remained heavy throughout the entire 2000 and featured extremely low prices. However, despite drop in currency earnings, increasing trend was traced in shipments of particular commodities, such as sweets, oil, oil cake, beer, etc).

Top articles within exports of agricultural produce and foodstuffs from Ukraine over 2000, which yielded the greatest currency earnings were:

- animal and vegetable oil and fats (foremost, sunflower oil);

- oil crop seeds (sunflower, rape);

- oilcake (sunflower, rape);

- meat and products;

- milk and dairy products;

- cereals;

- sweets (sugary, chocolate and products, which contain cocoa, pastry);

- others (smokables, alcohol and soft drinks, fruit and nuts, flour-milling products and cereals, vegetables).

Currency earnings from export of animal and vegetable oils and fats (primarily, sunflower oil) doubled, with physical exports yielding a 3-fold increase. Misbalance is driven by poor conjuncture on the oil market and lower prices, which were below the respective 1999 prices by 30-40%. It should be noted that prices for oil crops (sunflower, rape) also were on downturn. It is not surprising, therefore, that a 2-fold leap in physical shipments of the commodities yielded only a 40% growth of currency earnings. The situation somewhat improved only in late 2000 fostered by cutting production of sunflower and its oil in many countries worldwide. Thus, prices for oil crop seeds and vegetable oils reported slight augmentation. Speaking about shipments of sunflower seeds, it should be noted that their export throughout 2000 went considerably up against 1999, despite the effective 23% export duty. This was caused by good harvest yield of the crop in Ukraine, as well as wide application of tolling schemes.

As regards oil cake, situation throughout 2000 was rather favorable reporting high prices and remarkable demand. Because of favorable market conjuncture and sizable increase in domestic production of the mentioned articles, currency earnings from export made considerable boost. Thus, physical exports doubled, whereas cash flows increased 2.4 times. It is curious that in late 2000, demand for vegetable oils reported notable rise due to problems in the EU (mad cow disease (fungous encephalitis) and necessity to replace animal fats with vegetable ones). This drove prices up for virtually all oil products, and especially for oilcake.

As regards meat and products (primarily, carcasses and semi-carcasses of cattle stock), with low growth of physical exports by 3%, currency earnings added 16%. As it was mentioned above, this was backed by improving conjuncture on the market, in particular, increase in export prices and demand from Russian Federation. At the same time, both physical exports and export revenues from shipments of ready foodstuffs, which are made of meat and sea products, halved.

Favorable conjuncture on the market for meat and dairy products throughout 2000 fostered Ukrainian enterprises to boost shipments of these commodities, driving currency earnings 2.2 times up against 1999, whereas physical exports added 88%. At this, physical supplies of milk (primarily, dried milk) grew by 50%, export of butter went up 3.4 times, and shipments of cheese were 2.2 times up.

The year 2000 was marked with sizable recovery of confectionery production in Ukraine. Advanced exports of the commodities were, therefore, of no surprise. Hence, physical exports of sugary confectioneries over 2000 added 58% against 1999 (+50% in terms of currency earnings), shipments of chocolate and cocoa-containing confectioneries tripled (2.8 times up in currency earnings), and export supplies of pastries augmented 2.7 times (2.8 times up in currency earnings).

When it comes to cereals, it should be noted that among all agricultural produce and foodstuffs, this very group yielded the largest currency earnings to Ukraine in 1999. Then, there was fixed a record-high export of 6.3 mln. tons worth a total of more than USD 0.5 bln. As regards the year 2000, reduction in currency earnings from export of agricultural produce and foodstuffs was mainly due to the group of cereals. Currency earnings from shipments of cereals were by USD 0.4 bln. below the figure of 1999, while physical exports fell way down to 1.3 mln. tons. Supplies of virtually all cereal crops (especially wheat) reported decreasing trend. Only exports of barley grew by some 120 ths. tons. The situation occurred because of rather low production of grain in Ukraine for two years already. This is especially discouraging, since the year 2000 was marked with favorable conjuncture on cereal market and high prices, and the country was forced to import grain and flour. By the way, the situation in grain sector had negative effect on exports of flour-milling products. Currency earnings from shipments of the latter shrank 2.7 times in 2000.

Currency earnings from export supplies of smokables kept on increasing in 2000 with growth rate making 25% or USD 15.6 mln. Earnings from export of alcohol and soft drinks also reported sizable rise of 1.6 times, mainly on account of beer and pure alcohol. Thus, shipments of beer leaped 34 times from 1.3 ths. tons in 1999 up to 44.4 ths. tons in 2000, and export of ethyl alcohol added some 30%. Earnings from export of fruit and nuts advanced 2.4 times, whereas those from export of vegetables dropped by 7%.