As was to be expected, the clampdown on grain traders by the law enforcement agencies has slashed grain exports from Ukraine. Currently, grain reserves in Ukraine come to two million tons. However, according to the Ministry for Agrarian Policy, these reserves will last until the new crop. Grain prices have stabilized at the level of UAH 760-770 per ton of third- class wheat, twice that of in last September. The prices, however, are determined by the market, and precisely this irritates the bureaucrats and politicians.
As the fog of the grain scandal gradually lifts, it is becoming clearer that regional authorities are to blame for bungling this year’s grain procurement campaign. Precisely their inability to think in market terms is the root cause of the strife between farmers and oblast administration officials who shamelessly instruct peasants who to sell grain to and for how much. When these orders are ignored, the governors’ traditional response is one of exasperation and sheer amazement. They still simply do not understand that if the oblast administration wants to amass reserves for bread plants it has to pay for the grain. Moreover, it should pay the best price possible, lest the promises of private buyers should look too enticing.
However, this idea appalls the government. Last week the Cabinet of Ministers instructed oblast administrations to buy two million tons of grain from farmers by this fall. The reason behind the order is all too obvious. The public should be persuaded that the present crisis has taught the government a lesson. What the government is silent about is what money is to be used for grain procurements. After all, local budgets are stretched thin and do not provide for intervention in the grain market. As a result, the government pretends to be regulating the grain market and the governors to be taking care of grain procurements for the winter. At the same time, regional authorities are professing increasing yields. According to the parliamentary Committee on Agriculture, at least 10% of last year’s crop was on paper only. Once again it has become popular to report achievements and overproduction. In return, officials get medals, diplomas, and, if lucky, high posts. Others, however, do time for it. The case against former Vice Premier Leonid Kozachenko is quite illustrative in this respect. But the fact that Kozachenko alone is being called to account suggests a question of whether he is to blame after all. Of course, he did not force down grain prices last year and did not talk farmers into selling grain to commercial traders. Last year’s news archive shows that until he resigned Kozachenko kept stressing that grain prices were increasing at the rate of 7% per month and suggested that farmers be in no hurry sell. Simultaneously, the vice premier is personally responsible for the absence of a civilized domestic grain market and organized system of grain procurements. The Kinakh government either failed or did not want to use the levers to influence domestic market prices that are used the world over. Somebody should be brought to account for this. Incidentally, it is not ruled out that a scapegoat will be found to shoulder the blame for the present turbulent activity of government agencies on the grain market.
The results of the last agricultural season suggest that grain traders cashed in on the grain market situation. They simply outwitted the state both intellectually and financially. It should be stressed that the game was not played fair. The players of the government and sometimes the referees often made us question the sincerity of their intentions. However, to penalize the referee is no solution. This year’s unexpected snowfall in April damaged practically all winter crops. Reseeding takes money, of which there is none. This spells problems for Ukraine on the grain market come August. Unless the government gives up its habit of solving the problems on the grain market only when emergency strikes, the next crisis could be even more painful.
Meanwhile, farmers are looking to the government for assistance in the form of cheap long-term loans and special measures aimed at regulating the domestic grain market. Obviously, without a powerful state regulator on the domestic market, whose financial resources could match those of the private traders, the situation will simply not normalize in the long term. The reason why there is no such state regulator is quite obvious. The interests of the major economic players in the country intersect in the government. These players are more interested in cashing in on the instability of prices and their unfairness with respect to peasants. So far, this fact alone does not inspire optimism in the observers of the present grain crisis.
INCIDENTALLY
President Kuchma intends to sign a decree designed to intensify government regulation of the grain market. According to Interfax-Ukraine, he said this during the April 7 meeting with the respective heads of the Crimea’s Council of Ministers, oblast, and city administrations.
The president has demanded that governors ensure the fulfillment of decrees relating to the grain market: “We need to return to forming regional reserves of grain before everything else in order to keep prices down and offset grain shortages in the regions. Government regulation of the grain market should be intensified. To this end, the draft of a decree to this effect will be prepared, and I will sign it in the immediate future. We must urgently remedy the situation and not wait until the new crop.”
The head of state also pointed out the intensifying field works that increased by more than a quarter this year and in some regions even by one and a half times. At the same time, he underscored the low preparedness for field work in some regions. “Considering the existing problems, we must respond to the needs of each farm separately and find ways to help. We must use every opportunity, assistance from the state, funding from local budgets, bank loans, resources of investors, to meet the needs of the sowing campaign,” he stressed.
