Agricultural Policy Monitoring and Evaluation 2020

27. Ukraine

Support to agriculture

Producer support in Ukraine, as measured by the PSE, has been volatile over the past three decades, mostly due to fluctuations in market price support (MPS).1 Since 1992, MPS has been negative in most years, reflecting average producer prices below international reference levels, but with significant variation across commodities and time. Protected by import tariffs, prices for several meat products and sugar have been above international price levels. Those for several grains, sunflower seeds and milk have generally been somewhat below reference prices. The impact on prices of the state-owned Agrarian fund and the State Fund and Grain Corporation activities, and the annual MoU on grain exports, is likely to be limited, and more recently the total MPS for the sector has been slightly positive.

Budgetary support in the form of tax benefits and input support continues to be relatively small, but has contributed to the positive overall producer support in the last two years.

Support for general services has increased since 2015 but remains low compared to other countries. During 2017-19, the GSSE averaged 1.7% of agricultural value-added, well below levels seen in the mid-1990s. Most of these expenditures go to inspection and control services and to agricultural schools.

Main policy changes

The Ministry of Agrarian Policy and Food was integrated into what has become the Ministry of Economic Development, Trade and Agriculture of Ukraine, aiming to accelerate reforms towards the integration of the agricultural sector into the general economy. This in particular concerns the areas of land use, job creation, innovation and digitalisation, and market deregulation.

Ukraine instated new support for small and medium sized producers. The area payments are higher for newly established farms during the first three years of their creation than for longer existing farms and require that the eligible land is used for farming purposes. Another new measure provides partial reimbursement of up to 30% of the investment for construction or reconstruction of grain storage and grain processing capacities.

While the moratorium on the sale of agricultural land, which has banned selling farmland in Ukraine since 2002, has not been extended into 2020, and while both interest rate support and partial compensations of loans for the purchase of land are foreseen by order of the Cabinet of Ministers of Ukraine, the sale and purchasing of agricultural land in Ukraine continues to be legally impossible pending the adoption of the Law on Agricultural Land Turnover.

Assessment and recommendations

• Producer prices in several of Ukraine’s export oriented sectors, notably for sunflower seed and milk, remain below world price levels. Export duties applied to some of the products, the market activities (though limited) of state-owned enterprises and limitations in export infrastructure may each contribute to this negative support. In order to take advantage of its agricultural competitiveness, Ukraine should take additional steps to facilitate exports, including continued investments into the logistics and transportation system in line with growing export volumes.

• Having abolished special VAT regimes, which provided producer support for various production inputs, the integration of agricultural producers into the economy-wide VAT system since 2018 should help increase the efficiency in the sector and reduce the administrative burden. Ensuring well-functioning input markets, including for agricultural credits, remains key to improving farmers’ access to agricultural inputs.

• The end of the moratorium on the sale of agricultural land, which had been extended annually between 2002 and 2019, is a welcome signal towards removing rigidities in the land market that prevent this key agricultural resource from being optimally allocated. However, the efficiency-augmenting effect of this will only materialise once the sale and purchasing of agricultural land in Ukraine has been made fully legal by passing the Law on Agricultural Land Turnover.

• Productivity in agriculture has grown quickly over the past decade, but deteriorating capital stocks, likely caused by economic and political uncertainties, threaten future productivity growth. Ensuring macroeconomic and political stability will be critical for maintaining and developing a productive agricultural sector.

• Public expenditures for general services have started to recover after the economic depression of 2014-15, but remain low in relative terms. The focus on the country’s inspection and control system is a necessary step for supporting the export-oriented sector. However, to ensure high performance of the sector sensitive to weather variability, notably in light of a changing climate, Ukraine will also need a well-functioning and sufficiently funded knowledge and information system.

• The merger of the former Ministry of Agrarian Policy and Food into what has become the Ministry of Economic Development, Trade and Agriculture of Ukraine highlights the government’s ambition to accelerate reforms of agricultural policies within the development of the general economy. This should be linked to increasing the efficiency of the regulatory system and to improving the infrastructure needed by the export-oriented sector.

• Ukraine’s Nationally Determined Contributions (NDCs) to the 2016 Paris Agreement on Climate Change commit the country to greenhouse gas (GHG) emissions in 2030 not exceeding 60% of its 1990 levels, including from all agricultural and other land use sources. The recently approved Action Plan should help implementing a multisectoral monitoring, reporting and verification of GHG emissions. With agriculture responsible for more than 12% of national emissions, specific reduction targets and related policy action will need to complement this Plan for achieving the overall ambition.

Policy responses in relation to the COVID-19 outbreak

Agricultural policies

In late March 2020, the Ministry for Development of Economy, Trade and Agriculture of Ukraine and grain traders signed a document which provides for a limit of wheat export from Ukraine in 2019/20, i.e. until 30 June 2020, at 20.2 million tonnes. The agreement aims to ensure stability in domestic grain markets and exports, and to prevent flour prices from rising.2 Recent estimates saw Ukraine’s wheat exports in 2019/20 at 20.5 million tonnes,3 so the actual impact on trade flows may be limited. Nonetheless, the government indicated its preparedness for banning further wheat exports should sales exceed the limits agreed with the traders.4

The Cabinet of Ministers of Ukraine introduced a ban on buckwheat export until 1 July 2020. The export ban on buckwheat groats was implemented as a temporary measure and considered necessary to protect the domestic market.5 Import duties on rice, rye, buckwheat, and other grain crops were temporarily removed until 1 July 2020.6

The Ukrainian Government expects no food shortages and hence no need for additional export restrictions.7 However, Ukraine’s Minister of Economy, Trade and Agriculture announced on 27 March that that the state-run grain firm DPZKU and Agrarian Fund would sell 128 000 tonnes of wheat flour on the local market aiming to curb a jump in prices.8

Agro-food supply chain policies

Essential workers who provide basic goods and services to support the life of the population, including in agriculture and food production, are exempt from self-isolation imposed on the population.

Food markets in Ukraine have been closed by special order from 14 April 2020.9

Consumer policies

The Cabinet of Ministers is preparing a list of products of social importance for which state regulation of prices should be renewed. Such measures are implemented in accordance with the requirements of the law passed by Parliament No. 540-IX.10

Figure 27.1. Ukraine: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Support to producers (%PSE) has been fluctuating around zero for the past decade, and averaged 1.0% of gross farm receipts during 2017-19. Negative market price support (MPS) notably for sunflower seed and milk is offset by positive MPS mainly for sugar and pig meat, and limited budgetary producer support. On average, producer prices are aligned with reference prices, resulting in a Nominal Rate of Protection (NRP) equal to 1.0 for the 2017-19 period, although differences exist across commodities. Given these differences, 74% of all transfers to producers (whether positive or negative) are still implemented in forms that are potentially most distorting, down from 84% in the early 2000s (Figure 27.1). Single commodity transfers (SCTs) mirror the MPS across commodities, with sugar and pig meat receiving positive support and milk and sunflower seed, as well as the minor grain oats, being implicitly taxed (Figure 27.3). Total support has declined in relative terms, and represented 0.4% of GDP in the most recent three-year average, down from 0.5% in 2000-02. Support to general services has declined both as a share of total support (now 37.5%) and relative to the sector’s size, representing 1.7% of the Agricultural Value-Added in 2017-19. Producer support has declined in 2019 relative to 2018 mainly due to an expanded negative price gap in sunflower seeds, following declining producer prices. This was only partly offset by lower reference prices in other commodities.

Figure 27.2. Ukraine: Drivers of the change in PSE, 2018 to 2019

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 27.3. Ukraine: Transfer to specific commodities (SCT), 2017-19

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Table 27.1. Ukraine: Estimates of support to agriculture

Million USD

	2000-02	2017-19	2017	2018	2019p
Total value of production (at farm gate)	9 619	31 213	28 510	31 469	33 659
of which: share of MPS commodities (%)	86.8	82.9	81.8	82.7	84.2
Total value of consumption (at farm gate)	8 841	21 537	20 238	21 066	23 308
Producer Support Estimate (PSE)	53	330	-238	668	561
Support based on commodity output	-415	-2	-591	357	226
Market Price Support1	-531	-2	-591	357	226
Positive Market Price Support	388	339	169	437	411
Negative Market Price Support	-919	-342	-760	-80	-185
Payments based on output	116	0	0	0	0
Payments based on input use	203	144	191	120	120
Based on variable input use	169	65	161	10	23
with input constraints	0	0	0	0	0
Based on fixed capital formation	31	79	30	109	97
with input constraints	0	0	0	0	0
Based on on-farm services	2	0	0	0	0
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	265	189	162	191	214
Based on Receipts / Income	265	162	162	158	166
Based on Area planted / Animal numbers	0	27	0	33	48
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	0	0	0	0	0
Based on long-term resource retirement	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0
Percentage PSE (%)	0.5	1.0	-0.8	2.1	1.6
Producer NPC (coeff.)	0.95	1.00	0.98	1.01	1.01
Producer NAC (coeff.)	1.01	1.01	0.99	1.02	1.02
General Services Support Estimate (GSSE)	121	197	139	221	230
Agricultural knowledge and innovation system	51	68	68	68	68
Inspection and control	26	108	55	130	141
Development and maintenance of infrastructure	36	10	5	14	11
Marketing and promotion	1	0	1	0	0
Cost of public stockholding	1	3	3	3	4
Miscellaneous	7	7	8	6	7
Percentage GSSE (% of TSE)	69.5	37.3	..	24.9	29.1
Consumer Support Estimate (CSE)	384	34	566	-270	-195
Transfers to producers from consumers	478	58	580	-240	-168
Other transfers from consumers	-38	-20	-13	-24	-22
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	-55	-4	-1	-6	-5
Percentage CSE (%)	4.3	0.2	2.8	-1.3	-0.8
Consumer NPC (coeff.)	0.95	1.00	0.97	1.01	1.01
Consumer NAC (coeff.)	0.96	1.00	0.97	1.01	1.01
Total Support Estimate (TSE)	174	527	-99	889	791
Transfers from consumers	-440	-38	-568	264	189
Transfers from taxpayers	651	585	481	649	623
Budget revenues	-38	-20	-13	-24	-22
Percentage TSE (% of GDP)	0.5	0.4	-0.1	0.7	0.5
Total Budgetary Support Estimate (TBSE)	705	529	492	532	564
Percentage TBSE (% of GDP)	1.9	0.4	0.4	0.4	0.4
GDP deflator (2000-02=100)	100	1 225	1 137	1 313	..
Exchange rate (national currency per USD)	5.38	26.55	26.60	27.20	25.85

.. Not available

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Ukraine are: wheat, maize, rye, barley, oats, sunflower, sugar, potatoes, milk, beef and veal, pig meat, poultry and eggs.

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Contextual information

Ukraine is classified as an upper middle income country. It features a large area of fertile arable land, making agriculture a major sector of the economy compared to most other countries in this report: it accounts for 10% of the country’s economy and 15% of its employment. Agro-food exports represent around 40% of Ukraine’s total exports.

Four-fifths of Ukraine’s agricultural area is arable, and crops represent some three-quarters of agricultural output, up from two-thirds in the mid-1990s.

Table 27.2. Ukraine: Contextual indicators

	Ukraine		International comparison
	2000*	2018*	2000*	2018*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	188	391	0.5%	0.3%
Population (million)	49	44	1.1%	0.9%
Land area (thousand km2)	579	579	0.7%	0.7%
Agricultural area (AA) (thousand ha)	41 406	41 489	1.4%	1.4%
			All countries¹
Population density (inhabitants/km2)	84	76	53	62
GDP per capita (USD in PPPs)	3 818	9 233	9 275	21 924
Trade as % of GDP	46	40	12.4	15.3
Agriculture in the economy			All countries¹
Agriculture in GDP (%)	14.5	10.1	3.1	3.6
Agriculture share in employment (%)	21.9	15.3	-	-
Agro-food exports (% of total exports)	10.1	39.4	6.2	7.3
Agro-food imports (% of total imports)	6.1	7.9	5.5	6.3
Characteristics of the agricultural sector			All countries¹
Crop in total agricultural production (%)	59	76	-	-
Livestock in total agricultural production (%)	41	24	-	-
Share of arable land in AA (%)	79	79	32	33

Notes: *or closest available year. 1. Average of all countries covered in this report. EU treated as one.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

Between 2013 and 2015, real GDP had fallen by 16% while inflation rates had risen to almost 50%, due to adverse political circumstances. Since then, the economy has grown steadily at rates between 2.4% and 3.3% per year while inflation rates have come down. Unemployment also rose in 2014 and continues to be high at almost 9%.

Ukraine is among the world’s leading exporters of grains and vegetable oils. Its agro-food exports grew rapidly between the late 1990s and 2012, and export growth has resumed after the drop between 2012 and 2015, which was due to adverse political circumstances. Most of Ukraine’s agro-food exports are intermediary, mainly primary, products for further processing. Imports, in turn, are more mixed, with primary and processed products for final consumption representing about 60% of agro-food imports.

Figure 27.4. Ukraine: Main economic indicators, 2000 to 2019

Sources: OECD statistical databases; World Bank, WDI and ILO estimates and projections.

Figure 27.5. Ukraine: Agro-food trade

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

Both agricultural output and total factor productivity grew at rates significantly above global averages, at 4.6% and 4.1% per year respectively in the decade ending 2016. Output was also driven by intermediate input growth, while the use of primary factors, notably of capital, shrank. The shrinking capital stock may pose a risk for continued productivity growth in the future.

Despite the declining importance of agriculture within the economy, agriculture’s shares in the country’s energy use and GHG emissions have increased over the past two decades. Average nitrogen balances have also increased since 2000 and are now comparable to those across the OECD, while data now suggest a nation-wide negative balance for phosphorous.

Figure 27.6. Ukraine: Composition of agricultural output growth, 2007-16

Note: Primary factors comprise labour, land, livestock and machinery.

Source: USDA Economic Research Service Agricultural Productivity database.

Table 27.3. Ukraine: Productivity and environmental indicators

	Ukraine		International comparison
	1991-2000	2007-2016	1991-2000	2007-2016
			World
TFP annual growth rate (%)	0.7%	4.1%	1.6%	1.6%
			OECD average
Environmental indicators	2000*	2018*	2000*	2018*
Nitrogen balance, kg/ha	20.9	29.6	33.3	29.1
Phosphorus balance, kg/ha	2.6	-0.9	3.3	2.3
Agriculture share of total energy use (%)	2.1	3.7	1.7	2.0
Agriculture share of GHG emissions (%)	8.4	12.1	8.1	8.9
Share of irrigated land in AA (%)	5.8	5.2	-	-
Share of agriculture in water abstractions (%)	30.0	32.1	46.0	49.0
Water stress indicator	..	..	9.9	8.9

Notes: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

Description of policy developments

Main policy instruments

Ukraine’s agricultural policy measures are formulated in a number of major laws and decisions. The law “On State Support of Agriculture in Ukraine”, adopted in 2004, defines priorities and measures of agricultural policy. The “Concept of Rural Development in Ukraine”, approved in 2015, provides priorities for the development of rural areas in Ukraine until 2025. Ukraine’s policies are increasingly influenced by the Association Agreement with the European Union, ratified by Ukraine in 2014. Finally, the financial scope of agricultural policies is defined in the annual law “On State Budget of Ukraine”. Relative to 2018, this increased by about 15% in nominal terms in 2019.

Ukraine’s legislation provides for a range of instruments to intervene in agricultural markets. These include tariff protection, non-tariff trade regulation, and various forms of domestic price measures. The state agency Agrarian Fund can implement domestic price interventions through the operation of the State Intervention Fund. Initially dealing only with grain, the Agrarian Fund has become progressively involved in other activities, such as sugar sales from public stocks; state purchases and sales of a broad range of agricultural and food products; forward-contracting; flour processing and wholesaling.

For purchases by the Agrarian Fund, the law “On State Support of Agriculture in Ukraine” provides for the setting of official minimum and maximum intervention prices, covering commodities that are “objects of state regulation”, although the maximum prices have not been applied. Specific government decrees define the exact list of such products and the periods during which these administered prices are applied. Minimum prices do not play a role of guaranteed prices but represent a basis for decisions on commodity purchases for public stocks, and are regarded as a floor-price reference for private market operators. Minimum intervention prices should not exceed domestic market price levels to comply with the Ukraine’s WTO domestic support commitment. While until 2016 the Agrarian Fund has continued to procure and sell limited amounts of grains under this mechanism, since the 2016/17 marketing year no budgetary funds have been allocated to state interventions, and corresponding minimum intervention prices have not been set.

Agricultural producers are eligible for a Single Tax,11 which is set as a percentage of agricultural land value, established on 1 July 1995 and adjusted since with the general consumer price index. Introduced in 1998, the Single Tax originally replaced twelve taxes for which agricultural enterprises were liable as business entities. The scope of this tax have been narrowing since then. At present, the Single Tax replaces three taxes – profit tax, land tax (for land used in agricultural production), and special water use fee – with agricultural producers liable to all other taxes previously included in the Single Tax . The Single Tax regime generates implicit tax benefits to agricultural producers which for recent years were estimated to be around UAH 4.3 billion (USD 158 million) annually.

Since 2002, a moratorium on the sale of agricultural land bans selling farmland in Ukraine, although leasing for cultivation is permitted. The moratorium has been extended annually until and including 2019. It was not formally extended into 2020, but pending the adoption of the Law on Agricultural Land Turnover, the sale and purchasing of agricultural land in Ukraine continues to be legally impossible.

On 27 June 2014, the European Union and Ukraine signed the Deep and Comprehensive Free Trade Area (DCFTA) as part of their Association Agreement. It was provisionally applied from 1 January 2016 and formally entered into force on 1 September 2017. The liberalisation of trade between the European Union and Ukraine is to be implemented within a transition period of seven to ten years. The European Union opens tariff rate quotas for duty-free imports for Ukraine’s principal agro-food products, such as grain, meat and milk products, and sugar, and grants free access for the others. Ukraine reduced import duties for a number of goods imported from the European Union. About 40% of agriculture-related import duties were reduced to zero immediately after the Agreement entered into force, and around a half of import duties will be eliminated during the transition period. However, about 10% of tariff lines – covering selected products in such product categories as dairy and eggs, sugar, miscellaneous edible products, animal oils and fats, and feeding stuff for animals – will preserve non-zero tariffs. Since 1 January 2016, Ukraine applies three tariff rate quotas (TRQs) with zero in-quota tariffs for imports from the European Union of pig meat, poultry meat and poultry meat preparations, and sugar, respectively. The parties committed to apply no export subsidies for mutually traded agricultural goods.

The DCFTA incorporates fundamental WTO rules on non-tariff barriers, such as prohibition of import and export restrictions and disciplines on state trading. The main barrier for trade integration remains Ukraine’s difficulty in complying with EU food safety, veterinary and phytosanitary requirements. Thus, the DCFTA contains provisions for technical regulations, standards and conformity assessments to harmonise with those of the European Union, as well as for technical co-operation in the field of technical regulations, standards and related issues between Ukraine and the European Union. In line with these provisions, the “Comprehensive Strategy of Implementing Legislation on Sanitary and Phytosanitary Measures” was approved in 2016 and provides for a process of harmonisation of Ukraine’s SPS legislation with EU requirements.

Other Free Trade Agreements of Ukraine include the FTA with the European Free Trade Association (EFTA) in force since June 2012, the multilateral FTA with the Commonwealth of Independent States (CIS)12 in force since August 2012 as well as bilateral ones with all CIS members, and the Canada-Ukraine FTA, in force since August 2017.

Ukraine signed the Paris Agreement of the United Nations Framework Convention on Climate Change in April 2016, and ratified it in September 2016. Through its Nationally Determined Contribution, Ukraine committed to total emissions across sectors, including agriculture, not exceeding 60% of those in 1990 (equivalent to not exceeding 140% of those in 2012). In December 2016, the Cabinet of Ministers of Ukraine (CMU) adopted the National Concept of State Policy in the Field of Climate Change up to 2030. The “Strategy for Low Carbon Development of Ukraine up to 2050” (SLCD) was approved by the Cabinet of Ministries of Ukraine in July 2018. The SLCD defines a co-ordinated approach by various parties concerned and provides a national vision for separating economic growth and social development from the increase of greenhouse gas emissions. The Action Plan for the implementation of this Concept was approved by the CMU in late 2018 (see below). In addition, the Ministry of Agrarian Policy and Food (MAPF) (since 29 August 2019: Ministry of Economic Development, Trade and Agriculture, MEDTA) is developing measures to improve environmental practices related to the adaptation of agriculture and forestry to climate change, in line with the obligations under the Association Agreement with the European Union.

While amounts of support differed from year to year, most measures providing financial support targeted to specific activities continued in 2019. These include various measures providing preferential credits, the partial compensation of costs for agricultural machinery and equipment, the compensation of farmers for agricultural advisory services and, importantly, the single tax regime, a simplified tax system based on normative monetary land values resulting in annual tax benefits estimated at more than UAH 4 billion (USD 155 million).

For livestock producers, continued support measures also include: interest rate support for livestock husbandry and breeding; the partial reimbursement of costs related to the construction and reconstruction of animal farms and complexes; per head payments for cows to agricultural enterprises and for young cattle to rural households; and a partial compensation to agricultural producers purchasing high breeding animals, semen and embryos.

On the crop side, support continued in the form of seed cost compensation, reimbursements for different types of on-farm investments and debt repayments.

In contrast, the VAT accumulation system, which had provided significant support to agricultural producers through unpaid VAT, was discontinued in 2017, and a one-year “Development Subsidy” with similar characteristics was provided only in that year. Since 2018, this form of support has no longer been provided, with agricultural producers now integrated into the economy-wide VAT system.

Domestic policy developments in 2019-20

On 29 August 2019, the Ministry of Agrarian Policy and Food (MAPF), one of the oldest government agencies of Ukraine, was integrated into the Ministry of Economic Development and Trade to form the new Ministry of Economic Development, Trade and Agriculture of Ukraine (MEDTA) as the central executive authority of Ukraine in charge of the country’s agro-development. At the same time, the State Agencies of Forest Resources and for Fisheries of Ukraine have been transferred to the Ministry of Energy and Environment of Ukraine. The merger of the agricultural dossier into the Ministry of Economic Development and Trade aims at accelerating reforms towards the integration of the agricultural sector into the general economy in terms of land use, job creation, innovation and digitalisation, and market deregulation.

After substantial reductions, the state budget for supporting the Ukrainian agricultural sector has significantly increased since 2016. In 2019, total expenses by the Ministry of Agrarian Policy and Food of Ukraine and subsequently the Ministry of Economic Development, Trade and Agriculture for direct subsidies to agricultural producers amounted to UAH 4 343 billion (USD 168 million), up from UAH 0.3 billion (USD 12 million) in 2016 when most of the support had been provided through public revenues foregone.

A number of important regulations and strategy papers have been put in place recently:

• In July 2019, the Cabinet of Ministers approved the “Strategy for attracting private investment in agriculture for the period until 2023” which aims to increase agricultural exports, ensure national food security, and improve effectiveness and sustainable growth of the agricultural sector.

• In November 2019, the Cabinet of Ministers of Ukraine adopted a resolution amending the Action Plan on Implementation of the Association Agreement between Ukraine and the European Union. The updated plan takes into account the deepening of the Ukraine-EU bilateral relations and a series of regulatory acts adopted by the bilateral bodies of the Association Agreement in recent years. The Action Plan aims to ensure the accomplishment of the targets contained in the Government’s Action Program, to achieve Ukraine’s compliance with the implementation of the Association Agreement, by clearly defining deadlines and responsibilities for carrying out specific tasks across authorities.

• In October 2019, the government approved the “Procedure for establishing special conditions for imports of food and animal feed products”, thus strengthening the control over imports of food and animal feed goods by the State Service of Ukraine for Food Safety and Consumer Protection. The procedure aims to increase the effectiveness of state control over the imports of food and animal feed products in order to reduce or eliminate the level of threat associated with the presence of a dangerous factor in the imported products, and remove unnecessary burden during import procedures. The procedure clarifies under which conditions which import restrictions may be imposed, and assigns the authority to take decisions on establishing or abolishing import restrictions to the Ministry in charge of agriculture (now MEDTA).

• The Law “On Feed Safety and Hygiene”, adopted by the Parliament in 2017 and in force since January 2020, sets legal and organisational principles for production, circulation, labelling and presentation of feedstuff, and regulates the relations between executive authorities13 and feed market operators.

• The Law “On foodstuff information” adopted by the Parliament in 2018 and in force since August 2019, establishes the legal and organisational basis for providing food information to consumers. Among others, the law defines obligations of the food market operators, including on issues such as the placement and labelling of food products, as well as the control functions of the state.

• The Law “On the basic principles and requirements for organic production, circulation and labelling of organic products”, adopted by the Parliament in 2018 and in force since August 2019, provides the main framework for the production of organic food products and the functioning of the market for organic products. It also defines the roles and obligations for public authorities and organic market operators, and lays out further public policy directions for the development of organic product markets. In pursuance of the Law, the Cabinet of Ministers approved, in October 2019, the “Procedure for the Organic Production and Circulation of Organic Products”. The main provisions of this procedure are in line with the requirements of EU Regulation 889/2008.

The MAPF’s Order “On Approval of Honey Requirements” from June 2019 will enter into force in June 2020. The Order aims at harmonisation of the Ukrainian legislation with the EU legislation regarding the requirements for honey. The document sets requirements for the characteristics and composition of honey, terminology, honey labeling.

In October 2019, the Cabinet of Ministers of Ukraine approved the “Irrigation and Drainage Strategy in Ukraine for the period up to 2030”. This nation-wide cross-sectoral policy document aims to apply irrigation and drainage arrangements in order to increase yields and make them less dependent of weather conditions. The strategy contains several working directions, including, among others, a reform of the public administration system for irrigation and drainage; an improvement and maintenance of river basin; the restoration and expansion of the areas equipped with irrigation and drainage systems; promotion of public-private partnerships; the involvement of relevant stakeholders in related public policy making; improving irrigation and drainage systems; and enhanced research and training.

New measures were introduced at the end of 2018 to support small and medium sized producers. This support comes in the form of general area payments. Payments are higher for newly established farms (available during three years after their creation for agricultural purposes), at UAH 3 000 per hectare but not exceeding UAH 60 000 (USD 2 321) per farm, whereas the payment limit for other small and medium sized farms is UAH 12 000 per farm member and UAH 40 000 per farm. Payments require that the land is used for farming purposes.

In 2019, producers could also receive partial reimbursement of the cost of construction or reconstruction of grain storage and grain processing capacities. Up to 30% of the investment – including for equipment – could be refunded. In addition, since December 2019 a new web-based service provided by the state enterprise “State Register” provides data on grain quantities stored in all elevators in Ukraine.

Finally, the order “On approval of conceptual directions of cheaper loans to agricultural producers for the purchase of land”, approved by the CMU in September 2019, proposes both interest rate support and a partial compensation of loans used for the purchase of agricultural land. Pending the adoption of the Law on Agricultural Land Turnover that would provide the legal basis for land markets, however, the sale and purchasing of agricultural land in Ukraine continues to be legally impossible.

Trade policy developments in 2019-20

Ukraine has been a member of the WTO since May 2008. The country charges import tariffs on most agricultural products, with applied MFN tariffs for agricultural products averaging at 9.2%, well above the average for non-agricultural products at 3.7%. While most imports face ad valorem tariffs, Ukraine maintains a global tariff-rate quota for raw cane sugar which, however, has not been used since 2014 given excess supply on the Ukrainian market. Export duties are applied to some oilseeds, live animals and raw hides. Furthermore, Ukraine had suspended VAT refunds for exports of soybeans from September 2018, and planned to suspend those for exports of rapeseed from January 2020. However, VAT refunds for exports of both commodities were re-established from January 2020.

The FTA with Israel was signed in January 2019 and ratified by the Ukrainian Parliament in July 2019, but is yet to be put in force, pending ratification by Israel. Negotiations on a FTA with Turkey are ongoing.

In the context of the DCFTA with the European Union, parties agreed, in July 2019, to gradually increase duty-free EU tariff rate quotas for Ukrainian poultry and processed poultry meat. By 2021, the two TRQs are to reach a combined volume of 90 000 tonnes per year.

In response to a suspension by the Russian Federation of its free trade regime with Ukraine under the Agreement on Free Trade in the Commonwealth of Independent States (CIS) Area, and the implementation of a ban by the Russian Federation on imports of agro-food products from Ukraine, Ukraine in turn has suspended trade preferences for imports from the Russian Federation foreseen by the CIS FTA. Ukraine has banned imports of a list of 43 agricultural goods from the Russian Federation. This list includes meat and meat by-products, fish, milk and dairy products, tea, coffee, grain and its processing products, vegetable and animal oils, confectionery, baby foods, beer, vodka, ethyl alcohol, cigarettes, and others. In December 2019, the suspension of trade preferences and the ban on specific imports were further prolonged until the end of 2020, and a number of corn-based products were added to the list of banned products. Since July 2019, Ukraine has also banned the import of mineral fertilisers, animal feeds and veterinary products from the Russian Federation. Anti-dumping duties for chocolate and other cocoa-based food products produced in the Russian Federation, effective from 20 June 2017 for a period of five years, continue to be in place.

In October 2019, the Ministry of Economic Development, Trade and Agriculture (MEDTA) and main associations of grain exporters signed the traditional Memorandum of Understanding (MoU) on grain exports. It covers mechanisms for interaction of grain market participants, the exchange of information on grain export prospects, and the monitoring of grain market functioning. In contrast to earlier MoUs, however, the Memorandum for the 2019/2020 marketing year does not contain annexes that would determine recommended volumes of grain exports. Instead, grain market participants have agreed to meet on a monthly basis to exchange information on the grain market and export situation.

The Strategy for the Export Development of Agricultural, Food and Processing goods in Ukraine for the period until 2026 was approved by the Order of the Cabinet of Ministers of Ukraine in July 2019. The Strategy aims to enhance the competitiveness of products and expand the export product range; market diversification; stimulating the promotion of the Ukrainian food brand and information and analytical support for the exports of agricultural products, food and processed goods. A related Action Plan clarifies timing and responsibilities for the implementation of a large number of specific measures, such as the continuous monitoring and assessment of agricultural markets, online information systems or e-learning opportunities.

The New State Customs Service of Ukraine officially started working on 8 December 2019. The system was significantly transformed, with the number of regional customs offices across Ukraine reduced from 26 to 16.

The new Export Promotion Office was established in 2018 as a consultative and advisory body under the Ministry of Economic Development and Trade of Ukraine, to help Ukrainian exporters to access new markets. It provides assistance to both Ukrainian exporters and foreign importers.

Moreover, and per request by the CMU, a new Export Credit Agency was created in late 2018. This new agency is to facilitate Ukraine’s transition from a raw material exporter to a supplier of value added goods and services.

Notes

← 1.  Market price support estimates for the dairy sector have been revised for the years since 2014, to better reflect the quality difference between milk produced for the domestic market and that for the production of export products. These revisions have reduced the negative price gap for milk by 64% on average over the 2014-2019 period.

← 2.  https://latifundist.com/en/novosti/49385-minekonomiki-i-uchastniki-zernovogo-rynka-podpisali-dokument-ob-ogranichenii-eksporta-pshenitsy; USDA (2020): Cap on Ukrainian Wheat Exports, GAIN Report Number UP-2020-0019, 6 April 2020, https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Cap%20on%20Ukrainian%20Wheat%20Exports_Kyiv_Ukraine_04-05-2020.

← 3.  USDA (2020): Grain: World Markets and trade, March 2020, https://apps.fas.usda.gov/psdonline/circulars/grain.pdf.

← 4.  https://www.nytimes.com/reuters/2020/04/15/business/15reuters-health-coronavirus-ukraine-grains-exclusive.html.

← 5.  https://latifundist.com/en/novosti/49447-ukraina-vvela-zapret-na-eksport-grechki.

← 6.  https://oryza.com/49912/ukraine-remove-import-duty-rice.

← 7.  https://www.president.gov.ua/en/news/ukrayinci-zabezpecheni-harchami-j-zhodnoyi-nestachi-ne-bude-60497.

← 8.  https://www.reuters.com/article/grains-ukraine-flour/ukraine-sells-flour-to-curb-price-rise-monitors-wheat-exports-idUSL8N2BK5I7.

← 9.  https://www.bbc.com/ukrainian/news-52276696.

← 10.  https://agropolit.com/news/16090-uryad-gotuye-perelik-produktiv-sotsialnogo-znachennya-dlya-vstanovlennya-na-nih-regulyuvannya-tsin.

← 11.  Termed the “Fixed Agricultural Tax” before 2015.

← 12.  Other members and associate members include Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, the Russian Federation, and Turkmenistan.

← 13.  Cabinet of Ministers of Ukraine (CMU), Ministry of Agrarian Policy and Food (MAPF) (from 29 August 2019: Ministry of Economic Development, Trade and Agriculture, MEDTA) and State Service of Ukraine for Food Safety and Consumer Protection (SSUFSCP).