Economic science/12. Agricultural economics

Shubravska O.V.

Institute for Economics and Forecasting NAS of Ukraine

Modern Challenges of Ukrainian Agro-food Development

 

Agriculture is traditionally an important component of national economic complex [1]. Trends and prospects of the branch are determined by the general state of the national economy. And it largely depends on the main indicators of agricultural activities.

The main challenges and threats in the process of development and growth of agro-food production are influenced by factors as planetary scale, as the general economic situation in Ukraine and on the world food market and in the agro-food complex of the country [2]. In a global context presently the strongest challenges are connected with the change of climate, intensifying of ecological and demographic problems, deficit of water, meal, depletion of natural resources etc. For the Ukrainian agro-food production the number of these challenges also acquires considerable weight: foremost, the role of climatic factor becomes more perceptible in providing of stability of deliveries and consumption of agricultural products. In turn, this further heightens the problems of land degradation and increased water scarcity for the agricultural economy.

One of important challenges, also for agro-food development, is the increasing of global competition (economic transnationalization). Transnationalization affects on agriculture development not only straightly (through activity of dynamic participants of grain and oil markets, for example such, as TNC Louis Dreyfus Company, Bunge, Cargill, ADM, Serna and other) but also indirectly. Namely: through the formation of regional specialization of raw materials for domestic processers, as well as import demand from domestic producers in the market of material and technical means. Thus, the share of German BASF in 2015 on such market was estimated at 15-20%, while the Swiss Syngenta AG plans to increase its share to 27% by 2018.

In the whole world, the interest of large international capital in the sphere of agricultural and food production has been increasing for a long time and, taking into account the global food supply trends, will only grow in the future. Taking into account that representatives of selected countries (to which Ukraine does not belong) participate in such global competition, the scenario of consolidation of raw specialization of export and import dependence in deliveries of a number of important material and technical resources of the industry is fully realized in the domestic agrarian sphere. The most obvious long-term consequences of this are the final degradation of land resources, a significant deterioration in the ecology of rural areas, a decrease in the price competitiveness of domestic agro-food products, a reduction in the corresponding industries, etc., which together can negatively affect the national food security and independence.

Taking into account the general weakness of the Ukrainian economy and, accordingly, the position of our country in defending its own interests in attracting foreign investment, the real positive effect of the transnationalization of the agricultural sector seems incommensurable with the scale of the accompanying negative effects.

All this is also true for the sphere of land relations. There are now also formed significant challenges due to the existing in Ukraine uncertainty with the institutional mechanism of the land market and a fairly serious possibility of establishing high money control, incl. foreign, over land resources after the abolition of the current moratorium on their sale. Throughout the civilized world, it has long been accepted to assess the likely risks associated with foreign investment in the most important sectors of national economies and strategic assets, with a view to implementing appropriate proactive measures. It is obvious that some agrarian enterprises, as well as land resources of agricultural production, are among the objects whose sale (explicit or indirect) to non-residents threatens to create barriers to domestic supplies of goods that are strategically important for the domestic economy and restrict access to resources. Therefore, on the whole, without denying the expediency of attracting foreign investments, we believe it is extremely important to determine at the national level with a list of their potential threats, the corresponding preventive actions, as well as a list of spheres and industries of priority attraction of such capital.

The threats connected with the high level of involvement of the Ukrainian agrarian sector in the global space are extremely actual in modern conditions also due to the worsening in recent years of the world price conjuncture, namely: a prolonged general fall in food prices and their volatility [3].

The main threats of the national and branch level are formed under the influence of: a) inflation and national currency devaluation (this reduces the producers incomes and makes them unpredictable due to a decrease in effective food demand, time differences between the obtaining of production resources and receiving revenues from the sale of agricultural products, a high share of imports in the resource supply of agricultural production; b) relatively low efficiency, low yield and productivity of domestic agricultural production; c) predominantly the raw orientation of agro-food exports; d) the rapid reduction of the natural resource potential of the agrarian development, which is also intensified in certain regions of the country by unfavorable climate changes.

References:

1. Paskhaver B.I., Moldavan L.V., Shubravska O.V. Osnovni problemy rozvytku silskogospodarskogo vyrobnyctva [Main Problems of Agricultural Development] / Economika APK. 9. 2012. P. 3-10.

2. Shubravska O.V. Agroprodovolchyi sektor v umovah kryzy: osnovni tendencii ta vyklyki rozvytku [The Agro-food Sector under the Crisis: Main Tendencies and Development Challenges] / Economy and Forcasting. 3 2009. P. 99-110.

3. FAO Food Price Index [ ]. Available at: http://www.fao.org/worldfoodsituation/foodpricesindex/en/.