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Directorate for Food, Agriculture and Fisheries 1
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES
OECD OCDEORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES
AGRICULTURAL SECTOR TRENDS IN CEECs
Loek BoonekampHead of the Trade and Markets Division
OECD, Directorate for Agriculture
EastAgri conferenceRome, 28 February, 2005
OECD OCDEDirectorate for Food, Agriculture and Fisheries
2
Outline of the Presentation
• Macro-economic trends
• The context of agricultural world markets
• A focus on Ukraine
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Macro-economic Trends
• Robust GDP growth
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Robust GDP Growth
-4
-2
0
2
4
6
8
10
12
14
1997 1999 2001 2003 2005Pe
r c
en
t c
ha
ng
e f
rom
pre
vio
us
ye
ar
CEE
Ukraine
Belarus
EU
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Macro Economic Trends
• Robust GDP growthRobust GDP growth
• Inflation slowly controled
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Inflation slowly under control
0
10
20
30
40
50
60
70
2001 2002 2003 2004 2005
Pe
r c
en
t CEE
Ukraine
Belarus
Euro zone
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Macro Economic Trends
• Robust GDP growthRobust GDP growth
• Inflation slowly under controlInflation slowly under control
• External debt remains heavy….
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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External debt remains heavy…
0
5
10
15
20
25
30
1997 1999 2001 2003 2005
pe
r c
en
t
Emerging anddevelopingeconomies
CEE
Developing Asia
external debt servicing as a per cent of exports
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Macro Economic Trends
• Robust GDP growthRobust GDP growth
• Inflation slowly under controlInflation slowly under control
• External debt remains heavy….External debt remains heavy….
• ….Weighing down on investments
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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….Weighing down on investments
0
5
10
15
20
25
30
35
40
1999 2001 2003 2005
pe
r c
en
t CEEDeveloping Asia
investments as a per cent of GDP
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Agricultural World Market Context: The Evolving Economic Environment
• Increasing competition in world markets– Cereals from OECD– Renewed export subsidy use in EU (weak USD)– Meat, sugar, cotton, oilseeds from South America
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Growing Competition in Meat and Oilseed Export Markets
0
20
40
60
80
100
120
140
160
Beef Pigmeat Poultry Oilseeds Oilmeal
Per
cen
t ch
ang
e
OECDexports
Exports fromBrazil andArgenina
2013 compared to 1998-2003 average
6.1
2.1
4.3
0.5
4.6
1.4
35
46
11
46
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Agricultural World Market Context: The Evolving Economic Environment
• Increasing competition in world marketsIncreasing competition in world markets– Cereals from OECDCereals from OECD– Meat, sugar, cotton, oilseeds from South AmericaMeat, sugar, cotton, oilseeds from South America– Renewed export subsidy use in EU (weak USDRenewed export subsidy use in EU (weak USD)
• Continued productivity growth in agriculture– Downward pressure continues on real commodity
prices
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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World Prices Remain Low in Real Terms
0
100
200
300
400
500
600
1971 1985 1999 2013
US
D/t
Wheat Coarse grains
Oilseeds
0
100
200
300
400
500
600
1971 1985 1999 2013U
SD
/100
kg
Beef Pork Butter
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Agricultural World Market Context: The Evolving Economic Environment
• Changing consumer demand
• Growing civil society voice
• Changing market structures
• Increasing globalisation
• Shifting competition focus
• Growing role of standards
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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A Focus on Ukraine
• The policy situation– Low support levels
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Support in Ukraine Generally Low…
-100
-80
-60
-40
-20
0
20
40
60
80
100
1987 1991 1995 1999 2003
% o
f fa
rm r
ec
eip
ts Total PSE PSE CropsPSE LivestockPSE OECD
Producer support estimate
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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…Also Compared to Other CEECs
0
5
10
15
20
25
30
35
40
45
Per
cen
t
Bulgaria
Ukraine
Poland
Slovak Republic
Hungary
Czech Republic
Romania
Slovenia
EU
OECD
Per cent PSE in 2001
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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A Focus on Ukraine
• The policy situationThe policy situation– Low support levelsLow support levels–With big differences between commodities
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Big Differences in Levels of Support
-30
-20
-10
0
10
20
30
40
50
2001-2003 average
Pe
r c
en
t
PoultrySugar
Pig meatWheatBeef and veal
MaizeOilseedsEggs
Milk
PSE by commodity - 2001 to 2003 average
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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A Focus on Ukraine
• The policy situationThe policy situation– Low support levelsLow support levels– With big differences between commoditiesWith big differences between commodities–Most as budgetary support
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Most Support Given as Direct Payments
-6000
-4000
-2000
0
2000
4000
1993 1995 1997 1999 2001 2003
Mill
ion
US
D
Budgetarysupport
Market pricesupport
Composition of support over time
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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A Focus on Ukraine
• The policy situationThe policy situation– Low support levelsLow support levels– With big differences between commoditiesWith big differences between commodities– Most as budgetary supportMost as budgetary support
• High tariffs despite low price support
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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High Tariffs Despite Low MPS
0
50
100
150
200
250
300
Whe
at
Mai
ze
Sunseed
Beef
Pigm
eat
Poultry
Butter
Eggs
Sugar
Pe
r c
en
t Current AVT
2002 AVE
Offered AVT
OECD OCDEDirectorate for Food, Agriculture and Fisheries
25
Lowering MFN Tariffs Does Not Affect Domestic Prices
-50
0
50
100
150
200
250
300
Pe
r c
en
t
MFN Tariff (AVE)
Price differential
Binding tariff
Price differential=(domestic price-border price)/border price
OECD OCDEDirectorate for Food, Agriculture and Fisheries
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Some Concluding Remarks
• Aggregate support levels are moderate• Substantial distortion for some commodities• No need for severe border measures• Substantial scope for Ukrainian tariff cuts under
WTO accession• WTO membership would lay stronger
foundations for ‘good’ agricultural policies…• ..and facilitate access to the global food value
chain by Ukrainian farmers and food producers