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Outlook for Ukraine agriculture: results from AGMEMOD model Guna Salputra (LVAEI) Myrna van Leeuwen (LEI) Oksana Golovnya (KNEU) Serhiy Demyanenko (KNEU) International scientific-methodical conference Legal-organizational Forms of Agri-industrial Formations: Status, Prospects and the Impact on Rural Development Vadym Hetman Kyiv National Economic University (KNEU) Faculty of Economics of Agri-industrial Comlex, Kyiv, November 11-12, 2011

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Table of content What is AGMEMOD Objectives and (short) history Methodology from data handling to output analysis Data and variables Structure of the model Baseline scenario assumptions Ukraine agricultural outlook to 2025 for grains and oilseeds, meat, dairy 2 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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AGMEMOD AGriculture MEmber States MODelling Partial equilibrium Dynamic Recursive Econometrically estimated Multi-commodity markets and multi-country combined model Incorporates 29 individual country models 24 EU countries, Croatia, FYR Macedonia, Turkey, Ukraine, Russia. 3 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Objectives of AGMEMOD To make medium term annual projections and simulations for the main European agricultural sectors in order to establish a reliable baseline and evaluate measures, programmes and policies in agriculture at the EU level as well as at the stand- alone country (Member State, Accession Candidate and individual neighbouring countries) level with an emphasis on supply, demand, trade and prices. Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Part I 2001-2005 EU15 country models Organisation of project Part II 2006-2008 Part III 2009-2010 EU27 combined model Extension of Partnership Extension with Turkey Part III 2010-2011 Extention with Russia, Ukraine Endogeous world price EU funds 5 th FP EU funds 6 th FP History of AGMEMOD IPTS funds Nati- onal funds Extension Kazakhstan Vadym Hetman Kyiv National Economic University 11-12 November 2011

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From data handling to output analysis Compile data on commodity supply/demand balances and macroeconomic and policy assumptions Model specification for Ukrainian agricultural situation taking into account its specific structures and agricultural and trade policy Estimate/calibrate the specified equations with Eviews and transfer into the AGMEMOD GAMS framework Run, solve and validate the model Generate baseline and scenario analysis 6 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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From data handling to output analysis 7 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Data and variables in AGMEMOD Endogenous variables Prices Supply/demand balances production, consumption, stocks and trade Exogenous variables Macroeconomic indicators GDP, population, inflation rate, exchange rates UAH/USD and UAH/EUR Agricultural policy indicators intervention prices payments per ha/animal/production input subsidies production quota Trade policy indicators import and export duties Import and export quotas and tariffs quota tariff rates 8 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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AGMEMOD Ukraine model structure 9 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Baseline narratives for Ukraine Projections based on: historical trends taking account of the world market, macroeconomic and agricultural policy environment to 2025 as far as known at this moment Status-quo situation up to 2025: macro-economic projections (population, GDP, inflation, exchange rates) for Ukraine continuation of specific Ukrainian agricultural policy instruments continuation of trade policy of Ukraine no assumptions on ongoing Doha Development Round of WTO FAPRI April 2011 world prices incorporated 10 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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UA baseline outlook Grains and oilseeds 11 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Soft wheat: competitive UA price compared to world and EU price 12 Soft wheat price (/100kg) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Rapeseeds: UA price below world and EU price 13 Rapeseeds price (/100 kg) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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UA baseline: grains and oilseeds Area harvested: total grains area harvested projected to show moderate increase 80% of grains area is allocated to soft wheat, barley and maize total oilseeds area harvested projected to grow in reaction on UA is becoming an important rapeseeds producer and exporter to EU countries due to increasing biodiesel demand soybeans area would grow: UA is a protein-deficient country and soybean meals demand is expected to grow in answer on the actual rise of investments into meat and dairy sectors 14 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Soft wheat: production mainly driven by yield grow, slightly increase of wheat area harvested 15 Soft wheat (mio tons) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Barley: UA belongs to main barley exporters (80% to Middle East); higher feed use demand from increasing beef and poultry sectors 16 Barley (mio tons) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Rapeseeds: higher production expected as answer on higher demand for biodiesel (eg from EU); increasing net-export position 17 Rapeseeds (mio tons) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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UA baseline outlook Livestock and meat 18

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Beef: UA price follows the world price; it is slightly declining due to increasing self-sufficiency rate; UA is net-exporter 19 Beef price (/100kg)

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Pork: UA price close to EU price and significantly above world price; import tariffs; UA is net-importer of pork 20 AGMEMOD workshop, Brussels, 13/14 September 2011

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Poultry: UA price follows the world price; UA price is below the world and EU prices; UA has turned into a net-exporter of poultry 21 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Beef: increase of beef production, important factor - increasing slaughter weight 22 Beef (1000 tons) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Pork: import tariffs prevent influence from ROW; UA expected to remain net-importer con 23 Pork (1000 tons) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Poultry: 70% of production is concentrated into 2 vertically integrated companies; significant investments in more integration expected; UA was net-importer to 2008, but has turned into a net-exporter 24 Poultry (1000 tons)

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UA baseline outlook Milk and dairy 25

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Milk: price lower than EU price 26 Milk price (/100kg)

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Butter: domestic price follows same patterns as world and EU prices, but at lower level 27

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Cheese: UA price lower than world and EU prices; slightly increasing due to increasing demand 28 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Butter: stable production and domestic use projected; declining domestic use due to stable cons/head, but decreasing population; this enforces UA net-export position 29 Butter (1000 tons) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Cheese: projected production increase (1%/year) linked to projected higher milk production; yearly 1.7% rise in cheese cons/cap; UA keeps net-export position but with declining tendency 30 Cheese (1000 tons) Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Conclusions on baseline outlook UA is competitive partner on world crop markets and under baseline is projected to remain net-exporter of grains and oilseeds UA milk production expected to increase, which leads to higher beef production as well UA is projected to remain net-importer of pork; relatively high domestic price compared to other meats UA is projected to remain a net-exporter of dairy products with a movement towards production of cheese and fresh products (higher value products) 31 Vadym Hetman Kyiv National Economic University 11-12 November 2011

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Thank you for attention More information: www.agmemod.eu,www.agmemod.eu 32 Vadym Hetman Kyiv National Economic University 11-12 November 2011