The Cabinet of Ministers has rescinded a decree giving the government first dibs on farms' grain in what appeared to be its first-ever acknowledgment that confiscating grain in a year of low crop yields doesn't work.
A new decree, which bore the signature of Prime Minister Valery Pustovoitenko, overturned a July 27 Cabinet resolution that required farms to settle their debts to the state before they sell to anyone else.
That resolution effectively shut private agricultural input suppliers out of the market and cut private farmers off from commercial buyers. It also drew the wrath of Western agricultural advisors when it was sneaked through by the Cabinet marked 'not for release.'
As in previous years, when the government achieved control of the harvest through outright bans on the sale of grain until the state share was claimed, the debt order compelled farmers to turn their crops over to the state grain monopoly, Khlib Ukrainy – ostensibly to pay off debts to state suppliers.
In reality, the order was merely a rubber stamp for a grain confiscation scheme that was orchestrated at the highest levels of government and enthusiastically implemented at the regional and local level.
Documents obtained by the Post indicated that, in classic central-planning style, the central government and regional administrations fixed quotas for grain confiscation and consigned government security organs to ensure that harvests were delivered to state grain reserves.
This year's freeze on grain movements promised to cripple Ukrainian agriculture. Some Western input providers promised they would refuse to advance additional credits to Ukrainian farms for pesticides, equipment and fuel.
In a letter addressed to Pustovoitenko and published in the Post, the American Chamber of Commerce in Ukraine protested 'a damaging discriminatory policy against the private sector in agriculture.'
The letter went on: 'We were especially distressed to discover that instructions for the government to intervene and discriminate against the private sector by providing government institutions seniority rights and privileges in the market were authorized [by the Prime Minister]. … The Ukrainian government, if it truly believes in the development of a market economy, should be willing to establish common and fair rules for all participants in the market.'
While the decision to cancel the payment priority order may have been a reaction to indirect pressure from the U.S. government, other agricultural observers speculate that pressure from the International Monetary Fund and the World Bank had more to do with it.
The World Bank made lifting a decree that banned the export of sunseed oil a condition for Ukraine to receive its Agricultural Restructuring Loan. The IMF, currently in the process of gradually disseminating a $2.2 billion loan to the country, has also put pressure on Ukraine to liberalize its agriculture commodities market.
'[We] have decided not to mock the world with the order of priority for paying for grain,' the agency Ukrainian quoted an unnamed Agriculture Ministry official as saying.
Few outside the government knew the real motivation behind the surprise revocation.
'The Chamber of Commerce letter may have been instrumental in bringing pressure on the administration,' opined Peter Sochan, the senior policy coordinator for the Citizens Network for Foreign Affairs, which works closely with the agricultural sector. But he acknowledged it is difficult to say what is going on behind the scenes in terms of international pressure. 'The [Cabinet of Ministers] has been discussing this for several weeks now,' Sochan said.
Serhy Feofilov, director of the private company Ukragroconsult, has a different theory. He says the state's ability to confiscate could be breaking down, as it no longer has as many resources to enforce the ban as it once had.
'I think the picture has become more or less clear in terms of the harvest,' he said. 'Farmers are sitting on grain, avoiding delivery to silos – it's too risky. Others, however, have no option but to deliver.'
His words are backed up by a Sept. 23 Ukrainian News report that said 68 percent of 23 million tons of grain harvested so far this year in Ukraine is still held by agricultural enterprises.
The farmers had plenty of reasons to hoard their grain. Under the payment priority order, delivery to a silo all but ensured its confiscation – nearly all the grain elevators in Ukraine are owned or controlled by Khlib Ukrainy.
Even if a farmer could prove he had no outstanding debt to the state, Khlib Ukrainy officials often tore certificates of ownership up on the spot and reassigned deliveries to the state.
Of course, the risk still remains that local authorities will continue to zealously enforce grain collection despite having lost that right. Skeptics note there is nothing in the new resolution which compels oblast and raion authorities to cease and desist nabbing farmers' grain.
'For the authorities, confiscation is an ingrained habit,' Sochan groaned.
