The Infrastructure of Agrarian Market of Ukraine

Transcription

1 The Infrastructure of Agrarian Market of Ukraine Juraj Neománi 1, Oksana Kleban 2, Michal Belák 1 1 Faculty of Economics and Management, Slovak University of Agriculture, Nitra, Slovakia 2 Faculty of Economics and Management, Lviv National University of Veterinary Medicine and Biotechnologies named after S. Z. Gzhytskyi, Lviv, Ukraine Abstract: Our primary focus is to analyze the state and dynamics of development of the infrastructure of agrarian market in Ukraine. Conceptual, logical, statistic methods have been used with a view to carrying out the research. Key Words: infrastructure, agrarian market, agricultural enterprises, Ukraine Introduction One of preconditions of forward development of agricultural production is forming and operating the market infrastructure. The market infrastructure is the system of elements that provide stable and regular functioning of business links and interaction of economic players. The market infrastructure is a base where system of regional markets is located. It integrates fields of production, trade turnover and consumption, also supports acceleration of cash, asset turnover in the economy. Forming well-developed system of the market infrastructure is the impartial premise of effective operating of enterprises under market economy's conditions. Taking into consideration that agrarian sector of Ukrainian economy has significant production potential, forming modern infrastructure of agrarian market according to world's standards is important. 517

2 Material and Methods Nowadays many researches investigate problems of forming and operating the infrastructure of agrarian market at theoretical aspect, either practical. There are many opinions of scientists concerning the meaning of the term "infrastructure". Sabluk P. defines the infrastructure as the system of enterprises, organizations, establishments of production and non-production domains, which serve producers and form condition for timely and uninterrupted increment of production output (Sabluk 2000). Hubskyi B. considers that the infrastructure is the system of establishments, which provide immediate realization of exchange process as a place of having contact with market agents, i. e. sellers and buyers (Hubskyi 1998). The leading principle of forming the market infrastructure is the following: the infrastructure of agrarian market provides common conditions for supporting stable competitive advantages of all entities in the link of foodstuffs turnover "producer wholesaler retail final consumer" (Kyryliuk 2009). In order to carry out of research, we used following methods: conceptual and logical for summing up the theoretical tendencies and exploring the possibilities of forming effective market infrastructure; statistic to study the state and dynamics of the market infrastructure development. The aim of this paper is to analyze the state of operating of the infrastructure of agrarian market in Ukraine, also to study what is the best way of improvement of the development of market infrastructure. Results The result of Ukraine's transition to a market-oriented economy was destruction previous centrally planned system of products sales. In the past it was logically linked system of procurement planning and distribution agricultural products. All elements of distribution 518

3 were controlled and managed by government departments. Producers in advance knew where to sell their products and at what prices. The system of fixed prices was functioned. The main aim of the enterprise was to produce agricultural products according to the annual plan that was composed on the base of Five-Year Plan. Necessarily resources were supplied and concrete suppliers were assigned in accordance with that plan. Thus agricultural enterprises knew in advance about their production resources and suppliers. Nowadays the infrastructure of agrarian market is restructured and destroyed in part. State deliveries either have changed, or are not functioned at all. Owners of enterprises of processing industry are private individual. Commercial organizations have an access to crediting and controlling logistical support of agricultural enterprises. But farms become aware of monopolistic enforcement from them. Markets of agricultural products have changed substantially. There are a lot of private purveyors instead of only state purveyor. It is competition between producers. So it is difficult to sell products. Unfortunately producers of agricultural products don't have free access to such components of infrastructure as transportation, warehouse storage, processing enterprises etc. More than a half of gross output of agrarian sector is produced by individual farmers. Herewith they are not served by sales organizations. Thus there is a necessity to organize civilized agrarian market with well-developed system of marketing boards and supply industry. After agrarian reforms in Ukraine there are different forms of entrepreneurship. From 1992 commodity exchanges, commercial companies, wholesale markets started work in Ukraine. However these organizations don't support stability of agrarian market. It is still difficult for producers to sell their products and often they have to be adjusted to dumping 519

4 prices. For example, in 2008 it was rich harvest of grain, so it was noticed price reduction till the cost price. As a result producers couldn't earn planned income or they had losses at all. So the development of market infrastructure of Ukrainian agrarian market is very slow, because legislative basis and proprietary security are not up to requirements of modern market of agricultural products. Nowadays producers of agricultural products work in the conditions of market economy, where the main aim is making profit. There are two types of markets primary and secondary. On the primary market there are direct product deliveries from producers to processing enterprises. On the secondary market there is selling through middleman. If in the past, for example, producers supplied a milk or sugar beets to the nearest processing enterprises, nowadays these products can be transported for a long distance. Ukrainian producers of agricultural products risk losing a considerable part of profit because of data gap concerning changes of market situation. Middlemen purchase products directly in producers, so they take this risk upon themselves. Besides middlemen tries to earn profit likewise other entities. So from the figure 1 we can see the information about selling of agricultural products through different types of middlemen. 20% 1% 3% 8% 68% Processing enterprises Population (on account of wages) Shareholders (on account of rental payment for land or estate share) Market (through own shops, stalls) Other sales outlet 520

5 Fig.1. Production sharing of Ukrainian agricultural enterprises according to sales outlets in 2008 As we can see from the figure 1, 20% of sales outlets refer to direct deliveries to processing enterprises. The value of products that rural workers or inhabitants receive in kind is 4%. These products are used for household, for example food, forage for domestic animals and poultry. Very small part of these products is sold at city's markets. The share of products that is sold for consumption by final consumers is 8%. So summing all these shares of sale outlets we can receive the share of sale outlet at the primary market. It is 32%. And the share of products sold to middlemen is 68%. This is the secondary market. In 2008 the value of the products sold through middlemen was more than 38 milliard hryvnias ("hryvnia" is Ukrainian currency) or it's about 3 milliard euros. We can notice that the share of the crop production in sale's structure of agricultural enterprises was bigger than the animal produce (fig. 2). 0,0 5,0 10,0 15,0 20,0 25,0 30,0 milliard hryvnias Types of sales outlets 2,7 Processing enterprises 8,4 Population (on account of wages) 0,3 0,3 Shareholders (on account of rental payment for land or estate share) 0,03 1,5 Market (through own shops, stalls) 1,8 2,8 Other sales outlet 10,8 27,9 Crop production Animal produce 521

6 Fig.2. The value of agricultural products sold by different types of sales outlets in 2008 So the value of crop production sold through different types of sales outlets was about 35 milliard hryvnias, and the value of animal produce 21 milliard hryvnias. It can be explained that agricultural enterprises sold large quantity of animal produce directly to processing enterprises. But as we can see from the figure 2, 51% of animal produce was sold through other sales outlets. It means through middlemen. For all that direct relationship between producers and processing industry is chaotic and not well-developed. The most popular agricultural products, which sold through middlemen, are sugar, industrial crops, cereals and potato (fig. 3). Share of sales 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cereals Other sales outlet Industrial crops Market (through own shops, stalls) Potato Vegetables Grape Cattle and poultry (in live weight) Agricultural products Shareholders (on account of rental payment for land or estate share) Population (on account of wages) Processing enterprises Sugar Fig.3. The structure of sales of agricultural products sold through different types of sales outlets in 2008 On the primary market the most popular products, which sold to processing enterprises, are grape, cattle and poultry in live weight, vegetables. Therefore there is a problem of sales 522

7 on the primary market. The thing is that processing enterprises can reduce purchase prices. It can be prevented by cooperation or associations of agricultural producers, fixing of limit prices by government, also forming a transparent market of agricultural products. So we can draw a conclusion that there are a lot of sales at the secondary market of agricultural products. But the problem is that it has characteristics likewise "black" economy. The main requirement of the agrarian market development is operating of commodity exchanges. This organization consolidates entities and individuals which realize commercial or production activities. Commodity exchanges do services on making exchange agreements, monitoring and arrangement of sales. In 2008 the volume of concluded exchange agreements on agricultural products sales was 37,6 milliard hryvnias or 58,2% of the general volume of exchange sales. The biggest quantity of exchange agreements were in commodity (54,6%), agroindustrial (26,2%) and universal (11,5%) exchanges. For the last 9 years exchange sales of agricultural products increased almost in 40 times. But this index is made artificially because of putting into operating compulsory exchange registration of export contracts. Most of exchange agreements are spot contracts. But forward or future contracts are more favorable for farmers. The biggest share of concluded exchange contracts were at commodity exchange of Kyiv (52,1%), Dnipropetrovsk region (9,6%) and Poltava region (9,3%). So the operation of agrarian commodity exchanges in Ukraine is ineffective. There are reasons of this: only registered brokerage firms can trade at the common exchange. If farmers wants to take a part in exchange business, they have either employ a broker or to register own brokerage firm. So it leads to extra expenses and this is not profitable for producers. Even in the case of accepting of favorable brokerage places, producers spend a lot of time for arrangement of documents and closure of deals. This is not suitable for producers 523

8 because agriculture requires exact meeting of deadlines of sowing, cultivation, harvesting etc. The waste of time for producers means the breaking of technologic process of agricultural production. It is noticed small demand on common exchange's service because many traders purchase agricultural products directly from producers who are not well-informed about price situation. Imperfection of legislative basis of common exchange's operation. Lack of forward and future contracts. Another considerable problem of agricultural producers is lack of wholesale agricultural markets where small-scale enterprises could sell their products. It is really slow down the development of agriculture. We can consider that is no wholesale infrastructure of agricultural products in Ukraine. As an exception there are several well-developed wholesale markets in Lviv, Kherson, Kyiv. The main reason of this problem is high value of the land because it is placed near big cities. Also it requires great investments and durable payback period, also high level of bureaucratic process of launching of this kind of business. Conclusion Taking into the consideration of previously mentioned we can say that the modern state of the infrastructure of agrarian market doesn't facilitate the forming of relationship between producer, middleman, consumer and government. It has negative influence on the competitiveness of agricultural enterprises. This problem can be solved by intensification of the development of components of the market infrastructure. It will assist producers to make free choice of sales outlet with a view to have a profit. The fundamental components of 524

9 market infrastructure should be commodity exchange, wholesale agricultural markets, firm sales network and system of agricultural consultative services. References 1.Губський Б. В. Аграрний ринок. К.: Нора-прінт, с. (Hubskyi B. Agrarian market. Kyiv, p.) 2.Кирилюк Є. М. Формування економічних відносин сільськогосподарських товаровиробників із посередницькими структурами в Україні. Монографія. Черкаси, с. (Kyryliuk Ye. Forming economic relations of agricultural producers with middlemen in Ukraine. Monography. Cherkasy, p.) 3.Формування та функціонування ринку агропромислової продукції: / За ред. Саблука П. Т. К.: ІАЕ УААН, с. (Forming and operating of agrarian market / Edited by Sabluk P. Kyiv, p.) 4.Rovný, P. Nagyová, Ľ.: The role and the position of agriculture in the national economy in Slovakia and in the EU. In: Acta Universitatis Bohemiae Meridionales : Scientific journal for economy, management and trade - České Budějovice : South Bohemian University, Rovný, P. Récky, R. - Dobák, D.: Production and agrofood market in Slovakia in the conditions of EU and globalization processes. In: Internationalization of agrofood companies in the Slovak Republic, Publication 2008, SUA, Nitra. Contact address Oksana Kleban, PhD. Department of Marketing, Faculty of Economics and Management Lviv National University of Veterinary Medicine and Biotechnologies 525

10 named after S. Z. Gzhytskyi Pekarska str. 50, Lviv 79010, Ukraine Ing. Juraj Neománi Department of Marketing, Faculty of Economics and Management Slovak University of Agriculture Tr. A. Hlinku 2, Nitra , Slovakia 526