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№ 2018/4

Economics of agriculture


1Institute for Economics and Forecasting, NAS of Ukraine

Development of Ukrainian livestock sector and its support in conditions of growing global grain prices

Ekon. prognozuvannâ 2018; 4:93-105https://doi.org/10.15407/eip2018.04.093


The article proposes support tools for Ukraine's livestock sector in the face of rising world prices for feed grain. The importance of the subject is based on the existing disproportions in the agro-food sector, reflected in the high profitability of grain production and low profits for livestock producers. Analysis of the relevant papers shows that the economic analysis of "meat and feed" price ratio is absent in Ukrainian literature.
At the same time, a lot of works by Western economists provide important conclusions. First, grain prices are more volatile than prices for meat and dairy products due to a number of factors, the main of which is low demand elasticity. Second, individual livestock sub-sectors respond differently to changes in grain prices. Poultry prices integrate grain market changes very rapidly due to the short production cycle. Hog and cattle occupy the second and third places respectively. Third, meat prices have a cyclicality because of the difference between the producers' expectations and the actual balance of demand and supply. In this case, feed prices can indirectly affect these cycles. In general, for the livestock sector, higher risk means a sudden increase in feed prices rather than a drop of prices for meat and dairy products. Thus, the index of profitability for livestock industries is currently low due to the growth of prices for fodder denominated in hryvnias.
An analysis of foreign trade dynamics in Ukraine shows that meat exports have increased in re-cent years due to increased supply of poultry while the supply of beef and pork has declined. As for imports, after a fall in 2015, its volume began to increase through a large supply of low-quality products, which indicates poor competitiveness of the domestic producer. After a detailed analysis of the literature and current situation in the Ukrainian market, the author presents a number of tools for solving these problems. In particular, it is proposed to use "flexible" subsidies, to subsidize feed crops production, and to grant food consumption subsidies to the population. In addition, a series of decisions are offered to encourage exports and modernize the infrastructure.

Keywords: agricultural policy, prices, volatility, livestock production, feed, export, import, subsidies

JEL: Q11, Q17, Q18

Article in Ukrainian (pp. 93 - 105)