INTERNATIONAL AGRICULTURE AND TRADE (Newly Independent States & the Baltics)-- SUMMARY May 27, 1997 Approved by the World Agricultural Outlook Board =============================================================================== This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of INTERNATIONAL AGRICULTURE & TRADE (Newly Independent States & the Baltics), WRS-97-1, will be available within 1-2 weeks following release of this summary. =============================================================================== Meat Imports To Remain Robust Over Long Term Reform-based changes have transformed the Newly Independent States and the Baltics (NIS/B) region, once a major grain importer, into a top meat importer. Total meat imports from outside the region in 1997 are estimated to remain near last year's record 2 million tons, due mainly to a continued lack of competitiveness by most domestic producers. Since 1992, extra-NIS/B meat imports have about quintupled. More than half the region's meat imports consist of poultry, primarily leg quarters from the United States, which satisfy a large demand in Russia's major cities for a less expensive source of protein. Poultry meat production in Russia has declined 60 percent since reforms began, as the cost of producing and marketing domestic poultry continues to exceed prices of competing imports. NIS/B net grain imports in 1997/98 are again projected at a record low of under 4 million tons, as total grain use continues to fall while output remains stable or increases slightly. In the 1980s the region imported over 30 million tons a year. The United States, having adjusted to the collapse in grain sales to the region, has now positioned itself as the NIS/B's largest meat supplier, accounting for $1 billion in poultry meat sales alone in calendar 1996. Poultry meat is the single largest U.S. export to the NIS/B region, non- agricultural products included. Total U.S. agricultural sales to the NIS/B region are projected to grow over 10 percent from a year earlier in fiscal 1997, as exports of meat and other consumer-ready products (fresh and processed fruits and vegetables, nuts, and beverages) rise. USDA's long-term trade outlook for the region assumes slow recovery of real GDP to 2005, resulting in some increased meat consumption. Although projected modest increases in animal productivity should help NIS/B producers satisfy most of the rising demand, the region's comparative disadvantage in meat is forecast to continue, with net imports remaining at about 2 million tons. The region is not expected to return to the large grain imports of the pre-reform period, or to become a major grain exporter. Net grain imports in 2005 are projected at 2-3 million tons, primarily wheat, while in certain years there could be small net exports of coarse grains. USDA's long-term projections assume no significant changes in Russia's trade policy. Russia's ongoing accession into the WTO and its likely compliance with WTO regulations are expected to limit its ability to increase trade barriers and use trade-distorting internal support to protect its farm sector. After 5 years of market reforms that have spurred significant restructuring of NIS/B agricultural production, grain output may now be stabilizing. NIS/B grain production has fallen 35 percent since 1992/93, with coarse grains declining the most, reflecting reduced feed demand from shrinking livestock inventories. In 1997 the region's livestock inventories will contract for the eighth consecutive year. Since reforms began, NIS/B total meat output has fallen 45 percent, as producers have faced diminishing consumer demand for livestock products, worsening terms of trade, and high transaction costs due to underdeveloped marketing infrastructure. Since the breakup of the USSR, the NIS/B countries have differed in their degree of agricultural reform, falling into three groups. The most reformist have been Armenia and Georgia (in the Caucasus region) and the three Baltic countries--Estonia, Latvia, and Lithuania. Uzbekistan, Turkmenistan, and Belarus have reformed the least. Russia, Ukraine, Moldova, and the other NIS/B countries fall between the two extremes. The fast-reforming countries have adopted two general types of policies that affect agriculture: macroeconomic-related reforms, such as price deregulation, substantial reduction of subsidies to agriculture, and liberalization of domestic and foreign trade; and, at the microeconomic level, privatization of agriculture (though Armenia and Georgia have made more progress with privatization than the Baltic countries). Reform appears to be paying off. Agricultural production has grown for 4 straight years in Armenia, and 2 years in Georgia. Russia, Ukraine, and Moldova, pursuing middle of the road policies, have generally implemented the macroeconomic-type reforms cited above, but have done little to privatize agriculture. Although agricultural production in these countries continues to fall, mainly in the livestock sector, it will probably stabilize in the near term. Uzbekistan, Turkmenistan, and Belarus have been the least reformist NIS/B countries not only in agriculture but economywide. They have retained many policies of the previous Soviet regime, such as price controls, subsidies, and state procurement, and have done almost nothing concerning land reform and privatization. Since 1991, agricultural production in these countries has fallen less than in the moderately reforming nations such as Russia and Ukraine, but such statistics are misleading. The continuation of Soviet-type policies has shielded agriculture from the restructuring, and in many cases contraction, of agricultural output (especially in the livestock sector) that these countries will inevitably experience if they move towards market-driven and open agricultural economies. For further information, contact Christian Foster (202) 219-0625 or William Liefert, (202) 219-0656. END_OF_FILE