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Belarusian Review


The Sad State of Agriculture

Since the 1980s, agriculture has posed serious economic and policy problems for Belarus. Given the country's soil and climate, under Soviet rule, animal husbandry and hardier crops predominated.

Major products included flax (27% of production in the USSR at the time of its dissolution), potatoes (15% of Soviet production), buckwheat, rye, meat and dairy products, and, from the early 1980s, sugar beet. Other important crops included barley and animal fodder. Oats, millet, hay and tobacco were also grown in small amounts. Agriculture was devastated by the 1986 accident at Chernobyl, and fallout was particularly severe in the Homiel and Mahileu oblasts, the main agricultural region of Belarus. By 1992, 257,000 hectares of agricultural land, just over 4% of the country's total, had been removed from use, as had 1,340,000 hectares of forests, about 15% of the total. Chernobyl ensured that agricultural production began to decline in the late 1980s. The collapse of the USSR and the loss of markets led to further declines in output. By the end of 2001, output by value in the sector had officially fallen to just 73% of 1990 levels (up from a low of 65% in 1999) but the extent of the decline is undoubtedly understated due to under-reporting of inflation. According to the FAO output by volume was just 63.9% of output averaged between 1989 and 1991. Although grain production increased significantly in 2002 - by 16.2%, according to the FAO, it fell again in 2003, continuing an ongoing trend. Using official indices, output by value fell by an annual average of 4.3% between 1991 and 1995, and by 3.5% between 1996 and 2000.
Tentative attempts were made to reform the sector before 1995, but since then farming has remained in a time warp, and is still organised largely on Soviet-era lines. In 1990, the country had 2,522 collective or state farms. By the end of 2001 their number had fallen to just 2,388. During the same period, the number of private farms peaked at 3,029, before falling to 2,397. However, the area under private farming has slowly increased, to 93,200 hectares at the end of 2001 - about 1% of all agricultural land, reflecting a steady increase in average farm size (although the Statistical Year Book gives a figure of 81,700 hectares in a different table). Belarus also has a variety of private plots, including private subsidiary (household) plots, collective gardens, and kitchen gardens. Private ownership of household plots, initially up to 0.5 hectares, but from 1999, up to 1 hectare in size, dates from the reform period. Land must be used for its initial purpose after privatization, but owners of household plots can lease another 2 hectares of land for subsistence farming. Private farmers can lease up to 100 hectares. All together this sector accounts for about 15.5% of farm area, but about 39.4% of output measured by value in 2001, up from 23.7% in 1990.
Aid to agriculture seriously destabilised the economy in the late 1990s. Although the government had promised the IMF to reduce credits to the sector, the practice has continued. The sector benefits from a special tax, and a March 2000 resolution "requested" that all government agencies, banks and state-owned enterprises ?adopt? a farm. Loans continue to be made at a notional rate of interest, despite high inflation, and have helped raise the country's fiscal deficit by several percentage points. At the beginning of the 2000s banks were asked to provide 35,000m. rubels in lending, by selling foreign-exchange reserves to the central bank. Banks were compelled to extend loans to agricultural enterprises, although the practice was formally halted at the beginning of 2001. In 2002 the tax for agriculture, accounted for about 2% of government revenue (down from 3.3% in 2000). However, despite extensive subsidies, the sector has failed to modernise, and has actually moved backwards. Despite subsidies and low wages, by the end of 2001, 1,635 of the country's 2,400 odd agricultural enterprises were loss making (68.5% of the total). IMF statistics in mid-2002 showed that over one third of farms were bankrupt. The average debt of each was 800 million rubels (about $400,000). The sector has accounted for the bulk of wage arrears (about 90% of the total in 2001). Overall profitability in the sector declined from 12.8% in 1997 to 6.2% in 2000, -5.3% in 2001, and ?0.3% in 2002. Problems are concentrated in the state sector, where profitability was 6.7% in 2002.
Despite talk of reform, agriculture remains centrally managed. There are district and regional production targets for farms, farms are required to make deliveries to state procurement agencies, and there are fixed price-procurement quotas for major crops and livestock products. According to the Statistical Yearbook, a substantial proportion of output, particularly grain, continues to be sold for less than the purchase price. In late 1999 publicly owned farms sold about 85% of their output to the state or to state-owned processing firms, and private farms nearly two-thirds. According to the IMF, at the end of 1999 even household plots sold 20% of their output to state purchasers and processors, and another 35% to local collective farms. State agencies supply nearly all fertilizer, farm machinery, construction materials and fuel, and prices are controlled. However, despite government policy, the sector has slowly evolved. In 1990 agriculture accounted for 24% of GDP, but in 2002 the European Bank for Reconstruction and Development estimated it to account for just 10.9%, and according to official statistics it accounted for just 8.9% in 2001. Between 1990 and 2002, employment in the sector fell from 19.1% of the labour force to just over 11.8%, and total numbers employed fell from 985,400 to just 585,500 at the end of 2001, a drop of just over 40%, compared to a drop of under 15% for the labour force as a whole during the same period. By the end of 2002 the share again fell sharply, to just over 11.8% or 517,600. About two-thirds of those employed in the sector worked on collective farms. However, rather than declining gradually, the labour force has shown two sharp periods of decline: the first between 1995 and 1998 due to some degree to the financial problems engendered by the Russian financial crisis in 1998, and the second between 2000 and 2002. By the early 2000s, the sector had the lowest replacement rate of any job area: annually, only between 75 and 80% of lost labour was replaced by newcomers.
In conjunction with a series of IMF publications from April 2003, the recently published 2002 Statistical Yearbook tells a disturbing story. Farm wages remain the lowest in the country, and have fallen substantially since 1990, when they equalled 93.3% of the average wage. By the start of 2002, they were just 63.6% of the national average, although this was an increase from a low of 58.5% in 1997 (and according to the quarterly statistical bulletin had risen to 68.2% of the national average by late 2002). At 78,200 rubels per month, average wages were below the so-called minimum consumption level of 82,900 rubels at the start of 2002, and were less than 60% above the minimum subsistence level, although at the start of 2002, 70.4% of the country had wages below the minimum consumption level, and 28.4% below the minimum subsistence level.
Low wages have been supplemented by a high reliance on home grown foods. According to official statistics, in rural areas, almost all potatoes consumed are home grown (97.5%), most vegetables and squashes, most fruits and berries, most milk and dairy products, and most eggs. Over half of all meat and meat products are home grown. Even in urban areas private plots account for most potato and vegetable consumption, and a substantial proportion of fruits and berries.
Agriculture, particularly the state sector, is characterised by a lack of new investment, the decay of older infrastructure, de-mechanisation, and a return to primitive forms of production. Between 1990 and the end of 2001, the number of tractors in the country dropped from 113,400 to just 66,600, a drop of over 40%. Trucks used on farms dropped from 74,000 to 42,500; grain harvesters from 30,300 to 15,700; ploughs from 42,400 to just 18,700; sowers from 37,400 to 15,900; mowing machines from 29,700 to 13,600, and reapers from 5,400 to 1,500. Although to some extent the decline in mechanisation reflects a drop in output, there is no doubt that is also the replacement of labour for machinery. The erosion of the sector is also reflected in statistics on "depreciation". Levels of fixed assets are virtually unchanged since 1990, but depreciation levels for the sector as a whole reached 57.5% by the end of 2001, and those for machinery had reached 76.8%. This was the highest average level of depreciation in any branch of the economy. Nationally, according to official indices, annual capital investments in agriculture in 2002 had fallen by 90% in real terms from 1990 levels. Subsidies have permitted a recovery in fertiliser use, which has partly compensated for de-mechanisation, but despite recent increased use, overall consumption of fertilisers has gone down sharply from 1990-91 levels: mineral fertiliser use has fallen from 271 tons per hectare of ploughed land to just 138 tons, use of organic fertiliser has fallen from 77.1 tons to 31.4 tons, and total use of lime materials from 5,754.1 thousand tons to just 1,606.5 thousand. A recent agreement that Belarus will pay "market" prices for fuel makes it likely that costs of fertiliser and oil based inputs will increase, further straining the sector. Gasoline consumption dropped from 672,000 tons in 1990 to just 147,000 in 2001, and diesel from 1,325,000 tons to just 578,000. The private sector depends heavily ? and increasingly ? on horses, accounting for some 110,000 in 2001. Agriculture has also been a persistent debtor for electricity and gas. In 2002 it accounted for 17.4% of the total energy debt, including 11.7% of gas arrears and 30.1% of electricity arrears. Reduced yields reflect the lack of resources: output per hectare has dropped substantially for al gains since 1990 ? by an average of one quarter, and for vegetables, maize for fodder, forage roots, and hay by 40% or more. By contrast, yield for fruits and berries, grown mainly in the private sector, is up since 1990, although down sharply from 1985.
Rural poverty is reflected in poor housing conditions. In 2001, only 67% of rural dwellings were connected to mains water, only 61% were connected to sewer systems, only 48% had central heating, only 40% had hot water, and only 52% had baths or showers. Unsurprisingly, rural areas have undergone substantial depopulation since 1990, as young people leave for cities. Since 1994, the national population has fallen by 292,600 from a peak of 10,243,500. The loss has been in rural areas, which have had a negative natural growth rate since the early 1980s. The share of population in rural areas declined from 33.9% of the total in 1990 to just 29.3% in 2002, falling from 3,457,000 to 2,919,800 ? a fall of some 15%. During the same period the urban population increased by about 4.5%, despite a negative natural growth rate. The decline in rural areas is reflected in the growing share of the elderly in the population: in 2001, 33% of the rural population was over working age, and just 19.1% under working age, versus corresponding figures of 31% and 21%, respectively in 1990. By contrast, in 2001, 18.5% of the population in cities was under working age, and only 16.4% over.
Low wages plus reliance on their own production means that many farmers are only partially engaged with the formal economy. Many sell in private markets or in the underground economy to make ends meet. It is perhaps not surprising that a recent (2002) publication estimated that according to some methods of calculation, the size of the underground economy in Belarus was over 40% of GDP in 2001-2, among the highest in the CIS countries.
Government policy appears to have subsidised the sector as a kind of job creation scheme, aimed at maintaining rural employment regardless of enterprise profitability. A substantial proportion of support for the regime has come from rural areas and from small towns, and subsidies to agriculture have implicitly been subsidies to people in these areas. Despite subsidies, the sector is increasingly unprofitable. Employment in the sector has almost halved since 1990. Subsidies have propped up ailing farms and not improved rural infrastructure. They have not been used to build up a strong, modernised sector. Far from helping to modernise and replace equipment, they have paid operating costs and wages. The result is a sector which has reverted to the early 20th century in terms of technology and production.

Source: IMF: Republic of Belarus Article IV consultation; Statistical Yearbook of the Republic of Belarus, 2002).

Andrew Ryder is with the Department of Geography, University of Portsmouth, Portsmouth, England

By Andrew Ryder This article appeared in
Belarusian Review, Vol. 15, No 4
Copyright 2003 Belarusian Review
All rights reserved.

Andrew Ryder

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