Agricultural Policy Monitoring and Evaluation 2024

26. Ukraine

Main findings

Support to agriculture

The agricultural sector continues to be affected by Russia’s war of aggression against Ukraine, with a relatively low total value of production in 2023 compared to the pre-war level in 2021. Throughout the past three decades, support to the sector has been low or negative, mostly driven by market price support (MPS) which has been negative for some exported commodities but positive for several imported ones. Despite a slight increase in MPS in 2023, the average level of producer support for 2021-23 remained negative at -0.03% of gross farm receipts.

For the past two decades, Ukraine maintained negative MPS for oats, sunflower and milk, with average producer prices set below international reference levels. In contrast, sugar and pig meat benefited from tariff protection and a positive level of MPS. In 2023, producers of sunflower oil received positive MPS for the first time. MPS and payments for the unconstrained use of variable inputs, which are Ukraine’s most production- and trade-distorting measures, account for 87.4% of producer transfers. Other budgetary support mainly comes in the form of agricultural tax benefits, while many traditional support programmes have been suspended under martial law.

Support for general services (General Service Support Estimate, GSSE) has historically been below the average of the countries covered in this report, and further shrank to 0.7% of the value of agricultural production in 2021-23. Most of this support goes to inspection and control, which has increased slightly in the past two decades. The share of GSSE allocated to agricultural knowledge and innovation systems has declined, and spending on infrastructure has fallen to nearly zero for the past 10 years. Overall, total support to the sector as a percentage of Gross Domestic Product (GDP) declined from 0.4% in 2000-02 to 0.2% in 2021-23, and the interventions still in place are also being affected by the war.

Key recent policy changes

A large portion of the agricultural land base cannot be used for production due to contamination by chemicals and mines. In 2023, Ukraine introduced a plan to demine agricultural land, specifying priority areas for action on 470 000 ha spanning nine regions. To date, more than 300 000 ha of agricultural land have been demined and returned to economic use. The law currently exempts farmers from paying tax on land that is contaminated by, or may be contaminated by, explosive objects.

Ukraine has been in the process of gradually undertaking land reform. In 2023, the next step in the planned opening of land markets was undertaken, allowing domestic legal entities, such as companies, banks and territorial communities, to purchase up to 10 000 ha. Prior to the change, only individual citizens were eligible to purchase agricultural land plots. Additional laws were introduced to simplify land transactions and to provide for changes in state-owned land and the possibility of converting state-owned enterprises into limited liability companies.

Actions to implement the Ukraine-EU Association Agreement continue, with the goal of translating European Union directives into national legislation. The past year saw the introduction of new laws for food safety and quality, animal health and welfare, and the certification of seeds and planting materials.

Assessment and recommendations

• Rebuilding Ukraine’s agricultural sector is vital for supporting the country’s economic recovery and for sustaining trade. Given that Ukraine is one of the world’s leading producers and exporters of agricultural commodities, both temporary and longer-term efforts should be undertaken to restore the sector. External aid has provided invaluable support, helping to overcome logistical challenges and strengthen or maintain trade flows. However, domestic spending on general services, including knowledge systems and infrastructure, remains historically low and declining. Investments in these areas should be priority areas of investment when possible, to build the foundations for future growth.

• The need to demine agricultural lands has garnered international attention and progress has been made in restoring some of these lands to economic use. A large proportion of the agricultural land base has also been chemically contaminated, potentially posing long-term risks to agricultural productivity, environmental quality and public health. Systematic assessment and monitoring of the degree of damage should be undertaken to determine the scope of the problem. The sector will need to balance short-term recovery efforts with investments to restore its ecological integrity.

• The suspension of traditional producer support programmes is likely to affect the structure and sustainability of the agricultural sector. As funding becomes available, prioritising measures that enhance sustainable productivity could support short-term recovery as well as build increased resilience to shocks in the long run. In particular, further investments to support the digital transformation in agriculture, improve soil fertility on degraded lands, and reconcile Ukraine and European Union standards for GMO crops could contribute to this objective.

• Multilateral efforts to protect international trade, including the suspension of trade barriers by key partners, have been effective in sustaining agricultural exports. Close collaboration with neighbouring countries to reduce the transportation costs associated with shipping higher volumes through neighbouring ports like Constanta in Romania will help ensure that alternative options to the main export port of Odessa are available if needed.

Development of support to agriculture

Figure 26.1. Ukraine: Development of support to agriculture

Table 26.1. Ukraine: Estimates of support to agriculture

Million USD

	2000-02	2021-23	2021	2022	2023p
Total value of production (at farm gate)	9 619	39 008	50 143	34 546	32 333
of which: share of MPS commodities (%)	86.77	79.95	85.70	77.38	76.78
Total value of consumption (at farm gate)	8 841	24 573	30 786	21 590	21 344
Producer Support Estimate (PSE)	36	-13	57	-874	777
Support based on commodity output	-432	-327	-271	-1 167	457
Market price support¹	-548	-327	-271	-1 167	457
Positive market price support	389	587	500	429	832
Negative market price support	-937	-914	-771	-1 596	-375
Payments based on output	116	0	0	0	0
Payments based on input use	203	161	150	110	222
Based on variable input use	169	118	48	109	196
with input constraints	0	0	0	0	0
Based on fixed capital formation	31	43	102	2	26
with input constraints	0	0	0	0	0
Based on on-farm services	2	0	1	0	0
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	265	153	178	183	98
Based on Receipts / Income	265	130	158	133	98
Based on Area planted / Animal numbers	0	23	20	50	0
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	0	0	0	0	0
Based on long-term resource retirement	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0
Percentage PSE (%)	0.37	0.05	0.11	-2.51	2.38
Producer NPC (coeff.)	0.95	0.99	0.99	0.97	1.01
Producer NAC (coeff.)	1.00	1.00	1.00	0.98	1.02
General Services Support Estimate (GSSE)	121	257	268	262	241
Agricultural knowledge and innovation system	51	80	75	88	78
Inspection and control	26	163	177	160	153
Development and maintenance of infrastructure	36	3	5	2	2
Marketing and promotion	1	0	0	0	0
Cost of public stockholding	1	0	0	0	0
Miscellaneous	7	10	10	12	9
Percentage GSSE (% of TSE)	76.19	..	82.40	..	23.71
Consumer Support Estimate (CSE)	397	319	279	1 089	-411
Transfers to producers from consumers	490	337	291	1 104	-384
Other transfers from consumers	-38	-10	-8	-16	-6
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	-55	-8	-4	1	-20
Percentage CSE (%)	4.47	1.20	0.91	5.05	-1.93
Consumer NPC (coeff.)	0.95	0.99	0.99	0.95	1.02
Consumer NAC (coeff.)	0.96	0.99	0.99	0.95	1.02
Total Support Estimate (TSE)	157	244	325	-612	1 018
Transfers from consumers	-452	-327	-283	-1 088	391
Transfers from taxpayers	647	580	616	492	634
Budget revenues	-38	-10	-8	-16	-6
Percentage TSE (% of GDP)	0.41	0.16	0.16	0.38	0.62
Total Budgetary Support Estimate (TBSE)	705	571	596	554	562
Percentage TBSE (% of GDP)	1.83	0.33	0.30	0.35	0.34
GDP deflator (2000-02 = 100)	100	2 294	1 958	2 631	..
Exchange rate (national currency per USD)	5.38	32.07	27.29	32.34	36.57

.. Not available

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Ukraine are: wheat, maize, rye, barley, oats, sunflower, sugar, potatoes, milk, beef and veal, pig meat, poultry and eggs.

Source: OECD (2024), “Producer and Consumer Support Estimates”, OECD Agricultural policy monitoring (database), https://data-explorer.oecd.org/.

Policy landscape

Main policy instruments

Agricultural producers are eligible for a Single Tax1 set as a percentage of normative agricultural land values. The Single Tax replaces three taxes – the profit tax, the land tax for land used in agricultural production and a special water use fee that other businesses must pay. The Single Tax regime provides tax savings to agricultural producers of around UAH 4.3 billion (USD 133 million) annually.

In addition to the Single Tax regime, the general budget programme, On Financial Support of Agricultural Producers, provides measures targeted to specific activities, including partial compensation for the costs of agricultural machinery and equipment and interest rate subsidies on bank loans. For livestock producers, these also include interest rate support for loans funding livestock husbandry and breeding; partial reimbursement of costs related to the construction and reconstruction of animal farms and buildings; per-head payments for cows to agricultural enterprises and for young cattle to rural households; and partial compensation to agricultural producers purchasing breeding animals, semen and embryos. In turn, on the crop side, support is provided in the form of reimbursements for different types of on-farm investments and debt repayments.

Import tariffs are in place for most agricultural products, with applied Most Favoured Nation (MFN) tariffs for agricultural products averaging 9.1%, above the average for non-agricultural products of 3.7% (WTO, 2022[1]). While most imports face ad valorem tariffs, Ukraine maintains a global tariff rate quota for raw cane sugar. This quota was only used in 2011 and 2021, as there was an excess sugar supply on the Ukrainian market in other years. Export duties are applied to some oilseeds, live animals, and raw hides. Preferential import tariffs apply for products from EU countries for whom a trade agreement is in place.

Following the DCFTA with the European Union, which came into force in January 2016, and the subsequent suspension by Russia of the provisions of the Commonwealth of Independent States (CIS) free trade agreement with Ukraine, and the implementation of a ban by Russia on imports of agro-food products from Ukraine, Ukraine banned imports from Russia. This ban now covers 46 agricultural product groups, including meat and meat by-products, fish, milk and dairy products, tea, coffee, grain, baby foods, beer, vodka and cigarettes. Ukraine had also abolished zero import duty rates for goods from Russia. Both measures remain in place through the end of 2024.

Innovation for sustainable productivity growth

A policy priority and key area of investment for Ukraine is in the digital transformation. The Ministry of Digital Transformation, created in 2019, was founded with the goal of building a “digital state” that supports online access to all public services. In 2023, the Ministry of Digital Transformation, with the Ministry of Education and Science, issued the “Global Innovation Vision of Ukraine 2030”. The document outlines key priorities for the country, including digital transformation in the agricultural sector. The plan also laid out strategies for modernisation and innovation in processes and in cultivation practices. These include reaching a goal of 55-65% processed products in agricultural exports; implementing automated harvesting technologies; and restoring degraded and infertile agricultural lands.

Policy measures undertaken to support sustainable productivity growth largely focus on the regulation of GMO crops, supporting the capacity of entrepreneurs to undertake breeding and research on seeds and improved veterinary training. A law adopted in 2023 ensures the compatibility of Ukrainian legislation with EU law pertaining to GMOs by defining the powers of state authorities with respect to GMOs, risk assessment and registration systems, and requirements for labelling and traceability. Several resolutions passed in 2023 simplify the import of unregistered varieties of plants and seeds to ensure compliance with the OECD Seed Schemes and to enable breeding research. A resolution that defines new rules for postgraduate education of veterinary medical professionals will enter into force one year after the termination of martial law.

State support for innovations in the agricultural sector of Ukraine has been suspended due to Russia’s war of aggression against Ukraine. Before, some private companies invested in agricultural innovations, particularly in the production of cereals. Precision agriculture technologies are already in use on 45% of the land base in cereal production and have the potential for even broader diffusion (Prikhodo et al., 2022[2]).

Recent policy developments

Domestic policy developments in 2023-24

Starting in 2022 and continuing into 2024, agricultural policy and support mechanisms deviated significantly from pre-war conditions. Virtually all traditional support programmes were suspended, while new temporary measures were introduced under martial law.

Changes in agricultural support measures

The majority of subsidy and grant programmes that operated prior to the war were suspended starting in 2022 and have not been reinstated. Two new measures introduced in 2022 to support small producers in wartime conditions – a subsidy per unit of arable land for producers with up to 120 ha in cultivation and a subsidy for keeping cows for producers with 3 to 100 animals – were not extended in 2023. However, grant payments that were introduced in 2022 for the construction of greenhouses and horticultural gardens were increased to UAH 936.2 million (USD 25.6 million) in 2023 a substantial increase over the 2022 amount of UAH 53.7 million (USD 1.5 million). State support in the form of a budget subsidy to cost share the adoption of sprinkler irrigation was restarted in 2023 (after a pause in 2022), with transfers totalling UAH 8.9 million (USD 243 344).

Some measures were introduced or continued to operate to allow farmers to carry out consistent field operations during wartime. The Plan of Actions for Demining Agricultural Land, approved on 20 March 2023, defines priority tasks for carrying out demining measures on an estimated 470 000 ha of agricultural lands in nine regions (Ministry of Defence of Ukraine, 2023[3]).2 Overall, some 2.5 million ha of arable land may have been mined in early 2023.3 More broadly, according to the government, more than 300 000 ha of agricultural land have been demined and returned to economic use in 2023.4 Ongoing measures to support production include the extension of chemical use permits, simplified registration of agricultural machinery and forgiveness of loans for assets destroyed as a result of military aggression.

The government continued to provide reduced interest rates on agricultural loans under the Affordable Loans 5-7-9% programme, with the total amount of funds for the programme nearly doubling to UAH 6.8 billion in 2023 (USD 185 925) from UAH 3.5 billion (USD 95 697) in 2022.5 The state also provides relief to offset the fee on obligatory national social insurance for members or heads of family farms that are not classified as legal entities. In 2023, a total of UAH 1.9 million (USD 51 950) was transferred to these producers.

Changes to the legal framework

Some changes were made to the legal framework in 2023. Notably, a law was passed that ensures no environmental tax applied on land that is contaminated by, or potentially contaminated by, explosive objects. Progress was made on land reform with the opening of land markets to legal entities based in Ukraine, such as companies, banks and territorial communities, which can now purchase up to 10 000 ha. The powers of the State Land Cadastre were modified and a law introduced to simplify land transactions. The law, On Amendments to Certain Legislative Acts of Ukraine on Increasing the Efficiency of Land Use by Individuals and Subjects of the State Sector of the Economy, which entered into force on 3 September 2023, provides for changes in state-owned land including the possibility to lease plot and to convert state-owned enterprises into limited liability companies.

In 2023, Ukraine set up the foundational legislation required to establish the National Institute of Veterinary Medicines and Feed Additives, which is intended to manage applications and scientific evaluations pertaining to drugs and feed additives, as well as provide expert recommendations for their state registration. Under martial law, there is currently no budget for the Institute; as a temporary solution, the State Service of Ukraine on Food Safety and Consumer Protection has the power to authorise existing scientific institutions to perform the functions of the Institute.

In terms of agri-environmental measures, the procedure for carrying out environmental impact assessments (EIA) was modified substantially with the intent of improving the assessment process. In particular, the period for conducting an EIA was shortened from 216 to 67 days, with a reduction in public hearing times from 20 to 12 days and full digitisation of the permit procedure. With regards to GHG emissions and commitments, a resolution of 7 July 2023 approves measures to implement climate policy to contribute to the Global Methane Pledge by introducing state support to partially reimburse the costs of facilities to support biomethane production from agricultural waste.

The Ministry of Economy of Ukraine, along with MAPF, continues to translate European Union directives into national legislation as part of the implementation of the Association Agreement. Actions in 2023 included laws to harmonise legislation related to the safety and quality of food products; animal health and welfare; and the simplification of certification processes for seeds and planting materials. Additional measures have been signed into law but will not enter into force until late 2024 or 2025, including phytosanitary measures and the protection of geographical indications of alcoholic beverages.

Consumer support measures

Under martial law, state bodies are required to ensure price controls for a basket of goods including wheat flour, pasta, bread, buckwheat groats, pork, beef, poultry, milk, chicken eggs, sunflower oil, granulated sugar, white cabbage, onion, beetroot, carrot, and potatoes. State regulation also established a maximum trade markup of 10%, which was extended through 2023 for wheat flour, milk, eggs, poultry carcasses, sunflower oil and rye-wheat bread.

Trade policy developments in 2023-24

Starting in 2021, Ukraine set its tariff quota on raw cane sugar at 260 000 tonnes with a 2% tariff. In 2023, the Ministry of Economy accepted applications for raw cane sugar importers for a volume of 267 800 tonnes with a 2% tariff, though a total of only 307 tonnes was imported. Ukraine also introduced special duties on the import of cut fresh roses from any country of origin through May 2024, and applies an anti-dumping duty of 23.8% on the import of potato starch from Belarus through January 2027.

Several trade agreements in response to the war have been extended. The abolition of import duties and tariff quotas in bilateral trade with the United Kingdom, which began in 2022, was extended to 2029. In 2022, Canada cancelled import duties and quantitative restrictions on Ukrainian products, a decision that has been extended until 9 June 2024.

The European Union also adopted a regulation extending the suspension of all customs duties, quotas and trade defence measures on Ukrainian exports until June 2024. However, from 2 May to 5 June 2023, the European Commission adopted exceptional and temporary preventive measures on imports of a limited number of products from Ukraine under the Autonomous Trade Measures Regulation. These measures were in response to logistical bottlenecks for four products (wheat, maize, rapeseed and sunflower seed) in five Member States (Bulgaria, Hungary, Poland, Romania and Slovakia). On 15 September 2023, the European Union cancelled the ban on the import of certain agricultural goods from Ukraine, though the import ban was extended on the same day by Slovakia, Poland, and Hungary. In accordance with the rules of the WTO governing disputes, Ukraine filed requests for consultations with these three countries.6

On 1 January 2024 a resolution entered into force establishing goods for which export and import are subject to licensing and quotas for 2024. The resolution prohibits the export of salt suitable for human consumption, and lists products subject to licensing, namely wheat, rye, barley, oats, corn, soybeans, rapeseed, sunflower seeds, soybean oil, sunflower oil and rapeseed oil. Some exceptions are permitted depending on the foreign entity involved.

Policy context

Key economic and agricultural statistics

Agriculture plays a substantial role in the Ukrainian economy, in large part because Ukraine has a relatively large area of fertile arable land. The importance of agriculture in the economy has declined over time but remains a key sector representing 8.2% of the GDP, 15.1% of employment, and more than half of total exports in 2022 (Table 26.2).

Following a decline in Ukraine’s GDP of 28.8% in 2022, real GDP recovered somewhat, with an estimated growth of 5.0-5.5% in 2023. Even so, Ukraine’s GDP remains substantially below the level observed prior to the war. In 2023, approximately half of the state budget went to defence, with defence expenditures exceeding 30% of GDP according to the Centre for Economic Strategy of Ukraine. The country entered 2023 with record-high inflation of 26% but brought inflation under control with the help of foreign aid and a good harvest, which stabilised food prices, resulting in a drop in the Consumer Price Index for food products from 134.4 to 104.0.

Weather in 2023 was favourable for agricultural production in Ukraine, allowing for good harvests despite the loss of a significant portion of the arable land base due to occupation or contamination. Total agricultural production in 2023 increased by 7.7% relative to 2022, with growth in crop production of 10.1% and a small loss in livestock production of 0.9% as estimated by the State Statistics Service and the Ministry of Agrarian Policy and food of Ukraine. In particular, the yield of grain crops per hectare increased by 20% in 2023 relative to 2022, resulting in an increase in harvest of 10.8%. Sunflower and sugar beet production also increased relative to 2022, by 14% and 22%, respectively. Poultry and pig production increased in 2023, but cattle numbers and beef production declined by 6% and 13%, respectively.

Table 26.2. Ukraine: Contextual indicators

	Ukraine		International comparison
	2000*	2022*	2000*	2022*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	210	449	0.5%	0.3%
Population (million)	49	40	1.1%	0.8%
Land area (thousand km2)	579	579	0.7%	0.7%
Agricultural area (AA) (thousand ha)	41 406	41 311	1.4%	1.4%
			All countries1
Population density (inhabitants/km2)	84	69	52	64
GDP per capita (USD in PPPs)	4 260	12 671	9 363	25 965
Trade as % of GDP	44.1	31.0	12.3	16.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	14.0	8.2	2.9	3.8
Agriculture share in employment (%)	22.3	15.1	-	-
Agro-food exports (% of total exports)	10.1	53.2	6.4	8.0
Agro-food imports (% of total imports)	6.1	9.6	5.8	6.9
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	59	78	-	-
Livestock in total agricultural production (%)	41	22	-	-
Share of arable land in AA (%)	79	80	32	34

Note: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; International Labour Organization (ILO); UN Comtrade; World Bank, WDI; FAO database and national data.

Ukraine is among the world’s leading exporters of agricultural commodities, in particular grain products (wheat, barley and maize) and vegetable oils (rapeseed and sunflower). Exports of agro-food products grew steadily from 2015 to 2021, reaching a high of USD 26.7 billion before the war (Figure 26.4). In 2022, following Russia’s war of aggression against Ukraine, exports of the country declined at USD 23.7 billion but could be for a large part safeguarded thanks to two initiatives: the Black Sea Grain Initiative brokered with the assistance of Türkiye and the United Nations that allowed Ukraine to resume exports of grain through the Black Sea; and the “Solidarity Lanes” established by the European Union to ensure export of grain and import of essential inputs through continental infrastructure. In 2023, Ukraine established its own maritime corridor to the Black Sea ports of the Odesa region after Russia withdrew from its obligations under the Black Sea Grain Initiative, which allowed for a gradual increase in the export of grain and other goods, as well as a revival of maritime imports. Most agro-food exports are primary and processed products used by industry. European Union countries remain the primary destination for Ukrainian exports, accounting for 57% of total agro-food exports.

Prior to the war, growth in total factor productivity in Ukraine had increased from negative levels in the 1990s to a positive level that exceeded the global level for the period 2012-2021, at 4.1% (Figure 26.5). Intermediate inputs and the use of primary factors shrank over the same period. The overall level of output growth was 1.7%, roughly on par with the worldwide level. The war has had significant impacts on the performance of the sector, but more recent data on its productivity development are unavailable to date.

Although agriculture’s role has declined in the Ukrainian economy, the share of the sector in national GHG emissions increased, from 8.7% in 1991-2000 to 14.4% in 2012-2021 (Table 26.3). The nitrogen balance per hectare fell over the same period and remains well below the OECD average. The phosphorus balance is negative, which may pose challenges in terms of sustaining soil fertility in the long run. Soil health has also posed a significant challenge since the start of the war, with a large portion of agricultural land base that cannot be used for production due to contamination by chemicals and mines (see above).

Table 26.3. Ukraine: Productivity and environmental indicators

	Ukraine		International comparison
	1991-2000	2012-2021	1991-2000	2012-2021
			World
TFP annual growth rate (%)	-1.4%	4.1%	1.7%	1.1%
			OECD average
Environmental indicators	2000*	2022*	2000*	2022*
Nitrogen balance, kg/ha	23.9	12.6	32.1	28.2
Phosphorus balance, kg/ha	2.6	-3.0	3.3	2.3
Agriculture share of total energy use (%)	2.1	3.6	1.7	2.0
Agriculture share of GHG emissions (%)	8.7	14.4	8.7	10.1
Share of irrigated land in AA (%)	5.8	5.3	-	-
Share of agriculture in water abstractions (%)	36.8	33.3	47.0	49.5
Water stress indicator	..	..	8.7	..

Note: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

Historical trends in agricultural policies

Prior to the 1990s, central planning regulated all sectors of Ukraine’s economy, including agriculture, as part of the Soviet Union. The state administered prices and state enterprises controlled the production and marketing of agricultural inputs and outputs as well as the processing and distribution of food. The first reforms initiating a transition towards a market-based economy began at the end of the 1980s. A limited right to private production was established for land leased from collective farms or individuals, enabling the establishment of private family farms (von Cramon-Taubadel et al., 2008[4]).

However, Ukraine went through an economic crisis in the early 1990s, involving significant economic contraction and inflation that impacted the agricultural sector and resulted in substantial reductions in agricultural output and productivity. Consequently, several trade and price liberalisation policy reforms were reversed in the mid-1990s. Renewed reforms in agribusiness privatisation and collective farm restructuring intensified only after macroeconomic stabilisation in the 2000s (OECD/The World Bank, 2004[5]). While prior to the 1990s, the state owned all land,7 today about three-quarters of agricultural land is private property (StateGeoCadastre, 2017[6]).8

In 2005, the State Agrarian Fund was established as a state-owned public joint stock company (reorganised in 2013). Its initial mandate was to regulate grain prices through intervention purchases, to store grain in state-owned silos and sell it to bakeries to guarantee bread prices, and to provide loans to grain producers. The fund progressively became involved in other activities, such as state purchases and sales of a broad range of agricultural and food products; forward contracts; flour processing and wholesaling; and sales of fuel and mineral fertilisers to producers (OECD, 2015[7]). Starting in 2016, no state funds were allocated to the Agrarian Fund for the purchase of grain. In 2020, a law entered into force that excludes the activities of the Agrarian Fund from the law, “On state support of agriculture of Ukraine”, which implies that the Agrarian Fund may be liquidated in the future. In 2023, the Agrarian Fund was transferred from the Ministry of Agrarian Policy and Food of Ukraine to the State Property Fund.

Prior to the large-scale military aggression of Russia, two key events helped shape agricultural policies today in Ukraine. First, in 2008, Ukraine became a member of the WTO, setting its agricultural bound tariffs at an average of 10.8%, expanding its export opportunities, and contributing to changes in the system of state support for agriculture. Second, in 2014, the European Union and Ukraine signed the Deep and Comprehensive Free Trade Area (DCFTA) as part of their Association Agreement. The DCFTA formally entered into force in September 2017 and involves tariff reductions and duty-free import quotas to facilitate trade between Ukraine and the European Union, including in agricultural and food products.

Other free trade agreements (FTAs) in which Ukraine is engaged include the FTA with the European Free Trade Association (EFTA), in force since June 2012; the multilateral FTA with the Commonwealth of Independent States (CIS), in force since August 2012; bilateral agreements with all CIS members; and the Canada-Ukraine FTA, in force since August 2017.9 FTAs with Israel and the United Kingdom entered into force in January 2021. In February 2022, Ukraine and Türkiye signed a new FTA that is expected to enter into force in 2024.

From 1999 to 2016, the state provided significant support through VAT accumulation, based on an agriculture-specific VAT regime. Agricultural producers accumulated in special bank accounts the VAT due on their primary and processed products. The accumulated funds were directed to cover VAT on purchased inputs, with the residual available for any other production purpose. From 2014 to 2016, this mechanism provided 90% of total state support. In 2017, a development subsidy partially replaced this source of support, before the support was phased out altogether in 2018. Other domestic policy measures notably comprised input subsidies, tax concessions, price controls, import tariffs, non-tariff trade regulation, minimum purchase prices, direct state purchases, and preferential loans (Table 26.2).

A moratorium banning the sale of agricultural land was put in place in 2002, although leasing for cultivation was permitted. The moratorium was extended annually until and including 2019. It was not formally extended into 2020. From July 2021, a new law came into force that lifts the ban on the sale of agricultural land and grants individual citizens the right to purchase up to 100 ha of land. Since January 2024, larger purchases of up to 10 000 ha are permitted for Ukrainian citizens and Ukrainian legal entities, including companies, banks and territorial communities. Foreigners do not have the right to buy or sell land in Ukraine.

Table 26.4. Ukraine: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to 1990s	Planned economy	Planned agricultural production, state administered prices State controlled value chain and agricultural trade, including marketing of agricultural inputs and outputs
1990-2000	Transition economy: gradual reforms towards market economy Interrupted by deep economic crisis in the early 1990s	Increased import tariffs for agricultural and processed food products Land reform to allow private ownership Gradual dismantling of centralised marketing schemes Reversal of reforms during economic crisis
2000-2022	Renewed reforms towards an open economy	Reduction of agricultural tariffs following WTO accession Export taxes and quotas for main exported products, successively eliminated or replaced by MoUs State Agrarian Fund (price controls, production controls, marketing, loans, etc.) with market interventions through minimum reference prices and state food purchases successively reduced Sugar production quotas until 2018 Various subsidies for inputs, interest support and tax concessions
2022-present	Period of martial law due to large-scale military aggression of the Russian Federation	Reallocation of agricultural support funds to security and defense Suspension of traditional support programmes Introduction of temporary measures applicable during period of martial law, including tax breaks, food security measures, and simplified regulatory requirements

Due to the negative MPS only partly offset by transfers to producers through tax concessions and other measures, support to agricultural producers was negative for most of the 1990s. While the level continued to fluctuate over the recent decade, it has been closer to zero (Figure 26.6). With little budgetary support to general services or consumers, total support to the sector remained small for most of the past 25 years.

References

[3] Ministry of Defence of Ukraine (2023), Oleksii Reznikov: Action plan for demining agricultural land for sowing campaign approved, https://www.kmu.gov.ua/en/news/oleksii-reznikov-skhvaleno-plan-zakhodiv-iz-rozminuvannia-silskohospodarskykh-zemel-dlia-provedennia-posivnoi.

[7] OECD (2015), Sector competitiveness strategy for Ukraine - Phase III. Review of Agricultural Investment Policies of Ukraine, OECD Eurasia Competitiveness Programme, https://www.oecd.org/eurasia/competitiveness-programme/eastern-partners/Agricultural_Investment_Policies_Ukraine_ENG.pdf (accessed on 20 March 2023).

[5] OECD/The World Bank (2004), Achieving Ukraine’s Agricultural Potential: Stimulating Agricultural Growth and Improving Rural Life, The World Bank, Washington, D.C., https://doi.org/10.1787/9789264055841-en.

[2] Prikhodo, D. et al. (2022), Digital technologies in the grain sector of Ukraine, FAO, https://doi.org/10.4060/cc1600en.

[6] StateGeoCadastre (2017), Review of the State of Land Relations in Ukraine, https://land.gov.ua/wp-content/uploads/2017/03/Land-Review-Monthly_3_final-1.pdf (accessed on 20 March 2023).

[4] von Cramon-Taubadel, S. et al. (2008), “Ukraine”, in Anderson, K. and J. Swinnen (eds.), Distortions to agricultural incentives in Europe’s transition economies, World Bank, Washington, D.C., https://issuu.com/world.bank.publications/docs/9780821374191.

[1] WTO (2022), World Tariff Profiles 2022, WTO ITC UNCTAD, https://www.wto.org/english/res_e/publications_e/world_tariff_profiles21_e.htm (accessed on 29 March 2023).

Notes

← 1.  Termed the “Fixed Agricultural Tax” before 2015.

← 2.  The regions most in need of surveying are Dnipropetrovsk, Zaporizhzhya, Kyiv, Mykolaiv, Sumy, Kharkiv, Kherson, Chernihiv and Cherkasy.

← 3.  Ukraine’s First Deputy Minister of Agrarian Policy and Food, as reported in March 2023 by Reuters.

← 4.  Ukraine’s Deputy Minister of Agrarian Policy and Food in charge of digital development, digital transformations and digitalisation, in a comment to the news agency Ukrinform, as reported in March 2024 by Ukrainska Pravda.

← 5.  Under the programme, the state compensates lenders for the difference between the market interest rate and a reduced rate for clients.

← 6.  See https://www.wto.org/english/news_e/news23_e/ds619_620_621rfc_21sep23_e.htm.

← 7.  Article 3 of the Land Code of the Ukrainian SSR, https://zakon.rada.gov.ua/laws/show/2874%D0%B0-07/ed19920101#Text.

← 8.  More recent estimates suggest that the share of private property in agricultural land is even higher, at 80%: Mykola Solsky (People’s Deputy, Chairman of the Verkhovna Rada Committee on Agrarian and Land Policy), “It’s all about the land”, 2 April 2020, https://www.epravda.com/ua/columns/2020/04/2/658911/.

← 9.  Other members and associate members of the CIS are Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, and Uzbekistan.