PART II: AGRICULTURAL POLICY AND AGRICULTURAL MARKETS
3 Some aspects of food security in Ukraine
It has already been noted in the previous section that food security cannot be measured in terms of the average supply of food products. Even if the average Ukrainian has enough food for an active and healthy life, this certainly does not hold true for each individual Ukrainian. Income is unevenly distributed among the population, and therefore many people fall short of meeting their basic needs.
The following analysis is based on income and price data which reflect the purchasing power of Ukrainian citizens. We recognise that an investigation of the entitlements of different groups within the population would be the more accurate way to evaluate the general food security situa-tion. The income and price approach, however, is acceptable, since the main objective of this section is to show differences within the population and the different strategies for adaptation chosen by these groups. Precise identification of the groups or individuals suffering most would have to be based on household budget surveys and consumption figures. Instead, we concentrate on the concept of purchasing power, which equals income divided by price. Purchasing power can be augmented by
increases in income or by decreases in prices. For most foods, consumption increases as income in-creases and vice versa. The food consumption of low-income families is considerably more sensitive to changes in income and food prices than that of high-income consumers. Food price increases make it more difficult for the poor to meet their food requirements.
Being influenced by a multiplicity of factors such as supply, demand, world prices, etc., food prices vary constantly. The question is whether changes in food prices have been matched by corre-sponding changes in income in recent Ukrainian history. Investigating the correlation between food-stuff prices and income increases over the last few years in Ukraine is the subject of this section.
3.1 Consumer price and food price developments
Inflation can be measured in terms of the consumer price index (CPI), the food price index (FPI), nominal wages and the resulting real wages. The CPI is the most comprehensive notion and comprises the prices of a representative basket of consumer goods, in which individual prices are weighted according to their share in the consumption of a ‘typical’ consumer or household. The general CPI, therefore, does not take into account the different consumption patterns of different income groups within the population. Individuals and households who face high price increases for items of which they consume an overproportional share will suffer more from inflation than indi-viduals or households whose consumption shares correspond to those in the CPI basket.
Figure 1: The CPI for non-foodstuffs and the FPI in Ukraine, January 1998 – January 2001 (December 1997 = 100)
80 100 120 140 160 180 200
Jan 98 Apr 98
Jul 98 Okt 98
Jan 99 Apr 99
Jul 99 Okt 99
Jan 00 Apr 00
Jul 00 Okt 00
Jan 01
December 1997 = 100
FPI CPI, non-foodstuff
Sources: CASE, HIID (2000), No. 28 (2000) and No. 36 (2001).
In figure 1 the FPI and the CPI for non-foodstuffs in Ukraine are compared. The figure quite clearly shows that prices rose only slightly in the first half of 1998. Then, the Rouble- and the Hryv-nia-crises led to a sharp increase in both indices from August 1998 on. Note that the FPI grows faster than the CPI for non-foodstuffs in the spring of every year. Later in the year, after harvest time, the FPI decreases. However, in 1999, the FPI increase greatly exceeded that of the CPI for non-foodstuffs. In July 1999 both indices stood at about 130% compared to the base period in De-cember 1997. Then the FPI rose to more than 180% in January 2001, whereas the CPI for
non-foodstuffs ‘only’ rose to 150%. These price increases for food were caused by the change in the trade situation, i.e. the change from the net export to a net import situation for some major food products. But few people recognised that the price increase was sharpened by high import tariffs on major food products such as grain and sugar. Hence, government policies have contributed consid-erably to increasing food prices since 1999.
Figure 2: Changes in CPI, FPI, and nominal and real wages compared with the preceding year (%)
-20 -10 0 10 20 30 40 50
Percent chage in a year
FPI CPI
nominal wages real wages
FPI 20.0 14.1 22.1 26.2 34.5
CPI 39.7 10.1 20.0 19.2 28.2
nominal wages 21.8 8.9 5.6 24.3 34.1
real wages -13.8 -2.4 -12.9 3.4 11.5
1996* 1997 1998 1999 2000**
Source: *- data for 1996-1999: STATE COMMITTEE FOR STATISTICS (b) (2000).
**- data for 2000: UEPLAC (2000). Case, HIID, No. 36 (2001).
Figure 2 shows that during 1996-1998, CPI and FPI growth considerably surpassed nominal wage growth leading to a drop in real wages. In 1999 a slight increase in real wages occurred al-though prices for foodstuffs grew faster than nominal wages. Since 1997, however, FPI growth has exceeded nominal wage growth, meaning that people are spending more and more on food. Purchas-ing power has diminished over the last years, both in terms of all consumption and in terms of food-stuffs.
3.2 Expenditure on food
However, these averages tell us little about the real situation within the population. While food price increases do not have a great impact on the living standard of high-income families, for low-income groups, who spend a much larger share of their income on food (see figure 3), a fast rising FPI can have disastrous implications. In 1997, families with a per capita money income of less than 90 UAH per month, for example, spent about 70% of their income on food. The poorest part of the population even spent money in excess of their incomes on food. Better-off families – having a monthly income over 210 UAH – spent only about 40% of their incomes on food.
Figure 3: Monthly food expenditures by Ukrainians according to per capita monthly income in 1998 (%)
69.7
71.0
68.5
65.6 65.2 64.8
64.1 65.1
62.8
64.0
60.4
54 56 58 60 62 64 66 68 70 72
< 30.0 30,1-60,0
60.1-90.0
90.1-120.0
120.1-150.0
150.1-180.0
180.1-210.0
210.1-240.0
240.1-270.0
270.1-300.0
>300.0 per capita income, UAH/month
Food expenditure (% of income)
Source: State Committee for Statistics (1999b).
Figure 4a: Per capita meat consumption in Ukraine (kg/year)
0 10 20 30 40 50 60 70
<30 30-60 60-90 >210
monthly money income (UAH)
kg/year
1996 1997 1999
Figure 4b: Per capita consumption of dairy products in Ukraine (kg/year)
0 50 100 150 200 250 300 350
<30 30-60 60-90 >210
monthly money income (UAH)
kg/year
1996 1997 1999
Figure 4c: Per capita bread consumption in Ukraine (kg/year)
0 20 40 60 80 100 120 140
<30 30-60 60-90 >210
monthly money income (UAH)
kg/year
1996 1997 1999
Figure 4d: Per capita consumption of eggs in Ukraine (number)
0 50 100 150 200 250 300 350
<30 30-60 60-90 >210
monthly money income (UAH)
number/year
1996 1997 1999
Source: STATE COMMITTEE FOR STATISTICS (1997) and (2000).
Low-income families respond to even tiny price increases by reducing their consumption not only of ‘luxury’ foodstuffs such as meat and fish, but also of such necessary food staples as milk, bread, etc. This can be seen in figures 4a through 4d, which depict the relationships between income levels and consumption patterns in 1996, 1997 and 1999. As prices have increased, consumption by low-income families has declined while consumption by families whose money income is over 210 UAH per month has increased. Low-income families were forced to buy less of each product in 1999, compared to 1996 and 1997. Obviously, poor people substituted other food staples such as bread in order to survive. However, the price of bread increased over this period as well.
This wouldn’t be quite so serious if low-income families comprised only small share of total population. Unfortunately, this is not the case, as can be seen from figure 5. In 1997 49.8% of the population had an income of less than 90 UAH/month, while the cost of a minimum food basket was approximately 64 UAH. The figures for 1998 are even worse. As these income groups have to spend most of their income on food, they cannot afford proper medical treatment and have to sacrifice something else for each additional food item, or they have to sacrifice food to buy something else.
Luckily, many people can rely to some extent on home grown food products to help them survive.
Figure 5: Distribution of per capita money income in Ukraine 1997 and 1998
0 2 4 6 8 10 12 14 16
up to 20
20.1 -30
30.1 -60
60.1 -90
90.1 -120
120.1 -150
150.1 -180
180.1 -210
210.1 -240
240.1 -270
270.1 -300
more than 300 Income in UAH per month
Number of citizens (in million)
1997 1998
Source: STATE COMMITTEE FOR STATISTICS (b) (various issues).
One of the most vulnerable groups in Ukraine are the pensioners. With the small size of their pensions, many pensioners are not able to afford even a minimum food basket. Other social groups who must struggle to make ends meet are families with children and single mothers.