Table Of ContentHistoric, Archive Document
Do not assume content reflects current
scientific knowledge, policies, or practices.
United States
Agricultural Policie
sijLij) Department of
Agriculture
ctr
Economic and Performance
Research ir
Sen/ice
Foreign Central and Eastern
Agricultural
Economic
Report No. 247
Europe, 989-92
1
Nancy J. Cochrane Mark R. Lundell
Robert B. Koopman Michele de Souza
Jason M. Lamb Danielle Sremac
The cover photo, ofCity Park Vajdahunyad Castle, Agricultural Museum, Budapest, is courtesy ofKepzomuveszeti
Kiado. Photographer is Jaksity Laszlo.
j ' National Agricultural Library
NAL'Bitig
10301 Baltimore Blvd
MD 20705-2351
Beltsville,
Easy To Order Another Copy!
It’s
Just dial 1-800-999-6779. Toll free in the United States and Canada.
Other areas, call 1-703-834-0125.
Ask for Agricultural Policies and Performance in CentralandEastern Europe, 1989-
1992 (FAER-247).
The cost is $12.00 per copy. Add 25 percent for shipping to foreign addresses
(includes Canada). Charge your purchase to your Visa or MasterCard. Or send a
check (made payable to ERS-NASS) to:
ERS-NASS
341 Victory Drive
Herndon, VA 22070
We’ll fill your order by first-class mail.
Agricultural Policies and Performance in Central and Eastern Europe, 1989-92. By
Nancy J. Cochrane, Robert B. Koopman, Jason M. Lamb, Mark R. Lundell, Michele de
Souza, and Danielle Sremac. Agriculture and Trade Analysis Division, Economic
Research Service,U.S.DepartmentofAgriculture. ForeignAgriculturalEconomicReport
No. 247.
Abstract
Central and Eastern European agriculture underwent dramatic change during the last 3
years. The introduction ofmarket pricing, open borders, and increased freedom ofentry
and exit for firms occurred without the institutional and legal structures necessary for a
market economy. The effect of market reforms on agriculture exemplifies both the
positive and negative effects of these changes. Many of the countries shifted from pre-
reform tight agricultural supplies or outright shortages to post-reform surpluses. Farm
financial performancehas been poor, as the termsoftradehaveturnedagainstagriculture.
Land and asset ownership issues in the farm sector remain unresolved, leading to
uncertainty for planting and production. Consumer demand for agricultural products is
depressed due to the sudden rise in consumer prices, while nominal income growth has
been restricted.
Keywords: Privatization, CEE, demonopolization, unemployment, agricultural inputs
Washington, DC 20005-4788 February 1993
Contents
Summary
iii
General Economic Situation 1
Policy Reform in Central and Eastern Europe, 1989-92 4
Bulgaria 5
Czech and Slovak Federal Republic 10
Hungary 15
Poland 18
Romania 22
Yugoslavia 26
Central and Eastern European Trade Highlights and Developments 29
Shifting Trade Patterns 29
EC Association Agreements 30
U.S. Trade With CEE Countries 30
Commodity Market Highlights 36
Grains 36
Oilseeds 37
Beefand Veal 38
Pork 39
Poultry 40
Eggs 40
Dairy 40
Sugar 41
Cotton 41
Tobacco 42
Endnotes 43
Appendix Tables 45
ii
Summary
Central and Eastern European (CEE) agriculture underwent dramatic change during the
last 3 years. The introduction ofmarket pricing, open borders, and increased freedom
ofentry and exit for firms occurred without the institutional and legal structures
necessary for a market economy. The effect ofmarket reforms on agriculture
exemplifies both the positive and negative effects of these changes.
On the positive side, many of the CEE countries shifted from pre-reform tight
agricultural supplies or outright shortages to post-reform surpluses. Food availability
and diversity have increased appreciably. Food prices have risen in nominal terms, but
generally have lagged behind the overall inflation rate, reducing the prices ofmany
food items relative to other goods and services.
On the negative side, farm financial performance has been poor, as the terms of trade
have turned against agriculture. Food price increases have been slower than the rate of
inflation, while farm input prices equal or exceed the inflation rate. Many issues
regarding land and asset ownership in the farm sector remain unresolved, leading to
uncertainty for planting and production. Consumer demand for agricultural products is
depressed due to the sudden rise in consumer prices, while nominal income growth has
been restricted through wage/pension caps. In addition, where the farm sector
previously enjoyed unlimited demand for its products, it now faces stiff competition
from a wider array ofconsumer products.
The problems faced by the CEE agricultural sector, while fully evident in 1991, did
not have as large an impact on production in 1991 as might have been expected.
Gross agricultural production in the region declined by 4.9 percent compared with
1990. Production levels in 1991 formost grains exceeded their 1986-90 averages,
while many livestock and oilseed products fell below their 1986-90 levels. The main
problem for most ofthe countries, however, appeared to be overproduction rather than
underproduction. Declining domestic demand and disruption and stiffcompetition in
foreign markets caused surpluses rather than shortages. These surpluses further
depressed agricultural prices and exacerbated farm financial problems.
In 1992, production for most commodities was expected to fall by even more than the
1991 decline. Domestic demand should stabilize. The declines in supply were
expected to tighten internal market conditions during 1992, increasing agricultural
prices and improving farm financial performance.
Price fluctuations for CEE agricultural products could be wide over the next year or
two. Normal fluctuations due to weather and product cycles are likely to be
exacerbated by the lack of typical market institutions and rules, such as futures
markets and well-established ownership and contract laws. The declines in domestic
real prices of the last 2 years and the oversupply ofagricultural products have
prompted many CEE countries to introduce interventionist domestic and trade policies.
Policies introduced have included higher tariffs, import bans, credit subsidies, and
direct price supports through intervention purchasing.
This report summarizes some of the main policy and legal issues addressed by each
country over the past 3 years. While progress in passing reform agendas appears rapid
at times, false starts and missteps have been common. Progress varies widely by
country, but the northern countries of Poland, Hungary, and the Czech and Slovak
Federal Republic (CSFR) are much further along than the southern countries of
Bulgaria, Romania, and Yugoslavia. Albania, though part of the CEE region, had
insufficient data to include it in this report.
tv
Agricultural Policies and Performance
in Central and Eastern Europe, 1989-92
Nancy Cochrane Mark R. Lundell
J.
Robert B. Koopman Michele de Souza
Jason M. Lamb Danielle Sremac
General Economic Situation
While major economic indicators were depressed in 1991, CSFR were expecting lower inflation during 1992,
many Central and Eastern European (CEE) countries ranging from 10 to 40 percent.
looked forward to better conditions in 1992. Hungary’s
gross domestic product (GDP) was expected to grow in Unemployment is one of the foremost problems facing
1992, leading the way for the northern CEE countries. CEE governments. Providing social services for a
The southern CEE countries, on the other hand, are steadily increasing unemployed population is made more
forecast to have continued declines in output as their difficult by shrinking budgets and increased social
governments further restructure their economies. Output tensions. Unemployment, while historically low in
in 1991 declined 12.3 percent in the CEE countries, while Central and Eastern Europe’s planned economies, started
inflation varied from 550 percent (Bulgaria) to 36 percent to increase significantly during economic restructuring.
(Hungary). Unemployment increased in every CEE Unemploymentjumped in 1991 from its low level of
country in 1991. 1990. Only Romania reported an unemployment rate
below 5 percent. Unemployment in the other five CEE
During 1991, declines in GDP continued in Central and countries ranged from 6.3 percent in the CSFR to 19
Eastern Europe, although the decline in Hungary and percent in war-tom Yugoslavia (fig. 3). The CEE service
Poland stabilized compared with 1990 (fig. 1). Romania sector in the major cities has been able to absorb many
also experienced less of a decline in GDP in 1991 than in into the growing number of service-related businesses, but
1990, but this was likely the result ofa stall in the unemployment rates outside the major cities are much
economic transformation process. After implementing higher. For example, in Budapest, the unemployment rate
additional market-oriented policies, Bulgaria and the at the end of 1991 was only 2.6 percent, while the rate
Czech and Slovak Federal Republic (CSFR) experienced for the whole of Hungary was 8.3 percent.1 (See
declines in output during 1991. Yugoslavia’s lower endnotes, p. 43.) Unemployment in Bulgaria, the CSFR,
GDP was due mainly to the civil war that has disrupted Hungary, and Romania increased substantially in 1991
its economy. after low unemployment (1-2 percent) in 1990.
Inflation in 1991 increased in Bulgaria and Romania, as The 1991 current account deficit in Central and Eastern
officials liberalized most prices in their economies. Europe was estimated at US$3.5 billion. Declining
Inflation in Romania was expected to increase during production and a move to hard currency trade among the
1992 as more price liberalization measures were pursued. Council ofMutual Economic Assistance (CMEA)
High inflation in Yugoslavia during 1991 was fueled in countries accounted for the growing deficit, up from
part by the civil war in Croatia. Hungarian and Polish US$1.0 billion in 1990. The resulting hard currency
officials stabilized inflation during 1991, as price deficit has in some countries curtailed ability to import
liberalization measures were taken mainly in 1990. The needed inputs, and thus contributed to production
CSFR also experienced a comparatively low rate of declines. The CEE account balance was positive in
inflation during 1991 (fig. 2). Hungary, Poland, and the recent years. Hungary and Poland had a surplus in 1990
1
Figure 1--CEE growth of GDP, 1990-91 Figure 2-CEE consumer prices, 1990-91
With recovery expectedafter 1993 for the northern The removalofconsumersubsidies has causedprices
CEEcountries, GDPshouldbegin to grow. to increase substantially.
Bulgaria Bulgaria
CSFR CSFR
Hungary
Hungary
Poland
Poland
Romania
Romania
Yugoslavia Yugoslavia
-30 -20 -10 o 10 0 100 200 300 400 500 600 700
Percentchange from previous year
Percentchangefrom previousyear
H B
1990 1991,estimated
Source: WorldBank,PlanEcon,OrganizationforEconomicCooperation g Inflation,1990 g EstimatedInflation, 1991
andDevelopment(OECD)
Source: WorldBank,OrganizationtorEconomicCooperationandDevelopment,
ForeignBroadcastInformationService
Figure 3-CEE unemployment, 1990-91 Figure 4—CEE hard currency current account balance
CEEunemploymentwillcontinue to worsen Lowhardcurrencyreserves have constrainedsome
as reforms continue. CEEcountries'ability to importneededinputs.
Bulgaria
CSFR
Hungary
Poland
Romania
Yugoslavia
0 5 10 15 20 25
Percent
Billion U.S.dollars
S
I December 1990 December 1991 1990 1991
Source: ForeignBroadcastInformationService
Source: PlanEcon
2
