Modeling the impact of mineral fertilizer costs on effectiveness of production and export corn from Ukraine
DOI:
https://doi.org/10.51599/are.2022.08.03.07Keywords:
corn market, grains, mineral fertilizers, AGMEMOD model.Abstract
Purpose. The goal of the study is to evaluate the current status and model the influence of changes in the cost of mineral fertilizers on the effectiveness of corn production and export from Ukraine in probable scenarios using the econometric model of partial equilibrium AGMEMOD (Agricultural Member State Modeling), which creates the preconditions for improving the efficiency of decision-making and implementation of it and contributes to achieving the goals of state agricultural policy.
Methodology / approach. In the course of research the following methods were used: monographic – at detailing modern level of efficiency of functioning corn grain production; abstract-logical – to formulate conclusions; comparative analysis and expert assessments – for the analysis of quantitative and qualitative indicators of development of the domestic corn market; tabular – for a visual representation of the results of the study; statistical and economic – for the collection and processing of statistical data, the study of the dynamics of exports and imports of grain; factor analysis – to determine the factors influencing the efficiency of corn production; economic and mathematical modeling – to assess the impact of changes in the cost of mineral fertilizers on the effectiveness of corn production and export from Ukraine, it was used econometric dynamic model of partial market equilibrium – AGMEMOD.
Results. It is evaluated the current status and defined the main factors, which influence on the formation of the supply and demand in corn market. It was analyzed the effectiveness of corn production in terms of regions of Ukraine and dynamic of Corn Balance in Ukraine. It was determined the volumes, prices and revenues from grain export in general and corn export in particular in Ukraine in the period from 2010 till 2020. We modeled the consequences of the impact of changes in the cost of mineral fertilizers on the effectiveness of corn production and export from Ukraine according to probable scenarios using the econometric model of partial equilibrium AGMEMOD. According to the results of the study, in terms of probable scenarios of increasing the cost of mineral fertilizers, its impact on the level of yield, harvested area, volume of corn exports from Ukraine is quantitatively substantiated. It is proven that the high yield of corn and the favorable current price situation for grain will ensure a sufficient level of profitability of this commodity. However, the radical increase in the cost of mineral fertilizers threatens the competitiveness of Ukrainian corn in domestic and foreign markets, which will eventually lead to higher food prices, deteriorating food security, as well as reducing the export potential of the grain industry. To ensure profitability at the level of previous years, agricultural producers will be forced to reconsider technological operations, deliberately reducing productivity per hectare in favor of economic efficiency. It is substantiated that lowering the rates of mineral fertilizers from the technological need for growing corn will increase the dependence of the crop on weather conditions and contribute to the deterioration of grain quality. All this will ultimately negatively affect the gross harvest and export potential of the grain industry. The directions of improvement of the mechanism of reduction in price or compensation of expenses for purchase of mineral fertilizers for domestic commodity producers are offered.
Originality / scientific novelty. Using the econometric model of partial equilibrium AGMEMOD, the consequences of the impact on probable scenarios of growth of mineral fertilizers on yield, harvested area, volume of corn exports from Ukraine are substantiated, which creates preconditions for improving management domestic grain in domestic and foreign market segments.
Practical value / implications. Public and sectoral authorities can use the proposed methodological approaches and research results in developing priority areas for improving the effectiveness of the domestic grain industry.
References
USDA Foreign Agricultural Service (2022). Ukraine Agricultural Production and Trade. Available at: https://www.fas.usda.gov/sites/default/files/2022-03/Ukraine-Ag-Production-Trade.pdf.
World Bank Group (2022). Commodity Markets Outlook: The Impact of the War in Ukraine on Commodity Markets. World Bank, Washington, DC. Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/37223/CMO-April-2022.pdf.
GrowHow (2022). Analysis of the mineral fertilizer market – 2022: is there really a production deficit and what will happen to the price. Available at: https://www.growhow.in.ua/analiz-rynku-mineralnykh-dobryv-2022-chy-diysno-ie-defitsyt-vyrobnytstva-i-shcho-bude-z-tsinoiu.
Voronenko, I., Skrypnyk, A., Klymenko, N., Zherlitsyn, D., & Starychenko, Y. (2020). Food security risk in Ukraine: assessment and forecast. Agricultural and Resource Economics, 6(4), 63–75. https://doi.org/10.51599/are.2020.06.04.04.
Holomsha, N., & Holomsha, O. (2019). Correlation-regression modeling of competitiveness of Ukrainian wheat on the world markets. Ekonomika APK, 10, 88–97. https://doi.org/10.32317/2221-1055.201910088.
Dykha, M., Kuzinа, V., & Serdyukov, K. (2021). Grain pricing in Ukraine: a case study of malted barley. Innovative Marketing, 17(4), 26–36. https://doi.org/10.21511/im.17(4).2021.03.
Ilchuk, М., Konoval, I., Baranovska, O., & Yevtushenko, V. (2019). Development of the grain market in Ukraine and its stabilization. Ekonomika APK, 4, 29–38. https://doi.org/10.32317/2221-1055.201904029.
Mudrak, R., Tsymbalyuk, Y., Fytsyk, L., & Puah, C-H. (2018). Affordability of food as a key condition of food security of households. Economic Annals–ХХI, 168(11–12), 53–56. https://doi.org/10.21003/ea.v168-11.
Lyshenko, M., Makarenko, N., Makarova, V., & Mushtay, V. (2018). Organizational and economic regulation of the grain market in conditions of sustainable development. Journal of Environmental Management and Tourism, 9(1), 95–104. https://doi.org/10.14505//jemt.v9.1(25).12.
Shyian, D., Sakhno, I., & Kramarenko, K. (2019). Impact of expectations on grain futures price formation. Economic Annals–ХХI, 178(7–8), 123–133. https://doi.org/10.21003/ea.v178-11.
Hamulczuk, M., & Makarchuk, O. (2020). Time-varying relationship between Ukrainian corn and world crude oil prices. Economic Annals–ХХI, 184 (7–8), 49–57. https://doi.org/10.21003/ea.v184-05.
Berger, J., Dalheimer, B., & Brümmer, B. (2021). Effects of variable EU import levies on corn price volatility. Food Policy, 102, 102063. https://doi.org/10.1016/j.foodpol.2021.102063.
Skrypnyk, A., Klymenko, N., Tuzhyk, K., Galaieva, L., & Rohoza, K. (2021). Prerequisites and prospects for sustainable development of grain production in Ukraine. Agricultural and Resource Economics, 7(3), 90–106. https://doi.org/10.51599/are.2021.07.03.06.
Cheremisina, S., & Rossokha, V. (2021). Efficiency of grain production in Ukraine: analysis of the current state and prospects for improvement. Ekonomika APK, 6, 54–67. https://doi.org/10.32317/2221-1055.202106054.
Shyian, D., Lialina, N., & Honcharova, K. (2020). The influence of the level of production intensity on the formation of an effective cost structure in crop production. Ekonomika APK, 6, 27–36. https://doi.org/10.32317/2221-1055.202006027.
Wang, J., & Hu, X. (2021). Research on corn production efficiency and influencing factors of typical farms: based on data from 12 corn-producing countries from 2012 to 2019. PLoS ONE, 16(7), e0254423. https://doi.org/10.1371/journal.pone.0254423.
Bereziuk, S., & Zubar, I. (2019). Modern economic and ecological aspects of fertilizer application in the crop production. Ekonomika APK, 10, 34–43. https://doi.org/10.32317/2221-1055.201910034.
Stasiv, O., Kachmar, O., Vavrynovych, O., & Arabska, E. (2021). Ecological and economic efficiency of growing maize for grain in short-rotation cultivation of the Western region. Agricultural and Resource Economics, 7(2), 182–199. https://doi.org/10.51599/are.2021.07.02.10.
Lialko, D. (2021). Ways to increase profits from the export of Ukrainian corn on the world market. Ekonomika APK, 10, 90–97. https://doi.org/10.32317/2221-1055.202110090.
Tanklevska, N., Petrenko, V., Karnaushenko, A., & Melnykova, K. (2020). World corn market: analysis, trends and prospects of its deep processing. Agricultural and Resource Economics, 6(3), 96–111. https://doi.org/10.51599/are.2020.06.03.06.
Vashchenko, I. (2017). Theoretical foundations and current state of the corn market. Ekonomika APK, 2, 88–92. Available at: http://www.eapk.org.ua/sites/default/files/eapk/2017/2/e_apk_2017_2_15.pdf.
Soare, E., Chiurciu, I.-A., Bălan, A.-V., & David, L. (2018). World Market Research on Maize. «Agriculture for Life, Life for Agriculture» Conference Proceedings, 1(1), 216–222. https://doi.org/10.2478/alife-2018-0032.
Palamarchuk, M. (2014). Ways of domestic maize competitive ability increasement under present-day conditions. Ekonomika APK, 6, 91–96. Available at: http://www.eapk.org.ua/sites/default/files/eapk/14_06_91-96.pdf.
Santeramo, F., Lamonaca, E., Contò, F., Nardone, G., & Stasi, A. (2018). Drivers of grain price volatility: a cursory critical review. Agricultural Economics (Zemědělská ekonomika), 64(8), 347–356. https://doi.org/10.17221/55/2017-agricecon.
Hamulczuk, M., & Hertel, K. (2009). AGMEMOD model – structure and application for analysis and simulation of Polish agricultural sector. Metody Ilościowe w Badaniach Ekonomicznych, 10(1), 88–98. Available at: http://cejsh.icm.edu.pl/cejsh/element/bwmeta1.element.desklight-45e9127b-81d7-49bb-820a-93f62e0ab054?q=bwmeta1.element.desklight-1e9004b3-93e2-4b14-ba9a-8e1322ad9363;8&qt=CHILDREN-STATELESS.
Esposti, R., & Lobianco, A. (2005). Modelling the Impact of 2003 CAP Reform on Crop Production. The Case of Durum Wheat in Italy. Agricultural Economics Review, 6(1), 31–53. Available at: https://ideas.repec.org/p/anc/wpaper/232.html.
Banse, M., Salamon, P., Ledebur, O., van Leeuwen, M., Bouma, F., Salputra, G., Fellmann, T., & Nekhay, O. (2012). Impact of Russia and Ukraine on the international price formation and the EU markets – a Model based analysis. 123rd EAAE Seminar: Price volatility and farm income stabilisation: Modelling Outcomes and Assessing Market and Policy Based Responses. Dublin, Ireland. Available at: https://ageconsearch.umn.edu/record/122536.
Nykolyuk, O., Pyvovar, P., Chmil, A., Bogonos, M., Topolnyckyi, P., Cheban, I., & Fellmann, T. (2021). Agricultural markets in Ukraine: current situation and market outlook until 2030. Report No. JRC126768. Luxembourg, Publishing Office of the European Union. https://doi.org/10.2760/669345.
Chantreuil, F., & Barbenchon, M.-D. (2009). AGMEMOD 2020 Project Final Reports: Final Activity Report. Part I. Project SSPE-CT-2005-021543. CORDIS European Commission. Available at: https://cordis.europa.eu/docs/results/21/21543/121790321-6_en.pdf.
Dibrova, A., Pankratova, L., & Cheban, I. (2020). Simulation of Agricultural Policy Scenarios Using the AGMEMOD Model. ICTERI 2020. 16th International Conference on ICT in Education, Research and Industrial Applications. Integration, Harmonization and Knowledge Transfer. Vol. II. Kharkiv. Available at: http://ceur-ws.org/Vol-2732/20200471.pdf.
Cheban, I., & Dibrova, A. (2020). Development of liquid biofuel market: Impact assessment of the new support system in Ukraine. Journal of International Studies, 13(1), 262–278. https://doi.org/10.14254/2071-8330.2020/13-1/17.
State Statistics Service of Ukraine (2021). Plant Growing in Ukraine 2020. Statistical yearbook. Kyiv. Available at: http://www.ukrstat.gov.ua/druk/publicat/kat_u/2021/zb/05/ zb_rosl_2020.pdf.
State Statistics Service of Ukraine (2021). Balances and consumption of the main food products by population of Ukraine 2020. Statistical yearbook. Kyiv. Available at: http://www.ukrstat.gov.ua/druk/publicat/kat_u/2021/zb/07/Zb_Bsph_2020.pdf.
Rozhko, V. (2020). Ukrainian corn market: change of trends and uncertainty at the start of the new season. APK-INFORM «ITOHY», 11(77), 2–6. Available at: https://www.apk-inform.com/ru/exclusive/topic/1515858.
Agrarian portfolio-2021 (n.d.). Ukrainian Business and Trade Association (UBTA). Available at: https://ubta.com.ua/uk/analytics.
Khoroshun, V. (2021). Cereal Market Overview 2021: Exports, Production, Trends. Latifundist.com. Available at: https://latifundist.com/analytics/23-obzor-rynka-zernovyh-kultur-2021-eksport-proizvodstvo-tendentsii.
State Statistics Service of Ukraine (2021). Ukraine’s Foreign Trade 2020. Statistical yearbook. Kyiv. Available at: http://www.ukrstat.gov.ua/druk/publicat/kat_u/2021/ zb/06/ztu_20_ue.pdf.
FAO (2022). FAO Food Price Index. Available at: https://www.fao.org/worldfoodsituation /foodpricesindex/en.
APK-Inform. Analytic and Information Agency (2021). Prices. Available at: https://www.apk-inform.com/uk/prices.
Latifundist (2021). Fertilizers: a review of prices for the week. Has the price of nitrate fallen? Available at: https://latifundist.com/novosti/57788-dobriva-oglyad-tsin-za-tizhden.
Kucher, O., Hutsol, T., Glowacki, S., Andreitseva, I., Dibrova, A., Muzychenko, A. … Kocira, S. (2022). Energy potential of biogas production in Ukraine. Energies, 15(5), 1710. https://doi.org/10.3390/en15051710.
Dibrova, A., Dibrova, L., & Dibrova, M. (2016). Priority directions of development of export agrofood productions of Ukraine. International Scientific Days 2016. The agri-food value chain: challenges for natural resources management and society. Nitra, Slovak University of Agriculture in Nitra. https://doi.org/10.15414/isd2016.s1.02.
Dibrova, А. D., Krylov, Y. О., Dibrova, L. V., & Dibrova, М. А. (2020). Rehuliuvannia rynku zerna Ukrainy v umovakh hlobalnykh vyklykiv [Regulation of the grain market of Ukraine in the context of global challenges]. Nizhyn, Publishing PP Lysenko M. M.
State Statistics Service of Ukraine (2022). Use of fertilizers and pesticides for the harvest of agricultural crops in 2018–2021. Available at: https://ukrstat.gov.ua/operativ/operativ2018/sg/vmod/arch_vmodsg_u.htm.
State Statistics Service of Ukraine (2021). Costs of agricultural production in agricultural enterprises in 2018–2020. Available at: https://ukrstat.gov.ua/operativ/operativ2018/sg/vytr_na%20ver_sg_prod/arch_vytr_na%20ver_sg_prod_u.htm.
State Statistics Service of Ukraine (2022). Making mineral and organic fertilizers (1990–2021). Available at: https://ukrstat.gov.ua/operativ/menu/menu_u/cg.htm.
State Statistics Service of Ukraine (2022). Commodity structure of foreign trade of Ukraine in 2021. Available at: https://ukrstat.gov.ua/operativ/operativ2021/zd/tsztt/tsztt_u/arh_tsztt2021_u.html.