Identification of factors for the subsistence farms commercialization in Ukraine

Abstract

More than half (55%) of the total number of households in Ukraine are in one way or another related to agricultural production (identified legally as households plots). Aggregate households in 2018 produced 41.24% of gross agricultural production (for comparison - farmers - just over 7%). This determines their crucial role in providing the population with food and guaranteeing country’s food security. However, for the most part, household plots are production units classified as subsistence farms.

The risks of the spread of subsistence farming in terms of food security, social efficiency of rural production and development have been extensively explored in the works of EU researchers and hold true as well for the Ukrainian context: low resource use efficiency, low technology and product safety, low contribution to community development, informal employment, etc. Under these circumstances, determining the right strategy for the further development of this form of business is the key to effective development of the agricultural sector, rural areas and the national economy as a whole. An effective policy aimed at overcoming the SF path dependence in Ukraine should study the rationale, reasons and motives that determine the involvement of the people in conducting this form of farming. This constitutes the main aim of the research.

Research method is analytical logic based on official national statistics underpinned by the comparative and correlation analysis. Based on a comparison of changes in the basic parameters characterizing the agricultural activity of household plots over time, structural changes in the agricultural sector of the country are identified. Applying the correlation analysis, the relationship between the trends and the main characteristics of agricultural activity of households in regions as well as socio-economic conditions of regions development is investigated. The correlation analysis is also used to identify the relationships between socio-economic dynamics in rural settlements and tendencies of household plots’ development during 2008-2018.

The comparative analysis (2018/2008) shows that there is a reduction in the number of households in Ukraine in general, as well as of household plots in rural areas. The share of households keeping livestock, poultry and bees in rural and urban settlements is reduced; rural households are becoming more oriented on subsistence farming (by the proportion of land allocated for cultivation for their own needs), reducing the proportion of land used for commercial aim.

The results of correlation analysis show that for rural settlements the commercialization of households is closely linked to: the proportion of households without workers - the smaller this share is, the less commercialized the farms are (0.64); the coefficient of economic burden - the higher it is, the more intensive is the market activity of the households (0.74); the share of food expenditure in all expenditures - the higher it is, the more market oriented the household is (0.45); the average number of employees in the household - the higher it is, the less market-driven the farm is (-0.56); the share of active income in aggregate resources (the higher it is, the less market active is the household -0.69).

Results, obtained for personal peasant households (PPH) show that they are rather developed in regions where the average number of employees in one household is higher (0.55). It is interesting that as the unemployment rate increases, the number of PPHs will decline, meaning that this activity is not perceived as a proper alternative to a full day engagement (-0.54), but rather as part-time employment. In regions where the number of households without a single worker is higher, the total area occupied by PPHs will be higher (0.37), this is also true in the case of urban households (0.43). At the same time, the area of PPH is more directed to commodity production with increasing level of urbanization, as well as with increase in the number of households where there are no workers (0.46). In this case, these areas are formed through rented land (0.66 and 0.56, respectively). The number of PPHs correlates with the number of livestock, poultry and bee holdings (0.84). Moreover, with the increase in the number of such farms, PPH areas are allocated for the maintenance of a dwelling house (0.79) and conduct of personal peasant farming (0.53), but are eliminated from commodity production (-0.33) and rental relations (-0.46).

To sum up, one should emphasize that nowadays there is a decrease in the extension of households involved in agricultural production both for food self-sufficiency and for the production of products for sale in Ukraine. There are "natural" structural shifts in the sector, highlighted by Buchenrieder et al. (2009). At the same time, it is necessary to pay attention to the nature of these structural changes. In the context of the need to tackle the problem of subsistence farming, one should pay attention to another aspect of this problem - the lack of a strategy to support the establishment of a model of individual farming, which must counteract the risks of industrialized agri-production. After all, as the results of the analysis show, in the case of a revival of economic activity in rural areas (peripheral territories) as a result of the implementation of social policy measures, there will be a disappearance of the class of private small agricultural producers. This poses risks to food security, as it is these structures that make up the bulk of consumer basket products.