It was often said, in the course of the transition from communism to capitalism in the 1990s and 2000s, that Eastern Europeans are good at surviving. The IMF and the World Bank praised the local population’s capacity to “subsist” through small-scale agricultural production, “relieving” welfare budgets or helping shoulder the liberalization of prices. In fact, this focus on subsistence obscured a broader societal trend in much of post-communist Eurasia, the emergence of what one could term a new ‘great social divide’ between family farms and large corporate farms. Thus, on the one hand, throughout the post-communist region, local mega-corporations grew on the ruins of former collective farms to expand into world-level global producers. On the other, the region also experienced the contrasting trend of large shares of the population returning to or intensifying agricultural production to maintain their livelihoods through a combination of selling and self-consuming their products.
Ukraine is no exception to this trend of what the World Bank and other international organizations call the dualization of agriculture: together with Russia and Kazakhstan, Ukraine saw the emergence of some of the world’s largest agro-corporations in rural landscapes populated by millions of “subsistence” family farms. “Subsistence” though was somewhat of a romantic myth, here as much as elsewhere in the world. Rural and peri-urban populations were far more diverse than that term suggests. Few survived solely on their own produce. Rural people were getting by through a combination of self-consumption, petty entrepreneurship (selling some produce on local markets), sending family members abroad for work, and collecting meagre social benefits. Some 20% of Ukraine’s approximately four million rural households were selling more than half of their production already in the early 2000s, mostly informally. Many families have amassed enough land for participation in the same markets as corporate actors, sending produce such as soy, maize, and sunflower products to sea ports for export.
A hallmark of the approach advocated by states and international organizations vis-à-vis post-communist populations of small-scale producers was a complete break with the communist procurement system, which had been buying up the production of small farmers in order to process it in specialized units (factories). Post-socialist states have allowed that communist procurement system to collapse, and since the 1990s have either failed or explicitly refused to support family farms by means of buying up their production. They assumed that simply freeing markets for land, energy, and food would miraculously spur an entrepreneurial drive that would lead to the disbandment of collective farms and provide the cure to poverty (or at least limit it). Instead of such an entrepreneurial revolution, post-communist countries experienced in the 1990s a pattern of extreme property fragmentation, the return of small-scale farming, and the survival and transformation of the former collective farms. As of the 2000s, authorities and international organizations (the World Bank in particular) expected that land markets would “consolidate” agriculture to produce farmers more akin to Western European ones, incentivizing those “too small to grow” to sell their land and leave agriculture.
Ukraine, a latecomer to land markets liberalization, faced particularly intense criticism from the European Union, World Bank, and IMF for its agricultural land sales moratorium and finally lifted it following intense IMF and World Bank pressure in March 2020. The argument was that higher prices for agricultural products and land would drive investment and production growth. But the reality is that uncertainties over marketing possibilities, access to credit, subsidies, and leasing schemes abound. Three decades after the collapse of communism and facing a largely unprecedented combination of drought and war-induced cost increases, smallholders in Ukraine and elsewhere in post-communist Eurasia are still virtually on their own in the task of commercializing production from below. In Eastern European EU member states, many are excluded from subventions, which are usually only available to larger actors, above 1 hectare, and have no political representation. Links between corporate actors and the smallest family farms do exist. Still, these do not amount to any marketing or production support for small holders. Instead, rural households lease out their land to corporate actors in exchange for animal fodder, and market their small production surpluses locally, reaching global markets only via numerous intermediaries.
In Ukraine, the war exacerbates the divide between corporate actors and family farms; the latter, on their own in marketing their products, are facing depressed prices. Russia’s blockade of the Ukrainian Black Sea ports (until July 2022) and the occupation and destruction of the Azov Sea ports have made agricultural prices in Ukraine collapse. The impact on export routes was dramatic: before the war, trucks delivered agricultural products to the Azov and Black Sea ports, which had important storage facilities. With the blockade, export routes lengthened over several countries, alternating truck, rail, and river barges, to Danube and smaller Black Sea ports in Ukraine, Moldova, and Romania with far smaller storage capacities. Corporate actors were able to cover the associated costs and were well positioned to profit from steep world price increases; at least until July 2022, when a Russian-Ukrainian deal allowed agricultural products to leave Black Sea ports again (the Grain Initiative). The deal made world grain prices, that had doubled at the start of the war, fall. But not even the Ukrainian producers that actually reached the remaining Black Sea export facilities received world prices for their production, as few shippers risked entering Ukraine’s ports and demand premiums that pushed Ukrainian prices far below world levels.
In contrast to large exporters, Ukraine’s millions of family farms were thus confronted by the collapse of inner-country prices for export-intended goods that could not leave the country. Whatever transport and storage infrastructure is left is accessible only at exorbitant prices, and the prices on local markets for export-intended agricultural production have collapsed. In fact, in the summer of 2022, the cost of storing production was as relevant as the market price, as it became difficult to move produce around given the greatly damaged transport and storage infrastructure. Prices have varied more widely for goods intended for local consumption such as potatoes, a key staple for local survival under crisis conditions. Keeping in mind that potatoes are a favoured crop for smallholder specialization, prices went from 46% increases to the prior year to close to zero by the end of 2022, in both cases making it extremely difficult to sell production. The sudden price fall in October 2022 resulted from producers close to Russia – and Belarus seeking to sell as much as possible rather than store, fearing further attacks and disruptions. Depressed prices did not even cover the cost of seed material and according to market analysts will endanger the harvest for 2023.
The state should act as a last-resort buyer for small holders, especially for crops and products in which small farmers specialize, which are difficult to store and costlier to export. Still, such self-evident steps for which there are many workable global examples in the 20th century are not among the options that have ever been considered in the last three decades. What is also not on the table is a centralized state distribution of seeds and fertilizers. The main strategy advocated internationally for preventing hunger and helping agricultural producers get access to increasingly expensive inputs is to remove trade barriers (also for fertilizers). But this will predictably fail to tackle problems as varied as the collapse of infrastructure or speculation via agricultural derivatives which produce hunger and volatile food prices.
The little export that Ukraine achieved in the summer of 2022 – at one fifth of its pre-war capacity – required unprecedented efforts of trans-border cooperation. Before the war, Ukraine’s grain, soy, and sunflower oil left the country to Asian and African countries by ship directly from the Ukrainian Black Sea and Azov Sea ports. From March to August 2022, Ukraine’s agricultural products had to pass three countries by truck, train, or river barges: Ukraine, Moldova, and Romania, before reaching the Black Sea. Even with the Grain Initiative corridor opening in August and the accessibility of Ukraine’s Black Sea ports in and near Odessa assured, the three-country land-and-sea route stayed an important export avenue. Authorities had to repair abandoned rail tracks within three months; and expand the storage capacities of – until then – less-used Danube ports. Another new trans-border land-and-sea route now connects Ukraine via Poland by rail to the Lithuanian Baltic Sea port of Klaipeda for Western European markets.
The outcomes of such logistic efforts – as beneficial as they are to the rest of the world – deepen the local divide between export-capable corporate actors and small-scale farmers. While corporate actors have their own transport capacities (“truck fleets”) and can access export routes, the latter continue to face the dramatic situation of exploding production prices for fuel and fertilizers and collapsing prices for locally-sold produce.
Finally, while the drought in Europe drove up prices for the late 2022 and 2023 harvests, Ukrainian producers hardly benefit, as local consumers cannot pay the higher prices and imports of vegetables and fruit to counterbalance the price hikes. In summer 2022, Ukrainian traders were already replacing the lost harvests in fruits and vegetables in the Russian-occupied Kherson area – which they used to market within Ukraine – with products from Moldova and Romania (fieldwork respondents, July and August 2022).
The present-day crisis will, therefore, yet again – such as during the 1990s transition – test and reproduce the local population’s survival skills. Rather than retreating into the imagined peasant subsistence economy of the World Bank technocrats, they will struggle and combine various livelihood sources, from migration remittances and social benefits to small-scale agricultural production. As they are de facto abandoned once more by local and global politics, rural people will above all rely upon each other.
Mihai Varga is a sociologist at the Institute for East-European Studies, Freie Universität Berlin. His latest book is Poverty as Subsistence. The World Bank and Pro-Poor Land Reform in Eurasia.
Cite as: Varga, Mihai 2023. “Crisis-tested, yet forgotten: Family farms in wartime Ukraine” Focaalblog 14 February. https://www.focaalblog.com/2023/02/14/mihai-varga-crisis-tested-yet-forgotten-family-farms-in-wartime-ukraine/