Modelling Ukrainian sunseed and sunoil markets Yu . Vasylenko

1. Modelling Ukrainian sunseed and sunoil markets Yu. Vasylenko A system of interrelated models of the Ukrainian sunseed and sunoil markets was built, which has the following abilities: 1) to determine main characteristics (indicators) of these markets and reveal key factors determining their behaviour, namely: - actual sunseed and sunoil prices in the domestic market, - volumes of production and total supply of sunseed and sunoil, - volumes of domestic use of sunseed and sunoil; - actual income from 1MT of sunoil and sunseed; - sunseed and sunoil export volumes; - their export prices. 2) to determine elasticities of the above mentioned indicators with respect to the key factors and to rank the factors by the extent of their impact on characteristics of the markets; 3) to analyse the state and development dynamics of these markets with finding out each factor’s contribution to annual changes of the market characteristics; 4) to fulfill a systemic analysis of the dynamics of interrelated characteristics of the sunseed and sunoil markets; 5) to determine precise values of parameters of planned management measures for regulation of these markets; 6) to calculate consequences of both implementation of certain regulatory measures and change of exogenous factors.

2. 3 000 2 500 2 483 2 000 2 140 -268 UAH/MT 1 500 1 543 1 000 1 275 1 072 920 849 500 783 729 599 585 566 515 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Fig. 1. Sunseed price behavior in Ukraine’s domestic market 40% 20% 0% -20% -40% -60% -80% -100% Fig. 2. Pattern of factors contributions to annual gains in Ukraine’s domestic sunseed price Modelling domestic sunseed prices -1 411 +343 +865 -152 -321 +65 -144 +198 +163 -83 +50 100% 80% 60% +343 UAH/MT -144 UAH/MT +163 UAH/MT +198 UAH/MT +865 UAH/MT -1 411 UAH/MT -321 UAH/MT +50 UAH/MT -152 UAH/MT -83 UAH/MT +65 UAH/MT 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 calendar years import duty’s contribution contribution of sunoil output volume in Ukraine contribution of UAH real exchange rate to the US dollar contribution of government sunseed procurement volumes contribution of actual price of government sunseed procurements contribution of actual price for potash fertilizers contribution of sunseed supply in Ukraine

3. Key factors of the sunoil market behavior in 1991-2002 І. The greatest factor influencing changes in actual market sunoil price was the scope of domestic demand for this product, not its supply. ІІ. While planning suoil output volumes, the Ukrainian crusher is guided by last year’s situation and constantly lags behind changes in the domestic market. Actually, sunseed production volumes were the most influantial factor of the sunoil output behavior. ІІІ. The behavior of sunoil consumption level was determined at 35% by this product’s output volume. Rising actual price for sunoil naturally decreased per capita consumption of it. ІV. Export volumes were determined first of all by Ukraine’s sunoil production. The second strong factor was the cancellation of export rates in 1994. V. In the years featured by rising sunoil production in Ukraine (2000, 2002), a great decrease was observed in the actual market price of sunoil along with a small drop in its real production cost. As a result, the calculated real net profit plummeted, sometimes even the total proceeds from sunoil domestic sales did the same.

4. Analysis of consequences of both regulatory measures introduction and change of exogenous factors I. The response of the sunseed and sunoil markets to increased prices for sunseed growing input supplies is quite paradoxical: actual profits and total proceeds of sunseed producers go up. Though surging prices for raw material cut crusher profits, their proceeds grow. ІІ. Introduction or raising of the sunseed export duty has a negative aggregate economic effect: increased real proceeds and profits of crushers do not set off smaller profits of ag producers. ІІІ. Strengthening sunseed production by the extensive way improves conditions for hired sunseed growers, hired workers and owners of crushing plants, and the public, while those for ag enterprise owners worsen. With the intensive way, production performance will be the same, and financial indicators related to sunseed will improve to some degree.

5. Analysis of consequences of both regulatory measures introduction and change of exogenous factors VІ. Interests of sunseed growers and crushers are antagonistic. But cooperation of their interests is possible. For example, the Government may simultaneously cancel the sunseed export duty and take measures for achieving a 5% rise in sunseed production through free or beneficial supplying of ag enterprises with mineral fertilizers. In this case, it would benefit to everyone involved in the sunoil and sunseed markets: owners and hired workers of sunseed growing farms, those of crushing plants, as well as to all people of the country. VІІ. If the State plans measures for decreasing planted areas under sunseed in order to preserve soils, it should simultaneously take compensatory steps to stabilize incomes of both sunseed producers and crushers as well as public expenses for sunoil. For example, these could include raising sunseed yields by the means of granting free mineral fertilizers to ag producers. If the seeded acreage is to be slashed by 39%, the yield will need to be increased by 44%.