Decollectivization and the agricultural transition in Eastern and Central Europe

The agricultural transition is an essential part of stabilization and adjustment in Eastern and Central Europe because agricultural sectors are large and food is important. The supply response that many within and outside the region expected to emerge early and expeditiously is complicated by the removal of consumer subsidies and constrained export demand. In an atmosphere of acute economic uncertainty and declining farm incomes, the distribution of agricultural land is proceeding. The author traces the liberalization of food prices and the distribution of agricultural land to date. The essence of the agricultural transition is the state's withdrawal from its traditional role as residual claimant of rents forthe use of agricultural resources. This role will pass in stages to owners of land. The author concludes that an agricultural transition when demand is constrained is more difficult to manage than one in which the fruits of institutional change and productivity growth find ready outlets. Moreover, although price movements are not yet clear, it appears that removing subsidies on feed, credit, fertilizer, machinery, and energy will move the terms of trade against agriculture - particularly against the large livestock sector. The need to increase productivity will thus be even greater than in the past. Any progress on the demand side will thus give a major impetus to the institutional changes needed on the supply side.