Baltic Journal of Economic Studies 177 Vol. 7 No. 3, 2021 DOI: https://doi.org/10.30525/2256-0742/2021-7-3-177-185 EMPIRICAL ANALYSIS OF EXPORTS OF ORGANIC AGRICULTURAL FOOD PRODUCTS OF UKRAINE Svitlana Tkalenko1, Tetyana Melnyk2, Liudmyla Kudyrko3 Abstract. The main goal of the study is to identify endogenous and exogenous factors that determine the scale and dynamics of Ukraine’s exports of organic agricultural food products (OAP). The formulated goal caused assessment of a number of potential factors influencing the development of the export potential of the Ukrainian agro-industrial complex in terms of production and sales of organic agricultural products on foreign markets. The authors conducted economic and mathematical modeling based on the software product E-Views. The observation interval covers 2008-2019. Multifactorial regression model has been constructed and tested for heteroscedasticity, as well as causal relationships have been identified between the main indicators of supply and demand and the exports volumes of related organic products. This makes it possible for further forecast on Ukraine’s exports in the short and medium term. Methodology. The study has been based on statistics from international and Ukrainian institutions specializing in organic farming and trade, including FiBL (Research Institute of Organic Agriculture), the Federation of Organic Movement of Ukraine. Databases of the State Statistics Service of Ukraine, UNCTAD for the period 2008-2019 were also involved, which made it possible to conduct a full cycle of research procedures in order to identify the most significant factors influencing Ukraine’s export activity within related segment of the global market. The results of the conducted modeling show the following: achievement and increase of Ukraine’s relative advantage in international trade of organic agro-food products for the outlined years; the existence of strong connection between the volume of exports of organic agro-food products and the level of comparative country’s advantages in international trade; identifying a significant impact on exports of endogenous factors, namely the level of wholesale and retail sales on the domestic market of Ukraine as a factor that creates additional demand from the population and business of Ukraine (B2B and B2C markets) for organic products and enhances the attention of agricultural manufacturers to activities that combine the criteria of high profitability and public demand. Another endogenous factor is the volume of areas allocated for organic farming has shown insignificant impact, however, it allows to create resource conditions for increasing production and export activity of national business in a particular sphere on various directions, from meat and dairy products to production of organic fruit, vegetables, etc. Practical implications. Conceptual provisions, conclusions formulated by the authors based on the conducted econometric modeling, allow to optimize the measures of regulatory policy in terms of institutional support of conditions and factors contributing to promising activities of the national agro-industrial complex. This will ensure the implementation of the national strategy on sustainable development with its emphasis achieving environmental criteria of production and consumption, reduce the level of import dependence upon a number of strategically important food groups and, at the same time, increase economic efficiency of Ukrainian agricultural business. Value/originality. Prospects for further research in this area may assess the potential of international production and marketing cooperation between Ukrainian agricultural companies and non-resident companies in terms of limiting the latter’s access to the land market in Ukraine while finding flexible mechanisms to stimulate joint production and sale of organic agricultural products on international markets according to quality and safety standards. Key words: exports, comparative trade advantages, organic production, food security, import dependence, standardization, neo-protectionism, COVID-19. JEL Classifications: F14, F17, F52 Corresponding author: 1 Kyiv National Economic University named after Vadym Hetman, Ukraine. E-mail: sv.tkalenko@gmail.com ORCID: https://orcid.org/0000-0003-0385-846X ResearcherID: https://publons.com/researcher/1924024/svitlana-tkalenko/ 2 Kyiv National University of Trade and Economics, Ukraine. E-mail: t.melnyk@knute.edu.ua ORCID: http://orcid.org/0000-0002-3839-6018 ResearcherID: https://publons.com/researcher/1673478/tetiana-melnyk/ 3 Kyiv National University of Trade and Economics, Ukraine. E-mail: l.kudyrko@knute.edu.ua ORCID: http://orcid.org/0000-0002-9089-7223 ResearcherID: https://publons.com/researcher/1688352/liudmyla-kudyrko/ Baltic Journal of Economic Studies 178 Vol. 7, No. 3, 2021 1. Introduction The relevance of the issue under study, which is exports of organic agricultural food products in modern conditions, has several aspects. Firstly, currently there is a strong trend within the global market, especially among high-income importing countries, regarding the need to pay more attention to food safety and quality issues that are the object of international trade (Tsvitko, 2018). At the same time, latent neo-protectionist tools are increasingly being used to protect national farmers in conditions of global development crises caused by foreign competition through sophisticated and effective system of national standardization. Secondly, the global demand for quality organic agricultural food products leads to intensification of countries-manufacturers, aggravation of competition between them and the search for effective mechanisms to strengthen their position within highly profitable segments of the global agro-food market. Thirdly, taking into account the fact that the conditions for achieving competitive advantage in this promising and dynamically growing market for each exporting country vary, and along with it the following question arises logically: what forms and strengthens the ability to increase export expansion with organic food from Ukraine, being the country which is actively declaring about its ambitions and claims to create, and it has already created a significant competition for other participants? Thus, in 2019, Ukraine took 2nd place among importers of organic agro-food products to the EU countries, which are one of the world’s largest importers of these products, being second only to suppliers from China (Willer et al., 2020). The international prospects of Ukrainian agro-industrial sector look even more convincing if it becomes the object of more active interest from foreign investors (Makhnovets, 2020). Currently, bearing in mind the international comparisons, the investment potential looks huge (Nagachevska et al., 2021). 2. Literature review Theoretical research on international production and marketing of organic food has intensified since the early 2000s, mainly in the EU and the US, primarily in several directions: marketing aspects, cross- sectoral interaction of manufacturers, processors and distributors, institutional regulators. Thus, the peculiarities of imports of organic products to the US market have been investigated in terms of domestic and international market dynamics, import assessment as the way to resolve the imbalance between domestic supply of organic food and demand, having determined the role of certification when regulating import procurement (Oberholtzer et al., 2013). New aspects on standardization of organic products have been also considered from the standpoint of meeting consumer demand; however, raising the issue of adjusting the volume of exports and imports (Schäufele and Hamm, 2017). New challenges as for economic problems of the relationship between the sectors of production and processing of organic products, retail trade are becoming the focus of scientific research (Greene et al., 2009). The investigations confirm that the marketing characteristics and properties of organic products have indisputable impact onto the competitive advantages of producers (Mykhaylenko, 2017), their market status and economic efficiency (Dudar, 2019). The discovery of connection between ecological values and production, sale and consumption of organic products has become an urgent scientific problem (Muñoz-Sanchez et al., 2021). Institutional and organizational instruments that influence both domestic and international trade in organic food cannot be considered without overcoming information uncertainty for consumers through food quality labeling, including protected geographical indications (Aitken et al., 2020), which gives overall understanding of food safety and guarantees their protection from unscrupulous manufacturers. Greater demand for transparency over organization of production itself is generated by research on the development of new alternative network formats of production and marketing ( Jaouen et al., 2020). More and more actively, the export of organic food onto international markets is seen as the way to modernize national systems of agricultural production (Varia et al., 2021) and its efficiency increase (Ganush et al., 2021). The results of econometric analysis of the factors for development of organic production and trade become the basis for substantiation of proposals for state regulation (Bazaluk et al., 2020). There is no way to ignore the new aspect of sectoral studies of global and national development of agricultural sector, which may compete with the issue of food organics. They are about finding answers to the pressing questions: what exactly is going to be the impact of COVID-19 on income, nutrition and, ultimately, food security? Preliminary forecasts have been quite disappointing: by 2020 the number of people staying in conditions that do not meet acceptable level of food security reached 761 million people, or 19.8 percent of the total population (that is 76 low- and middle-income countries); it is projected that the shock to GDP from COVID-19 will rise the number of people whose living conditions are far from food security criteria, i.e., it has grown by 83.5 million in 2020 up to 844.5 million and increased this share to 22 percent (Baquedano et al., 2020). A retrospective review of scientific research indicates that the issue of international trade in agricultural food products is multifaceted indeed, that needs further research, achieving the balance of economic, environmental, security and institutional levers of control and promotion. Baltic Journal of Economic Studies 179 Vol. 7 No. 3, 2021 3. Methodology The conducted research deals with the usage of databases from international and Ukrainian specialized institutions, organizations and the National statistics service in Ukraine for the period of 2009-2019. Authors formulated preliminary assumption that volumes of OAP production and export depend on a number of factors, featuring endogenous (domestic, national) and exogenous (international) origin. Some of them relate to direct and indirect indicators of market supply, in particular world exports of OAP (in mln EUR); the number of operators and exporters of OAP on the world market (units), the area for OAP production in Ukraine (hectares), the number of certified enterprises- manufacturers of OAP in Ukraine (units), the index of relative advantage of Ukraine’s OAP exports; others – market demand, in particular wholesale and retail sales of OAP in Ukraine (in mln EUR), GDP per capita in Ukraine (EUR). In addition, authors considered it expedient to check the probability of the influence of monetary levers of the institutional environment through the weighted average Hryvnia exchange rate for 100 EUR . All indicators, except for the Index of relative advantage of Ukraine's OAP exports are obtained from public sources. (RXAij) is a calculated value, and has been determined by the authors through the following formula: RXAij = E E E E ij sj iw sw �� √ , where Eij is an export of i of country product j; Esj is the total exports of country j; Eiw is the world exports of i products; Esw is the global exports. The most relevant and significant factors influencing the export of OAP on the basis of the conducted analysis as for dependence of qualitative variables on many factors based on the normal distribution (Prob.) with the help of E-Views showed the following: – index of relative export advantage of Ukraine’s OAP (market supply factor that reflects effectiveness of national business participation within international trade on the relevant segment; due to combination of endogenous and exogenous factors); – wholesale and retail sales of OAP in Ukraine (factor of market demand for organic agricultural products of Ukrainian and foreign origin, identifies volumes of final and intermediate consumption by the population and business of Ukraine (B2B and B2C markets)); – area for OAP production in Ukraine (endogenous factor that creates resource prerequisites for increasing production and export activity of Ukrainian business in a particular sphere on its various directions). A multifactor regression model has been built for comprehensive investigation by using the software product of E-Views; the hypothesis of the impact on exports of organic food products of exogenous and endogenous factors has been tested as follows: Y = f (Fen, Fex), where Fen are internal factors, Fex are external factors. 4. Research results Among the tested internal factors, the most significant, when taking into account the time range, was the indicator of wholesale and retail sales of OAP and the indicator of the area allocated for production of OAP in Ukraine. The most significant external factor, which at the same time is formed on the grounds of internal sources and preconditions, is the index of relative advantage of domestic exports of the OAP. Statistical data for analysis are taken through the period of 2008-2019, and therefore, the model includes 12 observations (Table 1). The general view of the model on factors influencing external variables for export of OAP was described by the equation: E = C (1) * RXAij + C (2) * X2 + C (3) * X3 + C (4), Table 1 Statistics data of a multifactor regression model obs E (Y) RXAij (Х1) WRSoap (X2) Soap (X3) 2008 14.53 1.1022424 0.6 269984 2009 37.65 3.07397965 1.2 270193 2010 39.73 2.704579 2.4 270226 2011 41.8 2.207459 5.1 270320 2012 44.83 1.935292 7.9 272850 2013 47.76 1.947208 12.2 393400 2014 67.89 2.3425489 14.5 400764 2015 50.15 1.84531 17 410550 2016 59.05 2.056656274 21.2 381173 2017 98.62 3.693409 29.43 289000 2018 103.98 3.059986578 33 309100 2019 271.67 7.402071 36 497980 Source: calculated by the authors using data from UNCTAD, Research Institute of Organic Agriculture (FiBL), the International Federation of Organic Agriculture Movements (IFOAM) and the Federation of Organic Movement of Ukraine Baltic Journal of Economic Studies 180 Vol. 7 No. 3, 2021 where E is the export of Ukraine OAP, mln EUR; RXAij is Ukraine’s index of relative export advantage of OAP; WRSoap are wholesale and retail sales of OAP in Ukraine, mln EUR; Soap is the area for production of OAP in Ukraine, hectare. In the process of model analysis, correlations between the selected variables were identified and a correlation matrix was constructed that explains them (Table 2). Table 2 Correlation matrix E RXAij WRSoap Soap E 1 0.9522 0.7849 0.66764 RXAij 0.9522 1 0.6495 0.5171 WRSoap 0.78495 0.6495 1 0.5880 Soap 0.6676 0.5171 0.5880 1 Source: based on authors’ calculations Basing on the matrix data, a strong positive correlation is inherent between all endogenous and exogenous factors and OAP exports: the relationship between RXAij and E is being quite tough 95%, 78% between WRSoap and E, and 68% between Soap and E. The connection among all variables is within acceptable limits, which indicates the absence of multicollinearity. It can be argued that the more competitive domestic organic agricultural food products are, the more exports will grow. The results of selected factors influencing within 12 periods are represented in Table 3. The first step is aimed at analyzing the results of multifactor regression of OAP export growth. In this model we use 10% level of significance. Analysis of Table 3 has led to the following results: 1. All selected factors have positive effect on the export of OAP. With the growth of index of the relative advantage of domestic exports of the OAP by 1%, exports of organic agricultural food products increase up to 30%; growth of wholesale and retail sales of OAP leads to an increase in exports of these products up to 1%. The dimensions of the area allocated for the production of OAP has no special effect, but their effective use leads to increased crops and, accordingly, to an increase in exports. 2. The value of regression R2 shows how many selected exogenous and endogenous variables are related to the Ukraine’s export of OAP. According to regression calculations, 97% growth of E depends on these factors. This indicates strong enough connection, since there are other factors, both quantitative and qualitative that affect E. The probability of accepting the null hypothesis is close to zero Prob. (F-statistic) = 0.00, which confirms the alternative hypothesis indicating the significance of the equation in the whole. According to Fisher's F-statistics, not all coefficients of the regression equation are equal to zero at the same time. In addition, all the selected factors are significant in terms of the impact on E: the index of relative advantage of domestic OAP exports – 0.00%; wholesale and retail sales of OAP – 3.5%, and the area for OAP manufacture – 6%, which corresponds to marginal value less than 10%. As a rule, there are no strict requirements for the constants, but in our case it is also statistically significant, because it is less than 1%, i.e., all three indicators are statistically significant. 3. Using the Durbin-Watson criterion, we check the equation on for the availability of high-priority autocorrelation: this criterion (Durbin-Watson stat) is 1.86. We determine significant (critical) points dL and dU. For the number of observations of Table 3 The results of multifactor regression of OAP export growth Dependent Variable: Е Method: Least Squares Sample: 2008 2019 Included observations: 12 Variable Coefficient Std. Error t-Statistic Prob.   RXAij 30.43697 3.367611 9.038150 0.0000 WRSoap 1.161601 0.457623 2.538338 0.0348 Soap 0.000144 6.60E-05 2.180745 0.0608 C -77.38451 19.19558 -4.031371 0.0038 R-squared 0.971549     Mean dependent var 73.13833 Adjusted R-squared 0.960879     S.D. dependent var 67.42526 S.E. of regression 13.33601     Akaike info criterion 8.280015 Sum squared resid 1422.794     Schwarz criterion 8.441650 Log likelihood -45.68009     Hannan-Quinn criter. 8.220172 F-statistic 91.06033     Durbin-Watson stat 1.863769 Prob(F-statistic) 0.000002 Source: based on authors’ calculations Baltic Journal of Economic Studies 181 Vol. 7 No. 3, 2021 12 and 3 variables at a significance level of α = 5%, 0.658