GLOBAL AGRICULTURE : Dialogue : Farmers Fight to Get to Market in Ex-U.S.S.R. : Government still dominates supply and sales, former U.S. agriculture secretaries say.

O rville L. Freeman and John R. Block served as secretaries of agriculture in markedly different American administrations but now jointly chair an organization that encourages agricultural ventures in the former Soviet Union and elsewhere.

Freeman, 76, a Democrat and a former governor of Minnesota, was President John F. Kennedy’s agriculture secretary , while Block, 59, a Republican, was President Ronald Reagan’s. They co-chair the Citizens Network Agribusiness Alliance, which describes itself as a coalition of more than 200 agribusinesses, food companies, farm groups, trade associations and universities.

Freeman and Block, who toured the farming areas of Russia, Ukraine and Kazakhstan in early August, discussed their impressions with Times staff writer Stanley Meisler in Washington.

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Q: Looking at Russia, Ukraine and Kazakhstan, what were the main problems that you found in agriculture?

Block: First of all, I think they have a problem on the two ends of farming. On the supply side, in the spring they have a hard time getting on a timely basis, still, the chemicals and the seeds at a fair price that they need to do their farming. Even to this day a lot of their system is still government-dominated. . . .

On the other end, they have a problem with marketing their product. The government offers a price for the wheat or whatever, and they have a hard time getting paid by the government. So some of them have tried to sell it privately or barter it, where they could at least get money or get something of value for it.

That doesn’t mean there isn’t a problem in the middle too, in the farming side, but I think the supply side and the marketing side are bigger problems than on the farming side.

Freeman: I think I’d agree with that. They do not typically exercise much initiative on their own. They’ve been under a system where they did just about what they had to do to get by, and the stimulus of getting return related to the effort output . . . is very dim. So their productivity, per se, is not very strong. That . . . seems to be changing when they are responsible for the results themselves and can measure it and see it and benefit from it.

Block: When farms become privatized in one way or another, it transforms the motivation. The motivation is a profit motive. They look a lot harder for a place to market products, to make money, and we saw that last year on a farm that we visited.

We spent three or four days on the farm. They had a wonderful crop down near Krasnodar, in Russia, not far from the Black Sea. A beautiful crop, 40,000 acres, and I asked them if they owned the land. Of course they don’t. The farmers don’t own the land over there yet. . . . But he said that we have to pay the rent to Moscow--15% of the crops. I asked him if that wasn’t a considerable burden to give up that much of the crop. He said it’s no problem, we tell them we had a crop failure.

Then he goes on to say what we really want to do, almost pounding the table, is export this crop out through the Black Sea and get hard currency. We want dollars so that we can buy John Deere equipment. We want to buy Western seeds and Western chemicals. That’s what they want to do.

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Q: What about Kazakhstan? You always hear that’s really a Third World country. I wonder if the problems are very different in Kazakhstan from Russia, from Ukraine.

Freeman: I was there for a relatively limited time, but I would say . . . they are quite comparable there. I did meet with a group of farmers . . . and in the course of the questions I recalled I’d been asked many of those questions many, many years ago when I was secretary of agriculture. They weren’t too different in some respects.

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Q: They ask the same questions as American farmers?

Freeman: Yes. . . . What’s happening to the small farm, and how can we make a profit, and the government doesn’t give us adequate direction, etc. But fundamentally, the pervasive hand of Moscow itself, of the Kremlin, was just as weighty there in Kazakhstan as I observed it in other places.

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Q: Do you feel enough attention is being paid to these problems by the new governments?

Freeman: I think they’re trying. I think they understand what needs to be done, but it’s very difficult to carry it forward. When (Russian President Boris N.) Yeltsin put out a decree that you could have private ownership, there was no bank willing to issue a mortgage. . . . This is one of the real problems--the underlying confidence that we’re now going in this direction firmly and clearly. It’s not there. That confidence has yet to come. . . . But I think they want to do that, and I think they’re moving in that direction. I didn’t detect anybody who wanted to go back to the old system.

Block: We met with the president of the farmers organization, Mr. Vladimir Bahmashnikov. He said the biggest problem for the farmers was credit. In the United States you can borrow against your land as collateral. They don’t own their land. In the United States you can go to the bank and borrow against your growing crop, or the crop you’re going to plant to get the seed. But they haven’t quite advanced far enough to grasp that yet.

So farmers do have a hard time getting credit. Especially the private farmers. The bigger operations that have had ties with the state have a much easier time of getting that done.

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Q: What about the size of the farms? Do most of them have to be broken up into small farms?

Freeman: I don’t think the answer is in on that one yet, as to what’s going to work the best.

Block: Essentially, we’ve been seeing our own farms grow bigger, increased ownership by some individuals, really driven by technology--machinery and equipment and seeds and chemicals make it possible to farm a bigger acreage. That technology is available in the world today.

They need to have economical operations in Russia. . . . Some of them you might question if they’re too big, but we never want to suggest that they go back to the one-donkey farm, or a tiny farm, because that is not the wave of the future. But maybe they don’t need to be 40,000 acres either.

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Q: One of the theories has always been that, for economic development, you have to start with a small farm first before you go up to the big farm. But you don’t agree with that?

Block: You can’t go back to those little, inefficient farms. That’s what’s happening in some other places in Europe today, even in Western Europe. The tiny farms cannot compete in the global economy. Even in France today, the little farms are going bankrupt. The big, efficient ones are in business. I think Russia has to have relatively big, efficient farms. It will take time for them to get it all done.

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Q: What about crops? Do you have any feeling that they should be in different crops than they are?

Freeman: They always told the farmers what to raise. They gave them quotas. . . . And the government doesn’t do that anymore. I thought it was almost humorous meeting with the minister of agriculture, and he said, “Now we have some priorities we’re going to go for. We want more . . . soybeans.” He said, “We want more grain, feed grain . . . we want more milk . . . and we want more meat.”

Well . . . all of his objectives make a lot of sense. But I thought to myself, you can’t get it done the way you used to by telling farmers what to do. You have to have a price incentive of money, and they have to have a market. . . . It’s really an interesting change for them, a major change, an emotional change, a change in outlook. It’s something that takes some time, some adjustment.

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Q: You noticed this lack of confidence that they have. Do farmers talk about this?

Freeman: Not very openly. You had to kind of reach for it. They were still being a little cautious about what they said about the government to the outside.

Block: I think it was hard to get a real feel for what they thought. First of all, when you talk to the guy managing the 40,000-acre farm, let me tell you, nobody has more confidence than he spilled out. He can’t be as good as he says he is.

But when you talk to some private farmers, smaller farmers . . . they’re kind of struggling. The credit’s a real problem for them, getting the resources to plant their crops. I think they are lacking a little in confidence.

Freeman: Infrastructure in some places is very, very limited. Roads. Communications. And it takes a lot of courage to go out and to start an operation, perhaps in land that hasn’t been opened before, and to learn on the job. You have to learn enough as you go along to survive.

Block: It’s a giant leap of faith for someone whose father and grandfather have lived at the dictate of the state, and were cared for by the state, to suddenly step out totally on their own and say I can do it, I can do it. It’s a leap of faith. I’m not so sure how readily America could do that right away.

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Q: What about the land? Has this been kept productive? Have there been problems of erosion under the system?

Block: I thought their land looked like it had been reasonably well-cared-for. I’ve seen land that’s eroded badly in North Africa and other places, and I didn’t see, myself, terrible problems. There may be regions that I didn’t look at.

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Q: How profitable would it be for American companies to go in partnership at this stage of the game, to go into any of these areas, joint ventures and so on?

Freeman: That’s what our people are trying to find out. . . .

Block: They’ve got a long way to go. That’s what I say. . . . The (American) companies going over there are setting an example of how it can be done and probably ought to be done, and I think it will help upgrade the whole country’s way of doing business over time. Will these companies make a lot of money? No, not right away, probably. But if they can stay with it for a while until they get established, I think they’re hoping they will be profitable ventures for them.

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Q: On the whole question of confidence and a leap of faith, if credit were available--say a Russian or Ukrainian farmer could get the credit--would it be a profitable venture for him right now?

Freeman: That’s kind of a vague question, really. Many would respond to (the offer of credit) effectively, and others wouldn’t know quite what to do about it. They might misuse a credit.

Block: You’d have to have the market mechanisms as well.

Freeman: Without the proper market mechanisms, there’s great risk in loaning a lot of money to someone.

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Q: How does the farmer sell his product now?

Freeman: It varies. Some does go to the government. A lot of them go into local markets. . . . You’ve heard that food is coming very slowly and it’s not high quality. You go into one of these markets, you see very, very good things.

Block: And they barter.

Freeman: I’ve been going there for a long time, probably every year or two I’ve been there for the last eight or 10 years or longer. The merchandising of fruits and vegetables in the market is very nice. It is very, very beautiful. Some of it’s very good quality. A lot of the stores have a lot to offer today. Five years ago they didn’t have much. It’s a change of night and day between five years ago and today.