Separating grain: Europe is "flooded" with Ukrainian agricultural products. Will this overstocking hurt relations with the EU?
Five Eastern European countries, including Poland, ask the European Commission to balance assistance to Ukraine in exporting its crops
Last Friday, January 20, during the Green Week international forum in Berlin, the ministers of the Czechia, Bulgaria, Hungary, Poland and Romania approved a joint appeal to the European Commission to protect their markets from Ukrainian grain. This was announced by Hungarian Minister of Agriculture Istvan Nod. "We call on the European Commission to take measures aimed at stabilising the internal market through grain imports from Ukraine," he wrote. "Immediate measures are needed in response to the unrestrained growth of Ukrainian grain imports.
While navigation from Ukrainian ports has only partially resumed, imports of domestic grain across Western borders continue to grow. The problem is twofold. The first is that some agricultural products stay in the "transit" countries' markets and create pressure on their domestic markets. The second is that international traders have begun to substitute purchases from local farmers with Ukrainian grain, as the logistics are the same.
"Our goal is primarily to protect domestic and European farmers, maintain the balance of the EU's internal market, and comply with EU measures that help Ukrainian goods enter the global market," Nod says.
The same days, concerns over the prevalence of Ukrainian agricultural products in Europe were displayed in a more radical way by massive farmers' protests in Poland.
Mind explored whether Ukrainian agricultural products could become a "grain of discord" in European politics.
Why has there been such a massive influx of grain into the European Union? Ukrainian grain is imported to the EU as part of the Solidarity Corridors initiative announced by Brussels in May 2022 amid the blockade of seaports. The grain is transported from the Polish-Ukrainian border to the Baltic Sea ports.
To make this transit smooth, the duty on agricultural products made in Ukraine was zeroed. Officially, about half of Ukraine's 24 million tonnes of grain exports since the beginning of the current marketing season have been delivered by land. In December, exports via the Solidarity Corridors amounted to about 3 million tonnes.
At the end of 2022, the European Commission reported that these "corridors" were already reaching their capacity limit. Therefore, the EC is accumulating up to €1 billion in funding from partner countries to enhance the logistics potential.
What is Poland's role in the protest campaign? On January 17, farmers' protests organised by the influential AgroUnia association broke out in Poland's Chełm and some other cities. The protesters obstructed the international highway leading to Ukraine with hundreds of tractors.
"Lorry traffic on the DK 12 section through Chełm will be completely halted. Traffic problems may also occur on other access roads leading to Chełm and on the city's main streets. Truck drivers travelling to or from Ukraine are asked to use other border crossings," the Chełm police press service said in a statement.
The purpose of the 48-hour picket was to protect the domestic market, up to the return of the previously cancelled duties on Ukrainian grain and rapeseed.
What are the main claims of European farmers? The protesters say, no one would object if products from Ukraine were simply transported through Poland, as was originally intended. But in fact, a significant portion of it ends up settling and even being processed on the Polish market.
Large factories, feed mills, and poultry farms are increasingly switching to Ukrainian grain. For example, the Agrolok plant in Osek, which processes oilseeds, bought most of its rapeseed from Ukraine. Dissatisfied farmers also did not ignore this enterprise and blocked it for a day.
AgroUnia representatives estimate that up to 80% of imported Ukrainian goods remain in Poland, which leads to lower prices for Polish products. Agricultural producers from the border areas suffer the most, but the impact is felt throughout the industry.
Is the problem only in grain? The inflow of Ukrainian food products to the Polish market is not controlled, and the range of products is constantly expanding. While at the beginning only grain was imported, mostly fodder, now it includes flour, frozen berries, poultry, and cereals.
"Polish (produced in Poland – Mind) food means independence. Today we are fighting for the Polish grain market. Its operation is threatened, because our silos are overwhelmed with grain from Ukraine. The cereals that were supposed to pass through our country and go to Africa have stayed here because of an incompetent government that cannot cope with this," Polish media quoted Michal Kolodziejczak, head of AgroUnia, as saying.
Is there really that much Ukrainian product ending up in Europe? According to the European Commission, wheat imports to the EU from July 1 to December 11, 2022, more than tripled compared to the same period in 2021, to 3.5 million tonnes. The spike in imports is largely associated with a rapid increase in the supply of cheap wheat from Ukraine.
Local Polish statistics does not record large volumes, but few people believe them. Officially, in the first half of 2022, Poland imported 640,000 tonnes of grain from Ukraine. This figure is questioned by Polish agricultural market actors who believe that Ukrainian grain is being imported on an unprecedented scale.
"The spread of false information about millions of tonnes of grain coming to Poland from Ukraine is a big issue," said Henryk Kowalczyk, Poland's Deputy Prime Minister and Minister of Agriculture.
Every Polish company can legally purchase Ukrainian grain at the border, with a price difference of at least 20%. Note that this is a common practice: at one point, Ukrainian bakery companies did the same, buying flour in the border regions of Belarus, where it was cheaper.
Poland produces 24 million tonnes of grain per year.
Can the protests be considered unbiased? Opinions differ on this point.
AgroUnia's activities are perceived ambiguously in Poland. Andrzej Zibertowicz, an adviser to Polish President Andrzej Duda, said that although some of the farmers' claims are justified, AgroUnia's actions are aimed at undermining the situation inside the country.
According to another version, the association's leader is pursuing a political goal. And farmers' activism should be seen as an electoral campaign.
Could radical restrictions be imposed on imports of Ukrainian grain? Hardly.
On January 18, representatives of the strikers met with Henryk Kowalczyk. According to the protesters, his main argument was that the regime of grain imports from Ukraine was not approved by the Polish authorities, but by the EU.
At the national level, Poland is unlikely to push through restrictions on Ukrainian grain supplies. Even the organisers of the Polish protests themselves complained that the media were silencing their action because it went against the general line of assistance to Ukraine.
Although the issue of small farming is sensitive to Polish leaders, the geopolitical risk may be more significant than short-term losses in agricultural profits. Not said this time, but repeatedly realised, "if Ukraine loses, we are next" makes them prioritise in accordance with a more global agenda.
What changes in foreign trade rules are likely to occur? The European Commission should respond to the complaints.
Since five European countries are now insisting on revising the terms of the Ukrainian grain imports, this enhances the chances of at least correcting the status quo. The changes will most likely touch on the system of control over the use of grain and its origin in domestic markets.
Who else is complaining about the Ukrainian harvest surplus? Back in September, Romanian grain producers claimed that the supply of products from Ukraine threatened to bankrupt them.
In Bulgaria, farmers have not hidden their fears about illegal or, to put it more mildly, unregulated imports of Ukrainian food grain even earlier, which drives down prices for local producers. Imports of oilseeds and their seeds to Bulgaria from Ukraine increased 77 times in the first quarter of 2022.
For comparison, exports of Ukrainian oilseeds to Poland tripled from 629,000 tonnes in January–April 2021 to 1.763 million tonnes in the same period in 2022. Supplies to Romania increased from 8,000 tonnes in the Q1 of 2021 to 872,000 tonnes in the same period of 2022, and to Hungary – from 19,000 tonnes to 566,000 tonnes.
How did the European Commission react? In its statement, the EC said that it is aware of the impact of the so-called European Solidarity Corridors on neighbouring countries, such as Romania and Poland.
"No one foresaw such a success when launching the 'solidarity corridors'. But, of course, it is costly in terms of disrupting local trade in neighbouring countries," said Michael Scannell, Deputy Director General of the European Commission.
The European Commission suggests improving logistics as a way out of the stockpiling crisis. Among other things, it is necessary to establish road, rail and barge connections to help transport grain further. Another proposed measure is to improve storage conditions in "problematic" countries.
This issue is expected to be discussed by the European Commission at a meeting of the Agricultural Council in Brussels by late January.
If you have read this article to the end, we hope that means it was useful for you.
We work to ensure that our journalistic and analytical work is of high quality, and we strive to perform it as competently as possible. This also requires financial independence. Support us for only UAH 196 per month.
Become a Mind subscriber for just USD 5 per month and support the development of independent business journalism!
You can unsubscribe at any time in your LIQPAY account or by sending us an email: [email protected]
