On September 15, the European Commission decided not to extend the embargo on grain imports from Ukraine to Poland, Romania, Hungary, Bulgaria and Slovakia. By September 18, Ukraine must submit a plan of measures to control the export of four groups of goods in order to prevent any distortion of the market in these countries. Will Poland agree to unblock exports at the request of the European Commission and can the land corridor at least partially compensate for the losses from the termination of the so-called grain corridor?
In the material “Espresso” there is more detail about:
- Why Poland insists on banning imports from Ukraine
- Can Ukraine appeal Poland’s decision?
- Is there an alternative to exporting through ports
- Who is to blame for the drop in grain prices on the world market
Why Poland insists on banning imports from Ukraine
On September 12, the Polish government adopted a resolution calling on the European Commission to ban the import of wheat, corn, sunflower seeds and rapeseed by the end of the year. If the European Commission does not introduce this ban, Poland will adopt it at the national level. On September 15, the Prime Minister of the country, Mateusz Moravetsky, confirmed the introduction of a ban on imports from Ukraine, contrary to the decision of the European Commission.
“Despite the lack of agreement from the European Commission, I say to all farmers throughout Poland, we will continue the ban on the import of Ukrainian grain. We will not listen to Berlin or von der Leyen, Tusk or Weber. We will do it because it is in the interests of the Polish farmer.” Moravetskyi said.
Dmytro Kroshka, head of the Ukrainian Agar Export Association, is convinced that political logic has won over economic logic in Poland, as an increase in imports from Ukraine is generally beneficial for the economy.
“The import and transit of grain from Ukraine allowed Polish logistics companies and Polish ports to increase their profits enormously. As for farmers, if they had any losses due to price reductions, they were covered by millions of subsidies from the EU. But for Polish politicians, this is a matter of reputation , related to the elections. As they say, in order to solve a problem, one must first create it. Protecting the Polish market from cheap products from Ukraine is a popular topic before the elections, – says Dmytro Kroshka in the Espresso commentary. – At most, now politicians want to ban as well as the import of raspberries and honey from Ukraine. At the same time, they forget that they actually have a high volume of imports of these goods from Ukraine, because they process them (freeze, package them) and export them further to the EU.”
Meanwhile, Andrii Kupchenko, FAO expert on grain and oil crops and analyst of “APK-Inform” does not agree with the statements of Polish politicians about cheaper Ukrainian grain that will flood their market. If last year Ukrainian grain was cheaper than Polish grain, then this year across the street delivery, its price has increased significantly.
“I wouldn’t say that Ukrainian grain is cheaper than Polish grain. Yes, if you compare the price of grain in Ukraine and in Poland, they are much lower here. But due to expensive logistics, Ukrainian grain in Poland costs about the same as Polish grain “, Andriy Kupchenko told Espresso. “In fact, it is important for us to have a normal transit through Poland and other neighboring countries. If we talk directly about the imports that settle in these countries, then there is not much of it. In fact, we cannot say exactly how much grain there was imported to Poland and it remained there, it is difficult to say, because it is a direct business-business relationship. And it may be that they declare one thing, but in reality it is another.”
Poland’s export statistics for 2022-23 show that Polish companies imported Ukrainian grain and then resold it. By data Marcin Wronski, deputy head of the National Agricultural Support Center, in the 2022/2023 season, Poland exported a record 11.7 million tons of grain, which is 46% more than in the previous season. In general, the export volume of wheat increased almost twice, and corn – by 34%. It is obvious that such a record growth in exports took place also at the expense of Ukrainian grain, which Polish traders resell to other markets.
Does Ukraine have a chance to challenge the ban in WTO arbitration?
The Prime Minister of Ukraine, Denys Shmyhal, said that if Poland imposes an import ban, Ukraine will challenge it in WTO arbitration.
“We did not and do not intend to harm Polish farmers. We greatly appreciate the support of the Polish people and Polish families! But in case of violation of trade law in the interests of pre-election political populism, Ukraine will be forced to turn to WTO arbitration for compensation for damages for violation of GATT norms.” – he wrote in X (former twitter).
“If Poland unilaterally imposes restrictions on the import of Ukrainian grain, it violates the terms of the WTO. Therefore, Ukraine has every right to appeal its decision in the WTO. Moreover, it has every chance to win this appeal,” says Dmytro Kroshka. According to him, if in the spring the Ukrainian government reacted to the embargo quite restrainedly and unemotionally, now they are more categorical.
“The embargo in the spring and summer was not so critical, because it was the end of the agricultural export season. In addition, the grain corridor was active. Even in the summer, when the main export took place through the Danube ports, it was not super critical. But with the harvesting of the new harvest, the need to increase export opportunities have increased. Now the situation is critical, which is why the Ukrainian authorities are so categorically determined,” says Dmytro Kroshka.
Photo: Ministry of Infrastructure of Ukraine
Is there an alternative to exporting through ports
Ukrainian grain association again updated estimate of the potential harvest of 2023, increasing it by another 3.7 million tons to 80.5 million tons of grain and oil crops. This is even more than it was in 2022 (then, according to UZA, 73.8 million tons of grain and oilseeds were harvested).
“The increase in the forecast of this year’s harvest is caused by favorable weather conditions and a better yield of crops than expected, although the sown area is smaller than last year by almost two million hectares,” – says UZA.
In the 2023/2024 season, exports could potentially amount to almost 49 million tons, which is about 9 million less than last year. However, Ukraine will be able to achieve such a volume of exports only if Ukraine can export through its Black Sea ports, as well as if the logistics of alternative routes, including the Danube route, are improved and cheaper.
“The world has already become convinced that the export of grain through Ukrainian ports and ensuring the safety of navigation in the Black Sea is the only way to quickly and efficiently supply Ukrainian grain to countries that are in dire need of it,” says UZA.
However, while Ukraine cannot export grain through the ports of Odesa, the main route is the Danube ports, through which the grain goes to the Romanian port of Constanta, where it is transhipped onto large-tonnage ships and exported to Asian and African countries. Under conditions of high water, Ukraine can transport 2-2.5 million tons per month through the Danube. However, due to the regular attacks of Russian missiles and drones on the Danube ports, it is extremely difficult to maintain this level.
“For Ukraine, it is now critically important for us to preserve exports through the Danube ports. If the shelling continues and it is impossible to export through the Danube, it will be a big problem. Transit through land corridors, albeit with certain difficulties (the accumulation of wagons and there are problems with the transfer of wagons) is moving. However, there will be no exports through the ports – this will be critical not only for Ukraine, but also for the world market.”
In general, through all land corridors, Ukraine exports an average of one million tons per month. Even with the unblocking of imports to neighboring countries, this figure is unlikely to be significantly increased due to the limited capacity of border checkpoints and the shortage of wagons.
Who is really to blame for the drop in world grain prices?
The Romanian port of Constanta became the main gateway for Ukrainian exports after the grain initiative stopped working. However, exporters have to pay higher tariffs for transshipment of Ukrainian grain than for Romanian grain. About this told Director of Comvex Dan Dolgin (Romania).
“After the ban on the import of Ukrainian grain into the five EU countries, most of the grain was transited through Romania. This required the involved parties to guarantee that the product entered and left the territory of the country and did not enter the four other countries. Every transaction involving Ukrainian grain was tracked, and this added additional work with documentation,” said Dan Dolgin.
According to him, Romanian farmers are dissatisfied with their financial situation, because grain prices on the world markets are low.
“They are trying to shift the blame for this to someone, not necessarily to Ukraine. The problem of low prices on the markets now is not only due to Ukraine, it is a global problem. Russia is actually pushing prices down,” he says.
After withdrawing from the grain agreement, Russia is increasing the volume of grain exports at a record pace, including to the markets where Ukrainian grain traditionally went. Moreover, part of this grain is grown in the occupied territories of Ukraine. Thus, in August of this year, Russia exported 7.7 million tons of grain. According to Interfax, this is a record figure for the past seven years.
The largest buyer of the Russian Federation was Egypt, which purchased more than 900,000 tons in a month. Earlier, Egypt was one of the key importers of Ukrainian wheat. By destroying Ukrainian ports and blocking Ukrainian exports, the Russian Federation pursues two goals – to eliminate a competitor on the grain market, and to destroy the economy of Ukraine, which is largely dependent on food exports. It is grain and oilseeds that are currently the main source of foreign exchange earnings of Ukraine, if we do not take into account the financial assistance of international organizations.
Well, the third point is precisely the risks of a global food crisis due to the collapse of exports to Ukraine, which forces UN representatives and other high-ranking European officials to negotiate with Russia. In particular, UN Secretary General Antonio Guterres has already stated, who is ready to discuss the export of Ukrainian grain and the restoration of the Black Sea Grain Initiative with the President of Ukraine Volodymyr Zelenskyi, the President of Turkey Recep Tayyip Erdogan and the Minister of Foreign Affairs of the Russian Federation Sergey Lavrov. Earlier, the German publication Bild reported on a secret letter from Guterres to Lavrov, in which he allegedly offers to restore the grain agreement in exchange for the lifting of part of the sanctions. In particular, the connection of one of the Russian banks to SWIFT, as well as assistance in the return of frozen Russian assets.