Ukrainian ‘grain of discord’ angering EU farmers, explained

In recent months, farmers have been protesting in a number of European countries, demanding that Ukrainian grain not be allowed into their countries.

They claim that due to the flooding of markets with cheap Ukrainian wheat and other crops, prices in Poland, Bulgaria, Romania, and a number of other countries have fallen sharply. This, in turn, prevents local producers from making money, as they complain that they cannot sell their own crops.

The situation is most acute in Poland, where local farmers have repeatedly taken to city squares demanding to restrict the access of Ukrainian agricultural produce, blocked checkpoints on the Polish-Ukrainian border, thrown eggs at the minister in charge, and even threatened to disrupt President Volodymyr Zelenskyy's official visit to Poland if the problem was not resolved.

Amid the protests, Polish agriculture minister Henryk Kowalczyk has resigned, and Ukraine was forced to suspend its exports of wheat, corn, sunflower and rapeseed to Poland until July.

Last Friday, Romanian farmers began protesting by blocking roads in different parts of the country, demanding the return of duties on Ukrainian grain. Hungary, too, decided to tighten control over the transit of Ukrainian grain.

Has Ukrainian grain really flooded the markets of Poland, Romania, Bulgaria and other countries? LIGA.net looks at the consequences of the demands to ban the export of Ukrainian grain to the EU countries.

Ukraine’s export grows by leaps and bounds

Before 2022, Ukrainian ports accounted for around 90 percent of its agricultural exports. After Russia's full-scale invasion, Ukraine had to urgently look for ways to export agricultural products, which make up the lion's share of its GDP.

Neighbouring countries offered to transit Ukrainian produce to seaports. In addition, the European Union lifted duties and quotas on imports of Ukrainian agricultural products and helped arrange for grain blocked by Russia in Black Sea ports to be transported via Polish and Romanian road and rail networks.

In July 2022, Ukraine, together with the United Nations and Turkey, signed an agreement with Russia to secure a grain corridor from three Ukrainian ports. In the eight months since the agreement, Ukraine managed to export 26.3 million tonnes of agricultural products by sea, including 7.3 million tonnes of wheat and 12.9 million tonnes of corn.

"Now we are exporting grain by sea and by land in a one-to-one ratio," Olha Trofimtseva, the ambassador-at-large in charge of food security and agricultural exports who headed of Ukraine’s ministry of agrarian policy and food and currently, tells LIGA.net.

The opening of the EU market and improved logistics allowed Ukraine to sharply increase its agricultural exports to the EU. Back in 2021, Ukraine sold USD 8.97 billion worth of agricultural products to EU countries, their share in Ukraine’s exporting markets reaching 27 percent, according to a recent report co-authored by the agrarian ministry.

By the end of 2022, the EU's share increased to 55 percent, with USD 13.9 billion worth of agricultural products sold, which accounted for 60 percent of Ukraine’s agricultural export revenues.

In 2022, imports of Ukrainian agriculture to Poland almost tripled, to USD 2.6 billion. Grains accounted for almost 40 percent of Ukraine's agricultural exports, with the EU's share exceeding 51 percent.

It was Ukrainian grain that became the biggest ‘boiling point’ for foreign farmers and caused the first serious problem in relations between the countries since February 2022.

Back in February, farmers started blocking checkpoints on the Polish-Ukrainian border, protesting against the uncontrolled inflow of grain and other agricultural products from Ukraine, which instead of going further to other countries, remained in Poland and upset the market balance.

Are their accusations fair?

Is Ukrainian grain to blame?

Expecting even higher prices, especially after the former agriculture minister’s advice, Polish farmers decided to hold on to their harvest. This played a cruel joke on them.

While Polish farmers were waiting for better prices, Polish traders and processors started buying grain from Ukraine, as the cost of production was often lower than that of local farmers. As a result, grain prices began to decline contrary to expectations.

"However, the argument that Ukrainian grain is to blame for the fact that grain prices in countries such as Poland, Romania, and Bulgaria have fallen is a big exaggeration," Ms Trofimtseva says.

She explains that the decline in food prices is a global trend. Compared to last year's ‘prices of uncertainty’, this year they have fallen by 20 to 40 percent, so the protests against Ukrainian grain are emotional rather than rational.

This problem primarily exists on the Polish side, Andrzej Szeptycki, a professor of political science and international studies at the University of Warsaw, tells LIGA.net in an interview.

For various reasons, including logistical problems, Poland was unable to organise the export of Ukrainian grain to the countries that had purchased it, including from Polish traders. As a result, the Ukrainian grain that has already been sold has accumulated in storage facilities and is "irritating" local farmers, Mr Szeptycki says.

If Ukrainian grain were really active on the Polish market, local grain prices would have fallen significantly lower, Veronika Movchan, a research director and head of the Ukraine-based Centre for Economic Research, explains to LIGA.net.

"In fact, this is not the case: they remain much higher than they were before the war in all previous years. Moreover, they are fully correlated with the dynamics of the EU market as a whole," Ms Movchan says.

In particular, the European commission's data show that the price of grain in Poland – 259 euros – is almost the same as in France (262 euros), which has no Ukrainian grain problem.

Most likely, the Ukrainian grain that has entered the Polish market not in transit is sold to third countries as Polish grain, as the statistics suggests, Ms Movchan explains. While in 2021 grain exports from Poland amounted to 2.8 million tonnes, in 2022 it sold 3.7 million tonnes to the world.

EU farmers bidding for subsidies

Why, then, do Polish farmers blame their troubles on Ukrainian grain?

"This is partly a result of political manipulation on the eve of the [parliamentary] elections, and partly an attempt to get more from the subsidies promised by the European commission," Ms Movchan from the Centre for Economic Research believes.

Scrambling to contain the crisis after a series of protests, on 20 March the EU promised a total of EUR 56.3 million in compensation to affected farmers. Almost EUR 30 million will go to Polish farmers, EUR 16.7 million to Bulgarian farmers, and less than EUR 10 million to Romanian farmers.

But each of those countries claim that this is not enough, and continue to put pressure on the EU.

As Radio Liberty reported, In a 31 March letter to European commision president Ursula von der Leyen, the leaders of Poland, Slovakia, Hungary, Romania, and Bulgaria called on the EU’s executive arm to take action in connection with the surplus of grain and other Ukrainian food that has accumulated in their warehouses, in particular to purchase it for humanitarian needs.

The European commission spokesperson admitted in a comment to Radio Liberty that the EUR 56.3 million package of aid to farmers "is probably not the last one".

The experts that LIGA.net has spoken to believe that the countries’ efforts are ‘bargaining’ for larger compensations, which such protests will primarily aim in the future.

In her opinion, Ukraine should be prepared for closer scrutiny by those countries and try to convince them that we are not a threat but an opportunity that can strengthen the EU.

"For us, this situation is good training before joining the EU – understanding that such problems are still possible," Ms Movchan adds.

What if EU duties are returned

After protests in Poland, farmers in Romania and Bulgaria followed suit. While Polish protesters demand restrictions on Ukrainian grain imports, Bulgarian, Romanian and Hungarian farmers demanded the return of duties on Ukrainian grain that were lifted last year.

The European commission has so far refused to reintroduce duties on Ukrainian agricultural products.

Meanwhile, Hungary is taking the initiative to reintroduce, at least temporarily, duties and quantitative restrictions on imports of Ukrainian grains and oilseeds, its agriculture minister István Nagy announced recently.

Is Ukrainian business ready for such a development? The return of duties that will be paid by Ukrainian farmers or producers will lead to a discounting of Ukrainian products in all export destinations, Viacheslav Chuk, the commercial director at Astarta agriculture holding, explains to LIGA.net.

"But if there are no other options, Ukrainians will continue to ship grain even under such conditions. And the Europeans will have to compete," Ms Chuk adds.

He points out that Ukrainian business is no stranger to adaptation: The general trend in Ukraine is to reduce the area under grain in favour of oilseeds and sugar beet, which can be processed domestically and exported to foreign markets.

"So potentially Ukraine will compete less in the raw materials market and increase competition in the processed products market, including sugar, sunflower and rapeseed oil, and soybean."