What’s the deal with the grain ban by Ukraine’s allies? – expert analysis

26 April, 04:28 PM
Oleg Nivievskyi says that grain prices are falling all over the world, not just in Poland (Photo:Олег Нів'євський)

Oleg Nivievskyi says that grain prices are falling all over the world, not just in Poland (Photo:Олег Нів'євський)

Why are Ukraine’s East European allies boycotting Ukrainian grain, what have the farmers lost, and are the problems of unity within the EU

NV spoke with Oleg Nivievskyi, the Dean of Graduate Economics Studies at Kyiv School of Economics and associated member of the Center for Food and Land Use Research, on April 24 to find out.

Ukrainian grain is stuck at the EU borders.

First, Slovakia, Poland and Hungary blocked its import and transit due to local farmers’ complaints about having to sell their products at a higher price, as well as their allegations of Ukrainian use of pesticides in their products.

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Later the transit was unblocked, but the European Union is preparing emergency curbs on grain imports from Ukraine, as reported by the Financial Times.

European officials want to ban imports to Poland, Hungary, Slovakia, Romania, and Bulgaria. Only transit and re-export to other EU countries will be possible.

Poland greenlit the transit of Ukrainian agricultural products through its territory. Can we assume that the problem is solved and exports won’t be affected?

No, the problem is only partially solved. There are several aspects here, and as always, economics and politics are intertwined.

As for the economic side, Poland consumes our grain. About half of the products passing through European countries are imports. The rest is transit. This ratio is also typical for Poland. That is, it turns out that many Polish consumers will suffer from not receiving our products. And this is a loss for both sides. I hope that transit exports will resume, but there will be no imports.

But look at what is happening on the politics side. The EU is a block of countries, and each cannot decide unilaterally how to trade with other countries. This must be decided by Brussels. And what happened? Ukraine, roughly speaking, and not Brussels, negotiated with Poland. This is a blow to the unity of the European Union. And this is a bad signal. It’s possible to negotiate with anyone, but from the point of view of unity, this is a bad precedent.

Could this mean that the grain import ban canl be lifted if not supported by Brussels?

I think these curbs will be lifted. But I don’t know when it might happen. For me, although I’m an economist, this situation with the unity of the European Union, their trade policy, their decisions, seems to be very important. More important than the economic aspect. If such fluctuations are already observed, what can we say about security? Because when decisions should be made from the point of view of security, and we all have an enemy and we don’t have unity, that is a good signal for the enemy and a bad signal for the EU and for us.

EU countries claim that Ukrainian grain supplies lead to a drop in prices on the domestic market and to losses for local farmers. Is that fair?

The data doesn’t confirm this, especially the EU’s data. If we look at the dynamics of domestic market prices in Poland, they aren’t significantly different from Hamburg or Rotterdam.

However, what I saw in the Polish media was an incorrect reflection of this trend. They show the domestic prices are currently decreasing. Yet, this is happening everywhere, including in Poland, Germany, Slovakia, the United States, Brazil, and Argentina – because this is the global trend now. If this had been reported correctly in Poland, the situation could have been different.

No one is talking about it, but due to the trouble in Ukraine, European farmers likely received higher profits in the spring and summer of last year. The prices literally doubled. Grains are now sold at pre-war prices, but a month ago they were higher and local farmers were earning more than before the start of the great war.

Such stories are very easy to use from a political point of view for internal struggles. That’s why I see the political implications of the situation.

How much have Ukrainian farmers lost due to the ban on imports to some EU countries?

It’s still too early to assess. However, potentially, these could be very large losses. About 40% of all exports go overland to Western countries, and that’s a lot. This means that Ukrainian farmers will not receive income, and prices will also fall.

Russian aggressors are warning about the possible closure of the grain corridor. If this happens, what will be the consequences, and will it be possible to increase exports through EU countries to compensate for the losses?

We calculated that Ukrainian farmers lost about $15 billion due to the blocking of seaports. This is due to more expensive logistics, lower prices. What will be the losses now? Probably comparable.

If the western border is blocked and the Russian aggressors block the grain corridor, exports will be blocked, except for, of course, the Danube seaports. Roughly speaking, we’ll have the same situation as we had at the beginning of the war. Therefore, the losses should be comparable. However, I would like to add that we have not yet made detailed calculations.

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Has the boycott affected the price of grain on the world market?

Not yet.

How will the uncertainty affect the sowing campaign? What crops can farmers give up and will they reduce the sown area?

Farmers are already changing their plans. They sow less corn, paying more attention to oil and other more expensive crops that can withstand expensive logistics.

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