Why the EU is limiting imports of grain from Ukraine

Prior to June 5, Poland, Hungary, Romania, Slovakia, and Bulgaria will be prohibited from importing Ukrainian wheat, maize, rapeseed, and sunflower seeds, according to the European Commission.

In response, Poland, Hungary, Slovakia, and Bulgaria lifted their previously enforced one-sided import bans, citing the necessity to safeguard local farmers. Imports were not outlawed in Romania.

These are a few of the problems:

WHY DOES UKRAINE USE EASTERN EUROPE TO EXPORT?

Up until Russia blocked those ports last year, Ukraine mostly exported goods through Black Sea ports.

In response, three ports in the Odesa region were reopened in accordance with a July agreement approved by the U.N. to provide a secure export route to assist address the world food crisis.

Mykolaiv, one of the most significant Ukrainian ports, is still closed.

Instead, Ukraine, one of the biggest exporters of grains and oilseeds in the world, has grown exports through tiny Danube River ports and switched to land routes.

Since Belarus, a Russian ally, has been cut off from the shortest land route north, Ukraine has been forced to import as much grain as possible through eastern Europe.

The European Union announced in June 2022 a one-year suspension of import duties for Ukraine in order to facilitate this alternative.

EXPORTS TO EASTERN EUROPE: HOW MUCH HAVE They Increased?

The eastern European Union has seen a significant increase in the export of Ukrainian grains and oilseeds.

3.3 million tonnes of corn, 1.47 million tonnes of wheat, and 529,689 tonnes of barley were exported from Ukraine to Romania in 2022, according to data from the customs service.

Only 526 tonnes of maize were shipped overseas in 2021; no shipments of wheat or barley were made.

While this was happening, Poland received 44,114 tonnes of barley, 2.08 million tonnes of corn, and 579,315 tonnes of wheat in 2022.

A pitiful 6,269 tonnes of corn and 3,033 tonnes of wheat were transported to Poland the year before, but no barley.

Although the volumes are not as great as those passing through Poland and Romania, there have also been significant increases in shipments to Hungary and Bulgaria.

WHY ARE FARMERS IN EASTERN EUROPE UNHAPPY?

Eastern European farmers initially benefited financially from the crisis in Ukraine as crop prices dramatically increased in line with the world grain markets.

However, Ukrainian grains and oilseeds have become more competitive in the local markets. Due to the fact that many of the trucks and rail wagons that the farmers would ordinarily use are now being used to convey goods from Ukraine, the farmers have also discovered that it is more difficult and expensive to transport their produce.

Their worries have been heightened recently by a significant decline in prices, which some have blamed on imports from Ukraine. However, traders blame things like strong exports from Brazil and Russia as well as weaker-than-anticipated demand from China for the price declines, which are a global trend.

Farmers in the region experienced financial hardships as a result of a drought that affected portions of Central Europe last year.

According to projections from the International Grains Council (IGC), Hungary’s maize yield, for instance, decreased to 2.8 million tonnes last summer, less than half the 6.4 million tonnes of the season before.

ARE THESE EXPORTS TO UKRAINE IMPORTANT?

Ukraine was compelled to export grains and oilseeds through the eastern EU last year due to the shutdown of its ports, via rail, truck, barge, and even ferry.

Due to the closure of Ukraine’s borders with Russia and Belarus, everything passed through the eastern European Union.

Some of the pressure off land routes has been relieved by the accord supported by the United Nations to create a secure corridor for export by sea.

According to U.N. figures, 14.8 million tonnes of corn were among the 29.3 million tonnes of agricultural items transported from Ukraine’s Black Sea ports during the safe corridor period.

However, because there are only three ports, there has not been enough capacity to move agricultural products by sea, despite the fact that doing so is usually more expensive.

For instance, according to IGC data, Ukraine is expected to export around twenty-four million tonnes of corn during the current 2022–23 season (July–June). However, with fewer than two months left in the season, just 62% of the cargo has been moved along the corridor.

However, if Russia refuses to prolong the agreement to allow supplies across the corridor beyond mid-May, the significance of land routes will significantly expand.

HOW IMPORTANT TO THE GLOBAL MARKET ARE THESE EXPORTS?

According to IGC data, Ukraine was the fourth-largest grain exporter in the world in the 2020–21 harvest, after the US, Argentina, and Russia.

During that season, Ukrainian grain was exported to ninety-five nations, with China, Egypt, Pakistan, Spain, and Libya among the top purchasers.

However, the difficulties of raising and transporting crops in a war-torn nation have lessened their significance.

According to the IGC’s prediction, Ukraine would export twenty-eight million tonnes of grain during the 2023–2024 season, ranking it as the eighth-largest exporter globally.

Brazil’s exports have practically doubled from 26.2 million tonnes in 2021/22 to 50.9 million in the current 2022/23 season, making up a substantial portion of the shortfall from Ukraine.

WHAT EFFECT HAS THE CONFLICT HAD ON GRAIN PRICES?

Following the outbreak of hostilities in Ukraine, prices for wheat and corn soared due to concerns that the conflict may impede supplies from two of the biggest exporters of grains in the world. But since then, they have decreased to pre-war levels.

This is partially since Russian wheat exports have increased as a result of a record-breaking harvest last summer.

Additionally, a rise in shipments from Brazil has more than made up for a fall in Ukraine’s corn exports.

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