Ukrainian grain exports face boycott by EU countries, leading to losses for farmers
While transit has since been unblocked, the European Union is preparing emergency measures to ban Ukrainian grain imports to Poland, Hungary, Slovakia, Romania, and Bulgaria, and allowing only transit and re-export to other EU countries.
Oleh Nivievsky, dean of the Master’s program in economics and an associate member of the Center for Food and Land Use Studies, explained the consequences of the boycott and the reasons it has come about in an interview with NV Business.
Poland has allowed the transit of Ukrainian agricultural products through its territory. Can we say that the problem is solved, and exports will not be affected?
No, the problem is only partially solved. There are several aspects to consider, and as always, economics and politics are intertwined. If we talk about the economic aspect, Poland is a consumer of our grain, and about half of the products that go through European countries are imports, and the rest is transit. Poland also has this ratio. So, it turns out that part of the Polish consumers will suffer from not receiving our products, which is a loss for both sides.
I hope that transit exports will resume, but there will be no imports. However, from a political point of view, the situation is more complicated. The European Union is a bloc of countries, and each of them cannot unilaterally decide how to trade with other countries. This issue has to be resolved at the Brussels level. However, Ukraine, not Brussels, negotiates with Poland. This is a blow to the unity of the European Union and sets a bad precedent.
Could this mean that the ban on grain imports will be lifted if Brussels does not support such a decision?
I think these restrictions will eventually be lifted, but I don’t know when. As an economist, I believe that the situation with the unity of the European Union, their trade policy, and their decisions is very important, even more so than the economic aspect. If there are already fluctuations in this area, what can be expected when it comes to making security decisions? When we are not united, it is a good signal for our enemies and a bad signal for both the European Union and Ukraine.
In EU countries, they claim that supplies of Ukrainian grain lead to a fall in prices on the domestic market and losses for local farmers. Is this true?
The data does not confirm this claim, including data from the European Union. If we look at the price dynamics on the domestic market in Poland, they do not differ significantly from those in Hamburg or Rotterdam.
However, what I saw in the Polish media was an incorrect representation of this trend. They showed the dynamics of domestic prices, which are currently decreasing. However, this is a global trend that is happening in Poland, Germany, Slovakia, the United States, Brazil, and Argentina. If this was reported correctly in Poland, the situation would look different.
Moreover, no one talks about it, but due to Ukraine’s misfortune, European farmers were able to make a profit in the spring and summer of last year as prices doubled. Now, grains are sold at pre-war prices, but a month ago, they were higher, and local farmers earned more than before the start of the war. However, such narratives can be easily manipulated for political purposes, which suggests a political subtext underlying the issue.
As for the losses suffered by Ukrainian farmers due to the ban on imports to certain EU countries, it is too early to determine the exact extent of the damage. Nevertheless, potential losses could be significant as approximately 40% of all Ukrainian exports are shipped to Western countries through the mainland. This loss of income will inevitably lead to a drop in prices for Ukrainian farmers.
The Russian aggressors have mentioned the possibility of closing the grain corridor. If this were to occur, what would be the consequences, and would it be feasible to increase exports through EU countries to offset any losses?
Based on our calculations, Ukrainian farmers suffered losses of approximately $15 billion due to port blockades, which resulted in higher logistics costs and lower prices. If the western border is closed and the Russian aggressors block the grain corridor, the only available export route will be through the Danube ports. This will essentially result in a similar situation as at the beginning of the war, and the losses will likely be comparable. However, it’s worth noting that detailed calculations have not yet been made.
Has the boycott had an impact on the price of grain in the global market?
How will such risks influence planting decisions? Which crops may farmers opt not to plant, and will they reduce planting areas?
Farmers have already started adjusting their plans. They are planting less corn and paying more attention to more expensive crops such as oil, which can withstand higher logistics costs.
Source: The New Voice of Ukraine