EU import bans for Ukraine grain shock embattled farmers

When Ukrainian farmer Mykola Olytskyy partnered with a Polish grain trader last December thanks to mutual acquaintances, he felt a glimmer of hope.

Olytskyy runs an agricultural business in Novolabun, in Ukraine's western region of Khmelnytskyi, where wheat, corn and barley are cultivated. He hoped selling grain to the Polish market would bring financial security.

"The deliveries to Poland were the only chance of generating even the slightest profit," Olytskyy told DW. "The Polish partner collected the grain at the border, we earned 6,700 hryvnia (€167; $187) per ton."

Unilateral import bans

An agreement signed by Ukraine and Russia last year, mediated by Turkey, on a Black Sea grain corridor has been poorly implemented. Ukrainian grain exports via the sea route have repeatedly come to a standstill. This has caused the price of Ukrainian gain to drop and fluctuate considerably.

Large-scale grain deliveries from Ukraine to the European Union only became possible after Russia's invasion of its eastern neighbor. Just over a year ago, Brussels abolished tariffs and import quotas for Ukrainian agricultural products as a sign of solidarity and as an effort to buoy Ukraine's economy.

On April 7, 2023, however, Poland unilaterally imposed import bans on Ukrainian grains after mass protests by farmers there over falling prices, even though trade policy is typically Brussels' prerogative. This was quickly followed by similar bans in Hungary, Slovakia and Bulgaria.

In late April, the EU Commission retroactively legalized this ban, which has now also been extended to include Romania and covers wheat, corn, rapeseed, sunflower seeds and sunflower oil.

At the same time, the EU Commission emphasized that the transit of Ukrainian grain through these nations to third countries remains permitted. The restrictions initially apply until June 5, after which they can be extended indefinitely.

Financial setback

"The Poles paid about 300 hryvnia (€7.50; $8.41) more per ton than Ukrainian traders who brought the grain to Odesa for further export," Olytskyy said. "They were paying in foreign currency, which is clearly an advantage in these circumstances. Exports to Poland were a reliable source of income for us."

But when Poland and other neighboring countries halted grain imports, this came as a shock to Ukrainian farmers.

Olytskyy is deeply disappointed. "We are very grateful for the great support Poland provided to us in these difficult times of war, but this step felt like a stab in the back."

Now, he said, he can forget about earning profits any time soon. "The contracts signed with our Polish partners, which we worked towards for such a long time, are history," the agricultural entrepreneur told DW.

He is once more at the mercy of middlemen who resell his grain for far less money to Odesa for export. As soon as Poland closed its border to Ukrainian grain, Ukrainian middlemen lowered their prices. Olytskyy currently earns the equivalent of less than €150 per ton.

"I still have a lot of grain in storage, to make room for the new harvest in three months, I have to sell below production costs," he said.

Because of the EU import bans, 12 to 15 million tons of grain from last year's harvest will remain in Ukrainian silos, forecasts Pavlo Martyshev of the Kyiv School of Economics.

"This will hit Ukrainian farmers quite hard because their financial reserves from 2021, when prices were good, were used up in the first year of the war," Martyshev told DW. "Now they are without funds."

Ukraine's overall economy is suffering, too, he said, as much of the country's eastern industry was destroyed in the war. As a result, "the share of agricultural exports rose from 40 to more than 60% of total exports, so two-thirds of foreign exchange earnings now depend on this industry."

Farmers need stability

For Ukrainian farmers, this uncertainty in relations with European business partners is even worse than current financial setbacks, deputy chairman of the Ukrainian agrarian council, Denys Marchuk, told DW.

"Our farmers produce grain at competitive prices despite the war, but in order to enjoy a degree of certainty, they need to know what rules will govern the European market," Marchuk said. He expects the EU Commission will prevent individual countries from sabotaging shared trade rules in future.

Tensions with the EU weaken Ukraine, making the country even more vulnerable to Russian blackmail, according to economic analyst Martyshev. This means Ukraine is all the more dependent on the Black Sea grain initiative agreed with Russia.

To extend the deal, Russia is demanding ever more political concessions. "They sense Ukraine's vulnerability and are just talking about extending the agreement by 60 days, although this is not legitimate at all, as the document provides for an option to extend the deal by 120 days at a time," he said. Ukrainian traders complain that this uncertainty is driving up risk premiums and leading to fewer purchasing contracts.

Martyshev and farming representative Marchuk both want to see Ukraine and its EU partners quickly establish a long-term deal for agricultural exports.

After all, they say, Ukraine is EU membership candidate and Ukrainian products will one day have a firm place on the bloc's common market.

This article was translated from German.