The European council agreed to add several new agricultural products to a list that reimposes tariffs and quotas on Ukraine agricultural product imports to the EU, voting on a surprise decision to expand the list and caving in to pressure by the powerful agricultural lobby.

A trade dispute that broke out in April last year after the Polish local grain market collapsed thanks to imports of cheap Ukrainian grain leading to Warsaw imposing a unilateral ban on grain imports that was quickly taken up by other Central European countries. The European Commission (EC) has since proposed to introduce a set of “emergency brake” restrictions on some products to protect local EU markets.

All duties and quotas on Ukraine’s agricultural imports to the EU were suspended in 2022 after the Russian invasion of Ukraine and the third roll over of that decision is currently under discussion by the EU.

Restrictions on eggs, poultry and sugar have already been agreed in principle by the EC, but a late night meeting of the European Council on March 19, currently chaired by Belgium, agreed to add honey, maize, oats and groats to the list, the EC said in a press release.

“On Wednesday, Parliament and Council reached a provisional agreement on extending trade liberalisation measures for Ukraine in the face of Russia’s war of aggression,” the European Parliament said in a statement. “The regulation also provides for an emergency brake for particularly sensitive agricultural products, namely poultry, eggs, and sugar. MEPs secured the expansion of this list to include oats, maize, groats and honey.”

The MEPs also attained commitments from the Commission to take action if there is a surge of Ukrainian imports of wheat, although wheat was not formally included in the list, despite vigorous lobbying by Poland.

Under the new proposed rules, if the import of the listed products surpasses the average volumes from the last two years, tariffs will be re-imposed. The European Parliamentary negotiators also said that the EC will act faster - within 14 days instead of 21 days - if trigger levels for the automatic safeguards were reached.

Crucially for Kyiv, negotiators set the reference period to 2022-2023 that defines the benchmark volumes above which restrictions are triggered and excluded 2021, when import volumes were much lower.

The new list will now be signed off by EU diplomats on March 20 and then must be voted on by member states in the European Parliament on April 10-11 before going into force.

The decision represents a compromise as countries like Poland and the European agricultural lobby group were pushing for a much more extensive list of quotas and duties.

The complete list of products that were originally suggested for inclusion in the list was: poultry, eggs, sugar, common wheat, common wheat flour, wheat pellets, barley, barley flour, barley pellets, oats, maize, maize flour, maize pellets, barley groats, cereal grains otherwise worked, and honey.

Ukrainian grain imports have no impact on Polish prices

Ukraine’s agricultural lobby is up in arms, claiming the restrictions have more to do with European internal politics than any problems caused by Ukrainian agricultural goods transiting Poland to international markets. All this decision will do is make its fight against Russia more difficult at a time when Ukrainian soldiers are dying on the battlefield to uphold European values.

Ukrainian Agribusiness Club (UCAB) told bne IntelliNews in an exclusive interview that claims that the import of Ukrainian agricultural goods into Poland are jeopardising the ability of Polish farmers to earn a living are false.

“This is another kick in the teeth for the Ukrainian people who are, as we speak, fighting and dying for the European ideal. Since the beginning of Russia’s full-scale invasion, the temporary trade regime between the EU and Ukraine has been a vital source of financial help and a commercial lifeline for the country. The claim that Ukrainian goods are hurting the EU agricultural markets is demonstrably false,” Nazar Bobitski, the UCAB representative in Brussels told bne IntelliNews. “This decision has more to do with internal EU politics than it has to do with commerce.”

The claims are backed up by an EC report on agricultural imports to the EU in 2023 released in January that shows the share of Ukrainian grain in imports was very small in 2023, insufficient to cause major swings in prices.

After booming in the second half of 2022 and the beginning of 2023, monthly imports from Ukraine were almost back to their pre-war levels in September and October 2023, after they fell by nearly half (45%) in the second half of 2023, the EC reported.

Cumulative imports from Ukraine from January to October were only 1% higher (€100mn) compared to the same period in 2022. At the same time, exports from the EU to Ukraine were soaring, mainly in the value-added products that Ukraine is unable to make for itself thanks to the war. The EU currently enjoys a new trade surplus with Ukraine for agricultural goods of just under €2bn.

“Ukraine was the third destination for which EU agri-food exports grew the most compared to 2022, with an increase of €447mn (+19%), across most product categories. They reached €2.8bn in cumulative value from January to October, their highest level over the last four years,” the EC report says.

However, the dynamics within various product groups were more dramatic, with large increases in cereals imports (+€1.2bn, +39%), sugar (+€254mn, +652%) and poultry (+€148mn, +50%), while imports decreased in oilseeds and protein crops (-€762mn, -29%) and vegetable oils (-€688mn, -29%). The changes also have a regional dynamic, with exports to neighbouring countries rising faster than for the EU as a whole, the EC reports.

Nevertheless, despite these details another recent report by the Polish Institute of Public Finance (IFP). IFP experts also found that imports of Ukrainian grain did not significantly contribute to the decline in grain prices in Poland or the EU.

“The claim that "grain laundering" is taking place, with grain being shipped to a third country, falsely relabelled as a product of that country and re-exported to Poland to circumvent the embargo, was also found to be false,” Ukrayinska Pravda reported, citing the IFP.

The report also refuted the belief, widespread in Poland, that the embargo on imports from Ukraine could significantly affect the stability of prices on the agricultural market.

Bobitski further pointed out that all Ukrainian grain imports to Poland have already been unilaterally halted since April 2023, leaving the price of grain in Poland entirely dependent on the size of local stocks and the world market price. A ban on Ukrainian imports would have no effect as they have already been banned. The IFP report also concludes that an embargo on more grain imports will not have a significant impact on Polish prices, as Ukrainian agricultural imports are not a crucial factor contributing to the economic difficulties faced by Polish farmers.

EU agricultural trade with Ukraine

Poland currently runs an agricultural trade surplus with Ukraine. It imports grain and other raw agricultural materials from Ukraine, but exports back other semi-finished and finished food goods like cheese and cooked meats and earns a net trade profit from the business.

Polish media claim that Poland is being swamped by Ukrainian grain imports, but the total share of Ukrainian grain in Polish ports is only 10%, and only 60% of total Polish port capacity is currently being utilised. There is plenty of spare capacity available for increasing the export of Ukraine’s grain.

The UCAB released some statistics gathered by Eurostat to highlight their point. From the restricted products of eggs, poultry and sugar, Ukraine’s share in EU consumption in 2023 made up 1%, 2% and 3% respectively – not enough to significantly affect prices in the EU market, although these products do play a larger role in the local regional market.

And most of the Ukrainian goods that are “imported” to Poland are actually in transit. Ukrainian officials report that in January-February this year, 515,000 tonnes of grains and oilseeds went through Polish border crossings, but out of that only 24.3 tonnes remain in Poland. The rest goes on to Ukraine’s main customers in the rest of Europe: Germany (195,400 tonnes), the Netherlands (58,300 tonnes), Lithuania and Latvia (21,800 tonnes each), according to Polish analyst Mirosław Marciniak, as reported by Farmer.pl

Trade routes

Poland is most exposed to Ukrainian exports as it is the major transit route for Ukraine’s goods leaving by land on its way to the EU markets and Baltic ports. Romania is another major transit route but has withdrawn its objection to Ukrainian imports as it is a net winner from the trade.

“On the one hand Romanian farmers do in theory face competition from Ukrainian grain imports, but on the other it has made money from the booming business in the port of Constanta,” says Bobitski.

Hungary has objected, but it runs a net positive trade surplus with Ukraine, exporting value added food products such as dairy and processed goods. It is also a net exporter of some grains and honey, says Bobitski.

Moreover, as a landlocked country, Hungary is not a major export route for Ukrainian goods, unlike Poland and its access to the Baltic ports, or Romania which lies on the Danube River that leads to the heart of Europe. Budapest’s support of the Polish call on restrictions on Ukrainian agricultural exports is seen by many to have more to do with Hungarian Prime Minister Viktor Orban’s open support for Russia than having any commercial basis.

Russian grain

A lot of noise has been generated by the Ukraine grain row with calls to limit the exports, but little has been said about halting Russian exports of grain to Europe until this month, which remain unsanctioned.

Russia was exporting record amounts of grain in 2023, following an all-time record-breaking harvest in 2022 of 153mn tonnes – some 20mn tonnes more than the previous record set in 2018 – and is on course for a similar bumper harvest in the current agricultural marketing year which ends in July.

Total EU imports of grain and oilseed in 2023/2024 from Russia stood at 1.8mn tonnes by the end of February, of 2% of total EU agri-trade, European Commission data shows, compared with 19.1mn tonnes from Ukraine. The exception is sunflower meal, of which the European Union took a third of Russian exports, Reuters reports.

The Financial Times reported on March 19 that the European Commission is mulling a duty of €95 euros ($103.26) per tonne on cereals from Russia and Belarus, with tariffs of 50% on oil seeds and derived products to reduce the trade and further placate irate European farmers. All-in-all, Russian trade with the EU is down by two thirds (63%) since the war in Ukraine began.

Bobitski claims that the fuss being made over Ukrainian grain, while the issue of Russian imports is being ignored, only highlights the politicised nature of the debate which is being used by the EU agricultural lobby as leverage to force concessions in its campaign to have new green tariffs and regulations rolled back that European farmers will find very painful.

Polish grain price collapse myth

One of Poland’s main arguments for blocking Ukraine’s grain exports is that a flood of Ukrainian grain imports collapsed the prices on the local market, but UCAB claims this is a myth.

“What happened is that at the start of the war in 2022 grain prices spiked as it became uncertain if Ukraine would be able to continue to export grain,” says the UCAB team. “Polish farmers chose not to sell their grain at that time, expecting prices to rise further. But when the Black Sea grain deal was agreed in the summer of that year in Istanbul the prices rapidly returned to normal.”

Polish farmers were caught out by a bad bet on the future of grain prices that put many grain producers into loss. The price of grain became a political issue in 2023 when Poland held a tense parliamentary election where Donald Tusk had to rally the large agricultural sector to his cause to deliver a narrow victory in a vote that is likely to prove decisive to Poland’s future. In a sop to the key rural voters Warsaw imposed its unilateral ban on Ukraine’s grain imports as a measure to boost grain prices, according to UCAB.

The Polish grain price story is part of a wider story of EU farmers discontent with new EU policy that imposes harsh new conditions on EU farmers as part of its green agenda. New environmental charges and restrictions on agricultural producers are going to hit farmers in the pocket and are expected to see thousands of smaller farms shut down.

European farmers have become increasingly vocal and there have been mushrooming protests across the EU as farmers lobby to have the new rules relaxed.

Bobitski claims the issue of Ukraine’s grain exports has been taken up by the agricultural lobby as a lever to exert more pressure on the EC to relax the rules and has little to do with the price dynamic on local markets, pointing out that thanks to the unilateral ban on imports to Poland already in place Ukrainian grain plays no role in local price dynamics already.

“We have not been able to export grain to Poland since April last year. You cannot customs clear it. So the only pressure on the price of Polish grain now is the level of the local stocks and the international price of grain,” says Bobitski.