How much agricultural products Ukraine had been exporting by land before the embargo by its neighbors, what losses it may suffer due to the ban, and how Russia is using it.
For the first six months of the Great War, roads, railroads, and river ports were the only ways to export Ukrainian grain.
It was extremely difficult to move all the millions of tons of grain that had been sailing across the sea in large bulk carriers until February 24. The EU countries came to the rescue: they lifted restrictions on trade with Ukraine as part of the "trade visa-free regime" and introduced "solidarity corridors."
This allowed Ukraine to export grain further through EU ports: Romanian, Polish, and Baltic. In 2022, Ukrainian farmers increased their exports to the EU by 65%.
In 2022, grain exports to Poland increased 38 times, excluding transit, 54 times to Hungary, 575 times to Slovakia, and 690 times to Romania.
Despite the partial unblocking of Ukrainian seaports within the grain corridor, the export of products by land accounts for a fifth of domestic agricultural exports. Thus, grain from Ukraine has become a bone of contention in relations with its neighbors.
Following the bans imposed by the EU, trucks with Ukrainian products cannot cross the border with Poland even for transit to other countries. Exports to Hungary have also stopped.
How much can Ukraine lose from such an embargo, as evidenced by open data, and how can this play into the hands of the Russians?
Seeds of discord
As early as 2022, farmers in neighboring countries began complaining that Ukrainian grain was displacing their own on roads, railways, ports, and the domestic market.
Six EU countries asked the bloc to reduce the grain surplus on the market. They said that Ukrainian grain competes with their producers and reduces demand for local products.
Farmers from eastern EU countries also claim that Ukrainian grain lowers domestic market prices and farmers lose profits. These countries asked for compensation for their farmers and the EU agreed to provide it.
This was not enough, and on April 15, Poland banned imports of Ukrainian food, including dairy products and meat, until June 30.
Hungary and Slovakia have also banned imports of grain and oilseeds from Ukraine. Bulgaria may join them.
These decisions are hardly driven by economics alone. When Ukraine's grain exports collapsed in March 2022, global grain prices rose significantly, with corn and wheat costing more than €400 per ton instead of €200-300.
Subsequently, prices declined as the grain corridor was opened. According to the founder and former head of the KSE Agricultural Center Oleg Nivievsky, the quotes are still 30-50 euros per ton higher than they were before the great war.
As a result, European farmers are selling their products for a higher price than they were selling before, and they are making a lot of profit. At the same time, domestic prices in Poland do not differ significantly from those in Western Europe.
"Grain prices are falling on the global market, and there is no extraordinary downward movement in Polish prices. The thesis that our products are pushing theirs out of the market forgets an important caveat: because Russia attacked Ukraine and blocked exports, farmers in Poland and other EU countries were able to make huge profits," Nivievsky notes.
In addition, adds Denys Marchuk, deputy head of the All-Ukrainian Agrarian Council, Ukraine sold 700 thousand tons of wheat and about 1 million tons of corn to Poland during the year. "These are not the numbers that affect strategic indicators and harm the sale of our own grain," he explains.
So it is likely that the ban on imports of Ukrainian grain is not so much about protecting farmers as it is about getting additional subsidies from the EU ahead of the elections in each country that has resorted to an embargo.
How critical are the restrictions for Ukraine?
Overall, the EU accounted for more than 50% of Ukraine's food exports in 2022. The largest partners were Poland and Romania, which purchased Ukrainian products worth $2.6 billion each.
It is to the Romanian port of Constanta that Ukrainian exporters bring their products from the Danube ports. Exports by river sometimes exceed exports by land, according to the State Customs Service.
By sea, rail, road, and river
How Ukrainian agricultural products have been exported since the beginning of the Great War
The products exported to Poland accounted for about 10% of Ukraine's total agricultural exports, said Mykola Solsky, Minister of Agrarian Policy. Hungary accounted for about 6%.
Thanks to free trade with the EU, Ukraine has also increased its exports of processed products.
Marchuk emphasizes that during the war, exports of processed goods are extremely important for filling the budget, as they bring in foreign currency earnings and keep enterprises busy. In total, 500-700 thousand tons of various products came from Ukraine to Poland.
There are currently no exact estimates of losses from the ban on food imports from Ukraine, but the scale can be understood if we take the average monthly value of exports to Poland in 2022.
In this case, in three months, Ukrainian farmers will under-export goods by $650 million, excluding transit.
Most importantly, exports by rail or road depend on Ukraine's neighboring countries, which is why "solidarity corridors" were created in 2022.
Currently, Poland is the only EU country that has banned the import of Ukrainian agricultural goods, even if it is in transit. It is also an important transportation hub, as it provides access to the ports of Gdansk, Gdynia, Swinoujscie, and Klaipeda, Lithuania.
Where does Ukraine export food to?
The second largest importer of agricultural products from Ukraine to the EU, Romania, may also face a problem. The country's ruling party will ask the government to ban imports of Ukrainian grain. The Romanians emphasize that they will facilitate transit.
Transportation of products by land is not the best option for Ukraine, as such logistics is expensive and not always profitable. However, it is necessary while Russia is blocking Ukrainian seaports.
"Even without the problems at the border, Ukraine lacks export routes to get the grain from the previous harvest out before the harvest. This means that there is constantly more supply than demand in Ukraine.
The reduced ability to export through our EU neighbors means that we will be even more dependent on the grain deal," explains Pavlo Khoustov, an analyst at Barva Invest.
Negotiations between the Ministers of Agricultural Policy of Poland and Ukraine are underway in Warsaw. The parties must agree on the conditions for unblocking transit so that Ukrainian grain can go to key European ports.
In favor of Russian sabotage
Stopping imports of Ukrainian products will be another blow to exhausted Ukrainian farmers. Together with Russia's sabotage of the grain corridor, the situation is becoming even more uncertain.
"Producers will suffer from additional loss of liquidity. In addition, there is uncertainty: the restrictions have been introduced until July, but there is no guarantee that they will not be extended," explains Nivievsky.
According to KSE AgroCenter, the Ukrainian agricultural sector lost about $15 billion in February-August 2022 due to the seaport blockade. "This is a loss of liquidity, bankruptcy, underproduction, and problems with sowing," he adds.
"Harvesting will begin in the summer and there will be even more grain. If it is not exported, it can further reduce domestic prices, which are barely reaching the cost of production, explains Nivievsky. This means that many farmers were selling their products at a loss.
Farmers in western Ukraine, who, according to Marchuk, had contractors in the EU, may be particularly affected. The embargo jeopardizes their financing.
"Farmers are now at a crossroads: to sow or not to sow? Will they be able to sell the grain or will they find themselves in the same situation as in March 2022, when exports were not working for six months?" Marchuk speculates.
Restrictions on the western land border give the Russians additional leverage, as Ukraine will become even more dependent on maritime exports, notes Khoustov.
The aggressor is talking about extending the agreement for two months instead of 120 days, blocking ships for inspection for two days for the first time, and violating its agreements under the initiative. In other words, it is doing everything it can to prevent the grain corridor from working.
The abrupt actions of the EU neighbors may limit Ukraine's alternative to the sea and give the Russians another reason to blackmail it.