A grain glut is undermining the credit Ukraine desperately needs
(Bloomberg) — At blocked border crossings, a minister threw eggs and overflowing silos — anger is rising among farmers in Eastern Europe, who say a grain rush from Ukraine threatens their businesses, and it continues to undermine political goodwill. destroying.
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Poland and other neighboring states last year agreed to help get grain out of Ukraine and into global markets after blocking Russia’s invasion. A portion of that supply is now piling up in Eastern Europe, and is threatening local livelihoods.
The surplus has been created by infrastructure constraints as well as delays by farmers in selling last year’s produce. Hoarding of grain is becoming a political issue as protests spread to the streets.
Local growers held on to their crops in anticipation of higher prices after the war. A sweeping global recession has pushed prices down, with farmers in Poland, Romania, Slovakia, Hungary and Bulgaria facing reduced revenues and struggling to empty their stores before the new summer harvest begins Is falling
Political leaders who initially supported Ukraine have started complaining.
Polish Prime Minister Mateusz Morawiecki, who four months ago offered Ukraine $20 million to help export its grain to Africa, said in a Facebook post, “Transportation of grain to countries outside the EU And in sales we should help Ukraine.” “But this cannot be done at the expense of Polish farmers and local markets.”
The European Commission needs to limit the amount of Ukrainian supplies entering the EU because it is destabilizing local markets, he said.
The glut is very much local. Ukraine’s exports to global markets are still well below pre-war levels as deals to export grain from Black Sea ports remain tenuous.
Russia’s invasion sparked concerns about a worsening hunger crisis as food prices soared to record levels as Ukraine stranded large quantities of grain and vegetable oil. With Eastern Europe emerging as a transit route, governments were forced to jump in to keep supplies going. While some ports have reopened, the movement of shipments has been curtailed. Transport by rail, road and river remains important.
Imports into Poland are set to increase from around 100,000 tonnes in previous years to 2.45 million tonnes in 2022, turning into a huge undertaking for the rail network. The rolling stock had to be replaced because the tracks were different from those in Ukraine, preventing shipments. Priority on the trains was also given to coal that Poland was forced to import after an embargo on Russian supplies.
The race against food inflation begins on rusty Soviet rail tracks
Poland’s Agriculture Minister Henryk Kowalczyk told growers in June not to sell their grain because prices were unlikely to fall. But benchmark Chicago wheat futures have nearly halved from records reached just after the outbreak of the war as heavy harvests at other major shippers such as Russia and Australia calmed fears of a supply shortfall.
Demand for grain imports is also falling in key regions such as North Africa – one of the EU’s main wheat markets – as the economy there falters, said Hélène Duflot, wheat analyst at Strategy Grains.
On March 17, Kowalski was surrounded by a group of farmers wearing yellow vests and whistling at an agricultural fair in Kielce, southern Poland. He was forced to flee the venue.
Five days later, the minister was mobbed and eggs were thrown at him during a panel discussion with EU Agriculture Commissioner Janusz Wojciechowski in the town of Jasenka, a two-hour drive from the border with Ukraine. Earlier this week, Kowalski agreed to a plan that includes at least 10 billion zlotys ($2.3 billion) in aid and a pledge to boost ports’ capacity.
The farmers, however, are not giving up and are promising to resume the protest until the situation improves in the next two to three weeks.
Dissent can have political consequences. Elections are due later this year in Poland and Slovakia and farmers are an important constituency. A former Slovak premier who defies sanctions against Russia and arms supplies to Ukraine is leading in the polls. Bulgaria is in a similar situation, with elections due later this week. Poland has accepted over a million Ukrainian refugees and has been one of the largest contributors of military and humanitarian aid to Kiev.
Romanian farmers traveled to Brussels on Wednesday to protest in front of the European Commission building, chanting “Romanian farmers deserve respect!” The country, one of the EU’s largest corn and wheat producers, has facilitated more than half of Ukraine’s grain exports since the start of the war.
Imports rose from near zero to 570,000 tonnes last year, according to Razvan Filipescu, vice president of the Association of Farmer Producers in the Dobrogia region.
President Klaus Iohannis said the bloc’s crisis fund of €56 million ($61 million) for farmers was insufficient, while also criticizing it for failing to make up for the “huge sacrifice” made by the Balkan nation.
In a letter to European Commission President Ursula von der Leyen, Bulgaria and four EU states surrounding Ukraine called for increasing financial support to farmers, buying surplus grain for humanitarian aid or even restricting imports from Ukraine. insisted on doing.
According to a person familiar with the discussions, Slovakia wants the EU to work with the UN World Food Program to move Ukrainian grain out of member states.
Nevertheless, Ukrainian supplies could play a role in bridging any shortfalls in Europe. Drought in the European Union last summer devastated its domestic corn crop, requiring additional imports to fill the gap. However, shipments are likely to be lower in the coming months as the war will affect the harvest.
“All exports from Ukraine will decline, including to the European Union, it is clear,” said Alex Lisita, CEO of Ukrainian agribusiness IMC.
Concerns are also emerging that the grain transit agreement itself may break down.
“Nobody oversees the gentleman’s agreement that Europe will be a transit zone for Ukraine’s grain to Africa,” said Emil Macho, president of the Slovak Agriculture and Food Chamber. “It’s not working, the grain is staying here.”
Meanwhile, the anger continues to boil over. In Bulgaria, grain producers blocked the border crossing with neighboring Romania for three days, demanding compensation. Kasimir Avramov, founder of the country’s National Association of Grain Producers, said about 80% of the sunflower crop remains unsold in 2022 and farmers have more than 3 million tonnes of wheat left over from last year.
Wieslaw Gryn, 65, is growing maize, wheat, canola and sugar beet on a 320-hectare (791-acre) family farm in Rogow in eastern Poland. He says grain prices are down 40% and he still has a hundred tonnes to sell.
“Every year around this time I would have some surplus. But I’ve never had a surplus as big as now,” Grin said in an interview. “My business partners are delaying payments and I need the money because I must start growing my own grain now.”
–With assistance from Slava Okov, Daniel Hornak and Natalia Ojuska.
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