Deliveries of cheap products from Ukraine threaten the bankruptcy of the agricultural sector in Europe

Cheap grain exported from Ukraine, which should go to developing countries, settles in Europe due to disruption of food supply chains, which may threaten a number of bankruptcies in the European agricultural sector. Mikhail Oganezov, a specialist in the strategic research department at Total Research, told Izvestiya on Monday, September 19.

Newspaper last weekend The Wall Street Journal wrote that European farmers oppose cheap agricultural products from Ukraine. After the start of the special operation of the Russian Federation in the Donbass, the European Union canceled tariffs and quotas, allowing the export of grain to its territory. Farmers complain that Ukrainian grain, which until then mainly went to developing countries and was cheaper than that produced in Europe, now remains in European countries. According to the Argus agency, in September Ukrainian wheat and corn were sold at about $272 and $251 per ton, respectively. In the EU, wheat was sold at $324 and corn at $307.

The French poultry group Anvol also said that the EU should not renew the June agreement in 2023 that cancels tariffs and quotas on Ukrainian agricultural products. According to the statement, chicken meat imports from Ukraine more than doubled in the first six months of 2022 compared to the same period last year, hurting French farmers who have higher production costs.

Romanian farmers also complain that Ukrainian cargo not only brings in cheaper products, but also crowds out local grain in the port of Constanta.

Mikhail Oganezov from Total Research noted that what is happening in Europe threatens with a global food crisis.

“The energy crisis is raging in the European bloc, which affects the prices of various goods, as a result we are seeing historically high inflation. Food prices are also rising. Lack of fertilizers and high prices for them lead to low yields and cast doubt on next year’s yield. Abnormal weather this year also destroyed the lion’s share of crops. All this threatens a global food crisis,” he said.

According to him, the European authorities, in order to insure themselves against future problems and try to slow down inflation, use cheap Ukrainian grain. However, due to high production costs, local farmers must sell their products at high prices. But no one will buy expensive when there is cheap grain.

“This may threaten a number of bankruptcies in the agricultural sector of Europe,” the specialist believes.

The expert stressed that the supply of Ukrainian agricultural products to Europe will not solve the problem of the impending crisis.

“This year’s low yields, sanctions against Russia (whose harvest is in order), likely problems with next year’s harvest, the plight of European farmers more than cover the small share of cheap grain that comes from Ukraine. As a result, wheat prices will continue to rise in the near future. And a possible influx of refugees from starving countries will bring new problems,” Mikhail Oganezov concluded.

At the end of July, the head of Russia and the UN signed a memorandum on facilitating the supply of agricultural products and fertilizers of the Russian Federation to world markets. At the same time, the Ukrainian delegation signed an agreement with Turkey and the UN on the export of grain. Moscow periodically reports that the Russian part of the deal on product access to the markets is not being executed. The UN promised assistance to the Russian side in the admission of products and fertilizers to world markets.

In early September, Russian President Vladimir Putin said at a plenary meeting of the Eastern Economic Forum that only a small part of food is exported to poor countries as part of the grain deal. He proposed to reconsider the direction of grain export and promised to discuss the idea with his Turkish colleague. Turkish President Recep Tayyip Erdogan promised to discuss these issues with Putin in Samarkand.

During a press conference following the SCO summit on September 16, the Russian leader called the European Commission’s decision to leave restrictions on the supply of Russian grain ugly and accused Europe of creating problems in the food markets and solving them at someone else’s expense. Putin noted that formally, Western sanctions do not restrict the sale of Russian grain and fertilizers, but there are restrictions on freight, which is now being withdrawn from sanctions.