Uncertainty with the export of Ukrainian grain, leading to a global food crisis and rising food prices, can be resolved by buying last year’s and this year’s crops from Ukraine for a total of $30-35 billion through a specially created fund.
This will contribute to the development of exports from the country and its internal processing in the agro-industrial complex, as well as provide the Ukrainian agricultural sector with working capital and the opportunity to continue working under the conditions of the military invasion of the Russian Federation, MP of Ukraine Dmytro Solomchuk (the Servant of the People faction) wrote on his Telegram channel on Wednesday.
“The easiest way, given the current situation, is to create the World Food Fund, collect $30-35 billion, and transfer it to Ukrainian farmers, buying last year’s and fresh products at world prices, minus logistics, on the terms of responsible storage,” he wrote.
“The world, in turn, thanks to this, will stabilize inflation, calm the beginnings of a food storm, will be motivated to organize comfortable exports, and Ukrainian farmers will receive funds for winter sowing, which will save the world in 2023, and the development of a processed industry to simplify logistics. And most importantly, the Russian Federation will stop manipulating food security,” the MP added.
As reported, on June 28, the Cabinet of Ministers of Ukraine approved a draft agreement with the UN World Food Programme (WFP) on the resumption of its office in the country, which will allow the organization, among other things, to purchase agricultural products from Ukrainian companies to carry out international humanitarian programs.
The value of Ukrainian agricultural exports for the two months of the war with Russia (March-April) amounted to $ 1.74 billion, while in January-February the supply of such products brought 3.2 times more revenue – $ 5.68 billion, for January-April the country exported $ 7.42 billion worth of agricultural products
The key commodity groups in agricultural exports from Ukraine are traditionally cereals and oilseeds, vegetable oils and fats, waste from the processing industry and meat products, according to the website of the Institute of Agrarian Economics (IAE) on Monday.
According to the agency, agricultural products continue to be the main source of foreign exchange earnings for Ukraine’s foreign trade: in January-April 2022, its share in total exports exceeded 44%.
Despite the Russian military invasion, exports of agricultural products from Ukraine in January-April 2022 still exceed the figures for the first four months of 2021 by 3%, this excess is due to significant intensity of exports in January-February 2022 and a record harvest of 2021, the largest since the country’s independence.
“Today Ukraine still exceeds last year’s record food exports. However, Russia’s ongoing aggression, hostilities, occupation of territories in different regions of our country and blocking of seaports significantly reduce domestic foreign sales potential. Final export figures will depend on liquidity. , – quotes IAE deputy director of the institution Nikolai Pugachev.
It was reported that before the Russian military invasion, Ukraine exported up to 5 million tons of agricultural products per month through the ports of Odessa and Nikolaev, but now due to their naval blockade by Russia, the country can transport about 500 thousand per month. tons of grain. This leads to a monthly shortfall of about $ 1.5 billion in export earnings.
Since the beginning of the 2021/2022 marketing year (MY, July-June) and as of May 19, Ukraine has exported 46.51 million tons of cereals and legumes, which is 13.8% higher than on the same date of the previous MY. A total of 18.54 million tons of wheat was exported to foreign markets (18.7% more than in the same period of 2020 / 2021MG), 21.83 million tons of corn (+ 6.9%), 5.68 million tons of barley (+ 37.2%), 70.6 thousand tons of flour (-35.7%).
The European Commission has presented a set of actions to help Ukraine export agricultural products, the so-called “Solidarity Lanes.”
The plan was presented by European Commissioner for Transport Adina Vălean in Brussels on Thursday.
The European Commission said these proposals are presented as part of the EU solidarity reaction with Ukraine and will help Ukraine export its agricultural products. “Following Russia’s invasion of Ukraine and its blockade of Ukrainian ports, Ukrainian grain and other agricultural goods can no longer reach their destinations. The situation is threatening global food security and there is an urgent need to establish alternative logistics routes using all relevant transport modes,” the European Commission said.
According to the European Commissioner, some 20 million tonnes of grains have to leave Ukraine in less than three months using the EU infrastructure. “This is a gigantesque challenge, so it is essential to coordinate and optimize the logistic chains, put in place new routes, and avoid, as much as possible, the bottlenecks. Our communication addresses the emergency solutions but also medium and long time measures to better connect and integrate Ukraine’s infrastructure with the EU one. For both short-term and long-term solutions, we will work with the Ukrainian authorities and in close collaboration, especially with the neighbouring Member States, who spared no effort in helping during this crisis,” Vălean said.
According to the press release issued in this regard, as of today, in spite of immediate efforts by the EU and its Member States to ease border crossings between Ukraine and the EU, thousands of wagons and lorries are waiting for clearance on the Ukrainian side. “The average current waiting time for wagons is 16 days, while it is up to 30 days at some borders. More grain is still stored and held back in Ukrainian silos ready for export. Among the challenges are differing rail gauge widths: Ukrainian wagons are not compatible with most of the EU rail network, so most goods need to be transhipped to lorries or wagons that fit the EU standard gauge. This process is time-consuming and transhipment facilities along the borders are scarce,” the European Commission said.
In address these obstacles and set up the Solidarity Lanes, the Commission, together with Member States and stakeholders, will work on the following priority actions in the short term.
The first priorities are additional freight rolling stock, vessels and lorries. “The Commission calls on EU market players to urgently make additional vehicles available. In order to match demand and supply and establish the relevant contacts, the Commission will set up a matchmaking logistics platform and ask Member States to designate dedicated Solidarity Lanes contact points (a ‘one-stop-shop’).”
Another priority is the capacity of transport networks and transshipment terminals: the export of Ukrainian agricultural products should be prioritized, and infrastructure managers should make rail slots available for these exports. “The Commission also calls on market players to urgently transfer mobile grain loaders to the relevant border terminals to speed up transhipment. A road transport agreement with Ukraine will also remove bottlenecks,” the European Commission said.
Among the priorities are customs operations and other inspections and storage of products in the EU. To this end, the Commission urges national authorities to apply maximum flexibility and to ensure adequate staffing to accelerate procedures at border crossing points.
In the medium to long term, the Commission will also work on increasing the infrastructure capacity of new export corridors and on establishing new infrastructure connections in the framework of the reconstruction of Ukraine. “The next round of Connecting Europe Facility (CEF) calls for proposals will allow support for projects improving transport connections to Ukraine, including for railway connections and rail-road terminals. Against this background, the Commission today adopted a Decision with a view to signing a high-level agreement with Ukraine, updating the maps for the Trans-European Transport Network (TEN-T), as part of the Commission’s policy on extending the TEN-T to neighbouring countries.”
Countries importing agricultural products, primarily the Middle East and Africa, will not be able to do without export supplies of Ukrainian agricultural products, since it is physically impossible to replace its volumes with supplies from the aggressor country of the Russian Federation or from any other, this was stated by First Deputy Minister of Agrarian Policy and Food Taras Vysotsky on the air of Ukraine 24 TV channel on Friday.
“We supplied 10% of world wheat exports, more than 15-20% of barley, more than 50% of sunflower oil. On average, 50 million tonnes of agricultural products were exported from Ukraine. In record years, this figure even reached 65 million tonnes. Today there is no way to find an alternative to such volumes and replace our products. It is physically impossible to do this even in the next three to five years,” the deputy minister emphasized.
According to him, the blockade by Russian warships of key Ukrainian seaports in Odesa and Mykolaiv and the mined areas of the Black Sea led to a drop in exports of agricultural products from Ukraine to 15-20% of pre-war figures. Also, this has already led to its significant rise in price and its physical shortage around the world, especially in the countries of the Middle East and North Africa.
“If the situation with the war and the blocking of ports continues, for example, up to six months, the countries of these regions will, in principle, have no grain. And this means famine,” Vysotsky stated.
According to him, the Ukrainian government is working to expand the physical export of agricultural products through alternative logistics routes, which allowed it to quadruple its exports in April compared to March 2022.
“This is still not enough, but there is significant progress. And we see in May that there is still an opportunity to increase export performance. Therefore, there are two strategies here: first of all, our victory and unblocking the ports, and the second is the expansion of these alternative ways of marketing products,” he said.
The G7 countries and the UN are ready to provide Ukraine with full support in increasing the export of Ukrainian agricultural products via new logistics routes, bypassing its ports blocked by the aggressor country of the Russian Federation, Minister of Agrarian Policy and Food of Ukraine Roman Leschenko said on his Telegram channel on Tuesday.
They are also ready to help in the sowing campaign, the supply of food and fuel, Leschenko wrote about the results of the online meeting of the ministers of agricultural policy of the G7 countries, the EU Commissioner for Agricultural Policy, as well as representatives of the UN World Food Program and the UN Food and Agriculture Organization.
“We discussed the situation with food and sowing in Ukraine. I am grateful to the partners for their sincere understanding and for their support in expanding the markets for Ukrainian agricultural products through new logistics routes, supporting fuel and lubricants in the sowing campaign in Ukraine and supplying food kits for Ukrainians into the war zone,” the minister said.
He said that the meeting participants expressed their full support for Ukraine in these issues, and expressed hope for a quick joint solution of all challenges facing Ukraine.
A free trade agreement with Turkey may make some types of Ukrainian agricultural products uncompetitive in Ukraine and in foreign markets, since Turkish food products have already taken a strong position around the world, and similar Ukrainian products may not find markets there.
Head of the Ukrainian Agricultural Export Association (UAEA) Dmytro Kroshka told Interfax-Ukraine on Monday about the impact of the FTA agreement with Turkey signed on February 3 on the export of Ukrainian agricultural products.
“Competition between Ukraine and Turkey is most visible on the markets of third countries. We have already determined that Turkish tomato on the Ukrainian market will be cheaper than domestic. Our producer understands that if he cannot make money on the Ukrainian market, he will seek sales in Europe or somewhere else, where it turns out that Turkey is exactly the same in those markets. And sooner or later, a manufacturer that cannot reorient itself will have to reduce production or abandon it, this is very likely,” the head of the association said.
He said that the key risk for the Ukrainian agribusiness from the zeroing of customs duties is the export orientation of Turkish producers, supported and controlled by the state.
“In Turkey, there is a huge infrastructural and financial support for exporters. The state establishes KPI there, and a manufacturer is supported, whose products are not just produced, but exported. And for a manufacturer to export, its products must meet the quality requirements that the market requires, and not only increase the volume. The effect of Turkish policy has become actively noticeable to us in recent years, when the active expansion of Ukrainian products to world markets began,” Kroshka said.
The head of the UAAE said that Ukrainian producers of apples, nuts and other products of the fruit and nut group will definitely benefit from the actions of the FTA, which Turkey will be able to re-export to the countries of the Middle East and Africa, taking advantage of its favorable geographical location. However, this is guaranteed to have a negative impact on vegetable and egg producers.
“We just need to look at the news about the FTA between Ukraine and Turkey as news that we will sell more there and the trade turnover will certainly increase. But at the same time, I believe that this agreement will reveal a wave of internal Ukrainian economic problems in agriculture, which are linked to the production of agricultural goods common with key Turkish products,” the expert said.
He also said that in 2022, Ukrainian agricultural producers were faced with an increase in energy costs, a review of existing taxes and the introduction of new ones, fiscalization of business, which, along with an increase in Turkish food imports, will lead to a wave of bankruptcies of small agricultural enterprises if the latter do not receive proper support from the state.
He said that the agreement on the main terms of trade in food products between Ukraine and Turkey took place simultaneously with the approval of the Export Strategy of Ukraine and the sectoral export strategy for food products, the implementation plans of which were provided, including reducing the tax burden on producers. However, this decision was never implemented, which will affect the state of the market in the near future.
“It seems to me that many manufacturers simply will not survive this stage of development of Ukraine. 2022, taking into account these factors, will be the beginning of a wave of bankruptcies, especially for small enterprises,” the head of the UAEA said.
AGRICULTURAL PRODUCTS, FOREIGN MARKETS, FTA, TURKEY, UNCOMPETITIVE
