Posted on May, 1, 2023 at 11:05 pm
The development comes amid some EU members announcing restrictions on importing Ukrainian grain in the past few weeks.
Ukrainian grain -- which was significantly cheaper than that produced in the EU -- ended up staying in Central Europe mainly because of the high transport cost to traditional markets in Africa, trade sources said.
"The neighboring member states will be withdrawing their unilateral measures," Valdis Dombrovskis, EU trade commissioner said about the deal, adding: "We have a solution which addresses the concerns both of farmers in neighboring member states and of Ukraine."
The five countries will receive Eur100 million ($110.1 million) package from EU funds to compensate farmers, according to the deal. The commission will impose temporary curbs on a limited range of products in line with the deal, admitting that a glut of supply in the countries caused hardship for local farmers.
Wheat, corn, oilseed, and sunflower seed will only pass through these countries en route to other destinations, Dombrovskis said.
The commission will also investigate whether curbs should be extended to other commodities such as eggs and meat.
The deal will cover four EU states, Poland, Slovakia Bulgaria, and Hungary, who had banned or restricted imports from Ukraine due to a supply glut and lower local prices because of the inflows, he added.
The agreement will also cover Romania, which did not restrict supply, but complained about lower prices and a glut, he said.
It is very early as the deal will be implemented over the next few weeks and the specific impacts of the deal will be realized, a trader with a multi-national grains trading firm said.
After Russia's invasion of Ukraine on Feb. 24, 2022, some Black Sea ports were blocked and the EU dropped import tariffs and quotas on foodstuffs from Ukraine to assist it.
The unexpected success of the Black Sea grain deal with Russia and Turkey, until now, to ship grain via the Black Sea also diminished demand for land routes set up by the EU.
The EU imported 9.1 million mt of wheat in marketing year 2022-23 (July-June) as of April 22, up 164% year on year. Of the total imported volume, Ukraine supplied 4.7 million mt, up from 349,708 mt in the previous year.
For corn, the EU has bought 22.6 million mt corn in MY 2022-23 as of April 22, up 72% year on year. Of the total quantity, Ukraine accounted for 12.5 million mt, compared with 7 million mt in the previous season.
However, trade with the EU has become crucial to Ukraine as Russia said that the deal may not be viable beyond May 18.
"With the Black Sea grain deal in turmoil, the EU routes are important for Ukraine to ship out its supplies," another trader based in London said.
Platts, part of S&P Global Commodity Insights, assessed 11.5% protein wheat from Ukraine at $260/mt FOB on April 28, unchanged day on day. Platts assessed Ukraine corn unchanged at $224/mt FOB on April 28.
Source: SP Global