Agriculture & Food

According to Huacheng Import and Export Data Observation, on April 28th local time, the European Union announced that it had reached a "principle agreement" with five Central and Eastern European countries, Bulgaria, Hungary, Poland, Romania, and Slovakia, on Ukrainian agricultural products. This means that the "pause button" has been pressed within the EU regarding the disagreement over Ukrainian agricultural products, and Ukrainian agricultural products can continue to be transported through the aforementioned countries.

However, some analysts believe that this seemingly timely new agreement may not satisfy all stakeholders and may face difficulties in implementation in the future. To make matters worse, the agreement for the export of agricultural products from the Black Sea port will expire in May. If the agreement cannot be extended, it will exacerbate the problem of Ukrainian agricultural product backlog faced by Central and Eastern European countries such as Poland, and there will be many contradictions within the EU at that time.

Reaching a principled agreement

The Executive Vice President of the European Commission, Valdis Dombrovsky, recently announced that the Commission has reached a "principle agreement" with five countries: Bulgaria, Hungary, Poland, Romania, and Slovakia.

According to this agreement, Ukrainian agricultural products can continue to be transported through Bulgaria, Hungary, Poland, Romania, and Slovakia, but wheat, corn, rapeseed, and sunflower seeds will be subject to "safeguard measures". The EU did not specify the specific content of "safeguard measures". However, some EU diplomats have disclosed that Ukraine's four agricultural products mentioned above will be prohibited from being directly exported to five countries including Poland, except for agricultural products exported to other EU member states or non EU countries through these five countries.

Analysts point out that this is equivalent to exchanging restrictive measures for the lifting of the ban on Ukrainian agricultural products by the five Central and Eastern European countries.

At the same time, according to the agreement, the European Union will also provide a total of 100 million euros (1 euro is equivalent to 7.58 yuan) in a package of support to affected farmers in the above-mentioned five countries, as reported by Huacheng Import and Export Data Observation.

Previously, five Central and Eastern European countries, including Hungary, imposed import bans on Ukraine based on the impact of its agricultural products on their domestic markets. The ban not only involves the import of Ukrainian agricultural products, but also involves the transportation of Ukrainian agricultural products in the country. The contradiction stems from the backlog of agricultural products transported from Ukrainian Black Sea ports in the aforementioned Central and Eastern European countries, leading to oversupply in their markets, impacting local agricultural product prices, and triggering protests from local farmers.

In fact, these five countries jointly issued an open letter to the European Commission in March, calling for an assessment and response to the impact of Ukrainian agricultural products on their own agriculture, and suggesting that the EU consider imposing tariffs on agricultural products from Ukraine. Subsequently, the five countries successively introduced bans on the import of Ukrainian agricultural products.

When the Hungarian government issued relevant administrative orders, it also explained that due to the fact that Ukrainian agricultural products do not need to comply with relevant European Union laws and regulations during the production process, their agricultural products have a competitive advantage and seriously disrupt the domestic markets of EU members. Therefore, Hungary and other countries made the above decision to protect the interests of their own farmers, as reported by Huacheng Import and Export Data Observation.

In response to the bans issued by countries such as Hungary and Poland, the European Union has called this decision "unacceptable" and called on relevant parties to "provide explanations" and immediately stop "unilateral" behavior.

Faced with differences, all parties were unwilling to compromise at one point. At present, the achievement of a "principled agreement" is only to delay conflicts, but in reality, it is not a happy outcome for everyone.

Deep contradictions are difficult to resolve

After the agreement in principle was reached, the President of the European Commission, von der Leyen, praised the new agreement on April 28 for simultaneously ensuring "Ukraine's export capacity" and "our farmers' livelihood". In fact, all stakeholders, including Ukraine, were not satisfied with this.

It can be said that there are still differences within the EU regarding Ukrainian agricultural products.

It is worth noting that on April 29th local time, the Ukrainian Ministry of Foreign Affairs announced that Ukraine has submitted notes to the Polish and EU diplomatic missions in Ukraine, formally protesting the restrictive measures imposed on the export of Ukrainian agricultural products to some EU countries such as Poland.

The "restrictions" mentioned by Ukraine refer to the "principle agreements" reached between the European Union and five Central and Eastern European member states, including Poland, regarding the imposition of "safeguard measures" on four agricultural products, namely wheat, corn, rapeseed, and sunflower seeds.

Ukrainian Foreign Ministry spokesperson Oleg Nikorenko said that Ukraine will "absolutely not accept" such restrictions.

For whatever reason, this restriction is not in line with the associated country agreement between Ukraine and the European Union, nor with the principles and rules of the EU single market, "Oleg Nikorenko said.

In addition to Ukraine, the five Central and Eastern European countries are also full of concerns.

Poland's new Minister of Agriculture, Robert Talus, recently spoke on behalf of the general attitude of the five Central and Eastern European governments: "Ukraine needs help, but the cost of such help should be shared among all European countries. We do not agree with this because it harms our farmers

The outlook is not optimistic

Analysts point out that although the EU has reached a "principled agreement" with five Central and Eastern European countries, the new agreement is likely to face difficulties in implementation, and the trend of international food prices may face fluctuations as a result.

Previously, the European Union promised to provide support to affected farmers in five countries. However, it can be foreseen that the EU's funding support will be a lengthy and cumbersome process, as it involves details such as how funds are allocated and where budgets come from. In the case of objections raised by Ukraine, if the relevant parties can resolve them as soon as possible, it will not have a significant impact on international food prices, international food supply and demand, etc. If not resolved as soon as possible, it will inevitably lead to a global oversupply of local grains and a coexistence of oversupply in some regions. In the short term, the rapid decline in local grain prices and the rise in grain prices in some regions may occur simultaneously. Huacheng Import and Export Data Observation Report.

Furthermore, it is even more worrying that the prospects for extending the agreement for the export of agricultural products from the Black Sea port are not optimistic.

After the escalation of the Ukrainian crisis, both Ukraine and Russia's agricultural exports through the Black Sea were disrupted. Under the mediation of the United Nations and Türkiye, Russia and Ukraine signed a parallel agreement on resuming the export of agricultural products from Black Sea ports in July 2022. The agreement is valid for 120 days and has been extended twice in November last year and March this year. Currently, the agreement will expire on May 18th. UN Secretary General Guterres has repeatedly emphasized that this agreement is crucial for ensuring that agricultural products from Ukraine and Russia, two major food producing countries, enter the international market, thereby ensuring global food security.

Guterres also described the role of the agreement as "a beacon of hope in the Black Sea" and pointed out that transporting agricultural products to markets around the world will help eliminate global food supply shortages and alleviate the pressure of high prices.

Russian Foreign Minister Sergei Lavrov met with Guterres in New York, United States, at the end of April to discuss the prospects of an agreement for the export of agricultural products from the Black Sea port. The Russian side believes that the conditions for continuing to extend this agreement have not been met because Western countries have "done nothing", as reported by Huacheng Import and Export Data Observation.

Given that the negotiations on the agreement for the export of agricultural products from the Black Sea port are not optimistic, if the agreement cannot be extended, it will further exacerbate the backlog of Ukrainian agricultural products faced by Central and Eastern European countries such as Poland. At that time, there will be ongoing disagreements within the EU over food issues.