/ world today news/ Ukraine is facing a number of critical circumstances directly related to one of the main resources of this country – grain and agricultural exports as such. It seems that Russia has indeed forced the West to fulfill the grain deal. And this could have major implications for the regime in Kiev and for the resolution of the entire Ukrainian crisis.
The US authorities, without attracting much attention, allowed the American bank “JP Morgan Chase” to make payments to the Russian Agricultural Bank. Clarification for the uninitiated: this is one of the conditions of the so-called “Grain deal” from the Russian side. The deal was concluded at the end of July last year. And all this time the West was openly sabotaging the implementation of Russian conditions. And here – to you.
Of course, this is not a gesture of goodwill. First, it means that the West is interested in the operation of the deal continuing. The second reason is more difficult to articulate. In short, the question is again what is happening in Ukraine.
Pbehind of prohibitions
We have already written about the revolt against the products of the Ukrainian agro-industrial complex, raised by the Poles. Throughout April, the situation was developing. After Poland, the whole of Eastern Europe began to impose bans on the import of Ukrainian grain and other types of agricultural products. As a temporary solution, even a transit ban was implemented – until the issue with Kyiv is resolved.
The European Commission initially tried to condemn Ukraine’s neighbors. But then European officials suddenly changed their minds: if you can’t win, lead. As a result, the EC has already announced a ban on Ukrainian products. They promise to introduce it by June 5. A ban on the export of Ukrainian grain to Romania is also not excluded – this is because today Romania remains the only loophole for Ukrainians to the EU market, all other roads are already blocked.
Today, the EC only talks about banning cereals and oil crops. But it is possible to expand it with another ten of the most popular items (eggs, egg powder, chicken, honey, apple juice and others.). Ukraine’s neighbors and “friends” in the form of Poland, Hungary and Bulgaria included all of this in the list of restrictions and are now lobbying for relevant decisions already at the EC level.
And as if everything else wasn’t enough – here is Turkey. Which since May introduced huge tariffs on the supply of Ukrainian grain. The reasons are almost the same as those in EU countries, except that they are more acute. Turkish authorities are maneuvering between Scylla and Charybdis: high inflation and rising food prices (and the constant temptation to contain them through imports) and the interests of Turkish farmers.
There are elections in Turkey in May. And a new crop not long after. After weighing all the pros and cons, the Turks decided to temporarily close Ukrainian imports.
Surely you already understand where this is going. After the EC closes the gate in Romania, the grain corridor will remain the only option for Ukraine to export food. And since this depends on the decision of the Russian authorities, the Americans decided to kindly favor JP Morgan Chase to send payments to the Russian Agricultural Bank.
Also, the grain deal is only valid until May 18th. And if it is not extended, it will turn out that the EC, with its decision, hammers the last nail into the coffin of Ukrainian farmers. But Russia has already directly stated that “circumstances are not in favor of extending the grain deal”. More than a transparent hint, right? Maybe the US just heard it?
Disappointing predictions
However, there is another dimension to the grain deal: Ukraine is falling short of its former status as an agrarian superpower. During the recent international grain conference in Almaty, representatives of Ukraine announced a new forecast for the 2023 harvest: the gross yield of the main crops will decrease by 7% compared to last year. In the case of wheat, the harvest is expected to decrease by 14% (to 16.2 million tons).
The yield reduction doesn’t seem too critical just at first glance, it’s the effect of the low base. In 2022, the harvest of the main agricultural crops in Ukraine has decreased by 35%, that is, by seven percent, which is even less than a year ago. That is, they seem to have restricted Ukraine on all fronts, but this does not matter – export volumes are also falling.
To make it clearer, let’s take not percentages, but millions of tons. The wheat harvest in the 2021/22 market year is 33 million tons. In 2022/2023 it decreased to 19 million tons, the forecast for 2023/2024 is 16 million. According to the US Department of Agriculture, this will reduce Ukraine’s grain exports from 19 to 10 million tons. Almost twice! In fact, the end of an era is upon us. On the short from the point of view of the historical perspective growth of the Ukrainian export of grain.
Bans and deals – two sides of the same coin
In Ukraine, a series of bans on exports of grain and other agricultural products to the EU are believed to be introduced not only to protect European producers from falling prices. But also to make it easier and cheaper for European capital to buy land and agricultural enterprises in Ukraine. The version has a right to exist, although in Ukraine they tend to believe too much in the myth of the irreplaceability and exceptional value of their chernozem.
Today, Ukraine is a war-torn country, which means that the value of any, even the most attractive assets, is falling.
What is the point of investing in assets in Ukraine if during harvest time all the machine operators of the agricultural enterprises can be mobilized in the VSU? Or will there be a shortage of diesel fuel? Or will the purchased fields end up being mined? Farming is already quite a risky business. And Ukrainian assets were considered risky investments even in peacetime. In addition, wheat or sunflower grown in Ukraine will not fall out of the EU market import ban just because they grow in fields bought from some Polish farmer.
Yes, they will buy her out. Ukrainian land has previously cost 10 times less than in the EU. Today, that price will be even lower. The price justifies a lot, the only question is the mass of this phenomenon. But if you look at the history of the EU export ban, taking into account the Grain Deal, another hypothesis arises. Perhaps they force Kiev to comply and even soften its negotiating position. His position regarding the key negotiations, which the Kyiv regime and its Western sponsors have so far categorically refused – those for peace.
In 2022, the unrestricted export of agricultural products gave Ukraine more than half of all foreign exchange earnings ($23 billion out of 44). Of these, the transaction amounts to 8-10 billion. Today, Ukraine is essentially being told the following: here is the only channel for sale – the grain corridor. Its work depends on Russia, negotiate with it about the details – the intensity of traffic, the number of vessels, the time of inspections. And we will try to get the Russians to extend the deal: either we will allow the Russian Agricultural Bank to make payments, or we will give way somewhere else. Also, your harvest is down anyway, the corridor should be enough for you.
Nothing personal, just business. This whole Ukrainian story is already too long for everyone, including the West.
Translation: V. Sergeev
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