EU commits to rescuing Ukraine’s grain and creating new road routes, but logistic trouble persists

27 Jul 2023 --- The European Commission is reassuring it can expand alternative road routes for Ukraine’s grain exports and absorb the blow of the collapse of the Black Sea Grain Initiative sea routes. Alternative routes, the so-called “solidarity lanes,” might offer some relief to shaken commodity markets.

Now the EU is prepared to come to the rescue after the ending of the Black Sea Grain Initiative has sparked fears over global food supplies.

“We are ready to export by solidarity lanes almost everything Ukraine needs, about 4 million metric tons a month,” says Janusz Wojciechowski, EU Agriculture Commissioner.

“We achieved this volume in November 2022,” he highlights.

Another issue is the railway gauge, which is different in Ukraine and Poland, which means cargo has to be moved from trains.The EU land solidarity lines carried 60% of Ukraine’s grain exports until now. The remaining was previously transported through the now barred sea routes and now will have to be transported via land routes as well.

Logistical nightmare
Transport by train is more costly and ineffective than maritime shipments. Moreover, it has disrupted Bulgaria, Hungary, Poland, Romania and Slovakia, as the excessive amount of cheap foodstuffs arriving in these countries from Ukraine has made some local farmers uncompetitive.

To solve this, the European Commission implemented a temporary limit to the import of four types of Ukrainian crops, which is currently being discussed for renewal – it ends September 15.

The EC announced the “exceptional and temporary preventative measures” to allow some nations to limit the import of foodstuffs coming from Ukraine and ease logistical bottlenecks. The EC concessions were granted after Hungary, Poland and Slovakia unilaterally banned Ukrainian grain imports to protect domestic farmers in April.

Another issue is the railway gauge, which is different in Ukraine and Poland, which means cargo has to be moved from trains upon arrival at the Polish border.

Moreover, Wojciechowski underscores that high transit costs for trains and trucks are too high and asks the EU to subsidize them. If not, he says customers will buy cheaper Russian foodstuffs.

Putin said last week that Russia is ready to “replace” Ukrainian grain farming.

Ukraine pleads to the EC
The Ukrainian Grain Association (UGA) is asking the European Commission to increase exports that pass through the solidarity lanes by 1-1.5 million metric tons per month. It also asks for subsidies.The EU land solidarity lines carried 60% of Ukraine’s grain exports until now.

“[Subsidies] will lead to a significant reduction in the cost of grain transportation and will enable Ukrainian farmers to profitably export grain surplus to countries that need Ukrainian grain and stabilize global food security,” says the UGA.

The UGA proposes exporting grain through the ports of the Baltic States (Klaipeda and others), Germany (Rostock, Hamburg), the Netherlands (Rotterdam), Croatia (Rijeka), Italy (Trieste) and Slovenia (Koper).

“It is worth noting that these routes are not used much due to the complexity and cost of logistics compared to other routes. The price difference is approximately €30 to €40 (US$33.3 to US$44.4) per ton.”

To decrease prices, the UGA asks for sanitary, phytosanitary and veterinary controls to be moved from control checkpoints on the border with Ukraine to be moved to the country of destination and the named subsidies.

According to the EU Council, since May 2022, 37.4 million metric tons of foodstuffs have been exported through the solidarity lanes.

By Marc Cervera