Ukraine grain update: Allies continue import ban [Video]

David Ortega, associate professor at Michigan State University, shares his expert insights into the ongoing grain crisis in Ukraine.

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Elise Schafer, editor of Feed & Grain: Hi, everyone, and welcome to Feed & Grain Chat. I'm your host Elise Schafer, editor of Feed & Grain. This edition of Feed & Grain Chat is brought to you by WATT Global Media and Feedandgrain.com. Feedandgrain.com is your source for the latest news, product and equipment information for the grain handling and feed manufacturing industries. 

Today, I'm joined on zoom by David Ortega, associate professor at Michigan State University in the Department of Agricultural food and Resource Economics. He's here today to share his insights on the latest developments in the Russia Ukraine Grain Deal. Hi, David. How are you?

David Ortega, associate professor, Michigan State University: Hi, Elise. I'm doing well. How are you doing? 

Schafer: Doing great. Thank you for joining me today.

Ortega: Yeah, thanks for having me on. I appreciate it.

Schafer: Yes, well, let's get right into it! Ukraine recently filed a complaint to WTO against Poland, Slovakia and Hungary for continuing to impose import bans on grain after the Black Sea Grain Initiative expired. What was the original purpose of the agreement and why would Ukraine's allies continue to ban their grain?

Ortega: Let's just sort of take a step back and look at the big picture. So Russia's invasion of Ukraine in February of last year led to a halt of maritime and grain shipments from the Black Sea region. And this led to food security concerns as world prices began to rise, disproportionately affecting some of the countries that depend on that region for their grain.

Now, the Black Sea Grain Initiative was an agreement that was brokered between Russia, Ukraine, TĂĽrkiye and the United Nations to allow for safe passage of vessels transporting commercial food and fertilizer exports from some of those key Ukrainian ports in the Black Sea. Now, this year, in July, Russia pulled out of the deal. And the main reason why, or the reason that they actually gave about why they pulled out of the deal, was because they were not able to export their own grain and foodstuff.

Now, while Western sanctions on Russia have not explicitly targeted agricultural products, it's made it harder for entities to engage with Russia's agricultural sector. Now, the recent developments with regards to some of Ukraine's neighboring countries, so Poland, Hungary and Slovakia — these are three members of the European Union, and in a break from the European Union and the European Commission, they recently announced bans of imports on Ukrainian grain into their local markets.

It was actually they refuse to lift the temporary ban that the European Union had agreed to with them. And this was mainly due because of a surge in production and a sort of a glut in the system that was driving prices down in their home countries that was really affecting their farmers. So we've seen protests by farmers in those countries. And so, you know, this is really testing the foundation of the single market, the common market of the European Union member states. And so it's still a very fluid situation that's sort of happening between Ukraine and those neighboring countries.

Schafer: Now, what outcome is Ukraine hoping for as a result of this complaint, and could that cause further disputes over grain between Ukraine and its allies?

Ortega: Well, they're really hoping that these member countries will open up their markets as was agreed to by the European Commission. In 2022, the European Commission lifted custom duties on Ukrainian exports, to help facilitate exports to countries that depend on that region for food places in North Africa and the Middle East. And so it's a rather complex situation. And so, from the recent commentary that's emerged out of the European Union, it's just these three countries that are sort of breaking with the rest of the member states that are posing a problem and a challenge for the European Union and the European Commission as a whole right now.

Schafer: As Russia continues to attack grain warehouses along Black Sea alternative shipping routes, how much of the world is facing threatened food security?

Ortega: Well, prior to Russia's invasion, the regions of Russia and Ukraine together supplied a quarter of the world's wheat and about three-fourths of the world's sunflower oil that goes into the production of many processed food products. This region is known as the breadbasket of Europe, and it produces a significant portion of traded grains and other food commodities.

Now, the main challenge at the moment is getting grain and other food commodities out of the region into the world market to prevent a worsening food crisis that disproportionately affects lower income countries that import a lot of their grain, again, countries in the Middle East and North Africa. But it's important to note that there is more than enough food and grain in the world to meet demand. The big issue here is affordability and access to that grain. Now, Ukraine has been able to also export a sizable amount of grain through the Danube River, as well as through some of the rail channels through Europe. But these are more costly options than going through the Black Sea. So with the termination of the Black Sea grain initiative, these other routes have emerged as the only way to transport grain out of Ukraine.

And we've seen recently that Russia has attacked ports on the Danube, and there's still a lot of uncertainty with how long those routes will remain open. It can become too risky for companies that continue operating in that area and in those regions. So if they become unviable — these routes — we're likely to see commodity prices rise. But there's still a lot of uncertainty at the moment. When we look at sort of the broader, longer term picture here, this conflict has been going on for well over a year now. And this is really disincentivizing farmers in the region from planting more grain. And we're seeing planting production down compared to before Russia's invasion. Now, other countries around the world are going to need to make up for this deficit. But in the short term, this is really going to drive costs higher.

Schafer: Well, thank you for that analysis today, David, I really appreciate it.

Ortega: Well, thanks, Elise, appreciate you having me on.

Schafer: That’s all for today's Feed & Grain Chat. If you'd like to see more videos like this, subscribe to our YouTube channel. Sign up for the Industry Watch daily eNewsletter or go to feedandgrain.com and search for videos. Thank you again for joining and we hope to see you next time.