If Ukraine were to join the EU today, agriculture would receive €96.5 billion from the total pot, and support for farmers in other EU countries would have to be cut by 20%.
Starting in the fall of 2023, a wave of protests swept across Poland. Farmers express their disagreement with the policies of the European Union - both on the European Green Agreement and on food supplies from Ukraine. Some protesters point out that carloads of grain, as well as other food products, are entering Poland across the eastern border. The situation is getting worse, however, according to many experts, the problem for farmers is rather inflation and Russia, which floods the world with cheap grain, than Ukraine.
Wojciech Kononczuk, director of the Polish Center for Eastern Studies, claims that the arrival of many products from Ukraine has been limited, and since the end of April 2023, Ukrainian wheat, corn, rapeseed and sunflower have not been imported into Poland. He wrote about this on his page on the social network.
The expert also emphasizes that trade exchanges between Poland and Ukraine are very beneficial for his country. “In 2023, Polish exports to Ukraine amounted to 11.4 billion euros, imports from Ukraine – 4.4 billion euros. That is, Poland has a trade surplus with Ukraine of 7 billion euros,” notes the OSW director.
The Climate Warming Association points out another important aspect. She notes that the decline in grain prices in Poland is the result of the situation on world markets, and not the import of Ukrainian grains. “The cause of the farmers' problems is in Brussels. This is an absurd climate policy that reduces production while increasing costs,” they argue.
Inflation is the biggest problem for farmers
Polish economist Ignatius Morawski, on the pages of Puls Biznesu, points out the gap between prices for agricultural products and their cost. Farmers' frustration is partly due to the fact that Poles are paying less and less for farm produce, but still spend a lot on fuel or fertilizer.
The sources of problems for agricultural producers lie elsewhere, in much broader economic processes, and Ukraine and the EU are only victims here. It often happens that in conditions of large price changes, they look for specific culprits, because the inflation-deflation process is anonymous, the economist notes.
According to Moravsky's calculations, over the year, selling prices fell by about 40%, and production costs by 8%.
The expert also noted how much grain enters the EU from Ukraine. This is 6 million tons per year or about 6% of consumption. And even if we are talking about the entire common market, and not just the Polish one, even this amount of grain can cause emotions among Polish producers.
Monika Przeworska, director of the Institute of Agrarian Economics of Poland, which supports the farmers' protest, admitted in an interview with money.pl that if we talk about trade with Ukraine, it has really grown.
However, not all farmers will benefit from this. The problem is that officially the grain cannot enter Poland. But it hits. It ends up in the territory of Germany or Lithuania, which is not taken into account in the balance sheet, but from these territories it enters our market,” she explains.
What is causing farmers to protest is more complex. Farmers stand on the border between Ukraine and Poland because trade should be civilized. Until Poland and Ukraine begin to put pressure on the EU, no one will do this. Farmers are demanding the EU set quotas or tariffs for those worst-hit industries, he adds.
Monika Przeworska also agrees that Poland's agricultural sector suffers most from inflation.
“The truth is that Polish farmers cannot sell their grain because the warehouses are overflowing with grain coming from Ukraine. Farmers do not have money to buy fertilizers or repay loans; they are left with expensive grain, says the director of the Institute of Agrarian Economics,” the expert noted.
She also explains that prices for agricultural products have increased due to inflation. However, the problems became even greater.
“The cost of loans has also increased. And the brothers of their farmers are forced by EU demands to modernize their farms and adapt to environmental requirements. At the same time, the demands of the Green Deal, high production costs, high borrowing costs and the inability to compete fairly have all fallen on the shoulders of farmers.”
“In current conditions, the so-called free market is not a free market, because the Polish farmer, who is subject to a number of restrictions, is fighting for the market with the Ukrainian farmer, who is not obliged to comply with the restrictions. But they can sell,” concluded Monika Przeworskaya.
Is Russia flooding the world with cheap grain?
The situation for farmers is complicated by falling grain prices. MATIF (Marché à Terme International de France), the most important agricultural commodity exchange in continental Europe, records record low prices
As industry website wrp.co.uk notes, the March contract for MATIF is already close to 200 euros per tonne
The situation is becoming increasingly nervous on both the domestic Polish and foreign markets, as stocks are at record lows and the new harvest is inexorably approaching. The situation is aggravated by open dumping of Russian wheat prices.
The last time such a low level was recorded was in October 2020. This means that next season will be a challenge for farmers as grain sales at current prices do not cover production costs.
European farmers are concerned about competition from Ukraine
Changes in EU agricultural policy are inevitable. Therefore, European farmers are increasingly afraid of competition from farmers from Ukraine, who are gradually integrating into the common market.
The European Commission's decision to expand free access of Ukrainian agricultural products to the EU market includes special protection for sugar, poultry and eggs. Brussels realized that support for Ukraine should not come at the expense of farmers in other countries, but this is not enough for agricultural producers in Eastern Europe. They argue that protections should be set at a more stringent level and cover grains and oilseeds.
Brussels wants expanded duty-free access for Ukrainian agricultural products to the EU market, but with guardrails for sugar, poultry and eggs.
If Ukraine were to join the EU today, agriculture would receive €96.5 billion from the total pot, and support for farmers in other EU countries would have to be cut by 20%. These figures were cited in an EC document prepared last year to analyze what Ukraine's accession to the EU would mean for the Union. This is a static analysis that does not foresee any changes in EU agricultural policy, but it does provide a good indication of how important agriculture will be in Ukraine's EU accession negotiations.
We can mention various mechanisms for delaying this effect that were used when other countries joined the EU. Spain, when it joined the EU in 1986, was given a transition period of 7 to 10 years, notes an EU diplomat. This period allowed it to gradually implement EU standards and also protected the market of the ten old member states from Spanish competition, for example in fruit or butter. In contrast, Poland and other countries that joined the EU in 2004 had to wait many years for direct subsidies to be equalized.
However, the case of Ukraine is different. It is a profitable agriculture based on excellent soils (black soils) and dominated by large farms or corporations. Ukraine's accession to the WTO may mean the need for structural changes in EU agricultural policy.
Ukrainian agricultural producers are not necessarily interested in direct subsidies; what is important for them is access to the large internal EU market, as well as duty-free access to the markets of third countries with which the EU has free trade agreements. The problem is not that Ukrainian agriculture will become a burden for the EU. Rather, it will be too competitive, experts from the Bertelsmann Foundation write in a report on the preparation of the Ukrainian economy for accession to the EU.
Ukraine may refuse EU agricultural subsidies
Negotiations between Ukraine and Brussels on joining the EU will begin in March this year. The Ukrainian side is ready to consider the possibility of abandoning large agricultural subsidies from the European Union in exchange for easing Brussels’ requirements as part of the Green Deal. The idea is to reassure EU member states.
It is clear that the integration of a country with such a huge agricultural sector, which before Russia's full-scale invasion in 2022 ranked 4th in the world in grain supply, will become a highly sensitive political and economic topic for the EU in the next few years.
However, Kyiv's refusal of 96.5 billion euros in subsidies, which should be provided by Brussels for 7 years, could seriously complicate doing business for Ukrainian agricultural producers than without EU subsidies.
