1. The Black Sea Grains Agreement was interrupted by Russia, what must happen in your opinion for it to be resumed?

Given Russia's constant blackmailing, Ukraine no longer needs to hope for another "gesture of goodwill" and the reopening of the Grain Corridor. In fact, during the term of the Grain Deal, its execution was sabotaged by Russia through various means. Sometimes, vessels could not pass JCC inspections at all, which paralysed the work. Grain exports from mid-July (after the closure of the Grain Corridor) to early November 2023 were extremely difficult, but a solution was found - a humanitarian corridor coordinated by the Ukrainian Navy, which began operating in September and continues to operate as of today.

In our opinion, there is no point in resuming negotiations on the extension of the Grain Deal at this time. Russia has set unacceptable conditions for the continuation of the Grain Deal, such as the resumption of the work of the ammonia pipeline to Europe and the connection of banks to SWIFT. A compromise on these issues cannot be reached, as Ukraine is not ready to make concessions to the aggressor. Moreover, Ukraine has managed to open the Black Sea on its own, so the issue of reopening the Grain Corridor is not currently on the Ukrainian agenda. Over the period of the humanitarian corridor's existence, more than 200 vessels have left Ukrainian ports, exporting a total of 7 million tonnes of cargo.

  1. Does the possible unblocking of Ukrainian Black Sea ports reduce the pressure on the transit of grain through frontline countries, including Poland? Is the market paying attention to what is happening in Ukraine, or is the war already over?

The temporary corridor from Odesa ports significantly reduced the degree of tension regarding the export of Ukrainian goods and reduced the congestion of the Danube ports and the Western borders. However, exports through the Odesa ports cannot reach the level of pre-war exports in times of war due to a number of factors: limiting the number of vessels that can simultaneously load within the temporary corridor, military risks of loading in Odesa ports, delays in vessel entry or exit due to active hostilities, etc.   In any case, Ukrainian farmers and traders will not be able to completely refuse deliveries by land transport via neighbouring countries. Establishing logistics across the western borders has been and remains a priority for our government and business. In our opinion, in this situation, the only reasonable solution to reduce the pressure is to reach a compromise at the highest level of both countries.

  1. Is it profitable for Ukraine to invest in storing its agricultural produce at the eastern border and in the railway fleet?

Investments by business and Ukraine in the development of new logistics routes, railway connections and the construction of warehouses on the western borders are certainly promising and beneficial for all parties. The most attractive investment projects are those involving the storage of goods and the construction of terminals close to the western borders, which makes it possible to relieve border congestion and store goods in safer locations. Accordingly, businesses are looking for options to expand storage capacity near the border, in neighbouring countries or in neighbouring ports (Gdansk, Gdynia, Konstanza).

  1. Who makes money on the export of grain and agricultural products from Ukraine, the state, agroholdings?

Agribusiness is currently the main and fundamental segment of the Ukrainian economy, generating income and turnover for all market participants and the state. When exporting agricultural products, all members receive preferences and income: 1) farmers and agriholdings that grow and export their own products, which makes it possible to reinvest in new crops and harvests 2) traders who can sell the goods at marginal prices 3) the state of Ukraine, which receives taxes 4) related industries that work together with agribusiness (ports, terminals, logistics companies, carriers, shipowners, insurance companies, surveyors, etc.) 5) people who get jobs and employment. It is worth noting that Ukraine is strengthening control over the budget revenues from agricultural exports by creating new rules for the verification and reporting of exporters. Ukraine's policy is aimed at maximising revenues from agricultural exports, which is the main working sector of the economy at the moment.

  1. How can the frontline countries make money, if at all, from trade in agricultural produce with Ukraine?

In our opinion, it is possible to make a profit from trading agricultural products with Ukraine if stable and partnership-based trade relations are maintained. Ukrainian goods are highly competitive in terms of quality and price. Ukraine is one of the key exporters of raw materials to the EU, Africa, Asia, and India, which creates benefits for neighbouring countries.  Neighbouring countries can earn substantial income if they increase port, transshipment, storage and logistics capacities for Ukrainian goods. For example, the transshipment capacities of foreign ports and railways do not reach the level of Odesa ports. Currently, there is a large demand for agricultural exports in transit through neighbouring countries and ports, but neighbouring countries do not have sufficient capacity to meet this demand. In addition, the situation is complicated by long queues and blockades at the borders. Ukrainian traders and manufacturers are constantly looking for new logistics routes. Neighbouring countries that can offer improved logistics and increased exports of Ukrainian goods in transit could generate significant revenues and new investment opportunities for the development of railway, port and warehouse infrastructure.

  1. Transport costs have recently become much more expensive, which also affects the trade in agricultural raw materials. What does it look like in Ukraine?

Due to complicated logistics, there is a gap between the prices for Ukrainian grain in international contracts and the price received by producers domestically.  Today, however, Ukrainian producers and traders operate on a "grow/trade or die" basis. Producers sell their goods knowing that they will not make a profit this year. If they don't grow and trade, hundreds of companies will stop, and the entire industry will feel the impact.  Therefore, farmers continue to work in extremely difficult conditions, looking for ways to diversify their business, grow new crops and optimise costs.

  1. In your opinion, regardless of whether the Polish border was open or closed to agricultural products from Ukraine, grain imports in the current season would remain marginal, mainly for purely economic reasons? – We are unable to answer this question due to the difficulty of forecasting this situation. This question should be addressed to price analysts in the agricultural sector.
  2. The transit of four agricultural products from Ukraine, i.e. wheat, corn and rapeseed, is still being carried out, although in the meantime there has been a breakdown in diplomatic relations between Poland and Ukraine and a unilateral blockade. How does this conflict affect trade, if at all?

First of all, we would like to point out that there is no diplomatic conflict, as Poland and Ukraine continue to negotiate and find a way out of the situation at the state level. The situation is different with the organisations that actually initiated the blockade - their demands are ultimative, and in such circumstances, the possibility of reaching a compromise is reduced to zero.

It is worth recognising that the blockade of the border has a huge impact on trade not only in agricultural products, but also on the economies of both countries, especially Ukraine. In November, the losses incurred by the Ukrainian economy due to the border blockade were estimated at more than €400 million.

Even when goods are transported in transit, they cannot be delivered to their destination on time due to the border blockades, which creates additional costs in terms of transport downtime, non-fulfilment of export contracts, and deterioration in the quality of goods.  In such a scenario, there is only one outcome - contracts are not fulfilled, and losses increase in multiple amounts, which demotivates Ukrainian exporters to use the western borders for exports.

  1. Do you agree with the opinion that it was not the import ban introduced in May by the EC to five frontline countries that led to a decline in imports of Ukrainian grain, but the market situation made Ukrainian grain no longer competitive. How do you rate it?

We do not agree with this statement. The main factor behind the decline in exports of Ukrainian goods is the blocking of transport for Ukrainian companies. Ukrainian goods are competitive, and Ukrainian traders are even more interested in transit exports across neighbouring borders. If transit is blocked, it significantly reduces the amount of exported goods.

For example, before the war, the largest share of exports was carried out via sea routes - 49.5 million tonnes in 2021. Since the Russian Federation withdrew from the Grain Agreement in July 2023, sea exports began to recover only in October this year, with 5.6 million tonnes in October. Taking into account the situation on the western border, Ukrainian suppliers are now actively working to solve these problems and looking for new markets.

Exporting Ukrainian grain is a matter of logistics, not quality.

  1. Is Ukrainian agriculture able to quickly transform to EU standards, e.g. in the context of the consumption of active substances recommended in the EU?

In accordance with the Association Agreement with the EU, all EU requirements for the quality and safety of agricultural products have been incorporated into Ukrainian legislation. This is confirmed by the fact that Ukrainian farmers have already been quite successful in exporting their products to the EU, where they are checked for compliance with EU legislation. For full adaptation, Ukraine still needs to develop an internal mechanism for monitoring compliance with the above-mentioned norms.

  1. What are the current prices of cereals, rapeseed and sunflower in Ukraine? – We are not quite competent to answer this question, so you should ask your brokers.
  2. Can I ask for data on how many agricultural products Ukraine has managed to export since the beginning of this season? And what countries were they? –

According to the Ministry of Agrarian Policy and Food of Ukraine, in 8 months of 2023, Ukraine exported over 41.1 million tonnes of agricultural products, including over 30.7 million tonnes of grains and over 3.8 million tonnes of oilseeds. 59% were exported to the EU, 15% to the Middle East, 12% to Asia, and 7% to Africa.

Iryna Moroz, partner at AGA Partners
Vladyslav Kapustynskyi, associate at AGA Partners

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