Ukrainian Agribusiness Club together with UCABevent organized the online event “Agricultural Logistics between Ukraine and the EU: Time of Disillusionment” on the 6th of October during which speakers discussed logistics problems that Ukraine had with the start of the russian aggression and how to prevent these logistics troubles between the Ukraine and the European Union.

Key speakers:

- Dr. Alex Lissitsa, CEO of IMC (ag company);

- Taras Vysotskyi, First Deputy Minister of Agrarian Policy and Food of Ukraine;

- Aivaras Abromavicius, Chairman Of The Board Agro Region;

- Adomas Audickas, Deputy CEO of MHP (Ukraine);

- Ludwig Striewe, Management BAT Agrar (Germany);

- Cezar Gheorghe, Consultant of the Romanian Farmers Club (Romania);

- Gerard de la Salle, Agro-Kon sp z o o (Poland).

Russian aggression changed everything: normally the Ukrainian farmers have had actually only one route to export their grains and oil seeds. And that was the seaports of Mykolaiv and Odesa. But since the war started, ports have been blocked. And then finally, farmers, grain traders should've tried to export via western borders and via seaport in the Reni. And it was a kind of collapse. All participants in the logistics process have not done very well in improving their logistics cooperation between Ukraine and the European Union. The speakers of the online event discussed what happened and what we should do to avoid such a situation in the future.

We offer to get acquainted with the main messages of the event:

• Logistics is the most popular topic among Ukrainian farmers, as many challenges have been overcome since February 24th. With the start of a full-scale war, Ukrainian seaports, which were the main export logistics chain, were blocked. Only from August 1, it became possible to export by sea thanks to the “grain corridor” through three seaports of the Odesa region. However, the other three important ports are still blocked - Kherson, Mariupol and Mykolaiv. Regarding alternative export routes, the river ports of the Danube, the railway, and cars are actively used. The largest volumes are transported via alternative routes through Poland and Romania.
• If we look at the retrospective of exports from March to September, we see that exports are on an upward trend. The largest volumes in August and September due to the “grain corridor”, the second place in terms of volume is occupied by the river ports of the Danube.  At first, the most accessible transport was the railway, with the largest volumes in March and April, but then it was replaced by other alternative transportation routes. The best results were achieved in September 2022, when Ukraine exported 6.9 million tons of agricultural products by all available ways. For two months of the "grain corridor" operation, Ukraine exported 48% of total exports by sea - 6.2 million tons of agricultural products. In total, 268 ships left the ports, bound for Europe (48%), the countries of the East (22%), Asia (17%) and Africa (14%).
• As for what agricultural products were transported, the structure looks like this: 7.9 million tons - corn; 3.4 million tons - wheat; 1.7 million tons - sunflower seeds; 1.9 million tons - sunflower oil; 1.6 million tons - rapeseed; 1.081 million tons - meal; 741 thousand tons - soybeans; 843 thousand tons - barley; 126 thousand tons - soybean oil. Analyzing the importance of the grain deal for various types of products, it should be noted that this deal didn’t affect sunflower seeds (only 10% of exports), soybeans (24%), but it is very important for corn (70%), wheat (more than 80%) and sunflower oil (40%) exported to India and China.
• One of the achievements is the export of other types of agricultural products to the EU. At the request of the Government of Ukraine, the EU canceled quotas and duties on Ukrainian products from June 4, 2022 until June 5, 2023. This helped strengthen export positions, especially for certain types of goods - butter and dry milk, flour and feed flour, bran. The removal of quotas helped to significantly increase the export of dairy products. As a result, Ukraine is reaching record levels over the past two years.
• Last year the average price on world markets for corn was 233$. Right now, corn prices are 310-330$. So we're talking about substantially higher prices because of global inflation, the war and the cost increase. But the price in Ukraine is below 150$. And logistics is super expensive. To make it cheaper, it is necessary to develop the logistics infrastructure. So the reason to build long term lasting relationships between countries in the EU and Ukraine is because Ukraine is inevitably going to become part of the European family. We will together need to invest into infrastructure and make these bonds long lasting. 
• Products with high value are more profitable to export. Farmers who have poultry which is a more expensive product than grain, and despite the fact that logistic prices increased, they still have a positive economics. The situation is the same for those who have oil, which is also more expensive than grain. But with the grain all farmers are in a similar situation. 

“All Ukrainian achievements in exports are possible due to the simplification of the regime with EU countries in phytosanitary and veterinary control: inspection of livestock feeds and grains was canceled if those cross the EU territory in the transit regime; fumigation of the cargo can take place after the cargo crossed the customs border of Ukraine; phytosanitary control can take place in the EU country of the destination.

In addition, Ukraine together with international partners, managed to achieve a special regime of border and customs control (some of the checkpoints were assigned for cargo vehicles inspection only) and the ratification and implementation of the Common Transit Convention”, – mentioned Taras Vysotskyi, First Deputy Minister of Agrarian Policy and Food of Ukraine.

The plans of the Ministry of Agrarian Policy and Food of Ukraine to do everything possible to:

• Canceling of the Inspection of livestock products of those are exporting in transit regime;
• Construction of infrastructure and facilitation of common phytosanitary inspection;
• Implementation of the Common Transit Convention: common with the EU countries border checkpoints;
• Prolongation of Free Trade Agreement's abolition of import duties and tariff quotas;
• Prolongation of the Grain Initiative.

But according to the words of Alex Lissitsa, CEO of IMC  “The problems are not only on the Ukrainian side, but on both sides. Сrossing the border of Ukraine by car takes like 40 minutes while the time of crossing the Polish border is around 16 hours. If you observe the work on the border in Poland you see that there are a lot of inefficiencies. I'm just wondering, is it really just bureaucratic inefficiency? 

But the other issue is, for example, Hungary. The Hungary agribusiness had problems that year because of very dry weather, some bad harvest, high prices, and a lack of corn for the local livestock industry. So the Hungarian border used to work definitely better. So there is a big difference between the borders. That's exactly the problem for the whole of Europe and that should be clearly discussed”.

Other webinar participants also agree with Alex. So Aivaras Abromavicius, Chairman Of The Board Agro Region, spoke about his export experience:

“Since Lithuania has different rails than the rest of the EU, so to get grain to the ports of Lithuania, you need to change wheels twice at the Polish-Ukrainian border and at the Lithuanian-Polish border. But we fought that by using containers and in fact, it was faster. We were promised to export 15 thous. tonnes of grains to Klaipeda port per month. And now it's over almost four months. In the three months we managed to deliver only 960 tonnes instead of 45 thous. tonnes. So cooperation between Lithuania and Poland is almost non-existent.

There were various promises to help Ukraine build additional capacities, facilities, invest into them, add employees, increase working hours by all EU countries bordering Ukraine. But it is safe to assume and assess that much of that hasn’t happened for a variety of reasons. 

I just spoke to my technical director, who met a colleague on the border who spent 13 days crossing the Polish-Ukrainian border. So it’s been seven months since the start of the war but the queue is still a 33-32 kilometer line to go in or out of Ukraine”.

Also the speaker was convinced that some of these things that need fast implementation do not require a lot of financial investment: “Let's use our application DIA to help decrease the queues at the borders. There are a lot of technical solutions”. 

“Today the logistics are a nightmare and it's not the fault of the Ukrainian farmer. The farmer wants to sell his harvest and the logistics actually get out of his pocket a lot of money. At the end of the day, what happened today in Ukraine could happen tomorrow in Romania. We are neighbors and we need to support each other.

Moreover, it needs to create a kind of chamber of information cooperation. This chamber could be a non-profit organization or something like that in order to have an open dialogue and an open flow of information because farmers have a lot of questions regarding logistics, commercial, contractual regulations”, – such a view of the problem and possible ways to reduce it has Consultant of the Romanian Farmers Club Cezar Gheorghe.

Adomas Audickas, Deputy CEO of MHP, has a more positive export experience: “We don't count any economics at the beginning, we just needed to open routes. Oil exports increased from 6 thous. tons to 35 thous. in 45 days. It required a lot of work and wasn't easy. We could afford it, sometimes overpaying for the service. And we also work a lot with European veterinary service, since our products are highly controlled. Our company has people that are focused only on this problem, only on logistics. Each of the topics requires more time than it was before the war”.

But even though the Deputy CEO of MHP believes that, “it only seems that the problems are being solved. But really nothing is solved because it's too slow. Now already agreed that each European member country needs to increase their veterinary servicemen and increase the infrastructure capacity. But for this they need to go to the Parliament, approve a budget for this, allocate money and only when the money will be available they will be hiring people. So to hire a few veterinary workers it needs at least eight months because they will follow all the procedures. But in this crisis situation, we cannot deal with the standard of solutions because the problem is not standard”. 

Gerard de la Salle stressed the importance of knowing the prices of products in European markets using this knowledge for the benefit of the farmers: “There is a difference in the price of grain in the western and eastern parts of Poland. But in the western part of Poland we do not see Ukrainian grain. Ukrainian farmers can get more money if they sell grain in western Poland or Germany. The cost of such logistics will not be more expensive”.

“Without this horrible war the prices nowadays of the crops would easily be €60 lower now. So I would guess that we would have a price level without the war of only €250. And so therefore the farmers who are in line at the border with Slovakia, Poland, Hungary and Romania, give probably 20-25€ of the extra profit to European farmers. So when you wait seven days or something like that it is a loss of 100€ per tonne and it serves as an export tax for Ukrainian farmers. 

I think that sums up to 5-7$ billion of loss for Ukrainian farmers simply because of the lines at the border. And I feel embarrassed by it by Europe at the moment. Because in May there were so many efforts and promises made to solve the problems and to make the customs queues and procedures faster. And nothing has been achieved”, –  added Ludwig Striewe, Management BAT Agrar.