How does central Europe's ban impact Ukrainian grain exports?

Ukraine has become entirely dependent on alternative European Union routes for its grain exports after Russia last month exited a year-long deal that had allowed them to be shipped safely via its Black Sea ports. This has exacerbated Brussels' efforts to find a balance between helping Ukraine with the demand of five eastern EU member states to protect their own markets by extending a ban on domestic sales of Ukrainian grain till at least the end of 2023.

A current deal to protect farmers in the five states near to Ukraine - Bulgaria, Hungary, Poland, Romania and Slovakia - is due to expire on September 15.

Russian attacks against Ukraine's inland port infrastructure on the river Danube – its last waterborne export route – in the weeks since the collapse of the Black Sea deal have piled further pressure on the EU to allow proximity grain sales again.

Here are details on how the temporary ban in the five CEE states has affected sales of Ukrainian grain and its transit to other destinations.

Why did Ukraine grain inflows rise in CEE?

Ukrainian grain is exempt from EU customs duties, which has made it cheaper than local production. Ukraine's proximity and high logistics costs drove an unprecedented surge in its grain exports into the five states in 2022 and early 2023, creating sales disruptions, squeezing out regional crops from domestic and some export markets, depressing prices and prompting farmers' protests.

Poland's grain imports rose nearly three-fold in 2022 to 3.27 million tonnes, of which 75 percent was Ukrainian grain, mostly corn and wheat. High imports continued until March 2023.

Romania, one of the EU's biggest grain exporters in its own right, saw 3.2 million tonnes of Ukrainian grain and oilseeds remain within its borders by May, the agriculture ministry said. Its imports before the start of the war were negligible.

Cezar Gheorghe of Romanian grain market consultancy AGRIColumn, who placed Ukrainian grain sales at around 4.7 million tonnes, said imports continued even after the ban was enforced under the guise of existing contracts.

Hungary imported up to 50,000 tonnes of grains and oilseeds annually from Ukraine before the war. The flow spiked to 2.5 million tonnes of grains and oilseeds in 2022. In 2023 it was up to 300,000 tonnes until the import ban was put in place.

In Slovakia, imports of Ukrainian grain rose to 339,000 tonnes in the second half of 2022, an almost 10-fold increase versus the first half of the year, official data showed.

What happened after the import ban?

In April, Poland and Hungary unilaterally closed their borders to imports of Ukrainian grain and other food. Romania, Ukraine's biggest alternative transit route, stopped short of a ban but started sealing transports.

In May, the EU allowed five states - Poland, Romania, Hungary and Slovakia all border Ukraine, while Bulgaria lies south of the Danube - to ban domestic sales of Ukrainian wheat, maize and oilseeds till June 5 - later extended to Sept. 15 - while still allowing transit through them for onward export.

After the ban, transit surged. Transit of wheat from Ukraine via Poland jumped to over 90,000 tonnes in June from between 43,000-51,000 a month in the first quarter of this year. Transit of corn increased to 170,000 tons in June from about 50,000-70,000 tons a month in the first quarter of this year, the Polish agriculture ministry said.

Romania has shipped about a third of Ukraine's grain exports since the start of the war through its Black Sea port of Constanta – 8.6 million tonnes in 2022, and 7.5 million tonnes in the first half of this year.

Volumes increased in May and June, particularly via barges on the Danube from Ukraine's river ports.

How will Brussels handle extension request?

On July 19, the five countries requested the ban to be extended till at least the end of the year. Brussels will review the ban in early September, taking into account harvest results, storage capacity, and the situation in third countries in terms of their access to grain.

Poland, with an election due in October or November, has already said it will not open its border on Sept. 15, increasing pressure on Brussels to extend the protective measures.

Meanwhile, Lithuania has asked the European Commission to develop a route for Ukrainian grain through Baltic ports. The five ports in Lithuania, Latvia and Estonia have a combined grain export capacity of 25 million tonnes.

But the key issue will be the economic viability of alternative land routes, known as "Solidarity Lanes".

Ukraine estimates the extra cost of the EU transit route at $30-40 a tonne. Transiting by land via Poland added 37 euros more per tonne than through Romania's Constanta port, said Viorel Panait, the manager of port operator Comvex.