background
German farmers are worried: cheap grain imports from Ukraine could ruin prices. But is that really true?
“Imagine that in Ukraine, wheat is sold for 70 euros per ton.” This quickly turned into a rumor that worried German farmers: “Just imagine, Ukrainian wheat comes onto the market here for 70 euros per ton.”
If that were actually true, it would be bad news for German grain farmers. Because the price on the stock exchange is currently around 235 euros per ton of bread wheat. Imported cheap wheat could ruin the market and thus farms in this country. That’s the theory. But what is the reality?
No numbers from the Ministry of Agriculture
The research is difficult. In fact, many farmers are concerned. But then it gets vague. Many have heard that someone knows someone who said that cheap grain from Ukraine has been on the German market for many months. The fear: Of course, the agricultural trade and the mills would buy the cheap goods – no matter how poor the quality was – and the German farmer would be left with his quality wheat.
But how much grain has come from the Ukraine to Germany in recent years and is it currently coming? A spokeswoman for the Federal Ministry of Agriculture says: “We don’t know, we don’t have exact figures.” And approximate? “Grain arrives in Germany from the Ukraine, but we don’t know how much. We don’t do any statistics.”
The spokeswoman explains this ignorance as follows: If grain comes from the Ukraine to Germany via Poland, it happens within the EU, and what goes where within the European internal market via which channels is not recorded.
No grain from the Ukraine in German mills
A call to the Association of German Mills provides clarification. Eight million tons of wheat are processed in German mills every year, grain from the Ukraine is irrelevant, explains managing director Peter Haarbeck.
“This year almost 50,000 tons of wheat were delivered from the Ukraine to Germany, we have these figures from the Federal Statistical Office. But this grain does not end up in the mills, but is traded on or ends up in feeding troughs.”
However, it could be that due to the current political situation, slightly more grain will come from Ukraine in the future. “But this small amount does not shake the market, nor does it affect grain prices,” said Haarbeck. So what are farmers afraid of?
Export via solidarity corridors instead of across the Black Sea
The background: soon after the war began in February 2022, the normal trade routes for grain exports from Ukraine via ports on the Black Sea were blocked. Grain that people in Africa need could not be exported. That’s why so-called “Solidarity Lanes” were set up, solidarity corridors over land.
Since then, grain has been coming from the Ukraine to the EU by train, truck or barge – duty-free and without much bureaucracy – and is to be shipped to Africa via European seaports. Because Russian President Vladimir Putin recently canceled the grain agreement on exports across the Black Sea, these “solidarity lanes” are now to be expanded.
Grain does not land at the intended destination
There is resistance to this. As early as February, Polish farmers went on the barricades and blocked border crossings with Ukraine. Because the grain from the Ukraine, which was actually supposed to reach the port of Danzig on the Baltic Sea, did not get there. It stayed in Poland, caused an oversupply, prices fell, and Polish farmers could no longer sell their grain.
Farmers in Slovakia, Hungary, Romania and Bulgaria also protested. As a result, they are now receiving agricultural aid from the EU budget and protective measures have been imposed. No duty-free grain from Ukraine may remain in these states until September 15, 2023.
Going it alone hurts – but who?
But no sooner had these protective measures been decided than there was criticism in Germany. German farmers fear that the Ukrainian wheat will now end up here overland via Poland. Federal Agriculture Minister Cem Özdemir (Greens) also emphasized that the wheat absolutely had to end up in Africa and that the problem should not be shifted to Germany. At the end of July, he criticized the fact that the nation states of Poland, Slovakia, Hungary, Romania and Bulgaria went it alone in the Agricultural Council in Brussels.
“This harms everyone in the EU, Europe must show solidarity and the protective measures for Poland and the other neighboring countries of Ukraine should not be extended after September 15,” explains a spokeswoman for Özdemir. When asked who specifically is harmed by Poland’s behavior and whether Özdemir wants to protect German farmers from cheap imports with his demand, the spokeswoman does not answer.
Are rumors based on Russian propaganda?
Back to the rumors that Ukrainian wheat is trading for 70 euros. A Bavarian farmer with good contacts in Ukraine reports that bread wheat is currently being sold there for around 130 euros per tonne, and he believes the rumors are part of Putin’s war strategy to stir up anti-Ukraine sentiment in the West.
Farmer Dietrich Treis sees it that way too. Born in Hesse, he has been living and working in the Ukraine since 1990 and is the managing director of an arable farm with 4500 hectares, 70 kilometers east of Kiev. His comment on the rumors about cheap Ukrainian wheat: “There are probably Russian troll factories at work.”
Treis does the math: transport from his plant near Kiev to Germany costs at least 150 euros per tonne, and those who live closer to the border may get around 100 euros. “A large trader pays around 95 euros for the wheat from the farm, and that’s not necessarily the best price. Why should someone in Germany sell for 70 euros and pay the transport costs? Economically, that doesn’t make any sense. It would be cheaper driving wheat to the dump.”
BayWa and the farmers’ association warn against scaremongering
The agricultural trading group BayWa, based in Munich, reports that the market for agricultural commodities such as bread wheat is highly transparent, since the price is based on the stock exchange – and the daily rate in the middle of the week was around 238 euros per tonne. Press spokeswoman Ante Krieger: “In this respect, there is much to suggest that the rumor has little or nothing to do with it.”
The Bavarian Farmers’ Association (BBV) also doubts that prices far below the world market level are a realistic scenario. However, according to press spokesman Markus Drexler: “Farmers are actually wondering which route the Ukrainian grain will take.”
As early as July, the farmers’ association demanded that Ukrainian grain destined for other regions of the world should not be included in trade in the EU internal market. This sentence from the market reporting office of the BBV sounds reassuring: “In the dealer talks in the last week, no increased offer from brokers from this region (Ukraine) could be determined.”
That’s how it works in practice
There are rumours, there are figures on paper – and there is practice. Example 1: A farmer from Saxony reports that a few weeks ago he wanted to sell rapeseed to a large trader. The price on the stock exchange was 480 euros per tonne, a very good price and therefore a good time to sell. But the dealer refused. At this high price level, he couldn’t resell the rapeseed because everyone would wait until the rapeseed became cheaper again.
Example 2: A call to a BayWa warehouse in Upper Bavaria at the end of last week. The exchange price for bread wheat of 235 euros per ton is theory. According to BayWa, you pay between 190 and 200 euros. For feed wheat there is only 170 euros. Bad prospects: What is now being threshed in large parts of Germany after the rain will probably be of poor quality – and will therefore only be fodder wheat.