UKRAINE- The European Commission has reassured Ukraine that it can expand alternative road routes for Ukraine’s grain exports to soften the negative effects of the collapse of the Black Sea Grain Initiative sea routes.
The Ukrainian Grain Association (UGA) had proposed the use of the so-called “solidarity lanes,” pointing out that they might offer some relief to shaken commodity markets.
The association proposed increasing exports by 1 million to 1.5 million tonnes per month by compensating part of the costs of European carriers and ports that transit Ukrainian grain.
According to the EU Council, since May 2022, 37.4 million metric tons of foodstuffs have been exported through the solidarity lanes.
“We are ready to export by solidarity lanes almost everything Ukraine needs, about 4 million metric tons a month. We achieved this volume in November 2022,” says Janusz Wojciechowski, EU Agriculture Commissioner.
The commission provides that the EU land solidarity lines carried 60% of Ukraine’s grain exports until now and the remaining was previously transported through the now barred sea routes and now will have to be transported via land routes as well.
However, there are logistical issues that come with these alternative routes. For example, transport by train is more costly and ineffective than maritime shipments.
The UGA had proposed exporting grain through the ports of the Baltic States (Klaipeda and others), Germany (Rostock, Hamburg), the Netherlands (Rotterdam), Croatia (Rijeka), Italy (Trieste), and Slovenia (Koper).
“It is worth noting that these routes are not used much due to the complexity and cost of logistics compared to other routes. The price difference is approximately US$33.3 to US$44.4 per ton,” the UGA commented.
Moreover, it has disrupted Bulgaria, Hungary, Poland, Romania, and Slovakia, as the excessive amount of cheap foodstuffs arriving in these countries from Ukraine has made some local farmers uncompetitive.
To solve this, the European Commission implemented a temporary limit to the import of four types of Ukrainian crops, which is currently being discussed for renewal – it ends September 15.
The EC announced the “exceptional and temporary preventative measures” to allow some nations to limit the import of foodstuffs coming from Ukraine and ease logistical bottlenecks.
The EC concessions were granted after Hungary, Poland, and Slovakia unilaterally banned Ukrainian grain imports to protect domestic farmers in April.
Another issue is the railway gauge, which is different in Ukraine and Poland, which means cargo has to be moved from trains upon arrival at the Polish border.
Moreover, Wojciechowski underscores that high transit costs for trains and trucks are too high and asks the EU to subsidize them. If not, he says customers will buy cheaper Russian foodstuffs.
“[Subsidies] will lead to a significant reduction in the cost of grain transportation and will enable Ukrainian farmers to profitably export grain surplus to countries that need Ukrainian grain and stabilize global food security,” says the UGA.