EU countries increased purchases of Russian grain 10 times
While Ukrainian farmers are counting the losses from the war, lost crops, low purchase prices, and complicated logistics, Russia boasts that trade with the EU has significantly revived.
According to Eurostat, in 2023, purchases of Russian grain increased by 22% per month and 10 times per year. Latifundist.com decided to find out why Europe is increasing exports from Russia by putting obstacles to Ukrainian grain.
Who in the EU buys Russian grain and pulses the most?
From the beginning of the current marketing year to December 1, the aggressor country shipped 2.23 million tons of grains and legumes to the EU, more than twice as much as in the same period last year (968 thousand tons), according to the Russian Grain Union.
The largest importers:
- Spain – 40%. Shipments to this country increased by 8.8 times (850 thsd tonnes against 96 thsd tonnes in the same period last season);
- Italy – 35%. Purchases increased by 7.7 times (812 thsd tonnes vs. 105 thsd tonnes);
- Belgium – 17%. The increase was 3.7 times (198 thsd tonnes vs. 52 thsd tonnes);
- Greece – increased purchases by 1.9 times (160 thousand tons vs. 85 thousand tons.
Latvia is also among the leaders in purchases of Russian grain, although shipments to this country fell to 105 thousand tons from 410 thousand tons a year earlier, as reported by the Russian Interfax.
According to Russian analysts, Spain bought the most peas – 571 thousand tons. Italy became the largest buyer of Russian durum wheat in the EU – 583 thousand tons. Flaxseeds took the main place in deliveries to Belgium. Greece increased its purchases of wheat to 108 thsd tonnes and corn to 26.2 thsd tonnes.
“No sanctions and customs blocks are holding back: imports of durum wheat for pasta from Russia increased by 300 thsd tonnes in the first 9 months of 2023. It has become the second country of origin of Italian supplies,” writes the Italian edition Salvagente.
The increase in demand for durum wheat is attributed to a 7.7% decline in local durum wheat yields due to bad weather in the main production regions of Puglia, Sicily and Emilia-Romagna.
“It is clear that the European sanctions against Moscow, imposed after Russia’s invasion of Ukraine, did not work: through cooperation with Turkey, durum wheat (and soft wheat, which was agreed with Ukraine) is supplied to Europe and especially to Italy,” the newspaper writes.
As for grain, according to Eurostat, in 2023, purchases increased by 22% per month and 10 times per year.
Ukraine is still the main supplier of grain to the EU, although its share decreased by a quarter to 1.2 million tons over the year. Instead, Brazil (up to 1.1 million tons) and Turkey (up to 204 thousand tons) increased their exports.
Routes of Russian grain
Having imposed sanctions against Russia since the beginning of the war, Europe has not restricted the import of its agricultural products. Given the international situation, large companies are now very reluctant to provide information to the media about their cooperation with Russia, because they have simply reformatted it.
“Most of what comes out is handled by Russian traders who use (orenodized – ed.) vessels that international traders do not touch,” an insider told the publication.
By land, Russian grain gets to the EU through the Baltic countries and Belarus.
Karolis Šimas, President of the Lithuanian Grain Processors and Merchants Association (LGPPA)
“The scheme is very simple. The two largest Kaliningrad-based companies export grain in transit through Lithuanian ports, request and receive permission to transport grain in transit through Lithuania. The Lithuanian freight forwarder pays taxes for them. Then a Lithuanian company, the buyer of the grain, enters, and the Russian grain enters the port, one of the largest terminals, and successfully goes to third countries. All duties are paid and permits are obtained. And there are many such companies. Lithuanian intermediaries, freight forwarders, carriers, and logistics companies are involved in this scheme.”
According to Mr. Šimas, in 2023, the export of Russian grain through Lithuania increased by 5 mln tons (from 15 mln tons to 21 mln tons).
The situation is similar in Latvia.
In 11 months of last year, the country imported 333,225 tons of grain products from Russia, which is 51.5% more than in the same period of 2022, when 219,959 tons were imported, according to the State Revenue Service (SRS). During 11 months of the last year, 1.975 mln tonnes of grain products were transited from Russia through Latvia, which is 2.3 times more than in the same period of 2022, when 861 068 tonnes of grain were transported through Latvia. This is reported by a local online publication.
The State Revenue Service explained that goods that have been imported or released for free circulation acquire the status of European Union (EU) goods and circulate freely in the EU. They can be consumed in Latvia or transported to another member state without going through customs procedures, including transit.
“There is already a pun among grain exporters that does not do Lithuania and Latvia justice: Kaliningrad has the port of Klaipeda, and central Russia has the ports of Liepaja and Riga,” Karolis Šimas jokes sadly.
What is the price of the issue?
The Russians explain their success in the EU market by a more favorable offer relative to the cost of European grain.
“The discount from the beginning of the season to December 1 averaged $14-15/t (FOB) from the price of wheat offered by Europe,” the Russian Grain Union commented.
Russian grain market expert Alexander Korbut says that the countries that imposed restrictions on Russia turn a blind eye to them as soon as they see their economic interest. According to him, the growth of grain shipments from Russia to the EU countries was facilitated by the increase in durum wheat imports from Italy: the country usually bought it from Canada and Germany.
“As soon as they ran out of durum wheat, they increased purchases from us. But we need to understand that the EU is not the most interesting market for us. It is more situational than permanent,” Mr. Korbut commented to Agroinvest.
The Ukrainian Grain Association believes that despite Ukrainians’ justified indignation at this situation, European companies will be more likely to be guided by economic expediency.
“For them, it is higher than even the instinct of self-survival. But this applies not to everyone, but to some companies that make money on this,” said Mykola Gorbachev, head of the UGA.
Who is the enemy?
The war has put Ukrainian farmers in an extremely difficult situation. Market prices for grain are going down, in part due to the huge volumes of Russian grain that the aggressor country is flooding the world market with, boasting that it has an impact on its pricing. The enemy is destroying Ukraine’s port infrastructure. Because of the danger to Ukrainians, insurance premiums for transportation have skyrocketed.
Mykola Solskyi, Minister of Agrarian Policy
“Through the ports of Greater Odesa, the price for farmers has increased by $30. This is due to the fact that freight has risen in price. We have to pay for insurance. The railroad has also risen in price, and transshipment in the port has risen in price. That’s why logistics has become more expensive. But if you export through Romanian ports or alternative routes, it will be even more expensive by $59 or $112,”
Mykola Gorbachev, the head of the association, confirmed that grain transportation costs Ukrainians twice as much as Russians.
“The transportation of corn from Greater Odesa, for example, to Spain now costs 42-44 dollars, wheat will be two dollars different. This amount includes insurance (about $3.3 per ton) and the freight itself,” said Gennadiy Ivanov, director of BPG Shipping.
Meanwhile, for more than six months now, farmers and carriers from neighboring countries have been blocking the borders with Ukraine and demanding that the EU impose restrictions on the import of Ukrainian grain. Is it fair?
“The amount of Ukrainian grain that could pass through Lithuania is a trifle compared to the amount of Russian grain that gets to third countries through the ports of the Baltic states. Yes, grain is a food product, and it is not subject to direct sanctions after Russia’s war in Ukraine, but isn’t that a concern for us?” asks Karolis Šimas.
On February 5, Latvian farmers protested, demanding, among other things, a ban on food imports from Russia and Belarus without a transition period. If the demands are not met, they promised to go to Riga on February 12.
Paul Hughes, Chief Agricultural Economist at S&P Global, suggests that the problem of Russian grain dominance should be solved by market mechanisms. He believes that the biggest problem for Russia will arise if sellers in the EU lower their prices.
“At that point, Russia will have a choice. Firstly, to maintain the minimum level [of export price] and give up the share of exports to the EU, or, secondly, to give up its lower level, reduce the price and maintain the pace of exports,” he told CNN.
He called this scenario a “moment of reckoning.”
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