Has technical grain from Ukraine really flooded Poland?

Grzegorz Kowalczyk's article published in Business Insider.

"We have information that, for example, wheat was coming in as a cleaner, which is theoretically used to clean mills," one industry representative tells us.

• According to the Ministry of Agriculture, last year only 93,000 tons of grain declared as technical grain was imported into Poland. Farmers do not believe in such low volumes
• Analysts agree that such a volume should not shake up the market
• If not technical grain, what could have caused such a big problem with grain prices in Poland? Experts have several assumptions
• An import freeze could block the flow of raw materials needed by Polish agriculture. Dairy farms also fear a reaction from Ukraine

"According to the National Treasury Administration, in 2022, 93,000 tons of grain declared as technical grain entered Poland from Ukraine, approximately 3.8% of the total grain imports from Ukraine, which amounted to 2.45 million tons in total. Of these, 58,000 tons were corn and 31,000 tons were wheat," the Ministry of Agriculture said in a response to Business Insider. It adds that there was also 7.4 tons of "industrial" corn.

“These figures mean that the so-called technical grain could not flood the Polish market. This is just a drop in the bucket of imports from Ukraine. Last season, Poland produced more than 35 million tons of grain.”

Did Ukrainian grain not flood the market then?

Thus, the total grain imports from our eastern neighbor (i.e. the aforementioned 2.45 million tons) amount to only about 6.8% of domestic production. At the same time, in 2022, we had a positive trade balance in Poland, i.e., exports exceed imports.

"From January to December last year, Poland exported 9.2 million tons of grains and grain products, including about 3.88 million tons of corn and about 3.64 million tons of wheat. There is no system that would allow us to determine to what extent exports included Ukrainian grains. However, we do know that the balance of foreign trade in grains and grain products is positive at 5.6 million tons," says Monika Piątkowska, Head of the Grain and Feed Chamber.

“The fact that technical grain should not be the main problem on the market is also evidenced by the data obtained from the Ministry by the agrarian trade union Korona.”

They show that industrial grains did not dominate among all grains imported to Poland. As noted, from July 2022 to January 2023, approximately 165,000 tons of grains (wheat and corn) were imported, excluding feed, seed, or food grains (approximately 1.73 million tons). Thus, technical grain should also have a rather small share in Ukraine's imports during this period.

"In order to accelerate imports to Poland by avoiding border controls, in December 2022, the National Treasury Administration strengthened supervision over the import of such grain," the Ministry assures us in its response.

Farmers doubt the ministry's data

Indeed, imports from Ukraine have increased very significantly in percentage terms (they were monitored in 2021), but this still should not lead to a crisis in such a large market.

If the data shows that the inflow of grain from Ukraine is not that big, what caused so many problems? Farmers are sounding the alarm that granaries are overflowing with grain, and prices at procurement stations are too low. That's why some industry representatives believe that the figures do not correspond to reality.

"We believe that there are many more names under which grain was imported, but which were not included in the official statistics. It is not only technical grain.  We have evidence that wheat, for example, entered Poland as a cleaner, which is theoretically used to clean mills. This means that there may be much more Ukrainian grain in Poland than the official statistics show," estimates Marcin Gryn, a member of the management of the Association of Grain Producers.

"The government has started to take steps to reduce imports, but on the other hand, because of the frenzy created, buyers now know that we are up against the wall and can deliberately lower prices. We have seen prices decline very rapidly after the introduction of government subsidies. By the way, the price itself would not be a problem if the costs were lower, but they have increased significantly," he notes.

"It should be borne in mind that Ukraine, according to the US Department of Agriculture, will export 40.5 million tons of grain this marketing year, including 14.5 million tons of wheat and 26 million tons of corn. This potential is impressive for countries bordering this market, even if existing surpluses have not reached these markets in huge quantities. In addition, the concern grows when there is a real threat of a significant reduction or suspension of grain exports from the Ukrainian market through the Black Sea ports from time to time," says Monika Piątkowska.

Is it a collapse? No, it is not.

According to Jakub Olipra, an expert on agricultural markets and senior economist at Credit Agricole, it would be wrong to talk about the collapse of the grain market in Poland.

"I disagree with the assessment that we have a market downturn. The problem is to encourage farmers to sell grain at the current prices in a situation where a few months ago they could sell grain for several hundred zlotys more," he says.

"In my opinion, Ukraine has little to do with the strong depreciation we have been seeing since December," analyst Mirosław Marciniak confirmed in his analysis on infograin.pl.”

"Today, there are also no problems with sales to mills and feed mills. However, the problem is the price, which does not suit farmers," he added.

Jakub Olipra also claims that the current situation on the domestic market is a reflection of what is happening in the world.

"The purchase prices for grain in Poland are at the MATIF level (French Agricultural Commodities Exchange - ed.). This is due to the improved supply and demand situation on the global grain market, reduced market uncertainty, and expectations of higher yields next season," he says.

Is the government doing enough?

According to Olipra, the problem will not be solved by restricting grain imports from Ukraine, as the Polish government decided to do, allowing only transit.

"In my opinion, measures to block imports from Ukraine do not solve the problem in the long run. We need a lot of raw materials such as sunflower meal. Moreover, in many segments, Ukrainian exports do not compete with us, and our actions may, in turn, spoil trade relations with companies that export food products to Ukraine," estimates Jakub Olipra.

Farmers themselves also have doubts about such measures. The Polish Dairy Chamber (PIM), in particular, fears a response from Ukraine.

"The Ukrainian side may take retaliatory actions in trade exchange with Poland, which will lead to a slowdown or ban on the export of primarily our cheeses, whey powder and fermented milk products, for which Ukraine is an important market today. In the 1st quarter of 2023, Poland sold 5.14 times more dairy products to Ukraine than it bought from Ukraine," PIM said in a statement.”

The grain industry representative, despite appreciating the government's intervention, also speaks of great chaos.

"The government wants to act, and this can be seen as positive, but unfortunately, it changes its agenda every two or three days. First, it banned imports completely, then it came up with an idea to limit them, i.e., convoys and electronic cargo tracking. Today, we don't know where we stand," admits Marcin Gryn.

He adds that this problem leads to a reduction in export opportunities.

"Grain from Ukraine has led to a decrease in quality and a deterioration in the perception of our raw materials on foreign markets. Thus, it is now harder for us to sell Polish grain in the West," he argues.