BRUSSELS, BELGIUM — Intensifying protests have left the Ukrainian-European Union (EU) border nearly paralyzed, jeopardizing one of the export lifelines of the reeling Ukrainian economy. The rally backed by farmers all over the bloc, however, is increasingly seen as an attempt to revolt against the EU’s environmental policy.

Footage of grain spilled from a truck near the Shehyni-Medyka checkpoint on the Ukraine-Poland border has quickly become viral on social media networks, turning into a symbol of the growing dissent on the economic and, consequently, political front.

Politicians on both sides of the conflict now express fears that the dispute over the Ukrainian grain imports widely covered in media could weigh heavily on the European determination to keep supporting Ukraine in its attempts to resist the invading Russian forces.

“Ukrainian grain on the asphalt is not just a few dramatic shots,” said Ukrainian President Volodymyr Zelensky. “This is a testament to how emotions can become dangerous.”

He warned that the border blockade leads to an “erosion of solidarity” between Ukraine and its Western allies.

European farmers hope the protests will help yield the desired results, though the initiative lacks a unified stance.

In Poland, the agricultural producers emphasize unequal competition with Ukraine, while in France farmers protest against food imports from non-EU countries in general. However, the common goal is believed to draw the attention of EU decision-makers, who, according to farmers, ignored the sector’s opinion on the revolutionary Green Deal.

Despite a rise in yields in 2023, European grain farmers are seeing their margins dwindle, primarily owing to a drop in prices over the previous several months.

In 2022, European grain prices were hit by an upward rally, stemming from fears over a lack of Ukrainian grain on the global market, as Russian forces blocked its main export arteries. However, these fears largely subsided during 2023, just as some key agricultural commodities prices.  

As a result, wheat in 2024 has sold for half the price it did last year, and farmers participating in the protests are alarmed.

The turbulent market conditions occur against a backdrop of EU green reforms that were due to start in 2024 and included, among other things, a cut in fertilizer and pesticide use.

The turbulent market conditions occur against a backdrop of EU green reforms that were due to start in 2024 and included, among other things, a cut in fertilizer and pesticide use, which would have been playing heavily on farmers’ minds, said Michael Lee, director of Green Square Agro Consultancy working in the Black Sea region and Eastern Europe.

“Farmers’ dissatisfaction has emerged as protests across Europe, including blocking the border with Ukraine, as they look for someone to blame,” Lee explained.  

The Green Deal is complemented by the Farm to Fork Strategy, under which the European lawmakers seek a 50% reduction in the use of pesticides, a 20% reduction in the use of fertilizers, and a 50% reduction in antimicrobials for farmed animals in the coming years. In addition, 25% of agricultural land is due to be used for organic farming, and 10% of the land has structural elements with high biodiversity.

“These ambitious targets and objectives will have an impact on how EU farmers will be able to operate, and they will have to adapt to access subsidies,” Lee indicated.  

Access to state aid remains vital for European farmers. Agriculture is one of the EU’s main expenses, absorbing €60 billion a year, almost equal to the EU defense spending before Russia invaded Ukraine.

The Ukrainian side admits that the fears expressed by farmers in Eastern Europe over the fierce competition with cheap imported grain are not groundless. Roman Matys, an independent Ukrainian economist, indicated that some ecological requirements European farmers must follow are not applied to Ukrainian imports.

“Our agricultural producers can use cheaper pesticides that have long been banned in the EU,” Matys noted.

Nevertheless, the withdrawal of the preferential trade regime, proposed by the European Commission to come into force June 6, could remove one of the pillars of the war-torn Ukrainian economy.

In 2023, Ukraine’s exports of agricultural and food products totaled $21.9 billion and accounted for 61% of total exports of goods from Ukraine, against $23.4 billion and 53% of total exports of goods in 2022, Ukrainian Agribusiness Club UCAB reported. At the same time, the EU’s share in total exports of agri-food products from Ukraine in 2023 was 56.6%, versus 55.1% in 2022, or $12.4 billion, versus $12.9 billion in 2022.

“Ukraine may face a macroeconomic crisis and currency devaluation if international financial support does not materialize,” UCAB claimed.  

European feed in turbulence

Grain farmers are not the only ones alarmed over the repercussions of the trade liberalization with Ukraine and simultaneously pursuing the goals of the Green Deal.

The Polish National Poultry Council recently has backed the idea of restricting poultry imports from Ukraine, expressed by breeders in several other member states. Poultry imports from Ukraine to the EU reached nearly 250,000 tonnes in 2023, against only 90,000 tonnes before the trade liberalization, the business organization calculated.

Again, the inflow of cheap Ukrainian poultry is believed to be only the tip of the iceberg, and farmers point their finger at the green policy when asked about their real enemy. Farmers warn that new environmental and animal welfare standards hurt their business, eventually making them less competitive in the global arena.

Farmers warn that new environmental and animal welfare standards hurt their business, eventually making them less competitive in the global arena.

The problems hinder European feed consumption, undermining demand for some feedstuffs, including grain. EU compound feed production for farmed animals in 2023 is estimated at 144.3 million tonnes, reflecting a 2% decrease compared with the previous year, the European Federation of Feed Manufacturers (FEFAC) reported.

Indeed, the European feed industry has been facing a variety of challenges over the past few years, including global disruptions such as the COVID-19 pandemic, escalating geopolitical tensions and expansion of animal diseases, said Pedro Cordero, president of FEFAC.

“These multifaceted challenges have precipitated declines in production across diverse livestock sectors, thereby significantly impacting feed production,” he said. “Looking ahead to 2024, it seems unlikely that the industry will see a significant performance improvement.”

Cordero said the dairy and cattle sector may experience stability or even growth in some countries, but declines are expected in others due to regulatory pressures, such as nitrogen regulations and dire market conditions. The poultry sector is experiencing mixed trends, with some areas recovering from avian influenza, while others continue to combat further outbreaks.

“Additionally, the poultry production sector struggles with intensified competition from imports of poultry meat, in particular from Ukraine, impacting market dynamics and production within the EU,” Cordero said. “The pig feed production sector is generally declining due to regulatory pressure, reduced market demand, ASF closing off export markets, and structural issues in certain member states.”

Overall, the outlook for the European feed industry in 2024 suggests continued difficulties and a further decline in production.

“Given the complex array of challenges facing the industry, it is unlikely that there will be significant growth in demand for feedstuff in the near future,” Cordero added.

Overall, the outlook for the European feed industry in 2024 suggests continued difficulties and a further decline in production.

The problems of the EU grain and feed industries are interconnected. Last year, adverse weather conditions led to reduced yields, and the EU had to import more grains. While oilseeds and protein crops are typically imported, feed grains historically have reached self-sufficiency levels in the EU at approximately 90% of total feed usage, Cordero said.

“However, poor weather conditions can compromise grain quality, potentially affecting its suitability for food consumption,” Cordero added. “In such cases, grains may still be repurposed partially for feed use if they meet certain quality standards.”

The EU 2023 wheat harvest is estimated at 135 million tonnes, up 1% on last year and 2% on the five-year average, Lee said. Yields were average or above average in France, Germany, Romania, and Hungary, while the hot and dry weather in Spain produced a poor crop. EU grain export prices fell sharply from the start of 2023, dropping 20% to 25% by June, where they remained the rest of the year.

Red Sea crisis

Hurt by the COVID-19 pandemic and the fallout of the Ukrainian war in the background of tightening environmental standards, the European grain and feed industries also are worried about new black swans emerging on the horizon. For example, the ongoing crisis on the Red Sea, where Yemen-based Houthi rebels have been attacking ships, has exacerbated supply concerns in the European feed market.

“Shipping disruptions in the Red Sea have caused significant delays in obtaining essential feed additives like amino acids and vitamins,” Cordero said. “Although some companies continue to operate in the area with minimal disruptions, there is apprehension that prolonged crisis could lead to considerable cost escalations in the second and third quarters of 2024 linked to higher freight costs.

“These delays and cost increases pose potentially a threat to the supply chain for feed manufacturers, impacting the availability and affordability of feed for livestock.”

Additionally, the Red Sea crisis may jeopardize the competitiveness of EU grain exports. Trade capacities to the Middle East have been affected by the crisis, resulting in uncertainties regarding trade routes and transportation logistics. Consequently, there is a looming risk of reduced exports of EU grains to key markets in the Middle East, which could further influence overall market dynamics, Cordero indicated.