The 2024/25 grain season is not going as expected for many European traders. This week, too, the European Commission's wheat export figures show no signs of catching up. Somewhat more quietly, feverish talks are being held in Brussels and Kiev on a new trade agreement with Ukraine. The temporary exemptions that the EU introduced shortly after the Russian invasion expire this week. Negotiations on a more permanent solution have been ongoing for more than six months now, so far without success.
The September wheat contract on the Matif closed yesterday €0,50 lower at €202 per tonne. On the CBoT, wheat also took a step back, 0,6% to $5.36 per bushel. Corn closed a quarter cent higher at $4.38½ per bushel. Soybeans were slightly more convincingly on the rise, up 0,7% to $10.40¾ per bushel.
The European wheat export continues to be a bit shaky. Up to and including 1 June, the EU exported 19,13 million tonnes. Last season, the counter stood at 28,76 million tonnes over the same period. The export of barley is also lagging behind last season with this export of 4,23 million tonnes this season compared to 5,60 million tonnes last season. More maize has been imported by the EU. In the current season, 18,20 million tonnes of maize have been imported so far compared to 17,00 million tonnes last season.
The trade relationship between the EU and Ukraine is certainly not becoming more secure. After the Russian invasion in 2022, the EU abolished a large part of the import duties and quotas for agricultural products from Ukraine. This temporary framework, also known as Autonomous Trade Measures (ATMs), expires on Thursday 5 June. Since the end of 2024, the EU and Ukraine have been negotiating a more permanent solution for the trade relationship. So far without success. Several eastern member states in particular, led by Poland, have problems with the influx of agricultural products from Ukraine. The influx of products from the east is putting pressure on prices for their own farmers, these member states claim.
A lot at stake
Ukraine has become quite dependent on exports to the EU. In 2021, before the Russian invasion and with all import duties and quotas in place, almost 40% of Ukrainian exports went to the EU. That will have increased to almost 2024% in 60. According to Ukrainian sources, the loss of the temporary more or less free trade zone with the EU would cost €3 billion in export revenues per year. But there is more at stake, according to Ukraine. The war is partly financed by export revenues. And the agricultural sector is a much larger part of the economy than in the EU. One in five Ukrainians works in agriculture.
According to some sources, in order to prevent a sudden disruption of trade flows between Ukraine and the EU, European diplomats and ambassadors have been working on a transitional arrangement. This should form a bridge between the ATMs and a permanent solution and, above all, should buy time. However, the details of the transitional arrangement have not yet been announced.
Ukraine expects the upcoming grain harvest to be 10% smaller. That is what Vitaliy Koval, the Ukrainian Minister of Agriculture, told Reuters. "We are facing a difficult season. An abnormally warm winter, first without rain and then prolonged rains delayed the sowing campaign in some regions by two weeks. That is why we expect a smaller harvest," Koval told Reuters. "The most negative forecast is minus 10%. According to the forecasts, the grain harvest is 10% smaller and the oilseed harvest is 5% smaller. It is certainly not a failure, but God willing, we will harvest everything."