Proposed EU Ukraine import bans could push crush to northwest Europe

Import bans on key agricultural products sought by EU countries bordering on Ukraine could push cheaper oilseed supply to northwest Europe, giving them an advantage in terms of crush margins, sources told Agricensus on Thursday.

Several member states have taken steps to curb imports, mostly while maintaining transit options, and these measures could potentially be formalized if the EU approves a temporary, limited ban proposed this week by the European Commission.

After a meeting of EU agriculture ministers, during which measures were discussed, Commissioner Janusz Wojciechowski said that the current European Commission proposal on the table was for a temporary import ban on five products – wheat, corn, rapeseed, sunflower seed, and sunflower oilseeds – into the five member states most affected by imports – Hungary, Slovakia, Bulgaria, Romania, and Poland.

These products account for about 90% of all imports from Ukraine into the EU.

“If the ban really comes in place, the crushing margins will move to Rotterdam and Germany,” a Bulgarian trader said.

Bulgarian crushers, who have benefitted from cheap imports from Ukraine, are particularly concerned.

The import flow slowed down earlier this month, when Bulgaria’s government introduced additional quality inspections to be carried on the border as the trucks arrived, followed by a complete ban implemented on April 25, with around 300 Ukrainian trucks expecting quality test results now.

"We will be monitoring the situation, expecting some changes in the sunflower seeds imports policy within the next couple of weeks,” another Bulgaria-based trader told Agricensus.

"We have seen farmers protesting; maybe crushers will do the same," he added.

Crushers boosted processing and increased margins in sunflower oil sales after Russia’s full-scale invasion of Ukraine began in February 2022, leading Ukraine to export more sunflower seed and less sunflower oil, with almost 1 million mt of seeds imported throughout the year.

Bulgaria’s crushing capacity is around 2.5-3 million mt of sunflower seeds annually, with stocks estimated at around 1.2-1.3 million mt now, while just 300,000-400,000 mt of seeds are in crushers’ hands, sources said.

“Some big [crushing] plants will go into maintenance from next week, leaving the market with no buyers for about three-four weeks, as they will try to punish the farmers in some way [for not selling the seeds],” a source said.

“Buyers do not want to overpay due to this forced ban only because of some farmers' protests, what is happening here is not market-oriented, it is not right at all,” they added.

Both inland and waterway logistics are other key factors for grain and oilseed supplies to Europe, with market participants foreseeing a pessimistic future for Ukraine’s export corridor, amid unstable vessel inspections in Istanbul and an unclear extension situation after May 18.

“Let’s see how flexible the guys at the Polish border will be,” a Germany-based crusher told Agricensus, commenting on an unclear transit agreement between Poland and Ukraine in case of an import ban to Poland.

Some doubt over whether the import ban will be approved by the EU remains meanwhile, as it could suggest a weakening of support for Ukraine at a crucial time for the country.

Moreover, there are other proposals on the table, including activating Common Agricultural Policy crisis funds to provide further financial support for farmers affected by Ukrainian imports. 

“For early crop barley, rapeseed, and wheat, they will need the green border trade if the [Black Sea grain initiative] export corridor is closed,” the Germany-based crusher added.

The Black Sea grain corridor is currently at a virtual standstill, with Russia threatening to pull the plug after mid-May, leaving Ukraine once more reliant on shallow water ports and overland routes.