Poland: millions of tonnes of Ukrainian grain put EU unity to the test

The carefully maintained picture of a unified bloc of unconditional support for Ukraine turned slightly grainy recently, as Poland imposed import bans on Ukrainian agricultural products. The move widened the rift within the EU as Hungary, Slovakia and Bulgaria followed suit. These unilateral moves have added to the friction that already existed between Brussels and these frontier states.

The irony will not be lost on workers as the foremost sabre-rattling regime in the region suddenly turns a cold shoulder to its new-found Ukrainian friends. Polish magnates very much enjoy their theatrical bravado, but only as long as it doesn’t pose any serious consequences to their profits.

This is a massive headache for the EU bloc, which has already been at loggerheads with Poland over questions of so-called ‘judicial independence’. It is now scrambling to plaster over the very clear cracks in their hard built veneer of unity.

The move by the Polish government is dictated by short-sighted political goals, which for these opportunist politicians take precedence over either economic concerns or the wider strategic interests of the ruling class. This is especially true in an election period, as at present, with the incumbent right-wing government looking towards its rural voter base. The whole farce unfolding in grain markets, and the responses of European governments, are also a condemnation of the anarchy of the capitalist market.

Shockwaves and opportunities

The waves were already very turbulent when Russia decided to invade Ukraine in early 2022. With both Russia and Ukraine being major sources of grain for the world market, concern immediately set in about the possibility of shortages. Wheat was the main concern, as the source of food for millions around the globe for both people and livestock. But rapeseed, sunflower and other oil grains were to be also severely affected.

We wrote at the time about the potential ramifications of such a crisis for the class struggle. Since the article was published, the prices of grain shot up once more in May last year, particularly for rapeseed (of which Ukraine is the 3rd largest producer), along with other major crops of strategic importance: wheat, rye, feed barley and dry maize.

While the shock of war on global logistics was a substantial factor in the price increase, plain old speculation also played a role. Such shocks can present very profitable opportunities when utilised correctly.

The ABCD (ADM, Bunge, Cargill and (Louis) Dreyfus) monopolies who control anywhere between 75 percent to 90 percent of global grain trade made hundreds of billions of USD last year, even as the market was stabilising and prices began to fall after the May peak. But open speculation was being reported as early as April last year, when just ten hedge funds were identified as reaping £1.5 billion in profits on wheat and soybean.

The prices have substantially fallen after the initial fears subdued and as the EU announced its plans to open up the bloc to agricultural imports from Ukraine. Matif milling wheat futures fell from its peak of €438.25 per tonne in May to €391.50 the following month and €325.50 at the beginning of July – the same price as at the beginning of the Ukraine war. 

Political aims detached from reality

The EU legislation seemed like a golden measure, both politically and economically. The initial action plan of 12 May 2022 was purely intended as political propaganda. Its stated goal was the easing of restrictions on Ukrainian grain passing through the European Union, allowing it to bypass tariff barriers at the EU border states for re-export to the wider EU and world market. But the infrastructure simply did not exist to facilitate such ‘Solidarity Lanes’.

The minister of agriculture Henryk Kowalczyk advised farmers to withhold grain from the market / Image: U.S. Department of Agriculture Flickr

It was followed on 30 May by the more concrete step of simply removing tariffs on Ukrainian agricultural products, throwing open the door to the common market. But without the infrastructure to facilitate the transit of this huge quantity of grain, it has simply glutted the local markets of these border states.

The EU’s measures – purportedly aimed at supporting Ukraine in the war – immediately set grain-producing border nations like Poland, Bulgaria and Hungary on a collision course with other European nations that are further removed from the influx of produce. 

Last summer, alarm struck the Polish farmers. Prime Minister Morawiecki and his government were at pains to reassure this crucial sector of the country’s economy. The minister of agriculture Henryk Kowalczyk even advised farmers, on 22 June, to withhold grain from the market, reassuring them that prices would remain high: “I would absolutely appeal for calm… grain will certainly not be cheaper in the next six months.”

Meanwhile, the price of milling wheat fell from 1443 PLN per tonne in July to 1319 PLN in December, and rapeseed prices fell from 3,117 PLN to 2,525 PLN. This was in line with global trends, with Matif futures for milling wheat also falling further to nearly €300 per tonne in December, and as little as €248 in March. By March 2023 there were places, especially in Eastern Poland, where the prices for wheat fell to as low as 700 PLN (€153) per tonne. 

Not unexpectedly, Kowalczyk has since resigned from his ministry (albeit keeping his comfortable office as deputy prime minister), but on the way out, he pointed his finger at the European Commission for failing to fulfil its promises on the ‘Solidarity Lanes’, which were supposedly intended to facilitate transit of grain to places in Africa and Middle East.

Reality

The initial plan for ‘Solidarity Lanes’ immediately foundered because of antiquated infrastructure. There are only three main rail lines connecting Ukraine and Poland, all of which require intermediate transfer from Ukrainian narrow-gauge to Polish wide-gauge tracks. Polish transit ports in Gdansk, Gdynia, Szczecin are estimated to at best have a one million tonne transit capacity for grain per month. In actuality, this is closer to 500-700,000 tonnes, with peak capacity last year reaching 670,000 tonnes in July.

There is currently believed to be an excess grain in Poland of at least 5 million tonnes of wheat, and 700,000 tonnes of rapeseed. The next harvest is in three months. Even if Brussels and Warsaw make this their sole priority, under the most favourable circumstances the local market will end up with millions of tonnes in excess, on top of which the next harvest will be added.

This is assuming that the EU actually finds a buyer for all this grain. Even with the present depressed market prices, countries in greatest need of these food commodities, like those in the Horn of Africa, are caught up in an endless debt spiral. With debt maintenance servicing taking the lion’s share of these countries’ budgets, expensive EU grain is simply unaffordable.

Transporting all this mass of grain from Eastern Europe, either through Baltic ports in the North or through Danube riverways in the South is simply not ‘cost-effective’. In fact, Spain considered subsidising transit of feed crops across the continent, but found it was much cheaper to import from Latin America instead!

As far as the sellers go, tonnes of grains from Ukraine already turned great profits in places like eastern Poland, sometimes cutting the market price in half in the process. Why bother thinking about places like Egypt or Ethiopia if you can make money next door?

On top of this, there are reports of several scandals involving organised crime groups having taken hold of large quantities of so-called “technical grains” to sell them on as food grade. Technical grain is a legal category given to imports that did not go through proper veterinary and biological control at the border, and are legally supposed to be used only for non-food purposes like serving as biofuel, furniture particleboard, or industrial wheat starch and glues.

On 11 April, the Public Prosecutor’s office in Zamosc opened the investigation into how thousands of tonnes of such Ukrainian grain were sold to the major flour manufacturers in the country under the guise of Polish food-grade wheat. As much as 1.5 million PLN was reaped from this single deal. Other reports keep popping up – in another case up to 66,000 tonnes of technical grain was sold as a feed for pigs.

In short, the anarchy of the market, combined with bureaucratic attempts to extend a lifeline to the Ukrainian economy, has plunged grain markets in eastern Europe into complete chaos.

Adding fuel to the fire

The utter chaos on the market led Wiktor Szmulewicz – the leader of the National Council of Farmers Associations (Krajowa Rada Izb Rolniczych) – to propose the excess grain should be simply burned.

If the EU continues with its open door policy towards Ukraine, as it intends, Poland will face a deluge of grain by the time the harvest comes around / Image: Ermell, Wikimedia Commons

“I know that talking about burning grain today, especially for the faithful, practising, and people respectful of grain and bread, is incomprehensible,” he said. Still, with all due respect to the grain, under the insane logic of the market, destroying perfectly good grain has become the most logical course!

Along with burning grain, soon enough Poland may end up having to burn money itself. Anxious to maintain its ratings in the upcoming elections, the Law and Justice party (PiS) already promised to subsidise every tonne of grain, artificially raising prices up to 1,400 PLN per tonne.

This is a handbook example of kicking the can down the road. If the EU continues with its open door policy towards Ukraine, as it intends, Poland will face a deluge of grain by the time the harvest comes around. With the subsidies being handed out not per hectare of crop but per tonne of ready-harvest grain, control over where the money will go will be difficult to administer. Organised crime will be rubbing its hands at the prospect of another bonanza.

World in chaos

This is only one example of the chronic instability that the crisis of capitalism is creating everywhere. Markets have been shunted by one thing after another: trade wars, COVID-19, disruption to supply chains, inflation, the war in Ukraine, etc. Each new shock in turn produces new ripples and new shocks.

Volatility leads to an almost permanent turbulence, with commodity price spikes and dips, with oversupply in one place and shortages in another. Representatives of the ruling class find themselves running from pillar to post, trying to plug one hole after another to keep the situation under control. But as each national gang of capitalists strives to ‘solve’ the problems that come their way by putting their own interests first. The ‘unity’ of the likes of the EU is each time put to ever-more severe tests. And each hole plugged up only leads to new ones opening up elsewhere.

Marxists have long pointed out that these are not anomalies. The markets are behaving exactly as they’re supposed to.

In the meantime, billions of people are left to suffer: it is estimated that between 5-13 people die of hunger every minute – that’s 7,745-19,701 people per day. Meanwhile, there are millions of tonnes of edible grain stuck in Poland, where only the criminal elements seem to know what to do with it.

Pathetic “calls upon market players” to go against their own interests offer no way out. Only with the complete expropriation without compensation of all monopolies and multinationals that control the allocation of resources based on profit, and the introduction of a planned economy based on needs and not profit, can we end this madness.