EU’s duty-free measures drove growth in Ukraine's grain exports. What happens after they expire?

The war with Russia severely disrupted Ukraine's agricultural supplies, primarily due to the blockade of Black Sea ports, which were crucial for exporting grain and other farm products. This resulted in a significant decline in export volumes and a rise in transportation costs, adversely affecting both Ukrainian farmers and global food security. Black Sea grain (wheat and corn) export prices also reached a historical high in March 2022 amid supply concerns.

During this crisis, the EU extended its trade support to Ukraine by introducing autonomous trade measures (ATMs) in June 2022, allowing the latter to trade freely within the bloc. The ATMs removed four categories of tariff barriers that affected Ukrainian goods entering the EU market, covering nearly one-fifth of its exports to the EU. These measures proved very beneficial to the war-hit country in reviving its economy and continuing agricultural trade.

According to the Ukrainian agriculture ministry, the nation exported 48.99 million mt of grain and legume in MY 2022-23 against 48.35 million mt in the previous year, of which corn exports were 27 million mt, almost stable on year, and wheat 17 million mt, down 3% on year.

One prominent reason for the steady grain exports was the Black Sea Grain Initiative, an agreement between Russia and Ukraine, brokered by the United Nations and Turkey, aimed at ensuring the safe export of Ukrainian grain from Black Sea ports. However, the EU's support measures have been equally crucial in facilitating Ukraine's consistent exports during wartime. Furthermore, the EU extended its free trade measures for Ukraine twice, in June 2023 and June 2024.

As supply concerns eased, Black Sea grain export prices also came down to below pre-war levels. Ukrainian corn prices FOB Black Sea were at $240.5/mt on May 14, down $2.5/mt day over day and Ukrainian wheat 11.5% FOB Black Sea was at $237/mt, down $3/mt day over day, according to Platts, part of S&P Global Commodity Insights. Russian wheat 12.5% FOB Black Sea was assessed at $249/mt on May 14, up $2/mt day over day.

EU's share of Ukrainian grain imports rises

The EU is traditionally a key buyer of Ukrainian agricultural products, particularly grains, and its import volumes saw a jump since the EU-Ukraine free trade agreement was signed in June 2022.

According to the Directorate-General for Agriculture and Rural Development, EU corn imports from Ukraine surged by 84% year over year in the marketing year 2022-23 (July-June), while wheat inflows jumped over 1,600% and barley by 736%.

In the following years, too, the bloc's share of grain imports from its neighboring country remained significantly high compared to pre-war levels. Spain, Italy, the Netherlands and Poland remained the largest importers of Ukrainian grain in this period.

According to EC's latest crop observatory data, published on May 13, the EU's share of corn imports from Ukraine in MY 2024-25 was 57.1%, wheat 49.5% and barley 39.1%.

The EU also increased its imports of oilseeds such as rapeseed and sunflower oil from Ukraine in the past few years.

Farmers protest and emergency brake

The trade liberalization measures adversely impacted farmers within the EU, particularly those in countries neighboring Ukraine. Since its implementation, farmers in the bloc have been expressing their concerns over imports of Ukrainian goods, which are threatening their business.

In 2023-24, farmers in EU border states such as Poland, Slovakia, Romania, Bulgaria and Hungary carried out massive protests, which included blocking Ukraine's borders. They argued that an influx of Ukrainian grain being dumped into their markets has overwhelmed local storage, led to unfair competition, and pushed down prices for local food producers.

In response, the EC introduced safeguard measures in its extended free trade agreement with Ukraine for the June 6, 2024—June 5, 2025 period to protect EU farmers in case of market disruption. The revised ATMs also included an emergency brake for seven agricultural products, including corn, if their volumes exceed the average yearly imports recorded between July 1, 2021, and Dec. 31, 2023.

What will happen after ATMs expire?

The European Union will not extend its ATMs for Ukraine any further after they expire on June 5, 2025, the European Commission confirmed, stating that these measures were always intended to be temporary and could only be extended twice.

This means that the EU will reinstate quotas and import duties on Ukraine as the emergency trade deal ends in June.

The EU Agriculture Commissioner, Christophe Hansen, recently said that the commission is preparing a new system of tariff quotas, but "not at the same level" as allowed under the ATMs, local media reported.

Confirming the same, the EC spokesperson Olof Gill said a new trade mechanism is under consideration, which will replace ATMs.

"The Commission is committed to consultations with Ukraine under Article 29 of the EU-Ukraine Association Agreement to address reciprocal tariff liberalization," Gill said.

He emphasized that the ATMs will not be completely cancelled and all aspects of trade liberalization between Ukraine and the EU will be embedded in the Deep and Comprehensive Free Trade Area (DCFTA).

2025 crop outlook

The grains outlook for the marketing year 2025-26 is positive for both the EU and Ukraine. Commodity Insights analysts anticipate an increase in EU wheat production and exports compared to MY 2024-25, along with a rise in corn output and a slight uptick in imports.

In Ukraine, corn production and exports are expected to be higher than in the current marketing year, while the forecasts for wheat production and exports have been slightly adjusted downward for MY 2025-26.

EU-27 and Ukraine grain production and trade forecasts

Source: S&P Global Commodity Insights