How export quotas to the EU affect Ukrainian agricultural exports and Europeans themselves

The recent statement by Polish logistics companies highlighting significant losses being suffered by Polish carriers due to the lack of grain from Ukraine confirms the obvious: the European Union’s decision to eliminate trade preferences for our agricultural exports, along with the restrictions on merchandise imports from Ukraine imposed by some of neighboring countries negatively affect all participants in trade. As a result, instead of expanding together into third markets by combining Ukraine’s and European Union’s capacities and competitive advantages, each of the partners has to count its losses. Our producers and traders are worried about what to do with surpluses products, which, due to export quotas and high customs duties, are losing competitiveness on the EU market, while food processing and logistics companies in Europe are worried about what to do with the shortage of agricultural raw materials, and local consumers are worried about how this will affect food prices.

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QUOTAS ARE ON THE BRINK OF EXHAUSTION: UKRAINIAN FARMERS ARE CALCULATING POTENTIAL LOSSES

In connection with the end of the “trade visa waiver regime” (trade liberalization measures/TLMs introduced for Ukrainian exports after the start of full-scale Russian invasion) on June 6, the European Union has reinstated import quotas for 36 product categories, under Article 29 of the Ukraine-EU Association Agreement. While since 2022, tariff quotas have not been applied at all, and after mass protests by European (in particular, Polish) farmers in 2024, the quotas were reinstated for products from Ukraine “sensitive” for them – sugar, eggs, poultry meat, corn, oats, cereals and honey. Moreover, in 2023, several neighboring countries, despite agreed European decisions, unilaterally limited the supply of Ukrainian grain to their markets, and also began to aggressively obstruct it being transshipped through their respective territories.

Meanwhile, due to TLMs, Ukrainian farmers and traders earned an additional $5 billion per year on sales to Europe, which is critically important as Russia’s all-out invasion of Ukraine has been raging.

Of course, this does not mean that now that the “trade visa waiver regime” is not in effect anymore we are going to lose all this money. After all, we continue to supply some products to the European Union within quotas. Some (for example, honey) are profitable to sell even with duties, for some (importantly, corn) the EU has set a zero customs duty. Besides, the Ukrainian side has negotiated and managed to agree on full liberalization of trade in some products (whole and fermented milk, mushrooms, grape juice), and for some products (butter, non-fat dry milk, malt, gluten, oats and barley), maximum quotas have been achieved…

But, of course, the partners’ refusal to extend the validity of TLMs will not be completely painless for Ukrainian agricultural exports. Especially since some countries (in particular, Poland) have not yet abolished additional restrictions on the import and transshipment of Ukrainian agricultural raw materials. And the quotas for some individual product categories s are quite modest (if compared to the volumes of supplies in recent years), set at 583,330 tons for wheat, flour and meslin, 379,167 tons for corn, 204,167 tons for barley, 52,511 tons for poultry meat, 7,000 tons for beef, 3,500 tons for eggs, 5,833 tons for milk and cream, 2,917 tons for dry milk, and 1,750 tons for butter.

The National Bank of Ukraine (NBU) has estimated that, due to the elimination of trade preferences by the European Union, Ukraine will be short of $700 million in revenue by the end of the year.

Фото Serhiy Nikolaichuk

“We took into account our export loss due to lower harvests, and also assessed the effect from the termination of trade preferences the European Union introduced from 2022. We considered this factor as a risk (in the NBU’s preliminary macroeconomic forecast published in April, — ed.), but given that no long-term solution has been found, there will be certain losses for us, unfortunately. We are expecting approximately $700 million in losses this year. This is taking into account the fact that a significant portion of exports to Europe will be kept at the current level, while part of the exports may be redirected to third markets, but these products will become less competitive because of the duties on exports outside of the quotas. Our estimates also take into account the potential redirection of part of Ukrainian exports to third markets,” Serhiy Nikolaychuk explains.

The losses caused by the elimination of preferential trade regime with the European Union were one of the factors that influenced the NBU to downgrade its GDP growth estimate for 2025 to 2.1% from 3.1% forecast in April.

There are even worse scenarios. For example, according to research reports from the Institute for Economic Studies and Berlin Economics (released before the final decision on new export quotas had been made), Ukraine may face an annual export loss of up to USD 1.5 billion. Besides, the national budget will be short of USD 89 million due to a decrease in income tax revenues.

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EUROPEAN MARKET FOR UKRAINIAN AGRICULTURAL EXPORTS AND SEARCH FOR ALTERNATIVE MARKETS

Let us recall that Ukraine exported agricultural produce worth USD 24.6 billion last year, the second highest in its history, with over half of the proceeds coming from the European Union. Particularly last year Ukrainian farmers and traders sold USD 2.3 billion worth of corn to Europe, which is almost twice as much as in 2022, USD 1.1. billion worth of wheat (22 times as much as in 2022), USD 392 million worth of poultry products (twice as much as 2022), USD 204 million worth of sugar (over 18 times as much as in 2022, the first year of the Great War).

Фото Andriy Shevhyshyn

However, the results of this summer are not encouraging so far. In June, for example, (when TLMs were still in effect in first five days of the month), Ukraine’s goods and services trade deficit hit historic high at USD 5.075 billion, including USD 4.388 billion goods trade deficit, says financial analyst Andriy Shevchyshyn.

“The half-year deficit has amounted to USD 24.5 billion. What did cause the deficit to grow? The “tariff visa waiver” regime with the EU expired in June, resulting in agricultural exports, already weak, to fall even lower (shrinking by 4.8% against the previous year), while mineral products/raw materials exports collapsed by 14.9%. And this at the time when goods imports grew by staggering 26% since April 2024, Shevchyshyn explains.

Фото Denys Marchuk

According to Denys Marchuk, the deputy chair of the Ukrainian Nationwide Agrarian Council (UNAC), although not much time has passed since June 6, when new quotas were introduced, and supplies within the quotas are currently going quite rhythmically, we can already talk about a reduction in the presence of Ukrainian agricultural produce on the European market.

“For example, we exported 4.7 million tons of wheat to Europe last year. Now this volume has have been limited to 1.3 million tons. Will this affect food processing businesses in Italy, Spane, or Germany? I think so. Now they have to look for an alternative. And this despite the fact that conditions were favorable for Ukrainian feed grain and corn exports both in terms of quality and logistics,” the expert said in a comment to Ukrinform.

Quite clearly, in the future, with Ukrainian farmers and traders tapping into markets other than Europe, the situation will hopefully come back to normal. Take sugar, for example. After last year’s tightening of restrictive measures against our sweet products in the EU, Ukrainian producers were able to quickly diversify their exports to other markets, with the European Union market currently accounting for only 10 percent of Ukraine’s sugar exports.

The process is ongoing to redirect Ukrainian grain and seed oil exports to markets in Asia, Africa, and the Middle East, and work is going on on other product categories. But it takes quite a time to occupy niches in new markets. And there will be more losses (at least temporary) incurred in connection with the need to build a new logistics network and reduce prices to attract new consumers…

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THE OTHER SIDE OF EUROPEAN QUOTAS: LOSSES FOR OWN BUSINESSES

Meanwhile, logistics industries (transport companies, ports, transshipment terminals) in Poland are sounding the alarm as they stand idle without Ukrainian grain.

Laura Hołowacz, President of the logistics group CSL, criticized the current restrictions on the transit of Ukrainian agricultural products through Poland, stressing that the situation harms the Polish economy.

“We understand that the inflow of Ukrainian raw materials, agricultural products, and grain into the Polish market is undesirable and should not have happened. But we must distinguish between two things: permission for transit — which brings profits to Polish ports and transshipment terminals — and permission for placing goods on the domestic market. We believe that blocking the transshipment of Ukrainian goods in Poland is detrimental to our economy,” Hołowacz said.

In a press release, CSL highlighted a persistent issue in Poland — a significant decline in imports, particularly the transit of Ukrainian grain. This situation has led to high operating costs and the threat of layoffs.

“Unfortunately, we observe that imports, especially of grain from Ukraine, have not been carried out for over a year. Polish terminals, seemingly all of them, are standing idle while incurring high maintenance costs. Meanwhile, countries like Romania, Germany, and Turkey handle large volumes of Ukrainian grain in their ports. They have managed to organize logistics in a way that allows them to work with raw materials without allowing them onto their domestic markets. In Poland, the situation has been neglected. As a result, transport companies, ports, and transshipment terminals are suffering,” Ms. Hołowacz emphasized.

She also stressed that the transit of Ukrainian cargo through Poland is legal and supervised by national authorities.

“There is nothing wrong with the transit itself — it fully complies with the law. But we are losing huge amounts of money on rail transport, transshipment, port handling, and logistics. Our warehouses are empty, while other countries earn revenue from providing these services,” she noted.

CSL is calling for the development of transit routes through Poland to ensure that as much cargo as possible passes through Polish terminals on its way to third countries.

From a pragmatic point of view, this is a recognition of a mistake that the authorities of the neighboring country had previously made. But it is another matter entirely from a political point of view. The rhetoric of this statement doesn’t really favor us, because these words are based on Polish prejudices about the “harmfulness” of Ukrainian agricultural produce. “The flow of Ukrainian agricultural produce… should never happen”… This raises doubt about Europe being one of the most liberal, open and competitive markets in the world, doesn’t it?

“It is only natural that Europeans are defending their own interests in order to protect their farmers and their market. But objectively, there is no dominance of Ukrainian products in Europe. The only fear of European farmers is the European integration processes related to Ukraine. After all, against the background of changes in the European Union’s common agricultural policy that include a partial reduction in agricultural subsidies by 2027, Ukraine’s accession the EU in the foreseeable future and its presence on the European market create additional risks for them where it comes to competition for consumers,” explains Denys Marchuk.

He believes that Ukraine’s other neighbors could become an example for Poland to emulate. For example, Romania continues to earn quite well from the export of Ukrainian products, while at the same time restricting their access to its own domestic market.

“That being said, the markets in Romania, Bulgaria or Poland, objectively, are of little interest to us, because these countries themselves produce significant amounts of grain crops. But they are very important for us as transit routes, especially from the point of view of the possibility of diversifying the risks associated with sea export. And the Poles themselves have driven themselves into a situation from which they are now suffering,” comments the deputy head of the UNAC.

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EUROPEAN-STYLE SELECTIVITY: SUPPORT FOR FARMING BUT NOT FOR PROCESSING

The Deputy head of the UNAC additionally points out that, even at the stage of discussing the possibility of banning imports of agricultural produce from Ukraine, Polish milk and meat processors spoke out categorically against such radical decisions. But the country’s government sided with farmers, introducing tough restrictions. Though for Polish and other European processors, imports from Ukraine are an important source of cheap and relatively high-quality raw materials. The EU countries with established agricultural products processing industries can replenish their budgets thanks to the added value formed in this way with minimal risks (for example, there is no need to worry about the weather impact on their own harvest).

For example, many oil extraction industries in Europe sell products processed from Ukrainian-supplied technical raw materials not only to the EU markets, but also around the world. Fodder from Ukraine has become popular among livestock farmers in Europe, most particularly in Spain. That country — one of the top suppliers of livestock products to the European Union market– cannot produce sufficient amounts of fodder and therefore has to rely on foreign supplies, both due to climatic conditions and the “disproportionate” scale of the industry.

Let’s take as an example the data on the balance of supply and demand on the European soybean market. This year, Europe is counting on a high domestic harvest of this crop, which is forecast at 3 million tons. At the same time, domestic consumption exceeds this figure by 12–13 times! This gap in demand will have to be filled by imports. The import from Ukraine looks like one of the most logical options to compensate for this shortage.

Another thing is that this year we are forecasting a relatively poor harvest, so Ukraine is resorting to additional precautionary measures, including an export duty on soybeans and rapeseed. From the point of view of the interests of our producers and exporters, not everything is clear in this, and this is the topic of a separate report by Ukrinform.

Denys Marchuk reminds that the legislation that imposes export duties on soybeans and rapeseed has been adopted by parliament and is now awaiting President Volodymyr Zelensky’s signature to become law.

“But we have already seen the situation with rapeseed: shortly after the law was enacted, the domestic market price for this product immediately dropped to USD 70 per ton, which is very bad for producers. Now prices seem to be returning to an acceptable level. We will see what will happen to soybeans as the season for this crop is yet to come,” says the agricultural expert.

Ukrainian dairy products are in high demand in the European market. One of the signs of this is that less than two months after the elimination of TLMs, Ukraine has almost fully exhausted the quotas for major diary products, primarily butter and powdered milk delivered for export to the EU.

Ukrainian dairy producers are on the brink of fully utilizing the existing export quotas to the European Union, which may lead to a temporary halt in dairy product supplies to the European market.

At the beginning of July, Ukraine and the EU reached an agreement to increase export quotas for most dairy products. Additionally, a partial liberalization of trade is planned for non-fat dry milk and fermented dairy products. However, the introduction of new conditions is only possible after the European Parliament adopts the corresponding decision and implements the necessary technical regulations.

Exporting dairy products outside the established quotas is economically unfeasible due to high customs duties. At the same time, the domestic market in Ukraine is unable to fully absorb the surplus production.

Following the news of a possible increase in export quotas for dairy products to the EU, Ukrainian producers have already begun raising prices, anticipating an increase in demand for raw materials. Since the beginning of July, prices for raw milk in Ukraine have risen by 4–4.5%. It is noted that prior to this, prices remained stable at 16.2–16.3 UAH per liter from the second half of April to the second half of July.

Further price increases for dairy raw materials will depend on the official decision of the European Parliament regarding the increase in quotas, as well as the level of dairy product consumption within the country. It is forecasted that consumption will remain at the current level in August, with potential growth only possible at the beginning of autumn, according to estimates by ArgoReview.

 If dairy product exports to the EU remain blocked in August, there may be a price rollback in the domestic market and even panic among producers.

Moreover, any market instability could lead to financial losses for some market participants and result in payment delays for others.

According to media reports, the European Parliament is mulling increased export quotas for diary products from Ukraine. After all, Ukrainian producers have recently “hooked” European consumers and processors on their high-quality and relatively cheap products. In the first five months of 2025, while the quotas were no longer in effect, imports of these products to the EU market surged three times from last year, and more than five times from the previous year.

Experts predict similar development in some other segments of the European market, where Ukrainian agricultural products successfully compete with local and third-country rivals. After all, the European Commission has introduced new quotas calculated based on the volume of exports to the European market from Ukraine as it was in 2016. It is clear that even before the war, such quota frameworks were tight for most Ukrainian processed agricultural products and raw materials. And what to speak of current times where a significant share of Ukrainian agricultural exports is supplied or transported through Europe.

The good “no news” for Ukrainian producers and European processors is that the EU has granted zero-duty access to corn imports. That is, quoting corn imports, it can be said, is purely technical.

“I think that Europeans will continue to actively buy corn to feed livestock. We will still have to see what amount of this raw material will be available on the market this year, which depends on the harvest. Last year, Ukraine geared 50% of its corn harvest or a little more than 10 million tons to exports to the EU market,” Marchuk says.

And finally, about the interest of ordinary European consumers. According to experts, many consumers in the European Union have come to love Ukrainian food products. Additionally, several million of our compatriots who are accustomed to their native food now live in Europe. European retail chains have begun to actively work with Ukraine. The new restrictions disregard the interests of both retail chains and consumers.

Hence the analysts’ expectations that the Ukrainian and European sides will not wait until next year, but will continue to search for mutually beneficial compromises right now. Obviously enough, the TLM regime will be impossible to renew in the coming months. But the option of increasing export quotas and expanding the list of products that enjoy preferential treatment on the EU market is a completely realistic option. As is the elimination of purely politically motivated decisions by individual partner states to ban the import and transit of Ukrainian agricultural products, adopted without account taken of the economic interests of a significant part of their population and businesses.

Vladyslav Obukh, Kyiv

Headline photo via Marco/pexels