Opportunity knocks: How to restore trust between the Ukrainian agricultural sector and Poland using new technologies of cargo flows

Yuri Shchuklin, logistics expert, adviser on railway logistics to the UCAB Presidium, Head of the "Digital Ways of Freedom” Association 

 

Since the beginning of the full-scale war, Ukraine has radically re-oriented its logistical flows from Southern ports to Western border crossings, through Poland in particular, this country having become the main transit route for Ukrainian exports. I myself had brought to Poland, as early as April 2022, the equipment that allows to reload grain from wide rail tracks to narrow tracks, and organized the flow of Ukrainian grain to the ports of Szczecin and Świnoujście, and  it went farther on ships to the Baltic states.  Accordingly, other Ukrainian businesses, due to Poland’s geographical location and that country’s infrastructure, found their way across the Baltic Sea to their traditional markets, while discovering routes by land to new markets in Germany, Spain, Portugal.  However, with time, dissatisfaction grew in Polish society because of competition with Ukrainian agricultural producers which led to border blockades, political tensions, as well as to the introduction of temporary bans on transit and export from Ukraine.   

Despite all the events of this story, going on since April 2023, the chance to resolve contradictions is still there.  Moreover, Poland’s presidency in the Council of Europe provides a window of opportunities for re-thinking Ukraine’s role in the European Union’s logistics system. Active and pragmatic advocates for the renewal and expansion of trade relations with Ukraine are those Polish businesses which emerged or got an impetus for their development due to the sharp increase of logistical and commercial interaction between our countries in 2022.   

The XIII Fracht Intermodal Transport Forum (Sopot, 26-27 March), organized by the Polish-Ukrainian Industrial Chamber, saw significant attention to the topic of negative effects for the Polish business of the decrease in amounts of Ukrainian cargo flows. Polish companies which own infrastructure and process cargo have lost their income from working with Ukrainian cargo  and became aware of the fact that these losses were not compensated for by Polish or any other shipments. Accordingly, the content and tone of the assessment of the influence Ukrainian shipments of Polish economy have changed. The Chairperson of the Polish-Ukrainian Industrial Chamber, Jacek Piechota, voices the need to restore trust to Poland as a transit country.  Meanwhile, Polish companies which used to work with Ukrainian cargo and lost their income because of the restrictions, begin voicing requests to their government to remove barriers for the transit of Ukrainian shipments as the return of these could benefit both development and additional opportunities. 

However, the problem of Polish farmers, economic competition and its social-and-political aftereffects has not disappeared from the agenda. Polish farmers, whose production is often less efficient than that of Ukrainian farmers because of a lesser scale and higher expenditure, are apprehensive that the influx of cheap Ukrainian agricultural produce, in particular, of grain, will push them out of the domestic market and will lower prices, undermining their competitiveness.  For the Polish government, the problem is of a wider contest: support for farmers if not just an economic but also a social priority, as the agrarian sector provides for employment and stability in rural areas. At the same time, Poland wants to retain the role of a transit hub, collecting profits from the infrastructure, like the railways and the ports.  This creates a dilemma: to allow transit and risk the farmers’ dissatisfaction or to continue to restrict the transit, losing economic benefits.

It is important to understand that because of the lack of modern tools of monitoring cargo flows Polish officials and farmers cannot see the wider picture. On the Ukrainian side of the border the class of small- and medium-size agrarian producers has emerged who are not competitors to Polish farmers as their activity is oriented towards direct delivery to European consumers.  These farms, while adapting to war conditions, have organized their own supply channels in the EU having found niche buyers, processors or end purchasers who value the Ukrainians’ produce for its quality. Because of the small scale of production, they do not create surplus offer on the Polish market, while their export through Poland is of transit, not local, nature, which removes a direct threat to Polish agrarians.    

This class of producers has emerged out of the necessity to survive after the full-scale war, when the traditional patterns of selling agricultural produce through large-scale traders and the Black Sea ports had become unavailable.  Small and medium-sized farms, often from Ukraine’s Western regions, invested into their own logistics, for instance, in building narrow-track terminals close to the borders, and learned to conclude contracts with European partners independently.  Their produce, like niche cultures or organic foods, meets specific needs  of the EU market, not the mass demand which could be met by large Ukrainian agricultural holdings: this is their principal difference compared to their competitors who cause concern in Poland. This export model does not harm but does benefit the Poles: the transit of these cargos via Polish infrastructure, railways and the ports of Szczecin and Swinoujscie, generates stable income for participating enterprises, while not creating risks for local famers. These farms do not “litter” the Polish market with cheap produce but direct it farther, to Spain, Germany, or the Baltic states, which makes them ideal partners for Poland’s transit role. Thus, not only they integrate into the European economy but also demonstrate the model of cooperation, beneficial for both countries. This model could be expanded (and the volume of cargo, respectively, increased) if the Ukrainian farmers had an understandable system of entering external markets without intermediaries and re-sellers.   

So, the helpful background is there: Poland has already experienced economic loss from the embargo on Ukrainian shipments and is prepared to seek a compromise, while Ukraine, on the other hand, needs a stable transit for its export and its future integration into Europe. The main obstacle is that Poland, as the main transit gate, does not have an opportunity to foresee the volume and directions of Ukrainian exports.  

The solution is available, though: the transparent technological planning. It is possible to restore mutual trust by switching to the responsible early planning of logistics and trade, using modern digital solutions. This means:    

• Creating information environment where it is possible to plan and agree the volumes of production, export plans, and logistics capacities for a year or two in advance;
• Introducing a digital application for Ukrainian farmers, simple and understandable, like the ticket-purchasing applications, in order to deal with direct consumers of their produce in the EU without intermediaries;
• Monitoring the infrastructure and cargo flows in the real time in order to avert shocks and reloading.   

 

This system is beneficial to both sides: Poland will have controlled forecastable cargo flows, protection of its farmers by regulating the transit of produce, as well as an additional revenue from processing Ukrainian shipments, while Ukrainian small producers will be able to avoid a dependence on re-sellers, to find new markets, to grow niche cultures, and to sell their crops abroad according to futures contracts, and to become full-fledged participants in Europe’s economy.       

The infrastructural pre-conditions for this are already there. Part of Ukrainian producers are already integrated into the European economy: they are bringing their shipments to Baltic Sea ports by Polish railroads, they have experience, markets, and their own infrastructure next to the narrow rail tracks. They will not return to the old model dominated by traders and intermediaries. If all the Ukrainian farmers get the opportunity to sell their produce via the digital application, bypassing traders, essential changes will happen which will influence economic independence, profitability, and market prospects of this class of agricultural producers. 

Firstly, farmers will be able to directly sign contracts with European purchasers or processors, receiving a higher price for their produce, because the traders’ intermediary margin will go away, while traditionally the traders have dictated low purchasing prices. The digital application will simplify the process of drawing documents for export operations and logistics, from planning planting to contracting railway cars: at present, this requires hiring outside specialists which makes small farmers dependent on big players.  This will provide them with the ability to independently control the entire sales chain, raising their income.   

Secondly, the availability of the digital tool will widen the sales markets: instead of a limited circle of local traders who only buy mass cultures like maize or wheat, the farmers will have contacts with thousands of potential buyers in the EU, prepared to purchase niche or organic produce. They will be able to react to demand in a flexible manner, growing  what their customers need, not what intermediaries impose, which will expand the assortment of their produce and will raise its added value. For instance, instead of standard grain, they will be able to switch to niche beans and grain cultures prized in Europe.

Thirdly, the digital application will make the process transparent and forecastable: the farmers will know in advance how much and to whom they will sell, which will allow planning the crops and logistics for a year in advance, avoiding inactivity and losses. This will decrease their vulnerability to price fluctuations, often used by traders to their advantage, provide opportunities to sell their crops at forward contracts, build long-term relations with buyers, get more freedom in choosing their strategies, and do away with dependence on intermediaries, thus radically changing their role in Ukraine’s agricultural sector.   

It is high time to act. Until 1 July 2025, Poland will chair the EU Council. This is the window of opportunities to raise to the agenda the issue of integrating Ukrainian logistics into the European system and to do this on the basis of new digital technologies. 

 

It is necessary to:

• Create an inter-state working group;

• Adopt the methodology of taking Ukrainian agricultural shipments across the border;   

• Build the transparent system of administering and planning the logistics;   

• Bring to date the information on enterprises, production volumes, regions, and logistic capacities;   
• Use available IT solutions to launch a system of export planning. 

 

Ukraine’s integration into the European logistics system has already started. It should be done by joint planning, transparency, and technological openness. Poland can become our reliable ally. For this, we should start with concrete solutions in the format of a digital breakthrough in agricultural logistics.