Boycott costs the EU 5 billion per year
The EU proposed to supply additional funds for the promotion of boycotted products, which will have to be used to gain access to new markets. Statistics show that the boycott is costing the Union a total of 5 billion Euro per year. Spanish melon growers would also be eligible for the compensation and Czech growers are pleased with the increase in the country’s school budget for vegetables. Russian customs intercepted a considerable consignment of fruit and vegetables from Poland. The trucks had to turn around. In Kaliningrad, the market is slightly under pressure as import products become available; additionally, Russia continues to look to Asia as a supplier. India sees opportunities and wants to invest in a stronger relationship between both countries.
Yesterday the NATO member countries met in Wales, with the crisis in Ukraine on the agenda. Regarding the cease-fire that Ukraine announced a couple of days ago, Putin says he is no party to the conflict, so he cannot agree to a cease-fire; however, he presented a seven-point plan that should lead to a solution and which is to be discussed between Ukraine and the separatists in Minsk.
EU: Cost 5 billion, 30 million additional budget
EU Commissioner for Agriculture, Dacian Ciolos, announced that the EU will supply 30 million Euro up front for promotional campaigns in response to the Russian boycott. The sum will be used to find alternative markets and can be increased to up to 60 million Euro. The money comes on top of the CAP budget of 60 million Euro for 2015, half of which is funded by the EU. Consequently, Ciolos affirms, up to 120 million Euro may be invested; 60 million from EU funds and another 60 million from private parties. 29% of the EU’s fruit and vegetable exports went to Russia, for cheese and butter that was 33% and 28% respectively. The money comes on top of the measures already announced and will be available in 2015.
Spanish melon prices down 55%
Since the start of Russia’s boycott, export melon and watermelon prices have dropped sharply, between 40 and 55%; this is caused by the loss of the Russian market, as well as by oversupply. Overall fruit prices have dropped because of the boycott, and as a result consumers have access to a wide choice of cheap fruit.
Recently, Proexport informed the Government about this situation. The organisation wants the Ministry to urge the European Commission to grant melon growers access to the compensations. The authorities in Murcia and a group of international organisations support the proposal.
According to estimates by growers in Murcia, Spanish melon and watermelon exports in the last week of August reached 65,000 tonnes and 80,000 tonnes respectively. Proexport calculated a loss of 20.5 million for melon growers and 4.4 million for watermelons. The organisation does not understand why melon growers are not eligible for compensations, as they are clearly affected and the season is not over yet.
Spain is the EU’s largest melon exporter. In 2013, the country exported 410,537 tonnes of melons, 48% of which were shipped by Murcia. For watermelons, export volumes reached 542,243 tonnes, with Murcia’s produce accounting for 27% of the total. Based on these figures, Murcia is considered to be the most affected by the situation.
Russian apple prices rise
Since 2010, apple prices in Russia have steadily declined. In 2012, after the country joined the World Trade Organisation (WTO), the downward trend strengthened. In 2010-2011, the price stood at $ 1.43 per kilo; in 2013-21014, it dropped to 89 cents per kilo. The main reason for this was the WHO’s requirement to reduce taxes. Half of the apple imports came from Poland and the domestic production covered only 20% of the market, thus having a limited effect on prices.
Due to the boycott of European and Moldovan apples, this downward trend has been broken and prices are expected to rise. How much they will increase will also depend on the volume of apples from Poland and Moldova which will manage to enter Russia through other countries.
Russian frozen products
According to BusinesStat, the volume of frozen products sold in Russia has increased by 36% between 2009-13. In 2013, sales reached 315,000 tonnes. For the coming years, up to 2018, an average annual growth of 5% is expected. Compared to 2013, this would entail a 25% increase in sales by 2018.
In 2009-13, the retail sector was responsible for 60.3% of these sales; the industry sold an average of 14.4% and the catering sector accounted for the remaining 25.3%. It remains to be seen whether these growth rates will be achieved. The frozen food market is largely dependent on imports; 74% in 2013.
Russian retail was growing before the boycott
The Russian retail in the Nizhny Novgorod region, east of Moscow, was growing before the boycott. In 2013, the retail sector in this region had a turnover of 202 billion Rouble ($ 4 billion) from foods; an increase of 8% compared to 2012.
Throughout Russia, the share of food sales by retailers is of 25.9%, with an increase of 8% over the year. In July 2014, retail chains accounted for 24.1% of total food sales, compared to 22.9% a year earlier. The largest chains in the region are X5, Spar and Seven. The boycott could change the market.
Mushrooms and limes considerably more expensive
In the Rostov-on-Don region, in the south near the Black Sea, prices for some products have increased, including those of mushrooms, peaches, limes, kiwis, fish, turkey and cheese. Prices for mushrooms increased from 120 to 200 Rouble per kilo (from 2.40 to 4 Euro). Most mushrooms were imported from Poland.
For other products, prices in August remained stable, and for some seasonal products, such as potatoes, onions, carrots and apples, prices even dropped slightly, In general, food prices in the region have increased by 7.8% and the inflation over this period was 6%.
Yakuti invests in production and storage
In the Russian republic of Yakuti, a large province in the northeast, a five-year plan has been adopted for the agro-industry, which will lead to an expansion of the storage and processing facilities for local agricultural products. By 2018, the new facilities should be operational in all areas with an annual harvest of 2,000 tonnes of vegetables and potatoes.
India expanding trade relations with Russia
The Indian ambassador in Russia said that Russia is seen as a major trading partner and that the country intends to invest in a long-term cooperation. According to the ambassador, trade between large countries should not be limited to a select group of products. Indian growers would like to export to Russia and the country has a lot to offer. As the demand for agricultural products in Russia increases, they see many opportunities for export.
The biggest challenge lies in logistics, as goods must travel a distance of over 4,000 km. Both countries are investing in collaboration with a number of other international partners in the development of a new transport route. Additionally, India is interested in deepening economic cooperation with the customs union, and even a free trade area could be considered.
Chile supplying nuts and prunes
According to Andres Rodriguez, representative of the Chilean walnuts and prunes organisations, there are only two obstacles for export: “the willingness of the Russians to pay international prices and the availability of the products.” Rodriguez added that Russia has always been an important market for Chilean plums, accounting for 15% of the exports. In the current situation, he expects demand from Russia to increase; however, prices are currently high and the Russian Rouble is weak. Regarding nuts, it is believed that the ban on American almonds will boost the export of Chilean nuts.
Asia, main suppliers of fruit and vegetables for Russia?
Russia aims to replace American and European food imports with products from South America and Asia. South-east Asian countries are particularly encouraged to export exotic gourmet and other food products to Russia. The Minister of Economic Development, Alexey Ulyukayev, made this proposal to the ASEAN countries. According to Ulyukayev, the country needs especially fresh fruits and vegetables.
Alexey Kanevsky, President of the Committee of Economic Affairs in Moscow, believes that Asian fruit and vegetables have a very different taste to that Russians are accustomed to. At the moment, this Asian produce is still very focused on a specific part of the Russian market. Apples, oranges and bananas: no problem; but passion fruit and Indian jackfruit would entail problems to adapt for the majority of Russian consumers. It should be emphasised that Asian apples, pears, raisins, grapes and cherries could be easily sold in Russia.
Russia-Georgia highway closed
The Verkhny Lars mountain pass has suffered damages; as a result, the road will have to be closed for 10 to 12 days. The Armenian Minister of Agriculture, Sergo Karapetyan, reported on Friday, 22 August, that the incident would not hinder the export of fresh fruits and vegetables.
Czech growers welcome additional budget
The European Commission has increased the budget for school fruit programmes in the Czech Republic from 5.2 million Euro last year to 6.1 million. The fruit is made available to a large group of children from pre-school to elementary school. Czech producers affected by the Russian boycott see this as a positive development, as the Czech Republic can suffer losses of up to 50 million Euro.
Kaliningrad finds new suppliers
Russia’s Kaliningrad region was hit hard by the boycott. The region is enclosed by Europe and therefore completely dependent on imports. After the news about rising prices and shortages, the first fruits and vegetables from Azerbaijan, Uzbekistan, Macedonia, Belarus, Serbia, Argentina and Costa Rica have arrived in the region. Besides this, the region relies on its own production and imports from the Russian regions of Rostov and Krasnodar.
Potatoes from Gurievsky, Russia, cost 11 Rouble (22 cents) per kilo; Belarusian tomatoes reach 30 Rouble (60 cents); aubergines from the Russian Volgograd cost 25 Rouble (50 cents) and peaches from Azerbaijan reach 65 Rouble (1.30 Euro).
Russia intercepted Polish produce
The Russian authorities intercepted a total of 93 tonnes of fruit and vegetables from Poland that the country was smuggling through Belarus. Eleven trucks, including apples, carrots, potatoes and plums, were intercepted on the Russian highways M-1 and M-13; the route Minsk-Moscow and Bryansk-Gomel, respectively. Poland was identified as the country of origin and the trucks had to return to Belarus.
Publication date: 9/5/2014
Author: Rudolf Mulderij