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Russian Food Embargo a Big Blow for EU Producers

Russia's 'full embargo' against EU food will affect 10% of the EU's food exports. Meanwhile, the Russian people are deprived of fresh goods until the trade ban is lifted.

PARIS - Russia's embargo against food from the European Union will affect 10% of the EU's food exports and may cause a crisis of glut in Europe, industry experts said on Thursday.

The figures, at face value, mean that Russia's announcement on Thursday of a "full embargo" against EU food will deprive Russians of fresh goods in particular.

But it will also have a significant effect on many exporters who will now have to find new outlets and may lose markets to rivals in emerging countries.

European Union ministers are planning a meeting next week to "evaluate" the potential impact of the sanctions, said France's Agriculture Minister Stephane Le Foll.

The EU's ambassador to Russia, Vygaudas Usackas, said the bloc is also considering appealing to the World Trade Organization over the import ban.

Russia imports 35% of the food it consumes, and imports 10% of its needs worth 12 billion euros ($16 billion) a year from the European Union, official EU statistics show.

Among the 18 EU countries, Germany and the Netherlands are among its biggest suppliers.

Outside the EU, Brazil is a big supplier. Ukraine was also until it became embroiled in the conflict with Russia over eastern Ukraine, which lies behind the tit-for-tat trade sanctions.

Russia accounted for less than 1% of the U.S.'s agricultural exports last year at $1.2 billion, according to U.S. Department of Agriculture data.

The embargo will likely have the biggest impact on U.S. poultry exports to Russia, which were worth $310 million in 2013, nuts, worth $172 million, as well as shipments of soybeans and live animals, mainly cattle.

Vegetables on the Front Line

"Russia exports grains but is a big importer of fruit and vegetables and of processed food such as meat and milk products," the head of the main French farmers' union FNSEA, Xavier Beulin, said.

Experts say the EU product that Russians will miss most is vegetables, since Russia imports EU vegetables worth 770 million euros per year. Russian imports of EU wines and spirits amount to about 1.5 billion euros annually.

In the vegetable sector, Russia imports big quantities of EU apples, tomatoes and peaches, but the European market faces plentiful supply of these perishable goods owing to good production this year.

"Russian is shutting off imports but the products which no longer go for export are going to be offloaded in Europe and create a crisis situation," Beulin said.

The president of the French fruit producers' federation, Luc Barbier, said: "In 2012, Spain exported about 100,000 tons of fruit to Ukraine and Russia, and this is now going to arrive on the EU market."

Italy, Spain and France are already competing in a price war over nectarines and prices have collapsed, and the same "catastrophe" looks like engulfing the market for apples, he said.

French producers sent fruit worth nearly 26 million euros to Russia in 2012, he said.

"But this year, Poland, which exported a lot to Russia, is expecting a big crop, which will now arrive on the EU's internal market," Barbier said.

The world association of apple and pear producers, Wapa, said that Poland was by far the biggest producer of apples in the EU, with output expected to total 3.5 million tons this year, followed by Italy with 2.3 million tons and France with 1.5 million tons.

The biggest EU supplier of beef to Russia is Brazil by a long way, followed by other countries in Latin America and by North America, although US meat exports are now also under Russian embargo.

Sales of EU beef had already fallen sharply since 2013 to less than the equivalent of 50,000 tons of carcasses from 100,000 tons in 2011, the French Institute of beef producers said. Ostensibly, that is because of health reasons, said Guy Hermouet, at the French national beef federation.

Belgium, the Netherlands and Germany would be hit hardest in this sector, he said.

Norwegian Fish Caught in Uncertainty

Denmark and the Netherlands would suffer most in the dairy sector.

European exports of pig meat to Russia were already totally blocked by a Russian ban on January 29 owing to a risk of swine fever, on the basis of cases found in wild boar.

Barbier said that European producers now also ran a risk that competitors in Asia or Latin America would fill the gap and take away market share in Russia which EU industries would have difficulty winning back.

In Norway, which is not a member of the European Union, shares in companies raising salmon fell by eight to 11% on Thursday due to uncertainty about the outlook. Russia is one of the biggest markets in the world for salmon and the biggest for Norwegian fish products.

European grain prices also fell, but traders said this reflected mainly concern about the outlook for exports of wheat and corn from Ukraine, a leading exporter, set against concern about the effect of heavy rain on wheat fields in northwest France.

At Capital Economics in London, chief emerging markets economist Neil Shearing, commented that the impact of the Russian action was uncertain. Although some countries, notably Lithuania, could be hit hard, the overall impact on EU exports would be small.

"It seems likely that the biggest loser will be Russia itself," he said.

Anne Chaon, AFP

Copyright Agence France-Presse, 2014

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