European farmers feel Russian sanctions bite
08/08/2014 15:34
* Norwegian salmon prices seen falling 10 percent
* Dairy firms halt production destined for Russia
* Scottish mackerel farmers fear impact
By Sophie Walker
LONDON, Aug 8 (Reuters) - European dairy firms halted
production of cheese and butter destined for Russia and
Norwegian salmon prices fell, as a wide array of small fresh
food producers felt the first impact from Moscow's tit for tat
ban on their goods.
Russia stopped imports of most food from the West on
Thursday in retaliation for U.S. and EU sanctions imposed over
Russia's actions in Ukraine. Roughly 10 percent of EU
agricultural exports go to Russia, worth around 11 billion euros
per year, according to European Commission figures.
While Western multinationals were counting on their local
manufacturing plants to help them weather the ban
ID:nL2N0QD11S , small farmers are not so lucky.
They said trucks bound for Russia were turning around
mid-route, 8,000 tonnes of peaches were stranded in northern
Greece and fears were spreading about the impact on products
ranging from Spanish ham to Scottish mackerel.
Norwegian salmon prices are expected to fall 10 percent in
the next week as a result of Russia's food sanctions, traders
and analysts said on Friday, forcing farmers to scramble for new
markets at a time when prices are already under pressure.
"It's important that the producers cut their output next
week," said one exporter, who declined to be named. "When this
ban was announced yesterday, it was complete chaos."
Scotland's fishing industry also expected to be hit given
Russia's importance as an export market for mackerel. The
industry's main body said it was "extremely concerned".
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Moscow bans western food imports ID:nL6N0QD41M
EU to set up task force on Russian food ban ID:nL6N0QD68N
U.S. almond growers hit by import limits ID:n2N0QE01D
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DAIRY HIT
Arla Foods ARLAF.UL , which says it is Europe's largest
dairy cooperative, stopped production of all goods for the
Russian market on Thursday night, it said on Friday. The market
accounts for 1 billion Danish krone ($179.6 million) a year, or
1.3 percent of Arla's global annual revenue.
A company spokesman said it was trying to ship output
elsewhere or switch to other products destined for other
markets. "The immediate challenge is the market shut-down," said
a spokesman. "But there will be after-effects as well."
Milk prices are likely to come under pressure as companies
scramble for new buyers.
In Ireland, a major dairy producer, about 70 million euros
of the country's 230 million euros of food and drink exports to
Russia were affected, its food board said.
"It's the knock-on effect on cheese markets throughout
Europe that's worrying farmers. You take out the biggest export
market and that cheese has to go somewhere," said Sean O'Leary,
a dairy farmer in the south of Ireland and Chairman of the Irish
Farmers Association's dairy committee.
"The timing of it is just bad. Milk prices are already
falling. Farmers are expanding before EU quotas are ended next
year and Russia would have been identified as a growth market."
Finland's dairy cooperative Valio said it was planning talks
with labour unions concerning 800 jobs. The company produces
about 85 percent of the Finnish exports hit by Russia's
sanctions, Valio said on Friday. "The manufacture of all
products for the Russian market was halted on Thursday," it
said, with cheese, butter and milk the most popular items.
The company also said it was looking at how to cut its
operations in Russia, where it employs just under 500 staff.
Finnish food exports to Russia totalled 400 million euros
last year. Just under 300 million of those fall under the
Russian ban, which represents 0.5 percent of total Finnish
exports, data from the customs office showed.
GREEK PEACHES, SPANISH HAM
Greece exported about 160,000 tonnes of fruit to Russia last
year worth 180 million euros ($241 million), according to
Greece's fruit exports association, Incofruit-Hellas.
Christos Yiannakakis, head of an association representing
about 5,000 producers in Imathia, a peach-producing region in
northern Greece, said they were reluctant to ship to Russia in
case they were forced to turn back. As a result, around 8,000
tonnes of peaches are held up in refrigerators in the area.
"Russia is our main market," Yiannakakis said, adding about
50 to 60 percent of the region's peach exports go to Russia.
The producers have already suffered this year from the
crisis in Ukraine, its second-biggest market, as well as a
global oversupply of peaches and a slight drop in demand. "It
(the embargo) will throw our region's agricultural community
into great turmoil," he said. "It's a disaster."
In Spain, where the economy is finally emerging from a long
recession, producers of fruit, vegetables and meats - including
fine Spanish ham - said they were very worried.
"Any kind of ban on products tends to create excess
production and thus an extreme drop in prices. This affects
producers big and small, not just exporters," said Miguel
Padilla, head of agriculture and livestock association COAG.
The association is based in the southern region of Murcia, a
major producer of fruit and vegetables which exports an annual
about 33 million euros directly to Russia, which is a big buyer
of peaches, lettuces and cauliflower from Spain.
A large part of some 90 million euros of Murcia exports to
Poland, Germany and Netherlands also ends up in Russia, said
Padilla, who grows watermelon and broccoli.
"Exporters have told us that some trucks in the EU are
turning around right now because their orders have been
cancelled," he said.
The country's main fish and meat producers, Pescanova
PVA.MC and Campofrio CPF.MC will avoid the impact. Russia is
not among the main export markets for Pescanova, a source with
knowledge of the company's business said, and Campofrio sold its
Russian unit in 2008.
TOURISM IMPACT
But the tensions with Russia could have a knock-on effect on
Spain's tourism industry, one of the country's main economic
drivers and a sector that has recently boomed thanks a rise in
tourist arrivals, and spending, from Russia.
Russian tourists spent some 1.6 billion euros in Spain last
year, almost five times the about 388 million euros that the
country receives from food exports to Russia.
In Finland the opposite could be true. With St Petersburg
about 200 km (124 miles) from the Finnish border, locals on the
Finnish side hope there is a chance that shopping tourism may
partly offset the hit from the food sanctions.
"It's quite possible that shopping will increase here - they
have to get their food somehow," said Reijo Tervo, who runs the
Citymarket supermarket in Lappeenranta, a few kilometres from
the Russian border.
"We have already seen some people stocking up, mainly on
cheese and soya products," he said.
(1 US dollar = 5.5668 Danish crown)
(Reporting by Martinne Geller in London, Rodrigo de Miguel and
Robert Hetz in Madrid, Sakari Suoninen in Helsinki, Alistair
Smout in Edinburgh, Ole Petter Skonnord in Oslo, Conor Humphries
in Dublin and Karolina Tagaris in Athens; writing by Sophie
Walker; editing by Philippa Fletcher)
((sophie.walker1@thomsonreuters.com)(+ 44 207 542 9168))
Keywords: UKRAINE CRISIS/SANCTIONS FOOD