Europe faces produce glut after Russian ban

Russia's embargo

Russia's embargo against food from the European Union will affect 10 percent of the EU's food exports and may cause a crisis of glut in Europe, claim industry experts.

Fancy an apple? The Warsaw government hopes so. It’s asked the U.S. to buy apples now that Poland’s farmers have been shut out of their biggest export market: Russia.

Russian President Vladimir Putin has banned most food imports from the EU, the U.S. and other western countries in retaliation for sanctions imposed on Russia over Ukraine. That’s left European farmers, in particular, with the headache of offloading their unwanted produce.

Last year European farmers sold $16 billion worth of food to Russia, which is 12 times what the U.S. supplied. Peter Kendall, a British farming industry spokesman, worries that the EU is losing one of its best customers for milk, butter and cheese.

'They’re taking away a market that takes 300,000 tons of dairy products from the European Union a year. This could have really very damaging impacts," Kendall says.

The answer could be that European farmers will  have to try to sell their surplus produce at a decent price abroad. However, the U.S., Australia and other countries that export to Russia have also been sanctioned and they’ll have their own surpluses to sell.

British pig farmer Jim Leavesley is bracing himself for an influx of pork from Canada and Brazil.

“If you have something like only 5 percent extra supply into the market,” says Leavesley, “this can have a devastating effect upon the whole of the price paid across the whole of the European herd.”

Consumers may be licking their lips at the prospect of lower prices, but they shouldn’t, warns meat industry spokesman Mick Sloyan: Farmers still have to make a living.

"They stop producing if prices go too low and then, subsequently, prices rocket," he says. "So, seeing prices going up or down all over the place really isn’t in the interest of consumers.”

The European Commission has just unveiled a potential solution: They have plans to prop up peach farmers affected by the Russian sanctions. The EU will buy 10 percent of their crop and withdraw it from sale.

So, with peach mountains and milk lakes looming, Europe could soon be adding to its agricultural reserves.

 

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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