8/8/2014 EU stands ready to support farmers from sanctions fallout - FT.

com
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EU stands ready to support farmers from sanctions fallout
ByChristianOliverinBrusselsandEmikoTerazonoinLondon Authoralerts
Moscows ban on western food imports poses a grave challenge to the EU, although European pig farmers have shown that a major
sector can quickly diversify away from Russia.
The EU exported 11.9bn of farm produce to Russia last year, representing some 42 per cent of Russias food imports. Dairy products
and pork were Europes main exports to Russia, while the EU also sent 46 per cent of its exports of apples and pears there.
For the US, the stakes are lower. In 2013, America exported $1.2bn in agricultural products to Russia, less than 1 per cent of its total
farm exports, according to the US Department of Agriculture. David Cohen, a senior official at the US Treasury, said Russias new
measures would have an insignificant impact on the US economy.
The potential winners stand to be countries such as Brazil, Argentina, Uruguay, Iran and Turkey which will seek to fill the gaps left by
EU and US imports.
The EU is standing ready to support its farmers, already some of the worlds most protected. Dacian Ciolos, agriculture
commissioner, will hold meetings next week to determine how best to help EU farmers diversify away from Russia. Under the
Common Agricultural Policy, the EU has some 420m in crisis reserves that could be used to help.
Russia has banned EU pork products since the beginning of the year, citing fears over swine flu, but that embargo has shown how
quickly European producers can find new markets. In all, Roger Waite, spokesman for Mr Ciolos, said there had been relatively
little impact. Jana Puettker, from the ISN trade association representing the pig farming industry, said German sales had increased
to South Korea, the Philippines, Hong Kong and Japan since February, although more meat had needed to be frozen.
Mr Waite stressed that, with the right promotional campaigns, it should be possible to find new markets for Polish apples Russias
ban has already sparked an impassioned public campaign in Poland to eat more homegrown fruit. Mr Waite added that any excess
supplies could also be used for compost or energy.
Dairy is a sensitive industry and Sieta van Keimpema, vice-president of the European Milk Board, said that the sector was already
running on very tight margins, leaving it especially vulnerable to a glut in domestic supply that would push prices down further. She
said the embargo could particularly harm large Dutch dairies that had targeted growing cheese markets in China and Russia, but
expected some EU dairy producers to try to sidestep the embargo by shipping through Switzerland.
Finland, which also has significant dairy ties to Russia, has argued that the EU should consider compensation because of the impact
of sanctions. Scandinavia has reacted nervously to Russias food ban. Norwegian fish farmers were hard hit on the stock exchange as
Russia is one of their biggest export markets and Marine Harvests shares fell 9 per cent. Valio, the Finnish group that last year
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8/8/2014 EU stands ready to support farmers from sanctions fallout - FT.com
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exported more than 300m of dairy products to Russia, told Bloomberg it had stopped production on lines destined for its eastern
neighbour.
Ms van Keimpema agreed that some kind of burden sharing could be required for the dairy industry. Ms Puettker said the feeling
among pork producers was more dogged: The pig producers are not calling for help; its not in their character.
More opportunistically, Mehmet Simsek, Turkeys finance minister, said the ban could give Turkeys agricultural industry a boost.
RIA-Novosti, the Russian news agency, reported that Moscow would discuss increasing fruit and vegetable imports from Turkey on
Friday.
Mr Simsek tweeted the RIA Novosti story. Geopolitics one [piece of] good news, he wrote.
However, Abdolreza Abbassian, senior economist at the UNs Food and Agriculture Organisation, said that the immediate blow
would fall on Russian consumers by increasing food prices. He added that Mr Putins action now put food at the centre of tensions.
Jeroen van Ijzerloo, head of country risk research at Rabobank, also said that the Russian government could now have to focus its
attention on coping with the domestic fallout. If people are starting to suffer from the sanctions, the government will have to
provide some sort of subsidy or do something about it, he said.
Christian Schmidt, German agricultural minister, predicted that the measures would hit Russian consumers hard, while the effect on
European farmers remained unclear.
AdditionalreportingbyGeoffDyerinWashington,DanielDombeyinIstanbul,StefanWagstylinBerlin,NeilMunshiinChicago
andRichardMilneinOslo
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