ANALYSIS - Creative sellers will be looking at alternative trade routes into the Russian market for agricultural produce now that Ukraine, a previous ‘back door’ passage into the Russian market, is closed.
This is the assessment of two leading agricultural economists inferring that Ukraine has acted as a clandestine route into Russia in recent years when Russia has limited food imports.
Summing up recent Ukrainian buying patterns, Dr Steve Meyer of Paragon Economics and Len Steiner of Steiner consulting wrote: “Over the past few years Ukrainian imports of US meat and poultry have ‘surged’ every time Russia imposed restrictions.”
And in light of diplomatic tensions between Russia and Ukraine, they say Ukraine is ‘not at all likely’ to be a route in.
They say that this leaves Belarus – Russia’s biggest former soviet supplier – as the favourite to become the next ‘back door’.
In their daily Chicago Mercantile Exchange report, they wrote: “We’re pretty confident that some creative businesspeople are investigating such possibilities already.
“It might be wise to observe exports to Russia’s neighbours as this situation plays out.”
Meanwhile, US farmers are expected to hurt from Russia’s move, with a Texas economist sending warning singles to Texan ranchers and poultry farmers this week.
“In Texas, beef is a big export item and poultry is important, particularly dark meat items,” said Texas A&M international trade economist Dr Luis Ribera.
“Texas also produces some soybeans and horticultural crops, so those industries could be affected.”
Russia accounts for 10 per cent of all US exports, spending $1.3 billion annually on US food and agriculture, he added.
US International Trade Commission data has Russia as fifth pork buyer and eighth beef buyer to the US.
“There will be a ripple effect among all industries, everything from shipping and transportation to retailers,” he said. “There will be a multiplier in there, so the potential economic impact could be significant.”
But he added that the potential inflation in Russia, already at 7.9 per cent for the first half of 2014 could spell trouble for consumers there.
“Food prices have the potential to go way up as result of this ban. The issue there is this will hurt their own people as 40 per cent of their total food supply is imported.”