Finding Opportunities in the Russian Import Ban

Spend Matters welcomes this guest post from Liliana Gonzalez of Mintec.

On the Aug. 6, 2014, Russia banned the imports of several agricultural products from the US, Canada and other countries for a year reportedly in response to sanctions imposed on Russia over the current crisis in Ukraine. Russia is the world’s fifth largest agricultural import market, after the EU, China, US and Japan. The variety of products banned was wide and included some meat and fish products, fruit and vegetables and most prepared foods. These three categories alone equate to around 55% of the United States’ total exports to Russia in 2013 and are all now prohibited from entering Russia from the US.

The US share of Russia’s import market is relatively small, at 4% in 2013, mainly due to the distance between the two countries. The EU, in contrast, supplies 40% of the Russian agricultural market and consequently has been much more affected by the ban than the US. Out of everything banned, the largest percentage of exports came from poultry meat, tree nuts and food preparations.

US exports to Russia: Percentage value of US’s banned products

Source: USDA

Source: USDA

US poultry meat exports to Russia in 2013 reached $310 million, with the country being the fourth largest importer of US poultry. However, Mexico has the largest market share with 21% of total US exports, followed by Canada and China, with 12% and 8% respectively.

The tree nuts market in Russia had been expanding rapidly over the past couple of years, with the US being the largest supplier of tree nuts. According to the US Department of Agriculture, the US provided more than half of Russia’s total tree nut imports in 2013, but more than 95% of Russia’s total almond imports. Therefore the US will look for other import markets to supply to. US tree nuts exports are particularly large into Asia, with Hong Kong receiving 17% of the total global exports. Spain and Germany, with 9% and 8% respectively, are also large importers of US tree nuts. It is very likely that an increase in exports will be directed toward these countries in place of Russia.

In 2013, US exports of prepared food exports to Russia reached $84 million, an increasing trend seen right up to the point of the ban. Canada, Mexico and Japan are the largest export destinations of US prepared food with 39%, 10% and 4% of total exports respectively.

Certainly a trade ban will have an impact on the balance of trade of the countries affected, especially when there is no alternative country to export to. For the US though, this is not necessarily bad news due to the number of countries that are likely to benefit from an increase in exportable supply from the US. Higher supply in the export destinations is likely to lead to lower prices and higher demand, giving the US more export opportunity in the future.

So personally speaking, the Russian ban is an opportunity to expand export horizons for the US. The global market will welcome the extra supply available, especially in the Asian economies like Hong Kong, Japan and China that have had a strong import growth over the past couple of years.

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.