August 13, 2014 2:14 pm

Europe’s peach growers feel pain of Russian sanctions

Workers of an agricultural co-operation throw peaches into boxes on August 12, 2014 in Veria, Greece. 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, industry experts said on August 7. A series of measures to limit the impact of the Russian embargo on fresh Greek agricultural product imports was announced by the Greek Foreign Ministry. These measures include compensation of producers hit by the embargo, and the activation of a mechanism to redirect the products back to the domestic market and other export destinations. The ministry said that Greek producers will be fully compensated, if despite the above measures, there are still losses. AFP PHOTO /SAKIS MITROLIDIS SAKIS MITROLIDIS/AFP/Getty Images©AFP

Josep Presseguer had already dispatched 350 tonnes of peaches and nectarines on the road to Russia when the Kremlin announced its sanctions on EU food last week.

The chief executive of Fruits de Ponent said he had to summon his two dozen trucks back to headquarters in the Catalan town of Alcarràs, where he is now under pressure to find new buyers before his fruit rots into compost.

“That’s the question of the age: what happens with the fruit?” Mr Presseguer asks. “It’s going to cause a huge stock problem. We’d have to sell a lot of fruit at a very low price.”

Moscow’s embargo in response to last month’s sanctions by the EU and US has compounded problems for Mediterranean peach farmers who were already on their knees, suffering from a supply glut caused by unusual weather conditions. Mr Presseguer, who sends 25 per cent of his produce to Russia, was unambiguous about the possible impact: “It could be a disaster,” he said starkly.

Although 10 per cent of EU food exports traditionally head to Russia, officials in Brussels are increasingly confident that the agonies of the stoned-fruit sector will be an anomaly in the latest trade war between Brussels and Moscow. With some assistance, other EU farmers will ride out the storm and find new markets, they argue.

Much of the cautious optimism in Brussels is based on the case of pork – one of Europe’s leading food exports to Russia. Pig meat exports to Russia have been banned since the beginning of the year, with Moscow citing fears about swine flu, but European producers have been able to switch shipments to Asia, particularly South Korea and the Philippines.

Westfleisch, a meat marketing company owned by a co-operative of roughly 4,000 pork and beef farmers, located mainly in northwest Germany, said the embargo was “painful for German producers but not a disaster”. It responded to the ban by increasing sales in Europe.

Russia

As the biggest meat exporter to Russia, Germany has struck a defiant tone. Christian Schmidt, agriculture minister, said the effects of Russia’s embargo would be “visible” but that he had “no fears of these sanctions causing market upheavals”.

The EU last year exported €11.9bn of farm goods to Russia, but Brussels calculates that only €5.3bn of these would have been affected by the ban. Meat accounted for €1.2bn of exports, with a fifth coming from Germany.

However, meat has limitations as a blueprint for diversification – it can be frozen and slaughtering can be delayed. The Netherlands and Finland are more vulnerable in the dairy sector, where they had exports to Russia of €257m and €253m respectively last year.

In terms of overall national exposure to the Russian measures, the hardest-hit countries, in relation to their value of exports, will be Lithuania and Poland. Last year, Lithuania exported €927m of products that would have been hit by this year’s ban; Poland exported €841m.

Poland has been badly hit by a ban on its fruit exports to Russia (worth €340m last year) and Poles have launched a campaign to boost domestic consumption called “Eat an apple to spite Putin”.

Poland and Finland are seeking EU compensation for any losses. EU officials admit that eastern European countries may have more logistical problems in diversifying than western ones, but add that it is too early to discuss emergency funds when the quest for new markets has only just begun.

Still, farm experts from all 28 EU states will meet in Brussels on Thursday and will discuss how they may ultimately be able to deploy crisis reserves of €420m to help producers.

The EU has vowed it will not retaliate against Russia with tit-for-tat measures but has said that it will, officially, ask countries such as Brazil, Chile and Turkey not to fill the gap left by European exports to Russia. In private, officials are not worried if major countries do shift their exports to Russia, as any shake-up in trade routes will create new markets for EU exporters.

The EU announced steps to offer some financial support to peach and nectarine farmers this week. In 2013, Spain was the main exporter of stoned fruit to Russia, selling €75m-worth. Greece sold €49m-worth.

But the EU’s support measures were of little consolation to Costas Tamvakaris, who spent Tuesday morning with his family picking peaches in their orchard in Naoussa, a village in northern Greece.

“It’s a catastrophe . . . We’re at the peak of the harvest and the cold-storage warehouse is overflowing with fruit that we can’t sell,” said Mr Tamvakaris, who is president of the local fruit-growers’ co-operative.

His crop normally sells at premium prices in supermarkets in Moscow and St Petersburg “but now it is almost certainly heading for the dump”, he complained.

Additional reporting by Stefan Wagstyl

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