Author Archives: CrispConsulting

Russia rejects shipment of fruit

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The international market for pears and apples is changing. The decrease in the consumption of fruit in Europe and the veto decreed by Putin on the West are changing the economies of large blocks and market flows.

Russia is a prime example of this. On Tuesday, the Russian government devalued the ruble by 5.4%, which has accumulated a depreciation of 52% since early August, when the trade war with the EU and its allies began. This scenario is generating widespread losses in the Russian economy and its effects are starting to be felt in the fruit sector.

Importers of Argentine fruits are unable to meet their commitments because of the deterioration suffered by the local currency in recent times. “They close their agreements with the exporters in dollars and receive rubles for their sales. It is not difficult to understand the crisis they are experiencing,” confided one of the market participants when asked about the issue.

This week a ship with 43 containers of more than 700 tons of apples and pears from the Rio Negro Valley and Neuquén was rejected in Vladivostok, a port city located in the Russian Far East Pacific. Argentina’s Chamber of Integrated Fruit Growers (CAFI) confirmed that the importer failed to pay the freight and port services and therefore the fruit had been rejected.

“The problems that lie ahead with Russia are very complex for the Valley,” said Marcelo Loyarte, manager of CAFI. The official said that the ruble’s devaluation “is hitting the regional fruit producing sector as the dollar is anchored at 8.5 pesos here and internal costs are growing.”

The high expectations about the Russian market are evaporating as the harvest in the southern hemisphere approaches and Putin’s economic problems deepen. Part of these problems are due to the drop in international oil prices. Russia, one of the largest exporters of oil in the world, depends on oil sales. Hence, the 35% fall in the price of a barrel of oil will significantly affect the country. The acceleration of the devaluation of the ruble looks to mitigate the negative effects of this economic scenario.

The Rio Negro Valley exports an average of 90,000 tons of pears and apples to this market per year. Exporters are very concerned as Argentina’s exportable supply loses competitiveness in a market that has already devalued its currency by more than 50% in just a couple of months. They wonder if Russian imports this season will ratify the historical purchase volumes and if prices will be good enough to cover the costs in the Argentine market.

www.freshplaza.com

Russia boycotts Albania

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Export from Albania is added to the Russian ban. Russia saw Albania as a possible transit hub for illegal produce from Europe. The documents handed to Russia by Albania reportedly contained traces of fraud, after which Russia closed the border. Albania was the first country, whose produce is banned because of re-export. Switzerland and Macedonia may be the next.

www.echo.msk.ru, www.freshplaza.com

7 distribution centers to open in Russia

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A new conception of production and processing of agricultural products has been developed by specialists of the Ministry of Agriculture and Processing Industry of the Krasnodar Krai. According to the press service of the ministry, there are plans to create at least seven of such centers in the Krasnodar Krai.

“Today, already the Krasnodar Krai is first among the subjects of the Russian Federation in terms of production volume of Fruits and berries and is in third place by production of Vegetables. An additional increase in the production of Fruit and Vegetable products in Kuban is hampered by the lack of an established system of preparation and implementation,” according to the press release.

In 2010, there were already more than 30 storage facilities in the Krasnodar Krai for Fruit and Vegetable products and five wholesale distribution centers with a total capacity of 145 thousand tones.

This measure, according to representatives of the executive and legislative branches of Kuban, will be the basis for a decent infrastructure program of import substitution.

www.freshplaza.com

Russia’s Economic Development Ministry expects a recession next year

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The ruble sank to a new low of 54 against the U.S. dollar on Tuesday, giving up early gains after Russia’s Economic Development Ministry said it expected a recession next year and sees the currency remaining weak.

At 8:30 p.m., the ruble was down 5 percent against the dollar at 54 after rising as much as 1 percent on the day earlier in the session. It was trading 4.5 percent weaker against the euro at 66.9.

The Russian currency is at historical lows against both currencies.

Crude gave up some of its gains from late Monday but, at just above $71 per barrel of Brent, remained above the multi-year lows reached earlier. That lifted the ruble in early trade after it suffered its biggest intraday losses in 16 years in the previous session.

But the Economic Development Ministry said that lower oil prices and sanctions imposed on Moscow over its role in the Ukraine conflict will cause gross domestic product to contract by 0.8 percent next year, a significant change from an earlier forecast of 1.2 percent growth.

The ministry also cut its forecast for 2015’s average oil prices by $20 to $80 and said it expected an average ruble rate of 49 to the dollar.

“The revision of the economic outlook had been expected, but for some it still could have been an unpleasant surprise that had forced foreign currency purchases or closure of short positions,” said a dealer at a major Russian bank.

Comments from Finance Minister Anton Siluanov that the ruble is significantly undervalued in relation to current oil prices failed to lift the Russian currency. On the contrary — the ruble weakened further.

The Finance Ministry said later it was canceling its weekly treasury bonds auction, usually held on Wednesday, because of unfavorable market conditions.

The ruble closed its previous session down 1.6 percent, probably supported by interventions from the Central Bank, traders said. But earlier in the session on Monday, it had traded as much as 7 percent lower against the dollar.

“In case of a further fall in energy prices the dollar is poised to firm to at least 55 rubles and the euro-ruble rate should reach 68-70 rubles,” Gleb Zadoya, head analyst at Profit investment house, wrote in a note.

Vladimir Tikhomirov, an analyst at BKS, said crude prices may bottom out at $60 per barrel and the ruble’s “fair” value at that price would be around 55 rubles per dollar.

Russian stock indexes reflected the ruble trade. The ruble-based MICEX closed up 0.3 percent at 1,583 points, because of the currency’s weakening. The dollar-based RTS was down 3.4 percent to 925 points.

www.themoscowtimes.com

Russians may spend up to 40% of the expenses on food

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Russians are currently spending about 36 percent of all the expenses on food, but many specialists forecast that this number will grow up to 40 percent. The Russians have started saving and changing their shopping preferences to discount and convenience stores.

According to the study “Russian Food Retail: Current Situation and Prospects”, conducted by VTB Capital, the number 40 percent is significantly higher than the highest figure in European countries. For example, in Germany, the UK and Italy it is about 12-13 percent, in Poland and Turkey it is about 23 percent.

According to the same study, imported food products amount to about 20 percent. As for the fruits the number is about 40 percent, for vegetables it is less – 25 percent.

“One in four consumers now shops at discount and convenience stores,” Ilona Lepp, director of work with retail chains of Nielsen Eastern Europe.

At the same time, the increase in revenue of Dixy retail network (mostly convenience stores) is 29.5 percent in October. During the first 10 months of the year, the increase in revenue was 25.8 percent. The similar situation is with the Russian retail network Magnit – the increase in revenues is a 36.14 percent increase in October, and 30.66 percent increase for the first 10 months of the year. Retail representatives said that they did not noticed consumption decrease.

In July, food inflation in Russia was recorded at 11.4 percent, according to Russia’s Federal State Statistics Service and confirmed by Infoline-Analytics.

www.fruitnews.info

Euro exchange rate to ruble surpasses record high

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The official dollar rate for Friday has increased by 1.24 rubles up to 47.66 rubles, the rate of euro has increased by 1.72 rubles up to 59.62 rubles – that is a historic record. The dollar-euro basket (0.55 dollars and 0.45 euros) amounted to 53.04 rubles.

On Thursday, the ruble fell to its minimum for the last three weeks as a reaction to OPEC meeting. The reason for the weakening of the ruble is decreasing oil prices. Brent cost fell below $76 per barrel.

Representatives of several OPEC countries – Saudi Arabia, UAE, Kuwait and Qatar – said on Wednesday that they would not propose decreasing the volumes of oil production at the meeting. As Reuters reports, according to some analysts, if the OPEC countries did not agree on the significant reduction of oil production, oil price could fall to $60 per barrel.

According to expert consulting firm IHS Brushan Bahri, it is unlikely that OPEC will agree to reduce oil production significantly, although there is some possibility of surprise too.

www.vedomosti.ru

Rosselkhoznadzor asked Belarus to halt transit shipments destined for Kazakhstan and other countries

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On Monday, Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) asked Belarus to halt transit shipments of food products through the territory of Belarus, destined for Kazakhstan and other countries, starting from November 30. The purpose of such measures is to stop supplies of banned products to Russia from the EU, USA, Canada, Australia and Norway. Rosselkhoznadzor suspects that transit shipments through Russia from Belarus to Kazakhstan may partially stay in Russia. Since Russia, Belarus and Kazakhstan are in the Customs Union, shipments between these countries do not undergo customs clearance, so there are no accurate estimates of products destined for Kazakhstan that stay in Russia. But the results of random inspection at the border of Belarus and Russia have shown that it is about 20% of all food products.

www.vedomosti.ru

Negotiations of Federal Service for Veterinary and Phytosanitary Surveillance and Swiss Embassy

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Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) initiated the meeting with the Swiss Embassy. Maxim Gninenko, Deputy Head of Directorate for Phytosanitary Surveillance, Seed Control and Grain Quality, stated that after the introduction of Russian food ban from the EU, USA and some other countries, export from Switzerland to Russia has doubled on average, as for apples, export of apples has increased by 400%. In this regard, Rosselkhoznadzor suspects that not all of the products imported from Switzerland are of Swiss origins; and it is necessary to find out the real origins of the exported products.

Rosselkhoznadzor sent inquiries to the Swiss authorities regarding the volumes of certain types of vegetables and fruits produced in the country, as well as to confirm the authenticity of the phytosanitary certificates. Rosselhoznadzor would get this information within ten days after the negotiations, avoiding the introduction of protective restrictive measures at the moment.

In turn, the counselor of the Swiss Embassy expressed readiness to assist in the inquiries. He stressed that Switzerland is proud of its neutrality and is ready to maintain its business relationships with Russia.

www.fsvps.ru

Russian retail chains showing growth

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Global ratings agency Fitch Ratings has said that Russian food retail chains continue to demonstrate healthy sales growth, despite the food import ban imposed in August against the EU, US and certain other countries.

Most Russian food retailers analysed by Fitch Ratings have managed to adapt to the food import sanction by substituting the imported categories with food from other countries, keeping the mix of food products on the shelves little changed.

Based on financial results by Russia’s three large public food retailers – Magnit, X5 Retail Group, O’Key Group – operating margins are unaffected for now as retailers have been able to pass on the increased costs of some products to customers without altering the product mix materially.

Increasing prices for some food categories (fish, dairy products, fruits and vegetables) as a result of the food import ban are likely to cause customers to seek out lower price substitutes and, in turn, lower sales of non-essentials. These trends are also likely to be reinforced by the overall subdued consumer sentiment in Russia, Fitch said.

The latest quarterly results show LFL revenue growth ranging from nine per cent year-on-year for Lenta Group to 17 per cent year-on-year for Magnit, driven by strong average ticket and traffic growth. Larger store formats, such as hypermarkets and supermarkets, posted slower sales growth in September 2014 compared with smaller formats, as they witnessed some customers trading down to cheaper products and, in some chains, low or even negative traffic growth, Fitch Ratings said.

www.esmmagazine.com

Export of apples from Bosnia to Russia increased by 100 times

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In the first nine months of 2014, apple imports from Bosnia and Herzegovina to Russia increased by 100 times, according to Russian Federal Service for Veterinary and Phytosanitary Surveillance (Rosselhoznadzor). The office suspected another Balkan country in the illegal re-export of banned products from the EU and now threatens to suspend deliveries of Bosnian fruit to Russia.

Rosselkhoznadzor may ban the import of fruits and vegetables from Bosnia and Herzegovina into Russia, if there is no explanation of the increase in exports from that country. This is stated in the message on the Rosselkhoznadzor site.

Rosselkhoznadzor note that shipments of banned products from Bosnia and Herzegovina to Russia has tripled; and imports of apples increased by 100 times for the first nine months of 2014. Rosselkhoznadzor experts doubt the authenticity of the phytosanitary certificates that accompany consignments.

Rosselkhoznadzor required that the Bosnian companies would present conclusions about the authenticity of a number of phytosanitary certificates for one week. Also, Rosselhoznadzor demanded to send the information about the ranges and volumes of fruits and vegetables grown in 2014 in Bosnia and Herzegovina.

www.top.rbc.ru