Tomatoes in Game of Yes-No Between Russia and Turkey

Last week’s meeting between Russia and Turkey has yet to provide clarity about the tomato boycott, but the yes-no game isn’t over yet. In the run-up to the meeting, contradictory reports were heard. After last week’s meeting, only one thing became clear: nothing is clear yet, so borders will remain closed for now.

The choice of words of both parties after the negotiations illustrate the confusion. The Turkish Minister of Economic Affairs Nihat Zeybecki said in Turkish media that various agreements had been reached. For the remaining small problems he expects a solution before 20 October (when there’s a meeting in Kazan). “There are just one or two very small things regarding agrarian products. We agree on all major lines. I am certain all problems will be completely solved before 20 October.” Specifically about the tomato boycott the minister said: “In the near future we hope for a positive solution from the conversations with the Russians about lifting the sanctions.”

“Proposals for liberalisation of the tomato trade will be prepared separately within parameters between the Ministries of Agriculture,” according to the Russian Minister of Energy Alexander Novak in Russian media. When asked if the sanctions could be lifted by 20 October, he answered: “Yes, definitely. We have confidence that all will become clear before the meeting of the intergovernmental commission.”

A Russian analyst illustrates the different points of departure of the two countries for Turkish website Vestnik Kavkaza. “Our growers are unable to deliver tomatoes that can compete with the Turkish ones. It is obvious that Ankara is very interested in an end to the boycott, but our growers aren’t interested at all.” Earlier the Russian Ministry of Agriculture said he wants to protect the investments that have been made in the Russian cultivation of tomatoes.

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Russian Consumers Paying a Pretty Penny for Apples

The World Apple and Pear Association (WAPA) has reported that domestic apple production in Russia for 2017 is expected to be down by 37%, after late frosts and heavy rains hit production. However, this will not be the only reason why apple sales could be down this year.

According to industry sources, ‘The combination of rising apple prices and falling Russian consumer incomes has been the biggest factor in the decline of both imports and apple sales in the Russian market, industry sources acknowledge.’

Since 2013 the price of apples per kilogramme is up by 30%, more than any other fruit or vegetable in the country.

Despite recent increases in production, Marek Marzec from Ewa-Bis, said that Russian apple production only fills around 20% of the demand.

“Russia has been trying to develop the domestic apple industry for the last 20 years, sure, they have made some progress, but no where what is needed to become self sufficient. The positive thing about Russia is that it is such a large country with many different regions, they should be able always have success despite what the weather might throw at them.” said Marek.

Igor Muhanin, President of the Association of Fruit and Berry Producers (ASPRUS), had initially said that apple imports in 2016 had reached 1.38 million tonnes, but later revised that amounts to 1.25 million tonnes, saying that smuggling continued to be an issue in Russia, which authorities there have found it difficult to keep up with.

“The Agriculture Ministry is providing a subsidy payment to apple growers for planting new orchards and equipping them for higher yields of Rb236,000  ($4,140) per hectare. The experts say this represents between 10% and 25% of the costs of planting and equipping new high-yield apple orchards.” said Muhanin.

Estimates have claimed that Russian apple consumption came to 2.5 million tonnes in 2016, about 100,000 tonnes (4%) more than 2015. By 2020 the forecast is for consumption of 3 million tonnes; this represents an annual rate of growth of 4%.

According to BusinesStat, “The rate of growth of both domestic production and imports will depend not on the recovery of Russian consumer incomes and demand, and not on the sanctions or the increase in investments for commercial domestic orchards.”

“This year, apple sales will grow by just 1.7%, roughly the same as government and expert forecasts for Russia’s GDP growth. As the resumption of growth in real incomes begins, apple sales will grow in the retail sector. In 2021 the sale of apples in Russia will amount to 2.08 million tonnes, which will exceed the 2016 level by 35.7%.”

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How Sanctions Changed Russian Food Market for 3 Years

During the past three years, something Russians were used to doing in the 1990s has made a triumphant comeback: the habit of bringing food home from trips abroad. Shopping for food on vacation outside Russia has become a routine pastime for them since August 2014, when the Kremlin banned import of dairy, produce, fruit, meat, poultry, fish and seafood from the U.S., European Union and several other countries.

Authorities at the time maintained that the move would punish the West and boost the country’s agricultural sector, spurring it to thrive in the absence of competitors offering less-expensive products.

Three years later, officials insist it did. A closer look, however, presents a more uneven picture. Food production in Russia has increased, but so have prices. Higher prices have led to changed and lowered consumption, and in turn, reduced sales. Inflation has eaten into the promised government support to help food production. And, say consumers and people in the food industry, the overall quality of available food isn’t as high as it was prior to the food import ban.

The food embargo came at a bad time for Russia. Oil prices were at a record low, the ruble had plummeted and the country’s relationships with Western nations was worsening. The term “isolation” dominated the news here.

In an attempt at positive spin, the Kremlin announced that the food import embargo would boost “import substitution” and help Russians overcome what many politicians labeled their “addiction” to imported goods and become self-sustainable. Companies in the agricultural sector were promised financial and infrastructure support from the state. Many companies immediately jumped at the chance to conquer the market.

The agricultural sector has indeed increased production of some food items in the past three years, according to data provided by Rosstat, Russia’s state statistics service. Russian companies produced 17.5 percent more beef in 2016 than in 2014. Pork production increased 30.6 over the same period, poultry production 11.9 percent, frozen vegetables 31.6 percent, milk 5.8 percent and cheese 20.2 percent.

“The embargo was quite an incentive for us because it meant we’d be able to produce more,” says Andrei Danilenko, chairman of the Soyuzmoloko, Russia’a association of dairy producers. “Over these years, we filled the niche completely – together with Belarus that supplies the rest.”

Spokespeople at the Agriculture Ministry are even more positive. “For the first time in many years, Russian food items started to dominate on the shelves,” officials said in a written statement.

Food imports during the past three years dropped almost in half, the ministry said, from $43 billion to $25 billion, whereas overall Russian agricultural production has increased by 11 percent.

“Achievements of the agricultural sector in recent years allowed us to edge even closer to full self-sufficiency when it comes to food,” ministry spokespeople said.

However, there was a downside. Rising prices, spiked by the embargo and fueled by inflation, changed consumer behavior. People started buying less and sales started to drop.

“People in general are saving money on food, and we end up selling less,” says Pavel Grudinin, head of the Sovkhoz Imeni Lenina agricultural holding that produces vegetables, berries and fruit in the Moscow region.

With some products, consumers started choosing cheaper options, and that kind of behavior significantly affected the country’s fish market, says Timur Mitupov, head of the Fishery Information Agency.

“Russia used to import 600,000 tons of fish from countries under the embargo every year,” he says. “Then people saw that fish is disappearing from the shelves and becomes more expensive. So they started replacing fish with something more affordable – like chicken.”

Yearly consumption of fish dropped from 22 kilograms (48 pounds) per capita to 16-17 kilograms, Mitupov says.

Adding insult to injury, the promised state support turned out to be not much of a help, Grudinin says.

“Financial support from the government on paper increased this year, but if you convert it into hard currency, you’ll see that in reality it actually decreased, because hard currency is more expensive now.”

At the same time, he adds, various taxes and levies have increased during the past three years, and so have crediting rates: “So there is simply no money to invest into growing.”

For the restaurant industry, the food import ban is a double-edged sword. Many restaurants had based their cuisine on imported food items and shut down after the embargo, unable to adjust to the new reality quickly enough. Those that survived are experiencing a gastronomic renaissance, says Alexandra Sutormina, restaurant consultant and food critic for GQ Russia.

“Restaurateurs discovered Russian meat, Russian seafood, Russian vegetables. Russian food has become a thing,” she says. “They started experimenting with it, setting up their own small farms, selecting products more carefully.”

The quality of Russian food products, however, is far from the best, argues Victoria Lavrushkevich, manager of Saxon&Parole, an upscale restaurant in Moscow.

“We offer quality seafood and quality meat,” she says. “But Russian (food) products or products we now have to buy in other countries are worse in quality and the same in price compared to what we used to get from Western suppliers.”

Some food has turned out to be flat-out irreplaceable – like cheeses from Italy and France. It takes decades to produce a good mature cheese, notes Lavrushkevich.

Sutormina agrees: “Even though many small cheese farms appeared across Russia over these three years, wonderful cheeses from Europe is the one thing we all miss.”

The embargo has hurt the ordinary consumer in more basic ways, says Vasily Uzun, economy professor at the Russian Presidential Academy of National Economy and Public Administration.

“The embargo took the cheapest products off the shelves: Polish apples, American poultry and European cheeses. Products that replaced them turned out to be more expensive and of lower quality,” he says.

Russian Extends Food Import Ban Until December 2018

The Russian government has extended its retaliatory import ban on food products from countries that have imposed sanctions on Moscow.

Certain food products originating in the United States, the European Union and several other Western countries with not be allowed into Russia until December 2018, according to a document published on the Russian government’s website.

The restrictions were extended in accordance with a decree issued by Russian President Vladimir Putin on June 30. That order followed the European Union’s decision to prolong its sanctions on Russia for six months.

“These restrictions are intended to expand the special retaliatory economic measures to certain states based upon the level of their involvement in the anti-Russian sanctions regime,” the document reads.

Russia introduced its counter-sanctions in August 2014 as a response to European and American blacklists targeting individuals and companies for their involvement in the conflict in Ukraine or the annexation of Crimea.

Besides the U.S. and EU, the Russian sanctions also affect Canada, Australia, Norway, Ukraine, Albania, Montenegro, Iceland and Liechtenstein.

www.themoscowtimes.com, www.government.ru

Fruit & Veg Exports From Turkey to Russia up by 73%

Turkey’s exports increased by 15.8 percent in May compared to the same month of the previous year, according to data released by the Turkish Exporters Assembly (TİM) Thursday.

The monthly export volume stood at around $12.5 billion, increasing for the seventh consecutive month. In the first five months of 2017, Turkey’s exports have recovered, marking a 10 percent increase in total. The TİM announced the numbers during a press conference attended by Economy Minister Nihat Zeybekci.

“Of our 20 top exporting partners, the highest increase in exports was to Russia with 73.4 percent. The five-fold increase in exports of fresh fruit and vegetables to this country had an effective impact on the said hike. Thus, our exports to Russia showed the highest monthly increase in May 2017,” he noted.

Büyükekşi said exports to 160 countries and regions increased in May, while exports to 75 others declined, stressing that exports to the top five exporting countries increased.

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Africa Increasing Supplies of Fruit & Veg to Russia

The last couple of years have seen a rise in Russia–Africa trade, with aggregate turnover reaching USD 14.5 billion in 2016, up by USD 3.4 billion year-on-year. The bulk of it (USD 10.1 billion) was done by four countries, including Egypt (USD 4.16 billion), Algeria (USD 3.98 billion), Morocco (USD 1.29 billion) and South Africa (USD 718 million), with Algeria as the major growth driver adding USD 2 billion.

Agriculture is one of the significant contributors to the bilateral trade. Africa is becoming a promising market for Russian grain and agricultural machinery. Egypt, Côte d’Ivoire, Benin, Nigeria, Guinea-Bissau, CAR, Guinea, Burkina Faso and Mali are in turn increasing supplies of fruit and vegetables to Russia, benefiting from Russia’s counter-sanctions against European food products.

According to the Eurasian Economic Commission, Africa was the only region to have expanded its trade turnover with Russia in 2016 (unlike the EU, MERCOSUR, APEC, and others).

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Nearly 600 MT of Produce Detained in Novosibirsk in April

Inspectors of the Rosselkhoznadzor of the Novosibirsk region have reported their figures for April. This month, 584 MT of fruits and vegetables from the republics of Kazakhstan, Kyrgyzstan and Uzbekistan were detained at the border of the region. These were intended for sale in Novosibirsk and its neighbouring regions. Products like apples, lemons, tomatoes, peanuts and cereals were transported without appropriate documents confirming phytosanitary safety or without proper labelling on the packages.

“In accordance with the requirements of international quarantine legislation, all of these shipments were denied entry into the territory of the Russian Federation. The cargo was returned to the exporters in the republics of Kazakhstan and Kyrgyzstan,” stated the ministry’s press service.

It is worth noting that the volume of banned quarantine products in April is comparable to that of the first quarter this year (562.24 MT). This is due to an increase in the flow of plant products imported to the Novosibirsk region from the territory of the Republic of Kazakhstan.

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Turkey and Russia Lift Nearly All Sanctions

Following the lifting of the sanctions between Russia and Turkey, the Russian phytosanitary service is taking the first steps to get the trade started again. This month the service will travel to Turkey to inspect companies. It concerns cultivation companies that grow peppers, lettuce, pumpkins and courgettes. The goal is to judge the companies and to check whether they meet the conditions.

Turkish president Erdoğan called on his Russian colleague to also lift the final sanctions. President Putin says the sanctions won’t be in effect forever, but that time is needed to lift them. On Wednesday, the two presidents met and talked about the sanctions and other topics.

During the press conference after the meeting, the presidents said that they will make an effort to lift the sanctions, but for tomatoes it can take three to five years before Russia will open its borders again. “We agreed to lift all restrictions, but we’ve asked our Turkish partners and friends for understanding the fact that after well-known events, which led to the sanctions, life has moved on,” president Putin said during the press conference.

According to Turkish traders, the first onions from the province of Adana have been exported to Russia. The resumption of the export gives the Turkish growers hope again, says the head of the district. The Russian phytosanitary service will talk to the Turkish citrus sector. In October last year the boycott of fruit was lifted. Since then 12 parties have been intercepted which did not meet the phytosanitary demands. The conversations between Russian and Turkish delegates are planned for June.

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Russia Still Third Largest Import Country in the World

Despite the boycott of the import of fresh fruit and vegetables from EU countries and Turkey, Russia was still the third largest importer of fresh produce globally in the past year. During the final year before the boycott, Russia was also third. In 2013, this amounted to 8.5 million MT, while last year, that number was only 6 million MT, or 30% less. In value, Russia dropped from third place to eighth place on the list of import countries. The value of the import amounted to 4.2 billion euro in the past year, compared to 6.2 billion euro in 2013. Expressed in (sharply devalued) roubles, the import value increased from 260 billion in 2013 to 320 billion in 2016.

Officially, the Russian import figures aren’t complete. Many products from boycotted countries arrive in Russia through Belarus in particular. The export figure from Belarus is much higher than the import figure from Russia. Furthermore, it is also noticeable that Belarus’s import figure is much higher than the export figure. All in all, more fresh fruit and vegetables will have ended up in Russia than might appear to be the case at first glance.

According to figures from KCB/GroentenFruitHuis, no Dutch products are now sent (directly) to Russia anymore. Dutch fruit and vegetables are sent to Belarus, but in the past year, less was sent than in previous years. A fair amount of re-export is sent to Russia through the Netherlands. According to CBS and Eurostat, that amounted to about 54,000 MT in 2016, and more than 57,000 MT in 2015. In the past two years, about 30,000 MT of fresh fruit and vegetables from and through the Netherlands was shipped to Belarus.

Despite the boycott, many Polish apples ended up in Russia. According to Eurostat, 650,000 MT of apples from Poland were exported to Belarus and other former Soviet states last year. Besides, about 300,000 MT of other fresh fruit and vegetable products were exported from or through Poland to various former Soviet states. Important products in addition to apples are tomatoes, mushrooms, pears, headed cabbage and tangerines.

Furthermore, many fruit and vegetables are shipped to mostly Belarus through Lithuania. In 2016, this flow was considerably smaller with 560,000 MT, compared to 1.28 million tonnes in 2015. Products that go further south and then east through Lithuania are: pears, apples, peaches and nectarines.

According to the official figures from Russian Customs on the import of Russia, more than six million of fresh fruit and vegetables were imported into Russia in 2016. That is 11% less than in 2015, and compared to the final year before the boycott, it is 30% less. The most important import product, bananas, distorts the image somewhat, because the import of bananas has remained level in recent years with an amount of 1.35 million MT. The import of other products decreased by more than a third, from 7.2 million MT in 2013 to 4.7 million MT in 2016. Over the 2013/16 period, hardly any product can be found of which not (much) less was imported. In fact, only watermelons (for low kilogram prices) grew in import. Of important import products such as apples and tomatoes, import even halved.

Regarding suppliers, a number of remarkable things can be seen. The boycott of products from mostly EU countries since the summer of 2014 is naturally obvious. The boycott of a great number of Turkish products was added to that from 1 January 2016. Which countries profited from the lost trade from these countries? The number of countries is limited. The most important ones are: Egypt, Azerbaijan, Serbia, Uzbekistan, Armenia, Kazakhstan, Macedonia, Georgia, Bosnia, Uruguay, Abkhazia and Syria. So clearly countries with a certain relation to Russia in particular. The import of Moroccan products has increased, but not as much as was expected. Of the 350,000 MT of Moroccan product imported in 2016, 200,000 MT concerned tangerines, and 125,000 MT were tomatoes. The import of Moroccan tomatoes has grown considerably, for that matter. This is mostly due to disappearing tomatoes from various EU countries.

However, some countries which were expected to profit form the boycott, didn’t. The largest example of that is China. After banana country Ecuador, China is Russia’s largest supplier. The import of fresh fruit and vegetables from this country has remained practically at the same level, despite some fluctuations, since 2010. Russia primarily imports apples, tomatoes and tangerines from China. Other countries that didn’t profit are Israel, South Africa, Argentina and Chile.

In 2013, Russia imported 1.37 million apples, 800,000 MT of which from EU countries. Last year, they only imported 675,000 MT, with Serbia as the most important supplier, followed by China and Moldavia. The import of tomatoes decreased from 866,000 MT in 2013 to 460,000 MT last year. For tomatoes, it was mostly Turkish product of which less was imported. In previous years, 350 to 365,000 MT of tomatoes were imported from Turkey, while none were imported last year due to the implemented boycott. Previously, 260,000 MT of tomatoes were imported from EU countries. Besides Morocco, Russia has been getting its tomatoes more often from countries such as Azerbaijan and Armenia in recent years.

The decrease of 37% in the import of pears has remained limited in relation. The decrease was largely compensated for by imports from Belarus. In the two last years, about 100,000 M of pears were imported from and through Belarus according to official Russian figures. This figure does correspond to that of Belarussian exports.

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Turkish Tomatoes Suspected to Be Reaching Russia via Georgia

Turkish tomatoes are suspected to be reaching Russia via Georgia, as reported by the Russian newspaper Izvestia, although the Russian Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) has said that they cannot prove it.

“We have no confirmed cases of re-exports of Georgian tomatoes from Turkey. It is difficult to find such supplies. If all documents are in order, it is impossible, in the case of Georgia, to determine where the products were grown,” said the press secretary of the Rosselkhoznadzor, Yuliya Melano.

Indirect evidence suggests that Georgia has increased its purchases of Turkish tomatoes fourfold; at the same time, the volume of Georgian tomatoes shipped to Russia has also grown considerably.

The ban on the import of Turkish fruits and vegetables to Russia, in force since 1 January 2016, was party lifted for citrus fruits, but tomatoes are still subject to it. Turkey itself is unable to find alternative markets for its tomatoes, while consumers in Russia are experiencing shortages.

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