Putin's move to limit U.S. food imports could affect Iowa products

Russia imported $43.1 billion of food, raw ag materials in 2013

Young people march with a wheel barrow of apples during an event promoting Polish apples in Warsaw August 6, 2014. Moscow announced its ban on most fruit and vegetable imports from Poland last week following the European Union’s decision to impose sanctions targeting Russia’s banking, oil and defense sectors because of the Kremlin’s actions in Ukraine. (REUTERS/Franciszek Mazur/Agencja Gazeta)
Young people march with a wheel barrow of apples during an event promoting Polish apples in Warsaw August 6, 2014. Moscow announced its ban on most fruit and vegetable imports from Poland last week following the European Union’s decision to impose sanctions targeting Russia’s banking, oil and defense sectors because of the Kremlin’s actions in Ukraine. (REUTERS/Franciszek Mazur/Agencja Gazeta)

Russian President Vladimir Putin ordered restrictions on food imports Wednesday to strike back at countries that have imposed sanctions on Russia, and officials in Iowa are watching closely to see how the moves affect Iowan farmers and businesses.

Putin’s decree bans or limits food and agricultural imports for one year from countries that have imposed or supported sanctions because of Russia’s support for insurgents in eastern Ukraine, according to the Kremlin website. The government is drawing up a list of restricted goods.

“It’s a little premature until we know what all is on that list,” said Tina Hoffman, marketing and communications director for the Iowa Econimic Development Authority, on how great of an effect the restrictions will have on Iowa’s economy. Hoffman said that though every market is important, the overall size of Iowa’s export market to Russia is not large enough to see major effects.

Iowa’s Sen. Chuck Grassley was quick to react.

“This is the sign of a desperate Russia. The economic sanctions that the United States and Europe have put in place are clearly starting to have an impact. Russia’s possible ban on agriculture imports from countries that have rightly placed sanctions on Russia for its violations of the Budapest Memorandum and its encroachment on a sovereign nation is a drastic move on its part,” said Grassley in a statement. “And, if Russia goes through with this ban, it will hurt the Russian people more than it will hurt Europe and the United States.”

Russia is Iowa’s 12th largest export market, with $211.1 million in goods shipped to Russia in 2013. The top five exported items from Iowa to Russia were tractor parts, tractors, bulldozers, sprayers and liquid measuring equipment.

The top food product exported from Iowa to Russia was cereal at $1.8 million, leaving many commodity producers unconcerned by the coming restrictions when looking at the bigger picture.

Russia “actually imports very little beef from us, nationally,” said Dal Grooms, communications director for the Iowa Cattlemen’s Association.

It appears there will not be any considerable short-term effects, but long-term effects will be evaluated once the list of specific restricted imports is released from Russia, Grooms said.

The Iowa Corn Growers Association also is not yet concerned with the possible restrictions.

“Corn is not one of the major products exported from Iowa,” said Shannon Textor, director of market development for the Iowa Corn Growers Association. “Corn is going to be indirectly impacted from possible beef and pork exports.”

Kirk Leeds, chief executive officer for the Iowa Soybean Association agreed that the export market to Russia was small, but said that he was disappointed by the news of the restrictions.

“We’re always concerned when agriculture is used in a trade war between countries,” said Leeds, who said that as Russia’s livestock industries expand, that could expand exports of Iowa soybeans to the country, making it an important market even though it is currently smaller in size.

As a comparison, the US exports a total of $15 billion in soybeans to China, but only $157 million to Russia.

“The last thing we need is more uncertainty in the market,” said Leeds. “Really the people who are hurt the most are the consumers in Russia.”

Data from the Iowa Economic Development Authority shows that the $211.1 million worth of imports to Russia in 2013 was a drop of 36 percent from 2012 when there was $330.3 million in exports from Iowa to Russia.

Russia is embroiled in the worst standoff with the United States and its allies since the Cold War over Ukraine, where government troops are cracking down on separatist strongholds in the east. The U.S. and the European Union targeted the Russian economy, expanding penalties last week, joined by Canada, Japan and Switzerland, after the downing of a Malaysian passenger jet in Ukraine’s rebel-controlled area.

“The decision is not as critical as it looks at first glance,” Elena Tyurina, director of the Institute of Agrarian Marketing, said by phone in Moscow. “Many foodstuffs are imported from Latin America, Arab countries and Asia. We’ll be eating fewer apples and more bananas, oranges and kiwis.”

Putin has refused to bow to sanctions, aiming with Wednesday’s measure “to protect national interests,” according to the decree. He called on the government to increase domestic supplies with the help of producers and retailers and to avoid spurring food-price growth.

Russia imported $43.1 billion of food and raw agricultural materials last year, including $36.9 billion from countries outside of the former Soviet republics in the Commonwealth of Independent States, according to Federal Customs Service data.

EU members the Netherlands, Germany and Poland are among Russia’s 15 biggest food suppliers, as is the U.S., the U.S. Department of Agriculture said in a July 31 guide for exporters, citing data from the Global Trade Atlas. The U.S. shipped $1.6 billion of food to Russia last year, or 4 percent of total imports, according to the USDA.

“The government’s list will be published no later than tomorrow,” Natalya Timakova, spokeswoman for Prime Minister Dmitry Medvedev said by phone, declining to elaborate. The list will be flexible, allowing for revisions in goods and timing, according to the decree.

The limitations will include vegetables, fruits, meat products, and exclude wine and baby food, Vedomosti reported, citing an unidentified government official. Some dairy products also will be restricted, the newspaper said, citing another unidentified official.

The ruble, which has weakened 9.1 percent against the dollar this year, is among the 10 worst-performing currencies, according to data compiled by Bloomberg. It depreciated 0.3 percent to 36.1775 against the greenback at 6 p.m. in Moscow.

Even before the decree, Russia’s public health regulators banned some imports from EU member countries, the U.S. and Ukraine, hitting at their economies and putting pressure on prices at home.

Restrictions on imports have a “direct effect” on food prices, keeping them high despite a deceleration in the cost of fruits and vegetables, Maxim Oreshkin, head of the Finance Ministry’s strategic planning department, said Aug. 4 on its Facebook page.

Imported goods account for as much as 25 percent of retail sales in Russia, Andrey Karpov, executive director of the Retail Companies Association, said by phone. The country already provides about 90 percent of its own poultry, he said.

Inflation as the biggest challenge facing Russia, a poll published by the state-run VTsIOM research center July 10 showed. While consumer-price growth decelerated for the first time this year in July, the rate remained above the central bank’s target for the 23rd month. The central bank declined to comment on the decree.

“I can’t yet tell whether it’s a benefit or a threat,” said Dmitry Vostrikov, head of development at Russia’s food producers lobby, Rosprodsoyuz. “We’ll need to wait for a detailed list from the government.”

Tyurina took a more optimistic view, saying domestic producers will provide the nation with the basics and Putin’s decision may act as stimulus.

l The Bloomberg news service contributed to this article.

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