Most of you have heard or read the headlines yesterday in regard to Russian President Vladimir Putin ordering food import restrictions in retaliation against countries that seek to punish Russia. What does this mean to US producers? From what I can gather Russia has threatened to completely ban ALL US agricultural products from its market and slap an import ban on all fruit and vegetables from the EU. This will also include all US poultry being exported into Russia. About 20-years ago that would shave been a huge pinch considering about 40% of our poultry exports went to Russia, which now only accounts for about 7%. Overall, the US exported $1.3 billion in food and agricultural products to Russia in 2013, while the EU export total came to $15.8 billion. In other words Putin has chosen a more hardline response to western sanctions and tensions are starting to flare. There is no question the situation in the Black Sea is a huge “wild card.” But I honestly don’t see the US getting involved militarily at any juncture. Sure we could impose deeper sanctions and continue with a war of words, but I’m just not sure how that plays out as bullish longer-term? The trades natural knee-jerk reaction to political uncertainty is almost always to add in additional “risk-premium” for commodities… I’m just not so sure the “premium” is needed. From a purely fundamental perspective, cutting off imports simply decreases overall global demand and puts more available supply in the marketplace, hence lower prices. I also don’t see how a food related import ban even happens, considering Russia imports about 40% of all their food. Some economist say it could be economic and political suicide for Putin as inflation inside Russia would skyrocket as supplies of everyday grocery items disappear. Just this morning Moscow announced a blacklist detailing which foreign agricultural goods and food products will be banned under the new order…Below are the details:
Russia will ban fruit, vegetables, meat, poultry, fish, milk and dairy imports from the United States, the European Union, Australia, Canada and Norway, Prime Minister Dmitry Medvedev reported at a government meeting on Thursday. The ban is valid from Aug. 7 and will last for one year.
- cattle meat, fresh, chilled or frozen;
- pork, fresh, chilled or frozen;
- poultry and its subproducts, fresh, chilled or frozen;
- all salted, dried or smoked meats;
- fish, shellfish, scallops and other aquatic invertebrates;
- milk and dairy products;
- sausage and similar meat products;
- cheese and similar products.