World prices set to fall in wake of sanctions

RUSSIA’S wide-ranging trade sanctions on food from Western countries will have some direct effect on Australian agriculture, but the main impact is likely to come from displaced produce from other exporters.

The European Union will lose a major market for its agricultural products and that will find its way on to the global market, likely depressing world prices.

“Europe will have this product and they will have to sell it somewhere,” Australian Dairy Farmers chief executive Noel Campbell said.

The 12-month sanctions announced by Russia on Thursday are a response to penalties imposed by the West over its lack of co-operation in the investigation of the Malaysian Airlines flight, believed shot down by Russian rebels in Ukraine.

They cover beef, pork, poultry, fish, fruit, vegetables and dairy products from the United States, Canada, the European Union, Norway and Australia.

Russia ranks 10th among Australia’s dairy markets. It bought 22,000 tonnes of Australian dairy produce last year, mainly butter. This pales into insignificance against the 500,000 tonnes Russia buys from the European Union, accounting for 70 per cent of its dairy imports. “That’s the real worry for Australia — that’s a lot of product that will be competing for other markets,” Mr Campbell said.

He said the effect of this would be mitigated in the short term by the northern hemisphere coming into its low production months.

New Zealand, the world’s biggest dairy exporter, has not been sanctioned. “That could have a balancing effect,” Mr Campbell said. “If Russia takes more New Zealand product that will help to offset effect of the EU product.”

Bruce Donnison, director of operations and ingredients at Fonterra Australia, said the company’s network of more than 100 export markets will allow it to mitigate the effect of the Russian sanctions.

The sanctions will have little new impact on the Australian meat industries. While Australia sold beef worth $159 million to Russia in 2013, none has been sold since April when Russia banned Australian beef, claiming that growth hormones were found.

The new sanctions do not include lamb and mutton.

Midfield Group managing director Colin McKenna said the sanctions would have little effect on the company.

“Russia is not a big market for Midfield as I have purposely kept away because of the uncertainties which we are now seeing,” he said

According to Department of Foreign Affairs statistics Russia sells more to Australia than it buys.

The figures put Australia’s exports to Russia at $736 million and imports at about $1.057 billion.


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