Russian president Vladimir Putin's announcement this week that he's banning many of his nation's agricultural imports from the U.S., European Union, Canada and Ukraine is significant. It shows that Putin is willing to move troops into Ukraine whenever he is ready— at the sacrifice of his own people. The ban will raise food prices in Russia, it limits their access to the ag products they want and it discourages free trade. "Using food as a weapon isn't the way to feed the world," sums up Ray Gaesser, a Corning, Iowa farmer and president of the American Soybean Association.
While leaders of U.S. farm groups discourage the ban and say it hurts opportunities for free and open trade among nations, they don't feel Putin's ban will have a major impact on most American farmers—at least not as much of an adverse impact as was first thought when the August 6 announcement was initially made. Kremlin officials now say the ban doesn't include corn, soybeans and wheat. But it does include fruit, vegetables, meat, poultry, fish, milk and dairy products. Russian officials also say their ban on food product imports from the U.S. and EU will not have any impact on Russia grain exports. The majority of Russia's export grain goes to Middle East and North African countries.
Russia retaliates on U.S. economic sanctions with ag import ban
Putin's ban was a topic that came up as I talked with Ray Gaesser and Laura Foell, another Iowa farmer, this week at the end of a big conference at Iowa State University. The conference involved presentations by researchers and officials from ISU and 10 other universities. Gaesser and Foell were two of a number of speakers on the agenda at the "Resilient Agriculture: Adapting to A Changing Climate" conference August 5-7 at Ames.
Climate variability and how farmers will need to make changes in their farming practices and in their management of soil and water resources in order to cope with the increase in weather extremes we are already experiencing was the main topic of the conference. And that's what I discussed with Ray and Laura. But Putin's announcement was made earlier that day and was in the news, so we started the interview with Ray and Laura sharing a few of their thoughts on the Russian situation.
The ban announced by Putin came after economic sanctions were put in place by the U.S., EU and others on Russia following its aggressive actions in eastern Ukraine, including accusations that Russia supplied the anti-aircraft missile that downed Malaysia Airlines Flight 17 in July as the plane flew over Ukraine. Russia has denied involvement in that incident in which many people were killed.
U.S. farm groups urging Russia to rescind import ban
Leaders of the American Soybean Association and other U.S. farm organizations are concerned. "Russia is a key trading partner for U.S. agriculture and the Russian people are our customers like so many other people in the world's emerging markets," says Gaesser. "However, Russia, while very important, is only one of hundreds of our customers worldwide. By limiting his people's access to American ag products, president Putin does a great disservice to his Russian countrymen and women."
ASA pushed hard for establishment of permanent normal trade relations (PNTR) with Russia last year because significant growth and opportunity exist in the Russian marketplace. Soybeans are the second biggest crop export from the U.S. to Russia, due in large part to that country's burgeoning economy and growing demand for meat.
"Sanctions and bans like the one announced by President Putin serve only to hurt the Russian people," adds Gaesser. "While we certainly want to see a key market protected, it is equally important for American farmers to demand a higher standard from our trading partners. In this case the standard is not being met, and we urge President Putin to rescind this ban."
Did U.S. farm organization leaders see Putin's move coming?
Russia currently restricts pork, turkey and beef imports from the U.S., and earlier this year refused a shipment of dairy products destined specifically for consumption of the U.S. Olympic teams during the 2014 Olympics. Russian officials said the products did not satisfy the country's safety assurance requirements. Russia closed its doors to U.S. dairy products in 2010. Despite market access issues, Russia joined the World Trade Organization in 2012.
As a result of Russia's current support of rebels in Ukraine who are trying to overthrow the government there, the U.S. along with Canada, Europe and some other western nations earlier this year slapped economic sanctions on Russia. Did ASA see Putin's retaliation coming? Did Wednesday's announcement by Putin that he's banning certain U.S. food imports into Russia take you by surprise?
"Not really," says Gaesser. "If you look at the history of sanctions and trade retaliation, the possibility of Russia imposing trade sanctions on the U.S., Canada and Europe was on our minds. We were aware of the possibility, but were hoping it wouldn't happen."
Laura Foell, who farms with her family at Schaller in northwest Iowa, is a member of the United Soybean Board. She says, "I personally didn't think Russia was going to sit idly by and accept economic sanctions as punishment for military support of rebels in Ukraine. And here's another thing to think about. Russia supplies a lot of natural gas to Europe and Ukraine to heat homes and run factories, so this is an additional possibility—Russia could turn the gas off this coming winter."
Shutting door on U.S. poultry, meat imports affects soybeans
Foell makes another point: Although Russian officials say their ban on U.S. ag imports into Russia won't include soybeans or soybean meal, the ban does involve poultry and meat. That has a direct effect on soybean producers, not only in the U.S. but elsewhere too. For example, if the export market for U.S. poultry shrinks, that means fewer chickens and turkeys will be produced in the U.S. and less soy meal will be fed.
America Farm Bureau president Bob Stallman says, "U.S. farmers and ranchers would have been more surprised if Russia's leaders had not announced bans and restrictions on food and agriculture imports. It is unfortunate that the biggest losers in this will be Russian consumers, who will pay more for their food now as well as in the long-run."
U.S. exporters shipped $1.3 billion worth of food and ag products to Russia in fiscal year 2013, says USDA. That accounted for a little over 10% of all U.S. exports to Russia. Poultry was the top U.S. product the Russians bought, worth $310 million, followed by tree nuts ($172 million), soybeans ($157 million) and live animals ($149 million). Keep in mind Russia had already been restricting U.S. pork, beef and turkey access by applying what USDA chief Tom Vilsack calls "unjustified sanitary measures."
Import ban may create "opportunity" for Russia's farmers
Meanwhile, Russia's import ban on agricultural goods from the U.S., EU, Australia, Canada and Norway will be an "opportunity" for Russian farmers, said Nikolai Fyodorov, Russia's minister of agriculture, in a news report on August 8. He says the situation should be viewed as an opportunity to expand his country's ag sector to make it more competitive, implying Russia will become more self-sufficient and produce more of its own meat and food products.
Also, "We will replace imports from the U.S., EU and Canada with imports from our other partners," Fyodorov said. "And we are going to do it not just for a half year or a year, but I think we'll be able to find long-term partners elsewhere."—suggesting Russia will expand its imports from Asia and Latin America.
Iowa's Trade With Russia: Russia is Iowa's 12th largest export market. In 2013, a total of $211.1 million in goods were shipped to Russia. That was down 36% from 2012. A majority of the exports were ag equipment and construction equipment, according to the Iowa Economic Development Authority. Iowa's top 5 exports were: tractor parts, $89.5 million; tractors, $12.4 million; bulldozers, $22.7 million; sprayers, $21.8 million; other equipment, $6.7 million.