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Russia Extends Import Embargo, Launches New Enforcement Measures

This week Russia extended its food import embargo to include Iceland, Liechtenstein, Albania and Montenegro. Just over a year ago, Russia suspended most food imports from the European Union, the United States, Canada, Australia and Norway in retaliation for economic sanctions imposed due to the ongoing conflict in Ukraine.

None of the countries added this week is a large supplier of food to Russia, but Russian Prime Minister Dmitry Medvedev stated that the ban might be further extended in January 2016 to include Ukraine, if an economic agreement between Ukraine and the European Union enters into force. Through May of this year, Ukraine was Russia’s second-largest (behind Brazil) pork supplier at 10,428 metric tons (mt), up from just 633 mt during the same period in 2014. Ukraine was Russia’s fifth-largest beef supplier at 7,953 mt (up 131 percent), behind Brazil, Belarus, Paraguay and Argentina.

Earlier this month, Russian customs officials began on-site destruction of food products that were determined to have entered Russia in violation of the embargo. Images published in the media caused some backlash from Russian consumers who are enduring tight food supplies and rapidly rising prices – not only as result of the embargo, but also due to devaluation of the ruble, low oil prices and a correspondingly sluggish economy. After a rough July, the ruble was hit again by China’s devaluation of the yuan, finishing the week another 2.5 percent lower versus the U.S. dollar.

Russia’s GDP contracted by 4.6 percent in the second quarter, despite some growth in its agricultural sector due to restricted access to imports. The Russian government expects the economy to contract by 3 percent this year before returning to growth next year, but many leading economists expect a longer and more severe contraction.

For January through June, Russia’s total imports of all goods declined by nearly 40 percent compared to the first half of 2014. Pork imports mirrored this trend, dropping 47 percent to 112,000 mt, with Brazil, Chile and Ukraine being the main suppliers. Domestic pork production increased 3.5 percent (by slaughter weight) to just over 1.2 million mt. Russia’s live hog prices averaged $0.83/lb in early August – about even with last year in rubles, but down 43 percent in U.S. dollars. Beef imports (through May) were down 23 percent to 187,481 mt. Domestic beef production declined 1 percent to 616,000 mt and Russia’s cattle herd was down about 2 percent to 20,830 head.