Europe’s food industry looks to compensate for Russian embargo

The European Commission is taking exceptional measures to help fruit and vegetable growers reeling from a new Russian embargo against selected food imports. The aim is to avoid a glut in local European markets, as the West and Russia fight an economic war over the crisis in Ukraine.

You need a heavy coat to walk around the cavernous warehouse of Thomas Export, just a few minutes from Paris’ Orly airport. Crates of French cheeses are lined up in the glacial space at around three degrees Celsius.

Director Thomas Medard says these boxes of camembert, brie and Roquefort are heading to the United Arab Emirates, and the American market, but there is a lonely box or two, sitting on the side.

“Those boxes were supposed to go to Russia in October. Now, I will have to find new clients, and that will not be easy,” said Medard.

Unless things change drastically in coming weeks, Russians will not be eating French cheese anytime soon, or German sausage or Belgian pears. Retaliating against European and U.S. trade and investment sanctions over the crisis in Ukraine, Moscow has slapped a one-year ban on selected farm products.

Suddenly, growers and exporters like Medard are facing the prospect of their goods sitting on shelves or rotting in trees with no place to go.

At his office, Medard reads an email from one Russian customer. Due to elements outside its control, this company is ending its contract with Thomas Export.

“France’s cheese industry received no official notice about the ban. News came through the media, and clients signing documents stopping business because of a ‘force majeur’ – an element outside their control,” he said.

In some ways, Medard’s company is lucky. Russia’s food ban came down just as its last summer truckload of cheese made it safely to Moscow. But it stands to lose between $1 million to $2.5 million in business this year.

Others are bracing for much steeper losses. Europe’s main farm lobby, Copa-Cogeca, says its members export about 10 percent of their produce to Russia – worth about $15 billion a year.

“Prices for some vegetables, like in the Netherlands, are down 90 percent – for mushrooms, for example. Also 30-50 percent for fruit,” said spokeswoman Amanda Cheesley.

The European Commission says it is making $166 million in emergency support available for the most vulnerable foods like tomatoes, apples and kiwis.

“The basic measures are for withdrawing product from the market – in particular for free distribution,” said spokesman Roger Waite. “But there are also measures such as green harvesting and non-harvesting, which is basically taking fruit out of production before its ripe. Which is more cost-effective. So the idea of these measures is to ease the pressure on European markets given the loss of the export market at such relatively short notice.”

Cheesely of Copa-Cogeca says the compensation is welcome, but it is nowhere near what is needed.

“Because it is a crisis that has had nothing to do with the producers themselves. We are just being taken into a political situation. So we will make sure we get as much compensation as possible,” she said.

Countries like Germany, Poland and the Netherlands are expected to be among the hardest hit by the food ban.

In France, Daniel Corbel, who heads the National Association of Fruit and Vegetable Exporters called Aneefel, says the pear, apple and apricot industry will face the biggest problems.

“We have got everything against us. We have got the weather, we have got the financial crisis where the purchasing power of the consumer is not there. Plus the Russian crisis. So you accumulate all whose factors … together, it is something that is really difficult to overcome,” said Corbel.

French producers are also feeling another spinoff of Russia’s embargo – like the Spanish peaches selling at bargain prices in markets like this one. Corbel says the farm industry will shortly be launching a “buy local” drive.

That is a push that seller Vincent Costaz – who has a stand in Paris’ Alligre market – says is already catching on. And not just because of Russia.

“I am selling lots of French products because that is what my customers are demanding, for financial and ecological reasons,” said Costaz.

But some shoppers interviewed at Alligre say price and quality – not French solidarity – will drive their choices. That is the case of Thomas.

“What is happening with Russia will not change his habits. Taste comes first,” said Costaz.

At Thomas Exports, director Medard is now looking for new clients for his cheeses.

But the French cheese industry has weathered the sting of international disputes before. In 2009, for example, the U.S. government slapped a 300 percent tax on imported Roquefort as part of a trade war with Europe. The Roquefort guys were smart, Medard says, they cut their prices, and American gourmets had their cheese.



(Photo: Vjeran Lisjak)