Putin’s latest move double-edged sword for New Zealand exporters

A one-year ban instituted by Russia on food imports from the West could hurt New Zealand's dairy trade, even though local exports are exempt, say economists.

Early this month, Russian President Vladimir Putin implemented a retaliatory ban on countries that had earlier placed sanctions on Russia for supporting pro-Russian separatists fighting Ukrainian government forces in Ukraine along the Russian border.

The ban affects Australia, Canada, the European Union, Norway and the United States and covers fruit, vegetables, dairy, fish, meat and poultry.

Dairy imports from New Zealand, Brazil, and Argentina have been exempted. Economists said that while the ban could offer some opportunity, the prices could fall if product once-destined for Russia floods on to world markets.


Hayley Moynihan, Rabobank's director of dairy research for New Zealand and Asia, said the ban was "a double-edged" sword with the opportunities being more than offset by the potential negative aspects of hundreds of thousands of tonnes of product coming on to the market.

She said European dairy producers were likely to turn to other product lines such as skim milk and butter as a result of the likely cut in Russian demand.

Other New Zealand food exports, such as apples, could also take a hit. Russia takes just over half of Europe's apple production, which meant more product was likely to make its way on to New Zealand's apple market destinations of the Middle East and Britain, said ANZ rural economist Con Williams.

Economists said European food exporters could target regions currently served by New Zealand and the United States to take up the expected surplus once the ban takes hold.

A spokesman for dairy product exporter Fonterra said it was too early to say what the ramifications of the ban would be, but that the co-operative was "looking at it closely".

New Zealand does not have a large direct exposure to Russia, with receipts totalling just $215 million a year. Dairy accounts for the lion's share at $112 million or 48 per cent - mostly butter - followed by meat at 22 per cent, seafood (8 per cent), horticulture (7 per cent) and processed agricultural goods (7 per cent).

"As New Zealand hasn't been banned, it seems these exports are fairly safe so the direct impact is negligible," ANZ economists said in a research note. "However, many of New Zealand's primary sectors have large indirect exposures that could manifest in various ways."

Russia is an important global importer for many products they have banned, and the countries that have been banned are competitors for NZ in other markets, as well as end markets in themselves. "A big pile of food is going to be looking for a new home," Williams said.


On the dairy front Russia is the second-largest global importer of dairy products and accounts for 12-15 per cent of the trade. Russia only accounts for just over 2 per cent of New Zealand's total dairy exports and New Zealand's product mix is not closely aligned with Russia's needs, he said.

• Second largest global importer of dairy product, accounting for 12% to 15% of the trade.
• Accounts for just over 2% of New Zealand total dairy exports.
• Europe's entire Russian dairy exports are about 500,000 tonnes.
- Source: ANZ