Russian trade boycott hits Dutch growers

7 August 2014 - The Russian trade boycotts could have a rapid and severe impact on primarily the Dutch greenhouse and horticulture industry.

In response to EU sanctions, Russia has in turn implemented trade-impeding measures against EU countries. This pertains to boycotts of products including vegetables, fruit and dairy. While these measures will have a limited effect on the Dutch economy as a whole, the greenhouse horticulture and fruit growing sectors could be hit badly. Examples of products that may be affected include cut flowers (chrysanthemums and roses), fruit (pears) and greenhouse vegetables (tomatoes).

In 2013, Dutch agro export to Russia totaled 1.5 billion euros. Main categories are flowers and plants (365 million euros), dairy (300 million), fruit and vegetables (180 million euros direct export) and processed foods (130 million euros). As a total the Dutch vegetable and fruit export to Russia (citrus included) accounts for 600 million euros (re export included).

Falling prices

‘Even though it is not clear at this time exactly what sanctions Russia will impose, the financial consequences for the Netherlands could potentially run into the hundreds of millions of euros’, says Ruud Huirne, Director of Food & Agri Netherlands at Rabobank. ‘This is primarily due to falling prices. Products that can no longer be exported to Russia will end on up on the already saturated domestic markets and lead to fierce competition with other agri products. This will cause prices to fall substantially. While this is good for consumers, it is bad for growers.’

Impact

Ruud Huirne emphasises that the impact of the Russian boycotts will vary by company. ‘It will depend on the company’s customer base and the amount of its buffers. Unfortunately many growers in predominantly the greenhouse horticulture sector have gone through a number of bad years and are consequently facing low financial reserves. Companies in other agricultural sectors generally have better buffers and this makes it easier for them to absorb the setback.’

Support

Rabobank is committed to assisting the affected companies whenever possible. Huirne: ‘The farmers are faced with circumstances beyond their control. Local Rabobanks can support them temporarily by, for example, allowing them to postpone repayments. This will obviously be subject to the company having a secure outlook with respect to its long-term continuity. Each case must be judged on its own merits.’