Despite Record Apple Harvest, Russia Continues to Increase its Imports

Import substitution, which is so much talked about in Russia, has so far not yielded tangible results in the field of horticulture. Despite the very rapid expansion of the area of ​​orchards and an increase in the volume of domestic production of apples, imports of these fruits continue to grow steadily.

In the first two months of 2019, Russia imported 11% more apples than in the same period last year. Moreover, the January volume of apple imports exceeded 161,000 MT and was the highest since 2015, when, by the way, they were comparable to these volumes.

In order to understand how much more apples Russia actually imports, it is necessary to take into account that since 2015 apple consumption in the country has decreased due to four consecutive years of falling real incomes of Russian citizens and the rise in prices of products due to the devaluation of the ruble and the increase in VAT on fruits.

Experts explain this phenomenon easily; the Russian apple is of an inferior quality to its imported counterparts, so the consumer is simply not interested in it. Therefore, Russian growers are forced to sell a significant amount of crop for processing needs at bargain prices. Fortunately, the domestic market for apple concentrate is still quite capacious, and even low, according to Russian growers, prices for industrial apple are relatively high for other countries, such as Ukraine, Poland and Moldova.

However, this situation calls into question the prospects for further investment in new gardens in Russia. Protective measures, as practice shows, can do a disservice to Russian growers. After all, consumers demand quality products, which they mostly cannot yet provide.

And according to¸ even a ban on the supply of apples from the EU, the USA and Ukraine, which can give a really high-quality product, does not guarantee any protection. As soon as the apple re-export channel closes through Belarus, the import of apples to Russia from non-sub-Azerbaijan, Kazakhstan, Macedonia and Georgia immediately grows. These countries also became the leaders in the growth rate of apple supplies to the Russian market in the first two months of 2019.

10% of Total Russian Vegetable Imports Are Carrots

According to GidMarket analysts, in 2018, with a total volume of imported vegetables of 1.88 million MT, carrots took up 10%. The report said: “In absolute terms, the size of imports amounted to 179,400 MT. Carrots are not considered difficult to grow in culture, but imports of marketable carrots amounted to almost 10% in 2018.

It also noted that before Russia introduced food import restrictions, Poland and Holland supplied carrots to the Russian market. The share of agricultural enterprises processing Russian-made potatoes and carrots is growing, especially after the introduction of a ban on vegetables from the Netherlands, France, Germany and Finland.

Belarus Halts Re-Export of Banned Fruit and Veg to Russia

Following negotiations between the Rosselkhoznadzor and the deputy director of the Main State Inspectorate for Seed Production, Quarantine and Plant Protection, Belarus has stopped issuing certifications for banned fruits and vegetables from third countries in transit through Belarus, reports the Moscow Agency citing Rosselkhoznadzor official representative Yulia Melano.

However, those vegetables and fruits intended for consumption in Belarus will continue to be imported into the country, as the goal is to avoid illegal deliveries of such products to Russia.

On March 27, a meeting was held in Moscow between the head of the Rosselkhoznadzor and the deputy director of the Seed Inspectorate. The Russian institution drew attention to the problem of the re-export of banned products to Russia through Belarus with phytosanitary certificates issued by Belarus which, in many cases contain inaccurate information about the country of origin of the goods.

The Rosselkhoznadzor complained about the lack of statistics on the volumes of imported and customs-cleared products in Belarus and about the lack of a system to track the movement of goods. For this reason, it had called for measures and hinted at a possible ban on re-exports through Belarus.

Considerable Reduction of Russia’s Greenhouse Vegetable Imports

In January 2019, Russia imported minimal volumes of greenhouse vegetables compared to the past three years, according to analysts from EastFruit. Compared with January 2018, the value of greenhouse tomato, pepper and cucumber imports decreased by 15.2%, down to $ 79.5 million.

The drop in terms of volume was similar, with imports also falling by 15.2%. Tomato shipments totaled only 37,400 MT, which is 10.2% less than a year earlier. Those of peppers reached 14,700 MT (20.3% less), and those of cucumbers stood at 11,900 MT (22.6% less).

In January 2019, pepper and tomato shipments to Russia still exceeded the figures reached in the first month of 2017; however, the import of cucumbers continued to decline for the fifth consecutive year, falling to a record low figure (at least for the past few years).

Speaking about the reasons for the decline in imports, EastFruit analysts point to two main ones: the declining incomes of the Russian population (together with the rising VAT rates), and the growth of the country’s own greenhouse vegetable production.

Russia’s largest suppliers of greenhouse tomatoes in January 2019 were Azerbaijan, Morocco, Turkey, China and Iran. Azerbaijan, Turkey and Iran sharply increased their tomato exports to Russia compared with the same month last year, while Morocco and China, on the contrary, sharply reduced their supply volumes.

Israel was the clear leader in the delivery of peppers to Russia in January, well ahead of China and Turkey. Meanwhile, Iran exported mostly cucumbers to Russia; four times more than China.

Russia’s Annual Greenhouse Tomato Production Reached 380,000 MT

In the 2017-2018 campaign, Russia’s average production of greenhouse tomatoes amounted to 380,000 MT. The statistics have been provided by researchers of the marketing agency ROIF Expert in the report “Greenhouse Tomatoes in Russia: Maximizing Production”.

It is worth noting that the share of greenhouse tomatoes in the market has reached 45%. The main market trend has been the sharp growth in the share of tomatoes against the background of a reduction in the share of cucumbers. The gross tomato harvest in 2017-2018 grew by almost 25%, while the production of greenhouse cucumbers by only 0.2%.

According to a ROIF Expert, the most negative aspects affecting the development of greenhouse tomato production in Russia until 2023 will be the depreciation of fixed assets, the high capital costs for the construction of new greenhouse complexes, the increased competition between Russian and foreign suppliers in the vegetable market, or the pressure from federal retailers. Many will also be affected by infrastructure or logistics problems.

Russia Top Market for Turkey’s Fresh Fruit, Vegetable Exports

Turkey exported approximately $365.66 million worth of fresh fruits and vegetables in the first two months of this year. It was the Russian Federation that was importing the most Turkish produce, at around $104.53 million.

According to data from the Eastern Black Sea Exporters Association (DKİB), Turkey exported 697,577 tons of fresh fruits and vegetables to 100 countries in January and February. Russia ranked first in the amount of produce imported from Turkey, followed by Iraq with $34.084 million and Romania with some $33.11 million.

On the other hand, the Eastern Black Sea Region exported 52,247 tons of fresh fruits and vegetables to 31 countries in the same period, making $29.14 million in revenue. Russia ranked first among the countries that imported fresh fruits and vegetables from the region with $22.6 million, followed by Georgia with over $2 million and Iraq with $988,045.

Apple Production to Reach 1.5 Million MT in 2018/19

For marketing year 2018/19, Russian apple production is forecast at 1,506,100 MT. Notwithstanding recent growth in local apple production, Russia remains one of the world’s leading importers of fresh deciduous fruit, importing 858,612 tons of apples in 2017/18. In MY 2018/2019, Russian apple imports will likely decrease to 815,000 MT. Russian imports of table grapes and pears are also forecast to decrease to 270,000 MT and 352,000 MT, respectively, as consumers increasingly look to purchase less expensive domestically grown fruit.

Since 2014, Russia’s counter-sanctions have banned fresh apple imports from Europe and the United States. This, and the Government of Russia support amounting to 12.9 billion rubles (US$ 194.8 million) for the period 2013-2018, has propelled investment in Russia’s horticultural sector.

In 2018, the the Government of Russia announced a 242 billion rubles (US$ 3.6 billion) support program for Russian agriculture. In February 2018, the Gpvernment of Russia allocated an additional 7 billion rubles (US$ 105.7 million) specifically for agricultural development, this included a 5 billion ruble (US$75.5 million) subsidy to encourage investment.

Apples Imports to Russia in 2018

Russia remains one of the biggest apples importers in the world. In total in 2018, Russia imported 844,000 MT of apples amounted to $517.4 million, while it exported 11,700 MT of $4.11 million.

The main countries exporting fresh apples to Russia are Serbia (20.7%) and Moldova (20.5%). China ranks third with 16.5%.

Russia also imported fresh apples from Iran (7.3%), Turkey (7.2%), Azerbaijan (6.7%), Chile (5%), Belarus (3.4%), South Africa (3.4%), Argentina (3%), Brazil (2%), New Zealand (2.8%), Macedonia (1.2%) and other countries.

In 2018, the Russian Berry Market Grew by 1.5%

In 2018, Russia’s total berry production volume increased by 1.5% compared with the previous year. This broke the negative trend of 2017, when this figure fell by 5.8%, as revealed by data of the marketing agency ROIF Expert.

Agency analysts noted that 65-68% of the total volume corresponds to cultivated berries, and 32-35% to the harvest of wild plants. 92-94% of all grown berries are currants, garden strawberries and raspberries.

At the same time, no more than 1% of all products grown in the country are exported. In 2018, Russian berry shipments to foreign markets increased by 43% in terms of volume and by 9% in terms of value and reached $ 0.5 million. Berry imports last year grew by 8% in terms of volume and by 45% in terms of value, reaching $ 100 million.

Iran: Exports to Russia up 36% in 2018

Iran exported US$533 million worth of commodities to Russia in 2018. This is a growth of 36% in Iran’s exports to Russia, compared to the year before.

Iran’s exports mainly included pistachio, raisins, dates, apples, cucumbers, tomatoes, fish, shrimp, milk, cheese, tea, kiwi fruit and cabbage, according to Farhad Parand, Iran’s commercial attache in Russia. The trade between Iran and Russia stood at 1.74 billion dollars in 2018, registering a 2% growth from 2017.