If the embargo is lifted the dairy segment will suffer the most

7 august 2017 | Prime

Since the food embargo has been lasting for already three years, the PRIME reporters have asked the experts of pros and cons, achievements and challenges of the environment, in which the Russian economy currently exists. According to the agency, although Russian citizens were deprived of many familiar imported products, while the prices surged, it was not fatal: Russia still had food, thanks to Russian manufacturers who tried their best to fill the shelves with domestic products. However, it was not without adverse effects.

Roman Titov
Roman Titov
Department for Expert Analytics

"Shortfalls in imports created by counter-sanctions were never compensated by home manufacturers in many industries," said Roman Titov, an expert of the Analytical Center, to the PRIME reporter. "It was mainly due to diminution in the effective demand in this country and the failure to increase production at such a short notice in some industries. For example, in dairy and cattle farming". According to Mr. Titov, the production growth in the meat industry had highly depended on investments long before the embargo was imposed.

Imported beef has never been replaced in full: the domestic production covered only half of the shortfalls. Dairy products were mostly substituted by the Russian manufacturers, but what was left was covered by the imports from Belarus. "As for the fish imports, they were partially compensated only for the frozen fish, by 65% domestic products and 31% imported products from elsewhere, while the market of fresh fish and fish fillets dropped down," added Mr Titov.

Do import restrictions still have any positive influence on the Russian farming sector? Experts agree that the right answer is rather 'No' then 'Yes'. In the opinion of Roman Titov, the results of 2016 demonstrate that the positive effects of the food embargo are almost exhausted, since the comparable results of the previous two years are almost the same when it comes to import substitution.

The expert believes that in terms of the sensitivity of industries to lifting of the embargo, most vulnerable will be the dairy segment. It is mainly connected to higher cost of milk production in Russia compared to other countries, especially the European Union. "Such a level of competition can prove to be crippling for the Russian dairy farming," says Mr Titov.

Source: PRIME

Picture from open sources