Photographer: Andrey Rudakov/Bloomberg

Russia Seeks Food-Export Boom With China But Obstacles Abound

  • Russian agricultural shipments to China rise in 2016
  • China is top export destination for Russian food producers

After taking the top spot among China’s oil suppliers, Russia wants to boost the Middle Kingdom’s appetite for its food and agricultural products. So far, the going has been slow.

“There are lots of economic initiatives, but actually realizing them isn’t so easy,” Alexei Gruzdev, the deputy economy minister responsible for trade, said in a recent interview. “Accessing the market and finding one’s niche is a difficult process that involves serious competition.”

Russia’s farm sector has been on a roll in recent years, powered by years of investment, good harvests and government bans on imported competition. Last year, the country topped ranks of world wheat exporters for the first time in a century.

Boosting trade with China has been a particular Kremlin priority since relations with the U.S. and EU soured over the Ukraine crisis in 2014. Falling oil prices have eroded the value of Russia’s fuel supplies -- which had accounted for three-quarters of exports until recently -- and the government is looking to agricultural products to help fill the gap. Overall exports to China were down 6.1 percent in the first 11 months of 2016.

China is already the largest buyer of Russian farm exports, accounting for about 11 percent of the total, with shipments totaling $1.5 billion in the first 11 months of last year, up more than 8 percent from the year before. The bulk of that is frozen fish, sunflower oil and soybeans, according to data from the Russian Export Center, a government trade-promotion group.

“We see additional sources of growth,” said Gruzdev, who was Russia’s trade representative in China before starting his current job last year. “In China, demand is forming for high-quality products from Russia.”

But plenty of obstacles remain. Gruzdev said boosting supplies from Russia’s fast-growing pork and poultry producers is a priority -- China is the world’s largest consumer of pork -- but so far the market is closed because of a Chinese ban on Russian meat imposed as a result of outbreaks of African swine fever in Russia.

China ‘Euphoria’

Gruzdev said Russia is pushing to ease the restrictions, trying to convince Chinese regulators to allow shipments from areas that aren’t infected. “This is one of our key priorities,” he said of the effort to open the market.

Until the ban is lifted, however, projects are on hold. Ros Agro Plc, one of Russia’s largest meat producers, is building a 20-billion-ruble ($340 million) pork farm in the Far East near the Chinese border. But the focus for the moment is the domestic market, the company said, with expansion for possible exports likely only in the future.

“There’s a lot of euphoria about China,’’ said Albert Davleyev, president of consultant Agrifood Strategies in Moscow. “At the same time, it’s very difficult to deal with China. Their veterinary requirements are some of the most stringent in the world.’’ Europe and the U.S. are top pork suppliers, while Brazil and Australia lead among China’s sources of imported beef.

Dairy products are another Russian target area, according to Gruzdev, but they also face Chinese restrictions over safety concerns. Ice cream is the only one currently allowed from Russia, but sales in the first nine months of last year amounted to only $4.2 million, according to the Export Center.

Even where there aren’t explicit bans on imports, Russian shipments have been slow to grow. Grain supplies have been allowed since Dec. 2015, but deliveries have been negligible.

A few Russian specialties have taken off in China, such as chocolate. Gruzdev said his country’s sweets are especially popular in the border regions in the northeast, where a classic Russian honey cake is known as “Russian tiramisu.”

Gruzdev said joint ventures with Chinese companies have been a big source of soybean exports. His ministry agreed last year with its Chinese counterpart to move quickly to remove obstacles to trade and investment. There’s plenty left to do.

“The measures being taken to diversify exports are having some effect -- not as much as we’d like, but it’s just the beginning,” he said. 

— With assistance by Shuping Niu

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