Russian ban on Turkish tomatoes bears domestic fruit

Russian ban on Turkish tomatoes bears domestic fruit

MOSCOW – Reuters
Russian ban on Turkish tomatoes bears domestic fruit A ban on Turkish tomato imports that was motivated by geopolitics has inspired Russia to become self-sufficient in tomato production, a windfall for companies who invested in the technology that would increase year-round production.

Russia has been ramping up production of meats, cheese and vegetables since it banned most Western food imports in 2014 as a retaliatory measure for sanctions meant to punish Russia’s support of rebels in eastern Ukraine and annexation of Crimea.

After Turkey shot down a Russian jet near the Syrian border in November 2015, Moscow expanded the ban to include Turkish goods, including tomatoes, for which Russia was the biggest export market.

Ties between Ankara and Moscow have since largely normalized and all restrictions have been lifted but the ban on tomatoes remains in place and may not be lifted for another three to five years, officials have said.

That may be too late for Turkish exporters if Russian efforts to ramp up domestic production bear fruit.

Greenhouse projects being built with state support are key to Russia’s plans to become self-sufficient for its 144 million population by 2020, industry players, analysts and officials say.

Although Russia only imports about 500,000 tons of the 3.4 million tons of tomatoes consumed annually, the country’s notoriously harsh winters have limited its ability to ramp up to full capacity, IKAR agriculture consultancy said.

Currently only 620,000 tons of production comes from “protected ground”, or greenhouses, IKAR said. The remainder comes from “open ground” productive only from June to September, and most of that comes from private plots maintained and used by individual families or sold at local farmers’ markets.

Sergey Korolyov, the head of National Fruit and Vegetable Producers’ Union, estimated that greenhouse projects that have already started growing tomatoes could start seeing their money back in 8-9 years thanks to state support, which includes partial investment compensation and favorable loan rates.

“Now greenhouses which were originally built for cucumbers are being repurposed for tomatoes,” Korolyov told Reuters.

Although the greenhouse sector is dominated by dozens of small-size firms, several big players have also stepped in.

Russian conglomerate Sistema, bought the country’s largest Yuzhnyi greenhouse complex in December 2015, when the ban on Turkish supplies was announced.

The 144-hectare complex produces more than 45,000 tons of tomatoes and cucumbers per year.

“We were slightly lucky in this case - we bought the asset which was already working with good quality, customers and employees,” said Sistema’s senior vice president Ali Uzdenov.

The decline of the ruble currency against the dollar since mid-2014 has helped by making tomato imports less competitive, he said.

Other large vegetable producers include Russia’s second biggest food retailer Magnit, with a 84-hectare complex.

Deputy Prime Minister Arkady Dvorkovich, who is in charge of the agriculture sector, said the government is fully behind the effort.

“We need to achieve a certain share of independence from import supplies to stabilize the domestic market. And we will be supporting these projects,” Dvorkovich told Reuters in June.

But with so much of tomato production taking place in people’s private plots, imports will continue to be important in the near-term, he added.

The plan does not bode well for Turkey. As much as 70 percent of the country’s tomato exports went to Russia in 2015, earning Turkish growers $259 million, according to the Turkish Statistical Institute.

When the ban was put in place, most of the slack was taken up by Morocco, Azerbaijan and Belarus.

Ankara proposed in May that Moscow lift the ban outside of the main harvest season.

Asked about Turkey’s proposal, Dvorkovich said it might work, but only for local production of tomato paste or juices.