Magazine: A drop in our agri-food export to Russia

Hungary’s agri-food export to Russia decreased by 14 percent in 2014, from EUR 267 million to 230 million in value. In part this was caused by the crisis in the Ukraine; interestingly enough, the European Union’s sanctions against Russia resulted in smaller problems for the Hungarian economy than Russia’s answer to these. Russia is Hungary’s third biggest economic partner but because of the EU’s import embargo Russia stopped importing from EU countries and this had severe consequences for us: we have to find new markets for our agri-food products until things get back to normal. To make things worse, in addition to losing the Russian market, exporters from overseas entered those segments of the market where we used to be present – it is going to be very difficult for Hungarian agri-food products to return once the conflict is over. Luckily the newly opening Hungarian National Trading Houses and the Paprika store chain (established two years ago) are available to us for market rebuilding purposes. It can also be of help that EXIM Bank launched a programme for assisting the founding of Russian-Hungarian joint ventures. In certain product groups Hungary’s export to Russia has increased by 30-40-50 percent or has even doubled, showing that progress can be made. If we take a look at those areas where our export performance worsened, e.g. beef, pork, lamb, we can see that Brazil and Argentina replaced us and other EU countries. Meat and meat products used to be an important segment of our Russian export, for instance in 2013 it made up for 30 percent of our total agri-food export to Russia. Unfortunately last year our dynamic meat export development came to a halt. Not only our agri-food sector but the whole economy suffers from the sanctions introduced in the last 6-7 months, as up until the middle of 2014 it very much seemed that Hungary’s export to Russia has the chance to approach the level of the 1970s and 1980s. The EU’s sanctions and the Russian answer in August 2014 ruined years of hard work. Our meat export shows really well what happened: in 2013 (the peak year with 36,537 tons) we exported 8 times more to Russia than in 2004, but by 2014 our performance plunged to the 2007-2008 level. For example our pork export reduced to 5.2 percent at 772 tons, while our poultry meat export ‘only’ halved; however, our 1,500-ton rabbit meat export – representing a value of EUR 7.5 million – only decreased by 100 tons in 2014. This is good news as the Russians buy 30 percent of the rabbit meat we sell in foreign markets. In the long run, the Russians intend to satisfy domestic food demand from their own production, especially in the domains of milk and dairy products, meat and sugar. In the light of this fact Hungary has to make sure that more energy is invested in developing closer economic and scientific ties with Russia, instead of just concentrating on product export. By exporting knowledge and technology to Russia we can make up for some of the loss suffered in goods export until the embargo is lifted.