When the conflict between Russia and Ukraine is viewed through an agricultural lens, the eyes are mainly focused on the grain markets. After all, both countries are major players on the world stage when it comes to wheat or maize. But do recent developments also have consequences for the potato market?
At first glance, Russia's influence on the European potato market seems small. After the annexation of Crimea and Russia's involvement in eastern Ukraine in 2014, the European Union imposed sanctions. The Kremlin responded with counter-sanctions, which meant that vegetables, fruit, meat, fish and dairy products from many countries in the European Union could no longer be exported to Russia. This has hit the agricultural sector hard. And the counter-sanctions are largely still in force. Dutch potatoes and onions are therefore no longer exported to Russia, according to statistics.
Net importer
Processed potato products, such as fries, are not covered by the counter-sanctions. Although Russia has an extensive potato cultivation - in the period from 2013 to 2020 production fluctuated between 20 million tons and 25 million tons - the country is a net importer of processed and/or preserved potato products. Russia is not one of the largest destinations for European chip producers, but with a share that has fluctuated between 5% and 7% in recent months (of total chip exports outside the European Union), it is an important player.
That is also the difference with other commodity markets. Russia is a net exporter of wheat. The possible loss of Russia makes buyers nervous and they look for other suppliers; for example in the United States or the European Union. We have clearly seen that effect on the Matif and CBoT in recent days. For potato products, it is mainly the fear of the loss of a sales market that predominates. It is difficult to estimate the magnitude of the effect in the short term. Yes, Russia is an important market, but worldwide there is a good demand for fries.
Several countries, mainly Asian, are experiencing a shortage of French fries and it is quite conceivable that they will swallow Russia's market share unnoticed if trade with Russia is no longer possible. This can be done, for example, by sanctions from the Russian side or by disconnecting Russia from the international payment system Swift. This would make trade with the country virtually impossible.
The long-term effect is even more difficult to predict. If the conflict is limited to Eastern Ukraine - disrespectfully said to be the fringe of Europe - and a way out is somehow found (à la the unrest in the former Yugoslavia in the XNUMXs), then the effects may not be too bad. Due to a combination of expansionism, alliances and clouded international relations, it is conceivable that more parties will be drawn directly or indirectly into the conflict. In such a scenario, the consequences are many times greater and last longer. They are not limited to the potato market or other raw material markets.