On Thursday, Russia announced a ban on food imports coming from the European Union, the U.S., Canada, Australia, and Norway.
Russia is the world’s fifth largest importer of food, which means we should expect price distortions stemming from excess supply.
These price distortions may be pronounced in the global cheese market.
According to Capital Economics’ Tom Pugh, food exporters to Russia could be saddled with a lot of extra cheese.
“The Chart … shows the percentage of Russian imports which come from the sanctioned western nations,” wrote Pugh in a note to clients on Friday. “The ban is likely to have a much bigger impact on the markets for food in which Russia gets most of its imports from these countries. For example, over 70% of Russian imports of cheese come from the Western countries in question and almost as much pork and chicken. So we could expect to see a surplus of dairy and meat products over the next year, which may weigh on prices.”
Russia is likely to experience the exact opposite problem: higher cheese prices due to supply shortages.
“The upshot is that the Russian ban on imports is likely to put downward pressure, both directly and indirectly, on a wide range of agricultural commodity prices over the next year,” wrote Pugh.
This should be good news for anyone outside of Russia who loves cheese.
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