Canada Markets

At first glance, Canada's total exports to Russia are seemingly small. In 2012 Canada exported $1.7 billion worth of total product to Russia, which made the country Canada's 18th largest customer and received just .4% of Canada's total exports in 2012.

The significance of this trade becomes more apparent when just agri-food exports are considered, which is what has been banned by Russia in their latest move to counter those countries with sanctions against them, which includes Canada, United States, European Union, Norway and Australia.

As seen on the attached chart, pork exports to Russia totaled roughly $254 million dollars in 2013, which is the by far the largest component of Canada's agri-food exports to Russia, reported to total $515.2 million U.S. in 2013. This makes up 9.65% of Canada's total hog exports, placing Russia as Canada's third largest customer next to the United States and Japan.

Given today's media interviews with Canadian pork officials, there may be more questions than answers given the recent announcement. There's been communications suggesting that there were hundreds, even up to a thousand, 28 metric tonne containers in various stages of transportation to meet existing Russian business. It remains to be seen how this business will be resolved. As well, it is even too early to know just what products and which countries may be impacted in which ways.

Trade analysts following Russia are not surprised over the move, as Russia has had a pattern of imposing trade sanctions in the past, although if there's one question asked repeatedly, it's why food? Despite Russia's significant production capabilities, the country imports roughly half of their food supply. As well, the country already realized a 7.5% rate of inflation in the month of July. Escalating food prices and bare shelves may have everyday consumers questioning their political leadership in time.

Government and trade officials from Canada and the United States have suggested that Putin's move will harm no one but his own people. Bloomberg reports that Russia is "playing a bad hand badly," while one U.S. government official suggests "what the Russians have done is essentially impose sanctions on their own people." Federal Agriculture Minister Gerry Ritz suggested the move "shows desperation." Prime Minister Harper suggested that "business interests" will not govern foreign policy, with further sanctions announced against Russian billionaires and companies while arrangements were made to send supplies to the aid of Ukraine.

While the move is down-played by government rhetoric, there will be pain felt within the group of exporters, if not in Canada, certainly in the E.U., where exports of food are reported at $15.8 billion. Time will tell how this will play out, although one trade analyst interviewed on BNN suggested that additional trade sanctions imposed by Russia would not be a surprise. Meanwhile, trade sanctions against Russia are expected to have a significant impact on that country's economy. Who will blink first?

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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