Russia, China, Europe: which customers are and aren’t worth having

A couple of times in recent years in his market outlook presentations to the World Pork Expo – a fabulous pig-based event I yearly cover – economist Steve Meyer has commented that “Some customers aren’t worth having.”

He had been referring to Russia as a buyer of U.S. pork, and we’re seeing evidence of why that’s so right now, with Russia’s tit-for-tatism against Canadian and other western food products following the sanctions we imposed on Russia and Russians following the Crimschluss and the interference in Ukraine. (For a story by my colleague Barb Glen on Russia’s recent bans see this story.)

Russia plays lots of games with trade, imposing constrictions and bans for all sorts of inventive reasons that few in trade consider to be justified on the grounds claimed. In that, Russia’s a lot like China, which in recent years has appeared to attempt to perform a kinder and gentler form of central economic control than in its hardcore Communist days by playing around with imports of products from countries like Canada. Chinese authorities aren’t likely to admit what they’re doing, so we don’t know this for sure, but it’s what most trade analysts think. In order to manage domestic prices, farmer returns and national production, China either leaves its borders open or narrows the door.

A big difference between China and Russia is that China’s a customer worth keeping, regardless of how vexing some of its actions can be. It’s the world’s biggest growing economy and shows every sign of becoming a more and more important player in the world economy in coming decades. As a food and agriculture importer, it appears to be becoming the world’s most important market. That’s not something that most Prairie farmers would want to give up or antagonize.

But Russia’s a different matter, as Meyer has been noting. It tends to be a low-end market for price, it is notoriously unreliable as a partner and the country doesn’t seem to have much economic future. It’s basically a discount shopper that’s hard to work with. China’s obviously worth working with, placating and keeping on good terms with, but investing a lot of time in a relationship with Russia doesn’t seem worth too much of our while. If it wants to be a residual, discount buyer of whatever we have left after serving our higher-paying and better behaving customers, then by all means we should sell to its buyers. But as Canadian meat exporters are finding out yet again with this present complication, Russia isn’t worth basing a business plan on. If our low-end, low-quality competitors like Brazil and Argentina want to focus on the Russian market, we don’t need to scrap too hard for it. (To see a story on those countries’ attempts to fill the void we and the other bannees have created, read this.)

An even more complicated market that’s vexing us right now is the European Union, with its Byzantine internal politics making the present Canada-EU free trade deal negotiations seem fraught with future disappointment, and creating jaded expectations assuming a frustrated and frustrating result. But like China, Europe’s a market worth going to great lengths to develop and protect, even if it plays some of the same games Russia plays. The EU is a good market already and potentially a great market, and at least they follow the rule of law, even if those laws and regulations sometimes seem to be just elegant ways to disguise trade constriction. Europe is a customer worth having.

Russia’s ban on western food exporters like Canada isn’t likely to hurt us much and will probably be relaxed when Russian citizens get annoyed enough by rising food prices in a declining economy. But this present vexation will be worth remembering next time any of us consider basing future plans and investments on a relationship with Russia. It might not be worth it.

 

About the author

Ed White — Ed White has specialized in markets coverage since 2001 and has achieved the Derivatives Market Specialist (DMS) designation with the Canadian Securities Institute.

Also by this author

5 Responses

Post a response
  1. MR. WHITE, U COULD BE A GOOD REPORTER but the problem is yo biased!

    • Paul Yanko on

      How is Ed’s reporting biased?

      Cheers,
      Paul – WP web ed

      • hanntonn on

        Well, he’s biased by saying that it’s Russia that is unreliable as a partner. In fact, it the West that is unreliable because it started the sanction game. Russia only reacted to these sanctions. He’s also biased by saying that Russia has no economic future while in fact its economy have grown a lot since 2000 and it’s not near stopping that growth. The market was quite promising for foreign investors in Russia before the West started the sanction game. Truly, it’s much more western countries especially the United States that don’t seem to go toward a good economic future since the petrodollar will be dropped by a lot of countries a few years from now and they will get the blow-back from printing too much money.

  2. I love how this guy claims that a top 7 economy with no debt is somehow bottom of the rung and too small… and that any competitor that is beating them in world trade automatically is labeled “low end” “low quality”…

    Being from Australia, I would trust Brazil before I would buy anything Factory-Farmed in the US & Canada… Eeew Nasty!

    Ed is biased because this chump looks like he had to think of a way to dump on Russia. What a goose! But don’t worry Ed it looks like you don’t have a choice of whether to keep the customer or not as they walked out of your shop months ago and I doubt they will ever come back. But please don’t bother knocking on the door of Australia as we don’t want your ‘factory-flesh’ either LOL. Stick to dredging Tar Sands.

Respond





You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>