Pears Rot in Europe as Putin’s Retaliation Cuts Price by 70%

Sep 05, 2014 8:10 am ET

(Updates with comment on consumer impact, Russian inflation in 13th paragraph.)

Sept. 5 (Bloomberg) -- Bas Feijtel has a bumper crop of pears and no place to sell them all, so he’s leaving a quarter of them to rot.

That’s because the price he gets for his pears plunged 70 percent from last year after Russia’s food import ban, and the grower in Wemeldinge, Netherlands, says it’s cheaper not to harvest any but the most perfect fruit.

“When the problems started from Russia, there was panic,” said Feijtel, 47, who plans to harvest his highest quality pears while leaving behind the fruit with bumps or bruises that usually command a lower price. “It was a very bad moment for us because it was one week before we started picking, and we couldn’t change our plans. People were coming to pick the pears and storage was arranged.”

Russia, the biggest buyer of European pears, last month banned an array of food imports from the European Union, U.S. and other countries that supported sanctions against it over conflicts in Ukraine. The restrictions pushed prices lower for everything from Spanish peaches to Latvian cabbage to Finnish dairy products, according to Brussels-based farm lobby Copa- Cogeca.

Support Measures

In the wake of the Russian ban, the EU announced support measures for fruit and vegetable producers worth 125 million euros ($162 million), which include payments for non-harvesting of crops and for free distribution of fruit to charities, hospitals or schools. About 82 million euros of the total will be allotted to apple and pear producers, said Roger Waite, a spokesman for the European Commission, the EU’s administrative arm.

Exports of all EU food products now banned by Russia were worth 5.1 billion euros last year, representing 4.2 percent of the bloc’s total agricultural shipments, according to the European Commission. About 29 percent of the EU’s fruit and vegetable exports went to Russia, and the sector is the most affected by the ban because the products are perishable, the Commission said in a Sept. 3 report.

It costs Feijtel about 10 euro cents (13 cents) a kilogram (2.2 pounds) to pay workers to harvest his pears, more than he would get for lower grade fruit that would normally go to the export market, he said by telephone Sept. 2. While he may receive 15 cents for higher quality pears, that’s down from 50 cents at this time last year, he said.

Grower Losses

Most European pear farmers will lose money this year because their production costs are 40 cents to 50 cents a kilogram, Cindy van Rijswick, a fresh produce analyst at Rabobank International in Utrecht, Netherlands, said by telephone Sept. 2. Storage and paying for labor at harvest make up the biggest share of costs, she said.

“Picking costs are quite high in northwestern European countries, so I can imagine some of them will leave the pears in the fields, but it’s also an enormous waste,” van Rijswick said. Pears can last for about six months in temperature- controlled warehouses, so many growers will store their crops in the hope prices will rebound, she said.

EU pear exports to countries outside the 28-country bloc were worth 313.2 million euros last year, with Russia accounting for more than half the value at 179.3 million euros, according to Eurostat. The top EU suppliers to Russia were Belgium, Lithuania and the Netherlands. Argentina was the world’s biggest exporter by value in 2011, followed by the Netherlands, China and Belgium, according to the most recent data from the United Nations Food & Agriculture Organization.

Pear Production

European pear production may total 2.27 million metric tons this year, 2.5 percent less than in 2013, according to the World Apple and Pear Association, a Brussels-based industry group. The harvest will be larger than last year in both the Netherlands and Belgium, the group predicts, after northwest Europe experienced a mild winter and ample rain during spring.

“At the moment we see quite a lot of pressure on prices,” Ad Klaassen, the secretary general of the Dutch Produce Association, said by telephone from Breda, Netherlands. “Growers are still looking at the situation and what will happen, but a number of growers will not harvest their production.”

While lower prices may be “good news for consumers in the short term,” fruit costs may ultimately increase if losses push farmers out of business, Adrian Barlow, the chief executive officer of East Malling, England-based industry group English Apples & Pears, said by phone today. In Russia, inflation accelerated in August after the food import ban, the country’s Federal Statistics Service said yesterday.

Storage Scramble

The harvest in the Netherlands will continue through the end of this month, and Feijtel, whose orchard spans 25 hectares (62 acres), said growers are scrambling to find space to store crops that would normally be exported. Prices in Belgium that were 75 cents a kilogram in mid-June were about 46 cents in late August, European Commission data show.

“Hopefully we will get some normal prices, maybe not now but in 6 months,” Feijtel said. “The first thing everybody does is put all the pears in the fridge, and try to hire extra fridge space and extra boxes to put the pears in. When that’s not possible anymore, we’ll have to see what we can do.”