How the Russian War and Sanctions may Affect the Flower Industry?
In a surprising and devastating turn of events, Russia invaded Ukraine. The Russia-Ukraine conflict has turned into a war, and there are casualties on both sides. While this has had devastating effects on Ukraine and its people, world leaders have swiftly responded to Russia’s unlawful actions with sanctions. In turn, this has influenced the global economy and numerous industries.
The floral industry is no exception to this unrest. With Ecuador shipping large volumes of flowers to Russia and Russian sanctions in place, it has had a ripple effect throughout the industry. This article will delve into the latest floral industry news and discuss the consequences of the Russian sanctions on floriculture as a whole.
As the world responds to this tragedy, most nations have agreed to hit Russia with sanctions. One of these includes the blockage of the Swift system in Russia, effectively rendering the country unable to make foreign transactions. However, this doesn’t just affect Russians but also countries dealing with them. While Ecuador has already exported tons of flowers to Russia, they have yet to be paid. With Swift being blocked, this seems unlikely under the current situation.
Cancellations and Trade Restrictions
The advent of war has restricted trade and caused many cancellations. Export orders are being canceled, resulting in millions being lost. This is due to several factors, including transport, pricing difficulties, and even fuel.
Transport and Logistics
There’s no denying that the Russian sanctions and the war have significantly impacted all industries. When it comes to transport and logistics, this has become harder and more expensive. Transportation isn’t just more complex. The depreciation of Ukrainian and Russian currencies has meant that freight to Russia is now pre-paid. This is a barrier for many, causing further issues for the floral trade.
Yet another blow to the floral industry has been seen in the form of fuel prices skyrocketing. This has a huge impact on logistics and on plastic commodities such as floral sleeves. There is panic and chaos surrounding these changes and growers, wholesalers, and florists are seeing rising fuel costs cut into their profits.
Impact on Specific Countries
The global economy is certainly reeling from sanctions, but some countries have been hit especially hard when it comes to floriculture.
Russia is a large market for the Netherlands as well. In fact, according to the Association of Wholesalers in Floriculture Products (VGB), 2.5% of all Dutch flower and plant exports were to Russia. This may not seem like a lot until you realize this is worth a staggering €185 million ($201 million).
Numerous countries are reeling from the impact on their floriculture sectors, but this is especially true for Ecuador. The South American floral giant relied on exports to Eastern Europe. It has been estimated that 35%-45% of Ecuadorian flowers go to Russia. This is both directly and through surrounding countries like the Netherlands and Belarus. It should also be noted that many of the varieties that the Russian market loves are not popular in the Western Hemisphere!
In fact, Expoflores has estimated Russian and Ukrainian debts to rise to approximately $33 million. Since the bulk of flowers for events such as Women’s Day has already been exported, farmers and growers can’t obtain their payments and are suffering. Many are even getting rid of their stock by using it as livestock feed.
It’s not just floral exporters who have been affected by the Russia-Ukraine conflict. Even markets such as the U.S. have been impacted. Because of the lack of flowers being exported to Eastern Europe, it’s expected that Ecuadorian flowers will flood the U.S. market instead. Increasing supply and reducing demand and price is a lose-lose situation for Ecuador. The fall in demand also affects those in the American floral industry. According to Floral Daily, prices have already decreased by 25%-30% and are expected to fall further.
This has also impacted Russia. According to Currently from AT&T, flower prices have increased in Russia and have been directly impacted by Russian sanctions.