Russian sanctions mean about-face for American agriculture shipments

The situation in Ukraine and continued escalating financial sanctions imposed by the West have led Russia to take measures of its own, and that includes closing Russia’s borders to a large number of American and European agricultural products, effective immediately.

A country usually only closes their borders immediately when there is a public health emergency for contaminated food or a wildlife pest or infestation. However, in this fluid tête-à-tête between nations and trading blocks, reaction times are much faster.

The closure of Russia’s borders means that hundreds of containers of perishable, non-perishable and bulk food items in transit need to be diverted or returned.  In an article in the Journal of Commerce, Maersk details what they’ve had to do with their customers who have shipped poultry, beef, fish and vegetables to Russian consignees. Because much of the product is frozen, it can be redirected to other buyers, but for less than what they were initially sold for, in some cases pennies on the dollar. Cargo is being redirected to interests in Asia and Africa.

What about insurance? Could that help? There is at least one coverage that might apply, called “Export and/or import embargo indemnity,” but it is something to be discussed with your underwriter.

The impact is felt not just by shippers of these commodities, but the ports from which they depart. If there is a silver lining, it is that while Russia is closing its doors, other countries will have to step in and meet their needs opening new markets to American agricultural products. Brazil is a large producer of poultry and is expected to increase their shipments to Russia, leaving Brazil’s other customers needing a new supplier.

(Photo credit Flickr user Jaxport, CC BY 2.0)