Cargill to Stop Exporting Russian Grains Sourced by the Company
Cargill Inc., a major global agricultural commodities trader based in Minnetonka, has announced that it will cease exporting Russian grains sourced by the company from mid-2023. The decision follows the footsteps of other major companies like Bunge Limited and Glencore PLC, who have exited Russia due to pressure from within the country.
The Kremlin’s strong-arm tactics have forced foreign companies like Cargill to shift their operations out of Russia, as President Putin continues to tighten his grip on the country’s economy. The move comes after the departure of Big Oil in 2022, which was due to Western political pressure.
Reasons for Big Grain Companies Departure
The Russian government imposes grain export taxes to finance its war against Ukraine, and Moscow has long used food exports as a diplomatic lever in the Global South. Russian grain is largely exported to countries sympathetic to Putin, such as Egypt, Bangladesh and Turkey. The Kremlin has shown foreign companies the door, forcing them to sell silos and export terminals to Russian buyers. Local farmers are also likely losers as they will have fewer options to sell their crops.
The departure of Big Grain companies from Russia is different from the departure of Big Oil in 2022. While Western pressure caused Big Oil companies such as BP and Shell to exit Russia, for Big Grain companies like Cargill, the departure is largely due to pressure from within Russia.
Despite this move, Cargill’s other business divisions such as starches, sweeteners, oils and fats, as well as animal feed will not be affected.
Impact of Cargill’s Decision
Cargill will continue buying Russian grain cargo from other companies that it will then ship directly to destination markets. The cessation of Cargill’s grain “elevation” activities, which is the lifting of grain into export vessels, will stop after the 2022-2023 season. The announcement means Cargill will no longer load ships in Russian ports, which might be too costly for the international grain merchant to operate.
Russianowned agricultural commodity trading houses already control a large chunk of the country’s wheat export, and Russian oligarchs are expected to buy chunks of the supply chain on the cheap and connect with the old foreign owners through Russian traders in the Middle East and Asia.
Impact on Global Crop Trade
Russian shipments are crucial to global crop trade and food supplies, as Russia is the biggest wheat exporter. The cessation of Cargill’s activities will not disrupt Russia’s grain shipments, according to the Russian Agriculture Ministry. The government also said Cargill’s decision wouldn’t affect overall shipments out of Russia.
The supply disruptions caused by the war in Russia have led to massive profits for companies that buy, sell, and ship natural resources. Ukrainian grain exports for the 2022/23 season were down 17.7% to 36.9 million tonnes due to a smaller harvest and logistical difficulties caused by Russia’s invasion.
Future Expectations
Although Cargill’s decision is a blow to Russia’s agribusiness sector, it is unlikely to have a major impact on global food supplies. Cargill will continue shipping grain from Russia to destination markets to nourish the world.
The Biden administration is looking to ease tensions between China and the US, while agricultural markets are likely to seek direction from the US planting report due on Friday.
In conclusion, leaving Russia may spare Western companies like Cargill from falling afoul of Kremlin policy but presents its own set of challenges as they will need to find new sources of revenue if they want sustainability in their business operations.
Image Source: Wikimedia Commons
