You are currently viewing Russia Says Crop Titan Cargill Will Stop Exporting Its Grain

Russia Says Crop Titan Cargill Will Stop Exporting Its Grain

(Bloomberg) — Russia said top agricultural commodities trader Cargill Inc. will stop exporting its grain, the strongest move yet by a major Western crop merchant to pull back from the country.

Most Read from Bloomberg

As the biggest wheat exporter, Russian shipments are vital to global crop trade and food supplies. A bumper harvest there last year helped wheat futures drop more than 40% from a record reached just after Moscow’s invasion of Ukraine. While Cargill is a big exporter of Russian wheat, the government said the firm’s decision shouldn’t affect overall shipments out of the country.

The companies that buy, sell and ship the world’s natural resources have reaped massive profits from the supply disruptions caused by the war, but are having to navigate a growing web of sanctions and other curbs as Western governments wrestle with the challenge of ensuring the flow of vital commodities without benefiting Russia. Russian crops aren’t under any sanctions, but trade can be complicated by restrictions on Russian banks and state companies.

International grain traders have also faced pressure to leave from Russian officials and the local industry.

Russia’s agriculture ministry said it received a notification from Cargill about its plan. RBC earlier reported that the move will take effect in the coming agricultural year, citing a letter from the US company to Deputy Agriculture Minister Oksana Lut. A Cargill representative couldn’t immediately comment on the matter.

Russian food products aren’t under sanctions. The ministry indicated that it doesn’t expect the move to stop any Russian supplies reaching global markets and that Cargill’s assets related to shipping grain will keep functioning regardless of who manages them.

Russia “is ready to work with all foreign companies whose activities contribute to the development of both the domestic food market of Russia and its export potential,” a ministry spokesperson said, adding that any gaps in the market are being promptly filled by Russian companies.

Some foreign traders have already pared back business in Russia. Bunge Ltd. said shortly after the outbreak of the war that it was suspending new export business with Russia. Archer-Daniels-Midland Co. also said it would scale back operations, although its footprint there was limited.

For commodity traders, the price volatility wrought by the war has helped them rake in huge profits — while also adding hurdles to keep dealing in Russian goods. Several big crop traders have continued shipping large volumes of Russian grain.

Read more: War Brings an Uncomfortable Windfall for Commodity Traders

In other commodities, key crude traders recently said they’re wary of trying to muscle back into Russian exports. Glencore Plc has pledged no new business with Russia, while rival Trafigura Group is said to have been in talks to buy aluminum from Russia’s United Co. Rusal International PJSC.

Cargill promised the ministry that Russian shipments this agricultural season will fully meet the previously approved quota, RBC reported. RBC also said Cargill’s Russian subsidiary will begin reviewing its grain export assets in the country.

The decision from Cargill — which is owned by one of the richest families in the US — comes even after former Chief Executive Officer David MacLennan said in December that the company would stick by its decision to keep operating in Russia.

Russia’s main TV channel in December showed a film about the grain sector in which governors of key grain-producing regions called for foreign companies’ participation in the market to be limited. Around that time, major Russian fertilizer supplier UralChem informed President Vladimir Putin that it was willing to buy the local assets of grain traders Cargill and Viterra, according to a Kommersant report.

Foreign merchants in recent years have also seen more competition from Russian firms as Moscow seeks to expand its influence in the food sector.

–With assistance from Agnieszka de Sousa and Megan Durisin.

(Updates with ministry confirmation and background)

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.

Source link

Leave a Reply