PARIS (AFP) – Three of the world’s largest grain distributors have announced that they will pull out of Russia by July, a move likely to reinforce Moscow’s control over the global wheat market.
Government pressure and operational difficulties in the wake of the war in Ukraine have made staying in the country unfeasible for Cargill, Louis Dreyfus (LDC) and Viterra, the companies said.
Until now they had maintained operations in Russia including transport and storage via silos and port terminals, saying it was essential for ensuring the supply of crucial commodities for countries worldwide.
Russia is the world’s largest wheat exporter, and the grain was not targetted by Western sanctions against Moscow after the beginning of the war in February 2022.
But starting July 1, the companies will only charter cargo ships for agricultural shipments from Russia.
United States (US) giant Cargill is operating “only essential food and feed facilities” in the country, it said in a statement last week.
“However, as grain export-related challenges continue to mount, Cargill will stop elevating Russian grain for export in July 2023 after the completion of the 2022-2023 season.”
Viterra, part of the Swiss-based commodities group Glencore, followed suit a few days later, saying it “has concluded that its activities in Russia no longer fit the long-term direction of the company”.
“We are assessing options to transfer our business and assets in Russia to new owners,” a spokesperson said. Louis Dreyfus, based in the Netherlands, also said it was “assessing options for the transfer to new owners of its existing Russian business and grain assets”.
The geopolitical uncertainty surrounding Russia’s exports in the wake of Cargill’s announcement sent wheat prices soaring on European markets last week.
“We expect that everything will gradually come under state control,” resulting in much less transparency for the grain markets, said analyst at the brokerage firm StoneX Arlan Suderman.
Russian operators are also likely to be less efficient and therefore more costly than the global players, “raising fears about the stability of grain outflows from Russia”, Suderman told AFP.
