Cargill, Viterra to Halt Russian Grain Purchases for Export

The two biggest Western exporters of Russian grains, Cargill and Viterra, said they would halt purchases for export, a decision which will give local companies more control over shipments. Cargill will exporting grain sourced by the company in Russia from July, but will continue to buy cargoes from other firms. Glencore subsidiary Viterra is planning to exit the Russian export market and is expected to announce its decision in the near future. Both companies have been ranked as top six exporters of Russian wheat in the first half of the season. Russian grain is vital to global crop trade and food security. Its agricultural products aren’t under sanction, but trade can be complicated by restrictions on Russian banks and state companies. International grain traders have also faced pressure to leave from Moscow and the local industry.

The move raised concerns about global grain supplies disrupted by Russia’s invasion of Ukraine, lifting benchmark wheat futures prices to multi-week highs. Wheat futures rose as much as 3.5% in Chicago on Wednesday. Paris-based Euronext May milling wheat hit a two-week high and settled at €265.25 a ton.

Viterra is expected to leave the Russian export market by the end of this agriculture season, but the company is currently still shipping grain as it tries to come up with a solution on how to leave and what to do with its Russian assets. It owns 50% of the Taman grain terminal on the Black Sea.

Cargill cited mounting grain export-related challenges for its decision. It is expected to export 2.2 million tons of Russian grain in the 2022-23 exporting season, or around 4% of Russia’s total grain exports.

“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,” the company said.

“Cargill intends to continue shipping grain from Russia to destination markets in line with our purpose to nourish the world.”

The Minnesota, U.S.-based company is in the process of reviewing its portfolio of assets relating to grain exports. Its export assets include a stake in a port terminal in Novorossiysk on Russia’s Black Sea, and a river terminal in Rostov-on-Don.

Russia has been making it increasingly harder for foreign traders to obtain the paperwork necessary to export their grain. The country has been trying to gain more control over its commodity shipments, and recently discussed price levels at which wheat should be sold.

There are two Russian firms that could greatly benefit from Cargill and Viterra’s withdrawal, and both are state-backed. Grain Gates, the second-biggest exporter, is a partner of Demetra Trading. State-controlled VTB Group is one of the shareholders of Demetra. OZK, which is also known as United Grain Co., is owned by the state and Demetra.

Earlier, Russia’s agriculture ministry said it received a notification from Cargill about plans to stop exporting the country’s grain. 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.

Governors of key grain-producing regions last year called for foreign companies’ participation to be limited, so that Russia could control its own exports. Around that time, major Russian fertilizer supplier UralChem informed Putin that it was willing to buy the local assets of grain traders Cargill and Viterra.

Most international grain traders have stopped new investment in Russia since last year following Moscow’s invasion of Ukraine but continued exporting Russian wheat.

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