The Departure of Cargill and Viterra: Implications for the Russian Grain Market and Beyond
The Russian grain market is facing a major shift with the exit of two of the world’s biggest grain traders, Cargill and Viterra. While some Russian propaganda platforms are claiming that this means the country will just export to China without middlemen, the reality is much more complicated. Once a company like Cargill bails out of your country, it means that any grain you export in the future will compete with them, and Cargill is one of the world’s largest foodstuffs traders.
There is a limited number of grain bulkers in the world, and grain insurers, like insurers anywhere else, give the best discounts to the biggest customers. Additionally, Cargill’s intelligence network is said to surpass even the CIA’s. So, if Russian wheat exported from Rostov to Shanghai does not meet some international quality standard, Cargill is likely to know where it’s going, who the customer is, and which government or international agency needs calling to keep that wheat out of Chinese flour mills.
This highlights a significant problem with picking a confrontation with a superpower. It is not just the government and military that you are up against, but also the country’s trans-national corporations. When Putin assumed that oil and gas prices would go up forever in the mid-2000s, he stepped on a similar type of rake. As it turned out, energy companies in Scotland, Texas, Norway, and even the Emirates, all motivated by profit, figured out ways to tap shale, liquefy natural gas, and get it to market for way less than what the Russians were charging.
The exit of Cargill and Viterra from the Russian market means that the race is now on in the Russian oligarch class to grab all the grain silos, trading departments, rail cars, etc., formerly owned by these two corporations. This may lead to the consolidation of the market under a few large players, which could result in higher prices for Russian consumers.
It is also worth noting that the departure of these two grain traders could have significant geopolitical implications. For instance, Russia has been working to increase its influence in the Asia-Pacific region, and China is a crucial market for Russian grain. However, with Cargill’s exit, China may become more cautious about importing Russian grain, as they may not have the same level of confidence in the quality of the product.
Furthermore, Cargill’s exit could be a blow to Russia’s efforts to diversify its economy away from energy exports. Agriculture has been identified as a key sector for growth in Russia, and the country has been investing heavily in the sector in recent years. However, with the departure of Cargill and Viterra, Russia may struggle to attract the same level of investment and expertise in the sector.
In conclusion, the exit of Cargill and Viterra from the Russian grain market is likely to have significant consequences for both Russia and the global grain trade. While Russian propaganda platforms may be claiming that this is a positive development for the country, the reality is much more complex. With the consolidation of the market under a few large players, prices for Russian consumers may rise, and Russia’s efforts to diversify its economy away from energy exports may be hampered. Additionally, the departure of these two grain traders could have geopolitical implications, as China may become more cautious about importing Russian grain.
