Global grain traders stop exporting Russian grain as of July 1, exit Russian market

MOSCOW. July 3 (Interfax) - Global grain traders Cargill, Viterra and Louis Dreyfus have stopped exporting Russian grain as of July 1, and are leaving Russia. They informed the Russian Agriculture Ministry of this decision in March, and that they are starting to work out the issues of transferring their businesses to new owners.

Eduard Zernin, chairman of the board of the Union of Grain Exporters, told Interfax that international companies have done a lot to develop the Russian grain market. "During this time, powerful national players have grown in the country, which have already surpassed foreign companies in terms of business scale. This gives us confidence that nothing threatens the export of Russian grain, except for the hidden sanctions pressure that all exporters continue to experience regardless of shareholder origin," he said. This was probably a consideration of our foreign participants when they decided to stop export operations from Russia."

In the case of Viterra, whose subsidiary changed its name from Viterra Rus and now operates as MZK Export, it is noteworthy that the Russian team has reorganized itself and will continue its activities as an independent exporter, he said.

The market shares of the outgoing companies in different segments of the Russian grain market varied greatly, General Director of the Institute for Agricultural Market Studies (IKAR) Dmitry Rylko said. "Their departure can seriously affect the shipment of grain through the Black Sea, where their total share was quite high - 20%. Through the port of Kavkaz, they loaded about 13%, which is also quite a lot," he said, noting at the same time that shipments from Azov to end consumers were insignificant.

According to Rylko, the exit may have a negative impact on the level of competition in the market. "If state-owned companies take their place, then competition at the level of sales by farmers may suffer," he said. Our farmers, especially in the south, got used to the fact that a 'long line,' or chain of buyers, was built around their grain, so there was plenty to choose from, and as a result, pricing turned out to be quite competitive. In a number of local markets, three multinational companies were at the forefront of this list of potential buyers."

At the same time, the departure of these companies should not greatly affect the supply of buyers of Russian grain, he said. "If we talk about end markets, then, as a rule, Russian companies participate in the supply of Russian grain to them, along with the three multinationals. Yes, in the markets of some countries, for example, Saudi Arabia or Mexico, or Nigeria, the share of 'our foreigners' was great, but there are also Russian exporters," he said.

"It would be useful to retain the management teams of all three companies, as they were among the best on the market," Rylko said.

The market has actually "already integrated the departure of the global grain traders, and straws have been laid everywhere where necessary," Vladimir Petrichenko, general director of the ProZerno company said.

The share of these three companies in the export of Russian grain is 16%, he said.

As Petrichenko suggests, the new mechanism of interaction with foreign companies may look as if their former subsidiaries, for example, MZK Export (former Viterra Rus), will in fact be performing their former duties, and Viterra, together with Bunge will buy grain from them on an FOB basis. It's not necessarily true, but the mechanism can work that way," he said.

According to Elena Tyurina, Director of the Analytical Department of the Russian Grain Union, MZK Export in the 2022/2023 agricultural year (July-June) shipped 3.7 million tonnes of grain for export against 2.9 million tonnes a year earlier. Cargill's subsidiary shipped 2.3 million tonnes against 1.4 million tonnes, and Louis Dreyfus Vostok, subsidiary of Louis Dreyfus, shipped 1.2 million tonnes against 0.8 million tonnes, respectively. The total volume amounted to 7.2 million tonnes.

Vuterra's subsidiary ranks fourth in the ranking of exporters, with Cargill sixth, and Louis Dreyfus 11th, she said.

First Deputy Minister of Agriculture of the Russian Federation Oksana Lut stated in April of this year that the companies announcing their exits promised to formulate their positions by July 1 this year and prepare materials for the government commission to obtain permissions for the transactions, as well as inform the ministry. The Agriculture Ministry did not promptly respond to a request from Interfax for information as to whether information was received on the future plans of these companies.

According to the Agriculture Ministry's forecast, Russian grain exports in the 2022/2023 agricultural year may exceed 55 million tonnes, while in 2023/2024 agricultural year, the forecast is for 50-55 million tonnes.