World meat industry news

Everything can be politicized, except food. With hundreds of multinational companies exiting Russia, pressure is mounting on major agricultural trading companies to follow suit.

But is it too much of an ask? Probably.

The Big 4 of world agriculture – also called ABCDs – namely Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus are not expected to leave Russia, at least not in the short-term, analysts told S&P Global Commodity Insights.

Speculations of the Big 4 leaving have been rife in the market since the companies announced "downsizing of operations" in Russia.

Louis Dreyfus was the first of the four entities to halt its business in Russia in early March, before Bunge announced the suspension of any new export business from the country. On March 11, ADM and Cargill released statements signaling scaling back of their businesses in compliance with the EU sanctions.

Infographic: Sanctions on Russian energy and commodities explained

However, some analysts think that linking downsizing of operations with eventual departure from the country is too far-fetched.

"It is almost unthinkable that major agricultural companies will totally exit Russia as that will mean cutting-off the region's prime food supply source," a New York-based analyst said.

To say that Russia's grains supply is vital to satiate world hunger could well be an understatement.

As a transcontinental country spanning Eastern Europe and Northern Asia, Russia is a major global food supplier and world's top exporter of wheat, a stable crop for almost everyone on the planet. It also holds significance in global trade of sunflower oil, corn, barley, poultry meat, beef and chocolate confectionery products.

Commodity analysts see a definite trend: agricultural majors are adopting a prudent stance by weathering the storm and waiting for tensions to diffuse in the Black Sea region

Global agricultural companies have played a big part in Russia's resurgence as one of the world leaders in food supplies.

Through their sizable investments, including crushing plants and grains infrastructure, and extensive supply-chain network in Russia, the ABCDs have been an integral part of Moscow's food supply dominance.

So, the question of leaving all that behind must be tricky for these trading majors.

Soaring prices and profits

Calls for boycotting Moscow comes at a time when commodity prices have soared to rare peaks, generating tremendous profits for the agricultural trading houses.

Skyrocketing demand coupled with drought since 2020 in key producing regions of the world, such as South America and Black Sea, created a perfect storm for commodity prices to spike.

And then, Ukrainian crisis happened, which only escalated the tight supply-led price rally to an entirely new level.

Russia commands a significant chunk in global agriculture trade flow, especially for wheat and sunflower oil. For both these commodities, Moscow accounts for roughly 20% of global trade.

Ukraine is no slug either. It is one of the leading shippers of wheat, corn and sunflower oil, among others.

The ongoing geopolitical tension between these two leaders of global food trade clearly reflects on the price upsurge.

According to S&P Global, FOB Black Sea wheat (Russia, 12.5%) was assessed at $405.00/mt on April 12, up 68% on the year, while sunflower oil FOB Black Sea Ukraine (May) was estimated at $1869.50/mt, up 24% year on year. S&P Global assessed FOB Black Sea corn (Ukraine) at $334.50/mt, up 28% on the year.