The parade of western firms abandoning or limiting their business in Russia has — until now — had a notable absence: Minnetonka-based Cargill, one of the country's largest foreign agribusiness investors.
With public pressure mounting, Cargill said Friday it will scale back its business activities and has stopped investment in Russia. But the company declined to specify where and how.
"We will continue to operate our essential food and feed facilities in Russia," Cargill said in a statement. "This region plays a significant role in our global food system and is a critical source for key ingredients in basic staples like bread, infant formula and cereal."
Cargill moved into Russia and Ukraine soon after the Soviet Union's demise, investing more than $1 billion in the grain and food trades of both countries.
The agriculture behemoth is one of the largest non-Russian exporters of Russian wheat and owns mills about 200 miles south of Moscow. In Ukraine, Cargill's interests range from majority ownership of a large grain port to loans made directly to its government.
"They have a most difficult role to play right now," said Paul Vaaler, a professor in the University of Minnesota's business and law schools. "They have substantial sunk investments in both countries."
The company is faced with fundamental questions, Vaaler continued: "How can it continue to demonstrate sympathy to the Ukrainian government — and how can it preserve its assets?"
On Friday, Cargill said it is increasing support for Ukrainian humanitarian efforts, directing all profits derived there into nonprofit relief organizations.
Cargill is the largest privately held U.S. company and one of the nation's most global corporations, with operations in 70 countries.
"It's such an iconic multinational in the commodities business," Vaaler said. "Here in Minnesota, many people work for Cargill, and it is an important and visible stakeholder."
More than 300 companies had stopped doing business in Russia as of Thursday, according to a tabulation by Jeffrey Sonnenfeld, a professor at Yale University's School of Management. Most have suspended operations. Maplewood-based 3M, which has two plants in Russia, made that move Wednesday.
Many companies cutting ties to Russia sell or distribute products there but don't necessarily have large physical investments in the country. Some western oil companies planning to exit Russia do — and billions of dollars of write-downs are coming.
The global grain industry has been largely absent from the Russia exit. Of the world's four largest grain traders, the so-called ABCDs, only Louis Dreyfus Co. has publicly stated it is suspending operations in Russia. Bunge Ltd. on Thursday suspended new exports from Russia but said it would continue its oilseed crushing operations. Archer Daniels Midland Co., so far, hasn't made any commitment.
Grain companies face less public pressure than oil companies, said Andrey Sizov, managing director of Moscow-based SovEcon, a consultancy that focuses on Black Sea grain markets.
"They don't attract as much attention as oil firms, whose reputation is far from ideal," he wrote in an e-mail. "I think many/the majority will stay."
Vaaler said Cargill has demonstrated "corporate diplomacy" in dealing with the Russian war on Ukraine.
Mighty Earth, an environmental group long critical of Cargill, said Friday's decision "is a good step forward" but doesn't go far enough. "Anyone who does business with and pays taxes to Vladimir Putin's government is fueling Russia's war machine," said CEO Glenn Hurowitz.
Both Russia and Ukraine are magnets for agricultural companies like Cargill. Rich in fertile soil, both countries' agricultural production has been climbing.
The rise of Russia and Ukraine from net grain importers to major exporters has been one of the biggest developments in world agriculture over the past 30 years, said Ed Usset, grain marketing specialist for the U of M's Center for Farm Financial Management.
"Any player in the grain trade — including Cargill — wants to be part of that," he said.
Russia and Ukraine together account for nearly 30 % of global wheat exports — with Russia besting all countries. Ukraine has become the world's fourth largest exporter of corn. Together, the two countries dominate global exports of sunflower oil, another key product for Cargill.
Both countries rely on their Black Sea ports to ship massive amounts of grains and edible oils to the world. Those food and feed ingredients are now trapped in Ukraine and Russia, said Jason Ward, managing director of Minneapolis-based Northstar Commodity.
"Grain is not moving out of the Black Sea. They are trying to move as much as they can across borders by truck and by train, but those numbers are miniscule compared to what you could move by vessel," Ward said.
With about a half-dozen ships — including one chartered by Cargill — reportedly struck by missiles in the past two weeks, insurance rates have skyrocketed with no vessel owners or shipping companies willing to take that risk, Ward said.
Cargill has played an active role in opening the region to the West. The company began making direct investments in Russia when the Soviet Union dissolved in 1991.
The agricultural giant now has at least nine facilities in Russia, stretching from north of Moscow to the Black Sea. Its businesses there range from sunflower oil crushing and grain processing to the production of specialty food ingredients.
Cargill also owns 25% of a vital deep sea port terminal in Novorossiysk in southwest Russia. But Putin has made several moves in recent years indicating his intent to expand government control over the grain trading industry.
If Cargill exits the country, it risks "forfeiting its assets" in Russia, Usset said. Russian leaders have specifically threatened to nationalize the assets of exiting companies.
In Ukraine, Cargill has six facilities. Its investments have helped build the nation's agricultural infrastructure as Ukraine forged its own post-Soviet identity. In a 2016 joint venture, Cargill began building Ukraine's largest deep sea terminal at Port Yuzhny on the outskirts of Odessa. Cargill now owns 51% of that port, the Black Sea's second-largest by export volume.
Cargill often does business in parts of the world full of risk, Vaaler said. That means it is often on the ground floor of building economies. But it also has more on the line when conflicts arise.
In 2014, Cargill surrendered a sunflower-seed crushing facility near Donetsk, Ukraine, in the Donbas region — an area known for its population of Russian-backed separatists — to armed rebels.
An arm of Cargill, Cargill Financial Services, has even made loans to the Ukrainian government. The loans, with maturities of two to five years, were made in three batches of 250 million euros, one each in 2019, 2020 and 2021, according to Ukrainian media reports.
Cargill CEO Dave MacLennan met with Ukraine's President, Volodymyr Zelenskyy, in 2020 at the World Economic Forum in Davos in a sidebar conference, according to Ukrinform, a Ukrainian government news agency.
At that meeting, MacLennan said Cargill had invested more than half a billion dollars in Ukraine. Zelenskyy, who called Cargill one of his country's largest agricultural investors, reportedly asked Cargill for additional investments to help increase crop yields.
Some Cargill investments in Ukraine haven't worked as planned.
During the 2010s, Cargill loaned about $270 million to three Ukrainian banks that eventually failed — part of the country's corruption-tainted banking meltdown. Cargill was able to largely recover its credits to the three banks.
In January 2014, Cargill bought a 5% stake — reportedly for $200 million — in UkrLandFarming, one of Ukraine's largest owners of farmland. But UkrLandFarming was hit hard by Russia's first incursion into Ukraine in 2014. By the end of 2016, Cargill had exited its equity position.
Global wheat and corn prices have surged in recent weeks in anticipation of shortages caused by the war.
Grain traders say next year's production in Ukraine is where the real risk lies to global supply.
"But it's not about production agriculture anymore, it's about survival," Ward said. "They are not fighting for a corn crop right now, they are fighting for their lives."