Minnesota grain traders monitor conflict in agriculture-rich Ukraine
Minnesota agribusinesses with big operations and investments in Ukraine – often called the breadbasket of Europe – are bracing for a worsening situation as Russia escalates the conflict.
With 70% of its arable land, Ukraine is an agricultural powerhouse, among the world’s largest producers of sunflower oil, corn, wheat, barley, canola oil and soybeans.
Minnetonka-based Cargill has a sizable footprint in Ukraine, including a major port operation on the Black Sea, several grain silos and oil processing plants dotted around a country nearly as big as Texas.
The company’s easternmost office and facility is in Braginovka – less than 30 miles from the Donetsk region currently held by Russian-backed separatist leaders.
“Right now, since (Tuesday) morning, our businesses in the area continue to operate as normal. We have contingency plans in place as a precautionary measure as there is still a lot of uncertainty,” April Nelson said. , a Cargill spokeswoman. “We are closely monitoring the situation there, prioritizing the safety of our people above all else.”
CHS Inc., based in Inver Grove Heights, also operates in Ukraine, including in a deep-water port near Odessa, like Cargill. Its operations there are smaller than those of Cargill, but it has export terminals around Ukraine and Russia.
CHS said most of its employees are based in Kyiv and the company is closely monitoring developments.
“The safety (of our employees) and the safety of their families is a priority. CHS has been operating in Ukraine for 13 years and we hope that a diplomatic solution to the crisis can be found,” said the CHS spokesperson, Tom Ryan. an email.
On Tuesday afternoon, President Biden announced what he called a “first tranche” of economic sanctions against Russia. The sanctions are intended to limit Russia’s ability to seek Western funding and to cripple that country’s ruling elites.
Cargill has previously dealt with geopolitical conflicts in the region. In 2014, the company gave up control from a sunflower crushing factory in Donetsk to a group of armed rebels.
As one of the world’s largest grain traders, Cargill also has 2,500 employees in Russia, including in its Moscow office. On his websitethe company claims to be one of the largest foreign investors in the Russian agribusiness industry, contributing more than $1.1 billion to the Russian economy.
President Biden’s economic sanctions announced Tuesday will likely increase the cost of doing business there, said Jason Ward, chief executive of Minneapolis-based Northstar Commodity.
“If further economic sanctions are imposed on Russia, which I think the market will see, there will be a lot less wheat available in the world,” Ward said. “Today there was a sharp, sharp rise in wheat prices.”
Ukraine is the world’s third largest wheat exporter; Russia is no. 1.
Wheat prices rose 6% on Tuesday, the biggest single-day jump since July 2018. Corn prices rose 3% in Chicago.
Ward, who has been a commodity market analyst for nearly two decades, said U.S. producers could see higher prices for their grains, including corn which is already experiencing its tightest global supply on record. Ukraine is the world’s fourth largest maize exporter.
“Ukraine is rich in natural resources and agriculture. That makes it a target for what Russia is doing,” Ward said.
Several countries in the Middle East and North Africa receive up to half of their wheat from Ukraine, making them much more dependent on the country’s exports than Western countries. Foreign policy and humanitarian groups fear a full-scale Russian invasion could jeopardize food security in other countries.
“[Constrained supply] will significantly increase food prices over the next year if this conflict escalates,” Ward said. “There is no faster way to [more] conflict than food insecurity”.