Cargill Dodges Russian Missiles But Vows To Keep Feeding Both Sides Of The Ukraine War

The biggest privately held company in the U.S. has been operating in the area for decades and says food should never be used as a weapon.

On Feb. 24, in the first hours of Russia’s unprovoked attacks on Ukraine, a Russian projectile hit a ship in the Black Sea called the Yasa Jupiter. The ship was chartered by Cargill, one of the world’s biggest grain traders. Since then, Russian guns have pummeled the port city of Yuzhny, just east of Odessa. Cargill, along with the Ukrainian government, operates the port, where it says it’s struggling to get wheat, corn and other food crops out of the besieged area and into the hands of hungry people.

Despite the assaults, Cargill says it has no plans to abandon Ukraine’s conflict zones. Nor will it leave Russia. Food and medicine aren’t included in sanctions, according to the U.S. Treasury Department. “Food is a basic human right and should never be used as a weapon,” according to Cargill’s website. “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.”

Hundreds of companies from around the world have pulled out of Russia, hoping economic isolation will help push President Vladimir Putin to reconsider the onslaught against the much smaller Ukraine. Not Cargill. The 157-year-old Minnesota-based company, America’s biggest privately held company with $134 billion in 2021 revenue, has a long relationship with Russia, having done business in the old Soviet Union starting in 1964. The company is controlled by a handful of billionaire heirs, worth an estimated $42 billion. They don’t have to answer to public shareholders, who might complain that Cargill’s crops feed the Russian war machine.

Cargill has said it’s scaling back operations in Russia, where it does less than 5% of its global business. Trade experts say Cargill’s decision to remain in the country is also an effort to hold on to market share when it comes to domestic competitors. The real risk for Cargill, and its U.S.-based rivals ADM and Bunge, is that pulling out of Russia would open up the market for nationalization, according to S&P analyst Chris Johnson. That could cut the foreign-based companies entirely out of the market of 144 million people.

In Russia, Cargill continues to produce wheat, chicken, animal feed, syrups and starches, while crushing oilseeds and trading grains and other commodities. Cargill also makes controversial food ingredients called “texturizers” in Russia.

Cargill has far more exposure to potential loss from the conflict in Ukraine. The company, which announced earlier this month it would donate $25 million — a fraction of annual revenue — to the Ukrainian relief effort, seems to want to play the role of corporate diplomat dancing between the two warring countries, says Paul M. Vaaler, a professor at the University of Minnesota’s business and law schools.

“Cargill is sitting with substantial fixed and sunk investments in both of the countries,” Vaaler said. “What companies have substantial assets in both countries? Not many. They’re trying to manage their diplomatic position with both governments.”

Together, Russia and Ukraine produce nearly one-third of the world’s exported wheat. Millions of people, especially in the Middle East and North Africa, are in danger of going hungry this year due to export shortages caused by the war.

“There’s grain in Odessa, and normally it should’ve been sent but it’s not sent,” says David Laborde Debucquet, senior research fellow at the International Food Policy Research Institute. About 22 tons of wheat “from Ukraine that should’ve normally reached the market may not reach the market. So it will create an additional vacuum with very limited options about how we’re going to fill it.”

Ukrainians remember their own famine, called Holodomor, that killed millions in 1932 to 33. They say the Soviets orchestrated the widespread deaths by rationing the amount of Ukrainian-grown food that stayed in Ukraine while at the same time exporting it to other countries.

Cargill reports that none of their employees have been harmed by the Russian assaults, and the Yasa Jupiter remained seaworthy after the Feb. 24 attacks and its crew stayed safe. Annually, about 5 million tons of grain and other commodities move through Yuzhny, and while Cargill has always been the port’s biggest customer, other companies ship through it as well. There are currently four vessels docked at the port, according to Vessel Tracker.

The region plays a significant role in producing key ingredients for basic staples like bread, infant formula and cereal for families all over the world. Cargill said it’s focused not on one country but on the world’s food system.