Russia’s increased control of its wheat exports threatens to obscure prices and curb efficiency in the global grains market, according to Cargill Inc.’s head trader.
Russia’s grip on its wheat is tightening after three of the biggest global traders — Cargill, Viterra and Louis Dreyfus Co. — said they will stop buying grain for export, leaving Russian grain supplies largely in the hands of domestic and government-funded companies.
“The price discovery is going to be way more opaque,” Alex Sanfeliu, Cargill’s world trading head, said in an interview Monday. Russian wheat tends to be the price setter “so that puts an additional difficulty for all the wheat traders across the globe,” he said.
Russia is the world’s top wheat exporter. Government-funded traders had already been grabbing a bigger chunk of the market, while state-backed bank VTB has taken share from Cargill and Viterra in recent years. State-backed OZK, known as United Grain Co., is also among the top five shippers.
“We’re going to test also how reliable some of these entities are when you have the big price swing,” Sanfeliu said from Geneva. “The international trade honors the contracts no matter what the difference in price you have.”
Sanfeliu said he sees potential for more deals secured between Russia and other governments, though history shows that executing such arrangements takes a long time.
“I think customers around the globe, they would prefer to have the international trading role,” he said. “If you look in terms of risk for them, it’s way better to have a diversified portfolio of suppliers than to have all eggs in one basket.”
Follow us on social media: