After more than a month of war in the Ukraine, the commercial effects of the war can be noted as quite a few companies around the globe have withdrawn from Russia. That also applies to a certain extent for the swine industry, where some companies suspended or limited their activities. Here is an overview of the situation.
Agribusiness companies throughout the world are watching the developments in Ukraine and wonder whether the war needs to have consequences for their business there. Major worldwide players on the consumer market such as Coca-Cola, Shell, Ikea and Heineken have all partially or temporarily withdrawn from Russia.
The pig business, however, appears to respond more carefully. Existing sanctions put in place by Western governments may not always apply to agriculture, as this business is related to primary food production. In addition, for some companies doing business with Russia simply was already made difficult because of earlier sanctions related to e.g. African Swine Fever or the annexation of Crimea in 2014.
Adding to the complexity is that business relationships may have resulted from long-lasting cooperation, with intensive existing service contracts, affecting live animals. Last but not least, a decision whether or not to discontinue could also depend on the value a Russian business represents. The overview below is by no means complete, but may give an impression.
The Danish agribusiness cooperative DLG is pulling out of Russia. It announced to stop all its commercial activities, including its production of vitamins and minerals. According to the Danish agricultural media title Landbrugsavisen, the cooperative shared the message in a short announcement earlier this month. “DLG will stop all commercial activities in Russia. This includes the partial ownership of a company that produces and sells vitamins and minerals. In addition, DLG’s imports of goods from Russia and Belarus as well as sales to the 2 countries will be stopped.”
For several years, DLG has had a successful collaboration with Alltech in Russia, where the agri-food group owns half of a company with the American company. The company includes vitamin and mineral factory, as well as sales organisation.
On March 16, Danish pig breeder DanBred announced the termination of all activities with its subsidiary in Russia. For reasons of sanctions as well as safety, the company decided to stop all trade with Russia, and shut down all activities for the subsidiary and its employees in Russia.
In a press release, CEO Claus Fertin, stated on behalf of the genetics company: “So far, wehave kept it open, but now, we will terminate all activities for the subsidiary in Russia. This will affect a number of customers in Russia, so it is pretty serious. We also have Danish-owned customers who will be affected by this. But we cannot defend being present in Russia now.”
The press release continues to read: “DanBred is affected by the consequences this may have for the local employees, but we find the decision necessary. “We feel for all the innocent people who are affected by this miserable situation, and we hope for peace again soon. Our relevant partners have been contacted directly about the implications this will have for their business.”
A few days earlier, on March 11, Danish Genetics also decided to stop the activities in Russia – something that hasn’t been easy, said the company’s CEO Henrik Biilmann in a press release. “We see no other way to go than to stop selling animals and semen to customers in Russia as the situation is now. This is also a stop to all new activities in Russia.”
Biilmann motivated the decision by saying, “It hurts us to hear about the thousands of lives lost and millions of people affected by Russia’s invasion. Danish Genetics strongly condemns the invasion and fully supports the sanctions imposed by the EU, as well as other countries and international organisations.”
Netherlands-based animal nutrition company Agrifirm decided to withdraw completely from Russia, where it had a “limited activity.” In a news article in the Dutch agricultural title Food & Agribusiness the company said it wants to stop to an existing joint-venture – a development that had already been initiated in an earlier stage. In addition, all Agrifirm sales will be stopped.
On March 30 Rabobank announced that the bank and its subsidiary DLL have started to wind down all activities in Russia to leave the country. In a press release the bank states that it does not want to engage business in a country with a regime that brutally invades another sovereign nation.
Rabobank had relatively few commercial interests in Russia, with an aggregated direct net exposure to Russia amounting to € 400 million in January 2022, which amount has since then been further reduced to about € 300 million (March 2022). It is mainly Rabobank’s subsidiary DLL that is active in the country, with the leasing of machinery in the agricultural sector. New activities had already been discontinued by DLL since February 25, 2022.
Pulling out completely from a primary industry is often easier said than done though. Animal feed company Cargill shared that whilst it is continuing to operate its food and animal feed facilities, it will scale down some of its business operations in Russia, and discontinue further investments. The company has 2,500 employees in Russia.
Similarly, also Archer Daniels Midland (ADM) announced to scale down Russia operations. In a statement, the company said: “Our footprint in Russia is very limited, and we have made the decision today to scale down operations in Russia that are not related to the production and transport of essential food commodities and ingredients. And we will of course continue to comply with all sanctions, laws and regulations.” Both companies announced their support for the Ukrainian people through several efforts.
The expression of sympathy for Ukraine is a reaction that is common with many companies in the global pig industry. Together with expressing concern, sadness or anger about the war, they also announce to do their best for the people of Ukraine. For instance, (animal) health company Merck, outside the US known as MSD, said that whilst stopping its operations is not an option for humanitarian reasons, any profit of the sale in Russia will be spent on humanitarian causes.
Pharmaceutical company Boehringer Ingelheim also shared its initiatives to support the people of Ukraine in the tweet below.
Especially in the business of agricultural machinery, however, a stronger reaction to the Russian invasion could be noted. Case New Holland suspended all shipments to Russia and Belarus, so did John Deere and Caterpillar announced to suspend operations at its plants in Russia.
Meanwhile Dutch machinery and equipment manufacturer, Lely, a large player in the dairy industry, has also discontinued commercial activities in Russia and Belarus.