CRR Report (13th April 2023) – Sodrugestvo: Soy Trader Linked to Brazilian Deforestation, Russian Finances

• Sodrugestvo Group is a Brazilian soy exporter, but it is less recognized than the ABCD soy traders — ADM, Bunge, Cargill, and Louis Dreyfus. While Russia, China, and Turkey are major destination countries, the group also supplies soy to European countries, and therefore will need to comply with upcoming European anti-deforestation regulation. Apart from grains trade and processing, the company is active in infrastructure and logistics.
• Brazilian subsidiary Aliança Agrícola do Cerrado supplies soybeans from the Amazon and Cerrado biomes to ADM, Bunge, Cargill, and Cofco. In Brazil, the company operates two crushing plants and warehouse capacity of over 275,000 metric tons. The company mainly sources from Minas Gerais, Mato Grosso, and Pará, with the latter two states most exposed to Amazon and Cerrado deforestation risk. Despite high carbon storage capacity, Cerrado vegetation is only slightly protected under Brazil’s Forest Code and the forthcoming EU deforestation regulation.
• Aliança is linked to illegal Amazon deforestation despite being a signatory to the Soy Moratorium. A sample of 73 soy suppliers to Aliança, as well as existing case studies, suggests that the company is linked to illegal deforestation on the properties of several of its Amazon-based soy suppliers. Bunge continued sourcing from Aliança despite the allegations.
• Sodrugestvo may prove controversial in due diligence processes. Indirect association to the Ukraine-Russia war and links to sanctioned (by Ukraine) Russian billionaires may bring about reputational risks for its buyers, including Cargill, Bunge, ADM, and Cofco.
• EU institutions and banks that are linked to Sodrugestvo may face financial risks, varying from reputation to legal risk. The European Bank for Reconstruction and Development (EBRD) and several big commercial European banks are large financers of Sodrugestvo Group. The European Commission, already active in sanctions against Russia, and 71 countries funding the EBRD, face reputation risks from providing a loan of USD 130 million to the Russian-owned group. Moreover, commodity traders could receive fines for being linked to deforestation cases under the upcoming EU Deforestation Regulation.”

For more information you may contact our colleagues: