The forces behind the grain trade

by Peter Hendry

Merchants of Grain by Dan Morgan. Viking Press, New York, 1979, 514.95

A half dozen years ago, when the establishment of an effective global information system for food supplies was being debated at various intergovernmental meetings, a frequent warning was that the assembled information must be processed and circulated to governments in utmost secrecy lest speculators and profiteering transnational firms obtain such intelligence and benefit unduly from it. Such fond precautions are brought to mind by Morgan's impressive detailing of the intricacies of the international grain trade and, in particular, the operations of five family-owned grain companies that control so much of it. The image that arises from one well documented chapter after another is of a close-knit, close-mouthed order of entrepreneurs aptitude for sensing the slightest winds of change in world grain markets far surpasses that of any government or group of governments. There is, for instance, the almost plaintive testimony of a US assistant secretary for agriculture in support of a tax break for the US-based grain companies: "There is a US public interest in supporting the companies. They're the ones who keep us posted as to what's going on all over the world. Their system is ahead of our system."

Gentlemanly restraint

Merchants of Grain is rich in these touches of irony, and in its supporting anecdotal material. Too rich, perhaps, for the scholarly minded seeking quantitative assessments of the international grain trade or more definitive prescriptions for its better regulation. There are times when Morgan's fascination with the exotic background of the great grain dynasties seems almost to get in the way of clearer comprehension. The cast of characters assembled for the enactment of each new drama in the unfolding grain epic would do justice to a Russian novel. But Morgan is a journalist, not a theorist, and he wisely pennits the massive evidence he has assembled to bear its own message rather than burdening it with judgements and prophecies. The value of his work lies in the insights provided, certainly for lay readers, but likely for many specialists as well, into what has hitherto been a murky and much misunderstood business.

For as long as the cereal deficits of developing countries remained at modest levels and the surpluses produced elsewhere were usually managed with a certain degree of gentlemanly restraint by the four major exporters, no one paid much attention to the activities of Cargill, Continental, Bunge, Louis Dreyfus and Andre. Yet, as Morgan reveals, it was precisely during these moribund (as far as the grain trade was concerned) decades that the companies were strengthening their position through adaptation and diversification. When the USSR made its massive move into international grain markets in the summer of 1972, all of the companies, plus the "upstart" Cook firm of Memphis were quick off the mark, much quicker, as was documented in Congressional hearings, than the US Department of Agriculture.

On the issue of whether there may have been collusion between USDA and the grain companies, Morgan's journalistic penchant for focusing on personalities serves a useful purpose. Did Clarence Palmby, who left his post as assistant secretary of agriculture to become a vice-president at Continental during the early stages of the negotiations with the USSR, thereby provide that company with advantageous inside information? Not likely, says Morgan, and for a reason already familiar: even as a high-level government official, Palmby probably had no information that was not already well known at Continental.

On the other hand, Palmby's successor, Carroll Brunthaver, was, by Morgan's account, exceptionally slow either to grasp or to communicate to superiors the magnitude of the USSR purchases.

Not surprisingly, these transactions of 1972 serve as a kind of watershed in Merchants of Grain. But, commendably, these dramatic events are linked backward into the past and forward nearly to the present. There is a detailed account, for example, of the frantic but little-known negotiations that transpired in Ottawa in 1963 when the USSR first showed signs of becoming a major cereal importer. (The role for US grain in this case was restricted by the requirement for use of costlier US shipping for half of any transaction, but this, of course, did not rule out transnational grain firms from supplying the USSR from other sources.)

Readers seeking conclusive evidence to support convenient conspiracy theories may be disappointed by Morgan's work; so, too, will be those expecting some miraculous mechanism for making world grain movements more responsive to evident human need. Instead, there is Morgan's caustic one-line comment on inflated earnings and bonuses arising from the hectic transactions of 1973: "Serving 'a great human need' had become a most rewarding activity."

What Morgan has done is to serve us a strong dose of reality: refreshing, certainly, because it is original rather than a rehash of familiar ingredients; but definitely tart in the aftertaste when one begins to contemplate the many pious resolutions and plans of action that have been formulated by august bodies for the presumed betterment of the world's food supply system without a glimmer of comprehension of the forces that really shape the global movements of our most important staple foods.