Merchants of Grain
Cargill, Continental and the private grain oligopoly.
Summary
Morgan, a Washington Post journalist, wrote in 1979 the first substantial account of the private companies that dominated the international grain trade, principally Cargill, Continental Grain, Louis Dreyfus, Bunge and Andre. These firms were family-owned, disclosed almost nothing, and handled a large share of the world's traded grain.
The business material covers how the trade works: the firms buy from producers, transport and store, blend grades to meet contract specifications, and sell to importing countries, with margins coming from information about supply and demand conditions ahead of the market, from logistical capability, and from arbitrage between locations and delivery dates.
The central episode is the 1972 Soviet grain purchase, in which the Soviet Union, facing a harvest failure, bought enormous quantities of American wheat through several trading houses simultaneously and at subsidised prices, before the American government understood the scale of what was happening. Prices rose sharply afterwards and the episode became known as the great grain robbery. Morgan documents how the information asymmetry worked and how the trading houses profited.
He also covers the relationship between these private firms and American agricultural and foreign policy, including the use of food aid as an instrument. The reference has verified the book's subject and its principal episode rather than every detail. The book is from 1979 and the industry has changed, with consolidation, the growth of Asian and Chinese state buyers, and greater transparency in some markets. It remains the foundational account of an industry that handles essential commodities with almost no public visibility.
Key takeaways 8
- A small number of private family-owned companies handled a large share of the world's traded grain while disclosing almost nothing.
- Margins came from information about supply and demand ahead of the market, from logistical capability and from arbitrage between locations and dates.
- The Soviet Union bought enormous quantities of American wheat in 1972 through several trading houses simultaneously, before the government understood the scale.
- Information asymmetry between private traders and governments allowed the trading houses to profit from a transaction that raised prices for everyone.
- Blending grades to meet contract specifications is a source of margin invisible to anyone outside the physical trade.
- Private firms operated as instruments of national agricultural and foreign policy without being accountable through any political process.
- Food supply was used as a policy instrument, which made the trading houses participants in foreign policy rather than only in commerce.
- The industry has consolidated and changed substantially since 1979, including the growth of state buyers and greater market transparency.
Who should read it
Investors and operators in agriculture and commodities who want the foundational account of how the physical grain trade operates.
Who recommended it 1 · 1 direct
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