Thegrain trade refers to the local and internationaltrade incereals such aswheat,barley,maize, andrice, and otherfood grains. Grain is an important trade item because it is easily stored and transported with limited spoilage, unlike other agricultural products. Healthy grain supply and trade is important to many societies, providing a caloric base for mostfood systems as well as important role inanimal feed foranimal agriculture.
The grain trade is as old as agricultural settlement, identified in many of the early cultures that adopted sedentary farming. Major societal changes have been directly connected to the grain trade, such as thefall of the Roman Empire. From theearly modern period onward, grain trade has been an important part ofcolonial expansion and international power dynamics. The geopolitical dominance of countries like Australia, the United States, Canada and the Soviet Union during the 20th century was connected with their status as grain surplus countries.
More recently,international commodity markets have been an important part of the dynamics offood systems andgrain pricing.Speculation, as well as other compounding production and supply factors leading up to the2007–2008 financial crises, created rapid inflation of grain prices during the2007–2008 world food price crisis. More recently, the dominance ofUkraine andRussia in grain markets such as wheat meant that theRussian invasion of Ukraine in 2022 causedincreased fears of aglobal food crises in 2022. Changes toagriculture caused by climate change are expected to have cascading effects on global grain markets.[1][2][3][4]
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The grain trade is probably nearly as old asgrain growing, going back theNeolithic Revolution (around 9,500 BCE). Wherever there is a scarcity of land (e.g. cities), people must bring in food from outside to sustain themselves, either by force or by trade. However, many farmers throughout history (and today) have operated at thesubsistence level, meaning they produce for household needs and have little leftover to trade. The goal for such farmers is not to specialize in one crop and grow a surplus of it, but rather to produce everything his family needs and becomeself-sufficient. Only in places and eras where production is geared towards producing a surplus for trade (commercial agriculture), does a major grain trade become possible.
In the ancient world, grain regularly flowed from thehinterlands to thecores of great empires: maize inancient Mexico, rice inancient China, andwheat andbarley in theancient Near East. With this came improving technologies for storing and transporting grains; theHebrew Bible makes frequent mention ofancient Egypt's massive grainsilos.
Merchant shipping was important for the carriage of grain in theclassical period (and continues to be so). ARoman merchant ship could carry a cargo of grain the length of the Mediterranean for the cost of moving the same amount 15 miles by land. The large cities of the time could not exist without the supplies delivered. For example, in the first three centuries AD, Rome consumed about 150,000 tons of Egyptian grain each year.[5]: 297
During the classical age, the unification ofChina and the pacification of theMediterranean basin by theRoman Empire created vast regional markets in commodities at either end ofEurasia. Thegrain supply to the city of Rome was considered to be of the utmost strategic importance to Roman generals and politicians.
In Europe, with thefall of the Roman Empire and the rise offeudalism, many farmers were reduced to a subsistence level, producing only enough to fulfill their obligation to theirlord andthe Church, with little for themselves, and even less for trading. The little that was traded was moved around locally at regularfairs.
A massive expansion in the grain trade occurred when Europeans were able to bring millions of square kilometers of new land under cultivation inthe Americas, Russia, and Australia, an expansion starting in the fifteenth and lasting into the twentieth century. In addition, theconsolidation of farmland in Britain andEastern Europe, and the development ofrailways and thesteamship shifted trade from local to more international patterns.
During this time, debate overtariffs andfree trade in grain was fierce. Poor industrial workers relied on cheap bread for sustenance, but farmers wanted their government to create a higher local price toprotect them from cheap foreign imports, resulting in legislation such as Britain'sCorn Laws.[6]
As Britain and other European countries industrialized and urbanized, they became net importers of grain from the variousbreadbaskets of the world. In many parts of Europe, asserfdom was abolished, great estates were accompanied by many inefficientsmallholdings, but in the newly colonized regions massive operations were available to not only great nobles, but also to the average farmer. In the United States and Canada, theHomestead Act and theDominion Lands Act allowed pioneers onthe western plains to gain tracts of 160 acres (0.65 km2) (1/4 of a square mile) or more for little or no fee. This moved grain growing, and hence trading, to a much more massive scale. Hugegrain elevators were built to take in farmers' produce and move it out via the railways to port. Transportation costs were a major concern for farmers in remote regions, however, and any technology that allowed the easier movement of grain was of great assistance; meanwhile, farmers in Europe struggled to remain competitive while operating on a much smaller scale.
In the 1920s and 1930s, farmers in Australia and Canada reacted against thepricing power of the large grain-handling and shipping companies. Their governments created theAustralian Wheat Board and theCanadian Wheat Board asmonopsonymarketing boards, buying all the wheat in those countries for export. Together, those two boards controlled a large percentage of the world's grain trade in the mid-20th century. Additionally, farmers' cooperatives such thewheat pools became a popular alternative to the major grain companies.
At the same time in theSoviet Union and soon after inChina, disastrouscollectivization programs effectively turned the world's largest farming nations into net importers of grain.
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By the second half of the 20th century, the grain trade was divided between a few state-owned and privately owned giants. The state giants wereExportkhleb of the Soviet Union, the Canadian Wheat Board, the Australian Wheat Board, theAustralian Barley Board, and so on. The largest private companies, known as the "big five", wereCargill,Continental,Louis Dreyfus,Bunge, and Andre, an older European company not to be confused with the more recentAndré Maggi Group from Brazil.
In 1972, the Soviet Union's wheat crop failed. To prevent shortages in their country, Soviet authorities were able to buy most of the surplus American harvest through private companies without the knowledge of the United States government. This drove up prices across the world, and was dubbed the "great grain robbery" by critics, leading to greater public attention being paid by Americans to the large trading companies.
By contrast, in 1980, the US government attempted to use itsfood power to punish the Soviet Union for its invasion of Afghanistan with anembargo on grain exports. This was seen as a failure in terms of foreign policy (the Soviets made up the deficit on the international market), and negatively impacted American farmers.
Since the Second World War, the trend in North America has been toward further consolidation of already vast farms. Transportation infrastructure has also promoted moreeconomies of scale. Railways have switched from coal to diesel fuel, and introducedhopper car to carry more mass with less effort. The old wooden grain elevators have been replaced by massive concrete inland terminals, and rail transportation has retreated in the face of ever largertrucks.
Modern issues affecting the grain trade includefood security concerns, the increasing use ofbiofuels, the controversy over how to properly store and separategenetically modified andorganic crops, thelocal food movement, the desire of developing countries to achievemarket access in industrialized economies,climate change anddrought shifting agricultural patterns, and the development of new crops.
Price volatility greatly effects countries that are dependent on grain imports, such as certain countries in theMENA region. "Price volatility is a life-and-death issue for many people around the world" warned ICTSD Senior Fellow Sergio Marchi. "Trade policies need to incentivize investment in developing country agriculture, so that poor farmers can build resistance to future price shocks".[7] Two major pricevolatility crises in the early 21st century, during the2007–2008 world food price crisis and2022 food crises, have had major negative effects on grain prices globally. Climate change isexpected to create major agricultural failures, that will continue to create volatile food price markets especially for bulk goods like grains.[2]
Protection against international market prices has been an important part of how some countries have responded to the volitility of market prices. For example, farmers in theEuropean Union, United States and Japan are protected byagricultural subsidies. The European Union's programs are organized under theCommon Agricultural Policy. Theagricultural policy of the United States is demonstrated through the"farm bill", whilerice production in Japan is also protected and subsidized. Farmers in other countries has attempted to have these policies disallowed by theWorld Trade Organization, or attempted to negotiate them away though theCairns Group, at the same time the wheat boards have been reformed and many tariffs have been greatly reduced, leading to a furtherglobalization of the industry. For example, in 2008 Mexico was required by theNorth American Free Trade Agreement (NAFTA) to remove its tariffs on US and Canadianmaize.
Similarly, protections in other contexts, such as guaranteed prices for grains in India, have been an important lifeline for small farmers in the context of furtherindustrialization of agriculture. When the BJP Partygovernment of Narendra Modi attempted to repeal guaranteed prices for farmers on key grains like wheat, farmers throughout the country rose in protest.[8][9][10]
One or more of the preceding sentences incorporates text from a publication now in thepublic domain: Chisholm, Hugh, ed. (1911). "Grain Trade".Encyclopædia Britannica. Vol. 12 (11th ed.). Cambridge University Press. pp. 322–325.
