-Caveat Lector-
An excerpt from:
Merchants of Grain
Dan Morgan�1979,1980
Penguin Books
ISBN 01400.5502 9
--[0]--
It was the Wheat, the Wheat! It was on the move again.
>From the farms of Illinois and Iowa, from the ranches of
Kansas and Nebraska, from all the reaches of the Middle
West, the Wheat, like a tidal wave, was rising, rising.
Almighty, blood-brother to the earthquake, coeval with
the volcano and the whirlwind, that gigantic world force,
that colossal billow, Nourisher of the Nations, was swelling
and advancing.
-FRANK Norris, The Pit
Introduction
It is difficult to understand how the international grain companies could have
slipped through history as inconspicuously as they have. Grain is the only
resource in the world that is even more central to modem civilization than
oil. It goes without saying that grain is essential to human lives and health.
But as much as oil, grain has its politics, its history, its effect on foreign
affairs. After World War II, dozens of countries that had once fed themselves
began to depend on a distant source-the United States-for a substantial part
of their food supply. As America became the center of the planetary food
system, trade routes were transformed, new economic relationships took shape,
and grain became one of the foundations of the postwar American Empire. Food
prices, diets, the dollar, politics, anti diplomacy all were affected.
At the center of these changes are the five companies that are the subject of
this book: Cargill, Continental, Louis Dreyfus, Bunge, and Andre. The stories
of their growth and of America's emergence as a grain power are interwoven.
Yet the companies remain shadowy and unknown, and it has taken the
transformation of the global economy in the 1970s to make them of public
interest. The grain companies were involved in the well-publicized and
controversial sales of American grain to the Soviet Union in 1972. But it was
really only a year later, with the quadrupling of oil prices, that public
awareness of the critical importance of basic resources deepened.
This book is intended to contribute to a better understanding of the world
that was so suddenly and painfully revealed to us in 1972 and 1973�a world in
which nations all depend on each other for basic needs, and a few giant
international companies and banks allocate and distribute the essential raw
materials and the capital required to produce them. As much as possible, I
have tried to illuminate the basic economics with anecdote and with
descriptions of the personalities involved. And indeed, from the oligopoly of
seven families that control the grain companies to the traders hawking grain
futures -in the Chicago "pit," the grain business is rich in mystery, color,
and folklore. But it is no more possible to write about the people of Cargill,
say, apart from the political and economic context in which the company
operates, than it would be to write about Exxon without mentioning OPEC and
U.S. policy in the Middle East.
My own introduction to the grain companies came in the summer of 1972 when I
suddenly experienced every reporter's nightmare: I found myself in the middle
of a big story, and I had no source. The Washington Post had assigned me to a
brief stint in Moscow, and I arrived in the Soviet capital at about the time
when rumors began circulating in the United States that some companies had
sold the Russians $1 billion worth of grain. How to confirm the story? What
were these companies? Where were they? We had no idea. As usual, the Russians
were not talking. And the American government was not much help either. The
U.S. Embassy seemed as ignorant as the foreign correspondents. Political and
economic journalists back home were as bewildered as we were in Moscow. Only
one thing was clear: The grain companies were no mere paper-shuffling
middlemen, jotting down orders with stubby pencils. The Russian government,
second most powerful in the world, was negotiating with them, and the most
powerful government apparently did not know what they were up to. The
companies had authority, aura, mystery. it was weeks before a full account of
what came to be known as "the great grain robbery" was available.
This was my first experience with the traditional and wellprotected secrecy of
the grain companies. Later, when I let my curiosity lead me into the research
for this book, I had no illusions that obtaining information would be easy. As
it was, the task was much more complicated than I had anticipated.
In the first place, I had assumed that a considerable amount of my background
work would already have been done for me by trained historians. I guessed that
I would find, on library shelves, many scholarly works tracing the political
and economic history of grain, charting the trade routes, and, perhaps,
sketching the profiles of the great traders. The business had, after all, been
around for centuries. Instead, I soon found myself fashioning my own
historical narrative out of the bits and pieces that were available. This was
an interesting lesson in its own right. Multinational scholarship of the kind
required for inquiry into a subject like the grain trade is still in its
infancy. The focus of historical research still seems to be on individual
countries and their rulers, rather than on the world and its resources.
It is not that scholars have necessarily been derelict in their pursuits.
Rather, the world and the way we look at it has changed faster than the
scholarship. That is why unlicensed "historians" such as myself-free as we are
from academic conventions�have made the perilous crossing into the historians'
territory for better or for worse.
The subject of grain has not been ignored by academic researchers. I found
many useful books, pamphlets, articles, and reports covering pieces of the
history-even rather large pieces. The Odessa wheat port; the early grain trade
in the Mediterranean; the Irish "potato famine"; the repeal of the English
Corn Laws; the settlement of the Argentine Pampas and the Great Plains; the
California wheat trade; and the grain races from Australia-all of this has
been chronicled, often in fascinating and compelling detail. What I could not
find was any work that brought together and gave significance to all these
strands of grain's history when European civilization was industrializing and
expanding in the nineteenth century (although the French historian Fernand
Braudel does so for a period preceding the modem grain trade). As it is, the
literature on oil, rubber, timber, or railroads provides more accessible
information on the origins of these basic industries than anything I was able
to find on grain.
Others, with more resources at their disposal than I, have had comparable
difficulties. When in 1975 the staff of the Senate Subcommittee on
Multinational Corporations began investigating the companies' role in foreign
policy, it routinely asked libraries around the country to send material about
the firms. One library after another informed the subcommittee that no such
material existed. Senator Frank Church was to say of the grain multinationals,
"No one knows how they operate, what their profits are, what they pay in taxes
and what effect they have on our foreign policy-or much of anything else about
them."
The hearings he conducted did expand our knowledge of the grain business, but
they also clearly demonstrated the difficulties of probing deeply. For the
questioning of grain-company officials was called off after only one bruising
day. Cargill simply blitzed the subcommittee. Rows of experts from the
Minneapolis headquarters showed up, ready to refute every hostile reference to
the firm. These "wall-to-wall" 'Witnesses were lined up like a Napoleonic
musket regiment going into battle; and they were not content passively to
defend themselves but turned the attack back on the subcommittee -and accused
it of attempting to smear the grain business. Further scheduled hearings were
postponed-indefinitely�and there never was any questioning of Continental,
Bunge, and the other big companies.
Later on, as I pursued my investigations, I began to see how the companies had
been able to remain out of the public eye so long. Continental, a legacy of
the Fribourg family (which has been in the grain business since the start of
the nineteenth century), has never published a company brochure. The French
magazine L'Expansion, introducing an article in 1976 about the Paris-based
firm of Louis Dreyfus, called this company "a commercial empire of which one
knows nothing, but which covers five continents." Discretion, I learned, may
be the most valuable commodity of all in the grain business. "Economy is
desirable, but secrecy is essential," wrote the Boston representative of the
British merchant house of Baring Brothers to his New Orleans agent in 1844.
(He was instructing the agent to buy American corn for the relief of the Irish
famine. The precautions were effective: The corn had been safely in Cork
harbor aboard a vessel for two weeks before its presence on that side of the
Atlantic became known.)
Secrecy is not unusual in the corporate world, of course. Huge corporations do
not live by the standards of openness that apply in American political life.
Company officials do not have the same protection from reprisal by their
superiors as government civil servants do. But most large American companies
today take the view that they have some responsibility to account to the
public, to disclose and explain their actions. This is not the prevailing view
among the five major grain companies. The code of secrecy that applied in 1844
has been not only perpetuated but fortified as the control of the major
companies became centralized in the hands of a few people. The result is often
suspicion, reticence-and arrogance. The grain companies don't presume that the
public has a right to know anything about what they are doing-and this despite
the fact that they have received billions of dollars in U.S. government
subsidies over the years. My impression that grain companies are secretive
even by corporate standards was confirmed by-of all people�an oil executive.
The petroleum giants have not been known to be loose with their own
information, but as this high officer of a petroleum company said to me,
"Those Cargill boys are really secretive!"
Some old-timers in the grain business who had been retired from active service
for a decade or more refused to have anything to do with me. A French grain
trader hurried me out of his office in Geneva, telling me that I would find no
Watergate sources tucked away in -the Swiss mountains. Even the grain trade's
in-house historian, Bunge's vice-president Harry Fornari, declined to see me.
I had read his book Bread Upon the Waters, and to dispel any concerns he might
have, I suggested we limit our discussion to historical events occurring
before 1945. But this history was still too recent for Fornari to agree to
talk about it.
I still vividly remember an encounter with a grain trader in Paris in which
the fears generated by outside inquiries were evident. I had telephoned a
Lebanese grain broker who was said to have arranged many transactions with
Czechoslovakia. Would he agree to see me about the book I was writing? The
Lebanese replied in rather poor English that he would. At his office the next
day, I thought I finally had encountered the original gnome of Zurich. A pale,
moon-faced man peered at me across his desk and asked what commodity I was
selling. More than a little surprised, I explained that I was a prospective
author, not a merchant. He blinked at me. There had been a serious
misunderstanding, he said. It was his poor English, he explained. Now, he had
remembered an urgent appointment and must leave at once. And tomorrow, I
asked? Engaged also, he replied. And the following day? "In your case I will
always be engaged," he said impatiently as he swooped out the door. I caught
up with him on the stairs, where he seemed to calm down. "I really do have an
appointment," he told me. "At the bank. With some Russians." With that, he
hurried off down the street.
On another occasion I had been visiting a grain merchant in his office in
downtown New York. Talk turned to the question whether his company would be
selling grain to China this year. It seemed unlikely, he replied. The Chinese
had expressed little or no interest. He acted as if this were a very tedious
subject, but as he accompanied me to the elevator we passed a large glass-
enclosed conference room where I could see several American businessmen
engrossed in conversation with several Oriental men clad in unmistakable "Mao
suits."
Of course, leaks of information to competitors or to the public can be
exceedingly costly to a company in the grain-trading business. But I had
difficulties that went beyond the expected secrecy. The structure of the
companies seemed most responsible for the unusual wariness. The grain merchant
houses are private, centralized oligopolies that do not publish financial
statements. There are no public stockholders, which greatly limits the
obligation to disclose information. Ownership of the companies is vested in
the hands of seven of the world's richest and most uncommunicative families,
and the same families also have operating control of the companies.
Information and decision-making are tightly controlled at the top by a very
few people.
With several exceptions, the companies provided minimal as-sistance, or none
at all, in the preparation of this book. I was granted a one-hour interview
with the most prominent grain merchant in the world, Michel Fribourg,
president of Continen-tal. This was a signal honor, for Fribourg is a man who
virtually embodies the retiring traditions of grain men, who shuns publicity
and guards his privacy. The setting for our meeting was his office atop a
Park Avenue skyscraper, but the ambience was European. Freshly cut flowers
were on the table between us and off to the side was the beautiful Louis XV
desk on which he signs the papers that send grain ships around the world. I
was greeted by a trim, elegant man with graying hair and delicate features. He
could have been some country's foreign minister, or the curator of a European
museum�except for one thing: Michel Fribourg, a man whose family's wealth has
been estimated to be in the vicinity of half a billion dollars and whose
company stretches around the world, was clearly more ill at ease than I was.
He was pleasant and articulate, but the quick, practiced smile suggested
discomfort, Several months later, a letter came from Continental saying, "It
has been decided that we choose not to participate in further interviews with
you." Michel Fribourg had decided, and that was that.
I did not get near the Hirsches or the Borns, the ruling families of the Bunge
Company. President Walter Klein of Bunge's North American division saw me for
an hour and then had his public-relations agent inform me that he had "neither
the time nor the inclination for further discussions."
Pierre Louis-Dreyfus, the current patriarch of the Paris company with that
name,* invited me to lunch in his private dining room. M. Louis-Dreyfus, a
short, mustachioed man who speaks flawless English, told many fascinating
stories about his early interest in shipping and his wartime exploits flying
bombing missions for the Free French. The fish with cream sauce was superb, as
was the wine. But I left with a strong impression that I could not and would
not unearth many secrets from M. Louis-Dreyfus. Back in the United States,
repeated efforts to arrange a meeting with his son Gerard (who had succeeded
him as president) were futile.
Georges Andre, patriarch of the family that controls the Swiss company of that
name, kindly received me in his chalet, gave me hours of his time, provided
some historical data, and invited me to an excellent lunch of brook trout in a
village restaurant.
But only Cargill, the Minneapolis-based concern that is the world's largest
grain company, was helpful on matters of substance. Perhaps this is because of
all the houses, it is Cargill that is most secure, most successful, most
thoroughly convinced of the rightness of its corporate cause. Cargill itself
decides which executives outsiders have access to, and in my case these did
not include either the chairman of the board, Whitney MacMillan, or President
M. D. (Pete) McVay. Permission for me to see two of the merchants in Cargill's
important Geneva office was also denied. But Cargill, through its vice-
president for public affairs,
The family hyphenates the name; the company does not.
William Pearce (an unusual grain executive, as we shall see), does accept
questions and answers specific inquiries�although the answer may be "no
comment." Cargill certainly does not volunteer anything. And Cargill has not,
to anybody's knowledge, ever admitted it was wrong. But in mid-1978 it did
take the unusual step of starting to publish a newsletter. (The second number
described the ground-breaking for Cargill's $70-million steel plant�so the
newsletter does shed light on the company's wealth and diversity.) But it
raised eyebrows among company traditionalists. "Some of us don't feel very
comfortable with this sort of thing," a Cargill man allowed.
In the absence of company cooperation or published material, I employed the
tried-and-true techniques of investigative reporting. I developed what sources
I could inside the companies, talked to former officials, and wore out shoe
leather. My travels took me to the prairies of Manitoba, the towering grain
terminals along the lower Mississippi River, the hubbub of commodity
exchanges in Chicago, Kansas City, and Minneapolis, and the quiet offices of
grain and shipping brokers in New York City. I crossed over the sandhills of
western Kansas into the irrigated, pancake-flat wheat country and spent a
Saturday night "on the town" with the local wheat farmers and cowboys. I also
made three trips to Europe and spent weeks in the more sedate settings of
London, Paris, and Geneva, talking with traders who rim the "offshore"
operations of the European and U.S.-based companies.
And through all this there were the glimpses of the world of the grain
merchants�a sort of art deco room in the garish house of commerce.
These were all worthwhile journeys. For grain is a subject that takes its
student down a thousand paths-back into history, forward into the future of an
already overcrowded planet, and always across borders, borders of ideology,
nationality, and geography. Through wheat, for example, I saw the close
connection between two enormous events, the settling of the North American
prairies and the Industrial Revolution, with its insatia-ble need for bread.
Instantly the nineteenth century seemed less remote and more in focus. Study
grain long enough and the world shrinks. The wheat rising here and the demand
for bread there cease to be isolated events separated by thousands of miles
and become interconnected episodes in the "planetary village."
I was left with no doubt that the companies at the center of the grain
distribution system are not only wealthy but important and very powerful. The
time for them to stand up and take a bow is long overdue.
pps. 12-22
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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