Multinationals in the Grain Trade, 1850-1914 Morton Rothstein Universityof Wisconsin-Madison OVER thelast decade or sothere has been recurring concern about the market structureof the internationalgrain trade. A seriesof Congres- sionalinvestigations, several books on alleged"grain robberies,"and even suchrelatively balanced accounts as Dan Morgan'sMerchants of Grain [32] haveall left an impressionof globalcommodity markets that are controlled and manipulatedby aboutfive majorfirms in waysoften at variancewith the publicinterest. At the sametime, morescholarly recent work indicates that the grain trade remainshighly competitive,efficiently assembling, storing,and transferringthe commodityto the benefitof both farmers and consumers.They showthat this market workswell, yet thesesame scholarscomplain that we do not know enoughabout the structureor operationof the grain export systemor about the behaviorof the firms involved [7, 12, 32]. If we havea paucityof data aboutthe recentand current grain trade, we know less about the full dimensions of market structure and business behavior as that branch of trade evolvedduring the nineteenthcentury. There were expressionsof similarconcerns about the deficienciesin that businessas it graduallyspread around the globe,primarily under the aegis of multinationaltrading firms.Most of thesefirms were privatepartnerships as are their survivorseven at present,but there is no doubt that mostof them alsooperated in severalnations at onceand that they were headed by managerswho met PeterDrucker's criterion of "thinkinginternation- ally" [15]. Moreover,they increasinglyoperated in the United Kingdom, as much to perform their multi-facetedentrep6t functionsthere as to serve the continuouslyincreasing demand of British consumers.The importanceof the British grain market may have been exaggeratedby historiansin terms of the share of exports it attracted from surplus- producingnations, but its function as the nerve center of an evolving world tradingsystem remains unassailable [34, 36, 44]. Before the 1850sthe grain-importingbusiness was too uncertainand 85 irregularto encouragemuch mercantile specialization in that commodity. Somesmall-scale merchants in the interiorof the United Kingdomand of the United States,as well as a few continentalEuropean centers, did concentrateprimarily on grain[6, 20, 41]. Mostof the longdistance trade, however,was carried out by the generalmerchant shipping firms that dominatedthe slowlywidening scope of internationalcommerce. Such firms as Alexander Brown and Sonsor Baring Brothersand Company dealt mostlyin cottonduring the first third of the century,moving in and out of the grain trade only as conditionswarranted. In suchbrief periods, they virtuallydominated the trade [22, 37]. Lesserknown firms, suchas Morrison,Cryder & Co., held almostequivalent shares of both the cotton and grain trade from time to time in the trans-Atlanticbusiness. But it is difficultto estimatethe differencesin market sharesand influenceat any time amongthe more than two dozenAnglo-American firms in the cotton trade, or of agentsof continentalfirms at southernAmerican ports, and impossibleto calculatethem with regardto grain. In fact, marketshares changedabruptly from year to year, dependingon a variety of circum- stances.Bolton, Ogden & Co., for example,was very activein shipping flour from the United Statesto the United Kingdom and the continent from 1815 to 1820, then only sporadicallyengaged in grain-related activitieswhile becoming a leadingcotton-shipping firm during the 1820s and 1830s. In the 1837-1838 shippingseason, when Morrison, Cryder was suddenlya leader in bringing Baltic grainsto New York, Bolton, Ogden (which had equallygood connectionswith the Baltic ports) was going through insolvencyand reorganizationat Liverpool,withdrawing from both the cotton and grain businessfor severalreasons. They were backfull tilt in the grain trade during the hectic"hungry forties" before finallydissolving by 1850 [27, 33]. By the 1850s, many of the general merchant shippingfirms were either withdrawingfrom directparticipation in tradingto concentrateon bankingor shippingfunctions, or werebeginning to specializein a narrower range of commodities.The Brownsand Morrisonstook the former route; Baringsstill shifted in and out of grain trading through their extensive networkof correspondents,usually in responseto suchunusual opportu- nities as were offered during the Crimean War. Meanwhile,two other groupsof merchantswho had gainedimportance as multinational traders were operatingin the Britishgrain market. With the old Hanseaticports reemergingas sourcesof supplementarywheat suppliesfor the United Kingdom in the 1820s, merchantswith strong family and/or business connectionsthere became increasingly important in Londonand usedthat trade as a basefor extendingtheir businessbeyond Europe. Frederick Huth & Co., Mark Collett,and the Brandts,all firmly establishedin Britain by the first decadeof the nineteenthcentury, rose to prominencein the 86 grain businessduring the 1820s, then made connectionswith suppliersof other commoditiesin both North and South America during the 1830s [8, 12, 18, 25]. In the samedecade, the Anglo-Greekfirms began forging connectionsbetween the United Kingdomand westernEurope on the one hand and the new grain-surplusareas of SouthernRussia and the Danube basinports on the other. They introducednew techniqueson the British market for dealingin full cargoesof grain. The Railiswere probablythe most important of theseAnglo-Greek families, and they remain leading commodity traders to this day. They certainly had the most extensive network of branchesboth within the United Kingdom (at Liverpool, Manchester,London, and other cities)and betweenthe United Kingdom and the Mediterranean,but they were simplythe largestof at leasta half dozen major shippinghouses that made various Mediterraneanports, especiallyOdessa, a major sourceof grain imports,and were supplanting many of the older Baltic firms in that trade [ 16, 21]. It was after the well-known crisis of the mid-1840s in breadstuffs, and the associatedrepeal of the Corn Laws, that the full transformation of the grain and other commoditytrades began, intensified by the rapid spreadof the "CommunicationsRevolution" in transportand telegraphs and climaxedby the circlingof the world with a network of transoceanic cablesin the mid 1870s.Thus technologyreinforced institutional changes that in turn respondedto markedlyhigher levelsof businessactivity. By overcomingthe barriers of high shippingcosts over long distancesand the risks of sharp price changesover extendedperiods of time, these innovationsprovided the essentialcomponents of a world-widecommodity market system.Even as that systemwas evolving, new firmsappeared in the United Statesas it becamea major,dependable grain exporter.Based mostlyin the United Kingdom and specializingin a narrower range of commodities,the new firmsusually also had tradingconnections with other partsof the world. For example,William Rathbone& Co., with connections to the Far Eastand India, openedbranch offices in New York and Canada duringthe early 1850s,after severaldecades of dealingin North American flour through correspondents.It becamethe leadingfirm in the Anglo- American bulk grain businessduring the Civil War era [29, 38]. It was soonfollowed by David Bingham,the PattersonBrothers, and the Railis; all of them had New York officesby the late 1870s. Meanwhile, a wholly different group of merchant shipperswere openingbranch offices at SanFrancisco, dominating the rapidlydeveloping Californiagrain export trade by the late 1860s.Balfour, Guthrie, & Co. wasassociated with the Liverpoolfirm of Balfour,Williamson & Co., which in turn had begun its merchantshipping business in Chile [24, 35, 39]. Falkner, Bell & Co. was another British firm with Latin American connec- tions that moved into the San Franciscomarket in responseto new 87 opportunitiesin the grainbusiness. Both firmsremained extensive owners of sailingvessels until the late 1870sand early 1880s,both had experience in cargo-trading,and both wereprepared to investextensively in the grain productionand handlingactivities of the interior.They wereby no means the only sourceof foreign credit. Of the ten or more leadingbanks in San Franciscothat financedthe trade, at least five were controlledby shareholdersbased in the United Kingdomand in Germany.No other grain belt in the United Statesbecame so dependenton foreignmarkets for disposingof its grainas the WestCoast, or sodependent on foreigners for financingand storingthe crop. By the 1880s,as Californiawheat productionreached its peak and cablelinkages made price informationmore readilyavailable, additional firmsentered the grainbusiness there. Amongthem were several European traderswith relativelyslender financial resources, such as E Lenders,Ted Bosch,Dresbach, and Eppingers,all originallycontinental European traders whoalso had openedoffices in Liverpool.By then,some American shippers movedinto the trade aswell. One of them, GeorgeW. McNear,was known as the "Wheat King" of the WestCoast throughout the 1880s. Towards the end of that decade,however, Californians began shifting out of wheat growingand into more capital-intensivetypes of farming,while the West Coast wheat frontier moved north into the Columbia River basin. Also movingto Portlandand Seattlewere Balfour,Guthrie & Co., along with two smallerBritish firms, Kerr, Gifford & Co. and Sibson,Quackenbush [2, 23, 30, 42]. Two or three flour-millingconcerns