IGC evolution parallels unfolding of grain trade

by Morton Sosland
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It was 60 years ago, on the first day of August in 1949, that the first post-World War II International Wheat Agreement was declared effective. Negotiated in the wake of a devastating global conflict mainly to assure importing countries that major wheat exporters would undertake to supply specific quantities to nations worried about food shortages, the pact also included provisions having to do with maintaining prices. Headquartered in London, in recognition of Britain’s position at that time as one of the leading importers, the International Wheat Council was charged with monitoring the compliance of both exporting and importing member countries to the agreement’s specifics on prices and volumes. Such recounting of "ancient history" six decades later is especially important because the history of what began as a global wheat agreement portrays how modern-day trade evolved into the efficient and largely unfettered system it is today.

The drama of the many changes that have occurred in global trade during these six tumultuous decades was underscored at the annual conference in London sponsored by what is now the International Grains Council. The Council’s role involves administering both the Grains Trade Convention and the Food Aid Convention of the International Grains Agreement, as last negotiated in the mid-1990s. The London conference, drawing representatives of member governments and grain industry participants from around the world, heard presentations on market trends affecting national, regional and global grain markets. Even with all the difficulties of the recent period, there was underlying acceptance that the international market was working well. Of course, there were many references to massive challenges like the 2008 price volatility as well as continuing concerns about excess supplies in some places and food shortages in others. Yet, no one displayed the least interest in reviving some of the failed past undertakings that were conceived as the right sort of answer to these very same issues.

Indeed, the idea of trying to maintain minimum prices on trade in global markets, or to put a ceiling on prices if wheat markets tighten, loomed more as nightmares from the past than as solutions that might have cured the 2008 price trauma. Yet, such ill-advised steps were undertaken for a brief time as part of the original wheat agreement. Not only were price provisions put forward as a way to control markets that quickly overran such efforts, but other equally foolish steps were embraced at times in the past in seeking to impose limits on export volumes by enforcing minimum prices. Perhaps one of the greatest dramas in the past involved negotiations among exporting and importing countries aimed at establishing a system of global reserves of wheat that would be built to bolster prices or released to force prices down. It’s almost humorous to imagine an international negotiation being successfully concluded with these aims in mind. The mechanisms for administering such a process are beyond imagination.

It is to the great credit of the International Grains Council that it resisted lamenting the failures of these efforts to have it become the ultimate setter of world prices and trade volumes. Instead, the Council has shown how such an organization really works exceedingly well as a provider of essential data and information and as a place where governments may discuss, debate and resolve quarrelsome issues that really do threaten to hamper trade. Its monthly Report an eagerly awaited compilation of market analysis and trade data, providing to both member governments and to the global industry a series of compilations that help significantly in comprehending just what is happening in one of the most complex of global economic sectors. The conference itself has grown to become an important meeting place for people involved in global grain, either as government officials or as traders and government officials.

In administering the Food Aid Convention of the Grains Agreement, the Council provides another unique service that is often overlooked at times when expanding global hunger draws the attention of other better known global bodies. While the United Nations and its Food and Agriculture Organization and many non-governmental agencies might be trying to address how to help the nearly 1 billion people who purportedly do not have enough food, it is the Council, through its Food Aid Committee, that has mustered the nations that provide the bulk of such global assistance through donations of both food and money.

Perhaps the most visible measure of how the Council has kept up with changes in the global grain industry is the way its coverage has broadened beyond the original solitary focus on wheat to include coarse grains, oilseeds and rice. When combined with the shift from attempting to control prices ruling in international trade to providing market information and analysis, as well as a being a center for governmental discussions, this expansion of coverage means the Council has not just maintained, but has greatly expanded its role in facilitating global grain trade. Underscoring how important this is are the fivefold increase in global grain production and the sevenfold increase in grain exports that have occurred during the Council’s 60-year history.

As dramatic as these developments may be, yet another revolutionary change in the global grain industry emerged in London. It is part of the evolving responsibilities of the Council, a new chapter in the unfolding history. At the beginning 60 years ago, the Council’s focus was on use of wheat as food.

This changed when expanding quantities of wheat were used for livestock and poultry feeding and trade in coarse grains expanded. Developments in feed quickly rivaled food as a force in global markets. Now, industrial use, primarily for fuel but in other applications as well, stands as the third factor. Food, feed and industrial use now drive global grain markets, introducing a tripartite dynamic that stirs the imagination about what the International Grains Council will observe at its next major anniversary.