The International Grains Council (IGC) is preparing to celebrate its 60th anniversary, reckoning its age from the signing of the International Wheat Agreement in 1949. But the IGC’s history stretches back even further than that.
International cooperation goes back to the 1920s, when low prices were causing distress to producers and concern to governments in many producing countries. The first discussions were between the major exporting countries: Argentina, Australia, Canada and the United States as well as the world’s main importers, including the United Kingdom.
More formal international cooperation started with the International Wheat Agreement in 1933. Its program of export quotas and stockholding objectives failed to combat protectionism and problems caused by oversupply. In the words of the IGC’s own brochure, "its ambitious ‘economic provisions’ could not be made to operate effectively." Out of the International Wheat Agreement came the Wheat Advisory Committee, which became the International Wheat Council in 1942. A new International Wheat Agreement, signed by 46 nations, took effect in 1949. As Time magazine wrote in an article published on April 20, 1953, "a big world surplus was keeping wheat prices low, and it seemed both good international policy and smart business to set fixed prices for world wheat sales.
"Roughly, the agreement protected importing nations by giving them the right to buy fixed quotas of wheat at a ceiling price of $1.80 a bushel," the article said. "Exporters were protected by a floor of $1.50 a bushel (later reduced to $1.20). Everybody seemed taken care of."
U.S. President Harry S. Truman seemed pleased. "The 81st Congress understands the importance to American farmers of a balanced and expanding world trade," he said in a Labor Day address in 1949. "A new International Wheat Agreement has been negotiated and is now in effect. By this agreement, American farmers are assured a fair share of the world wheat market at fair prices for the next four years."
Other leaders also welcomed the deal. Canadian Prime Minister Louis Stephen St. Laurent described it as being "of the greatest importance to our farmers and for our entire economy.
"But the signers of the agreement turned out to be poor guessers," the Time article noted. "The war in Korea sent prices skyrocketing far above the $1.80-a-bushel ceiling."
The result was that the U.S. government had to pay U.S. exporters a subsidy averaging 62¢ a bushel to cover the difference between the agreed maximum export price and the U.S. market price. "The agreement, when it expires next July," the Time article noted, "will have cost the U.S. almost $600 million in subsidies, which are now running at the rate of $130 million annually."
That week the U.S. had taken the lead in agreeing to a new wheat deal at a meeting in Washington, D.C. "For Agriculture Secretary Ezra Benson, who believes that international price-fixing is fundamentally wrong, it was a distasteful assignment," Time said. "But withdrawal by the U.S. would have been taken as a sign of repudiation of U.S. pledges of world economic cooperation and would have provided Russia with a potent propaganda weapon sure to be used."
The U.S. tried to get a higher price in the new agreement, but Britain, the biggest importer, refused to sign. "Perhaps it thought it could strike a better bargain with Argentina, which has a wheat surplus and has never joined the pact," Time said.
"The agreement could still go into effect without Britain, and there was a good chance that it would," Time said. "Wheat prices are again falling, after the biggest bread-grain crop in world history last year. The U.S. is also facing a glut at home."
Once the 1953 agreement was finally reached, it cut U.S. subsidies to 31¢ a bushel, "still painful enough to raise howls in the Senate, which must ratify the pact," Time said. "But finding a market for the U.S. wheat surplus might well be even more costly without any agreement, since other countries might dump wheat at prices far below the proposed floor prices."
The agreement, subsequently renegotiated in 1956, involving a further reduction in the guaranteed quantities which applied at the minimum or maximum of the price range. The IWAs of 1959 and 1962 introduced a number of changes, broadening their scope by introducing set percentage undertakings rather than absolute amounts, and applying these throughout the agreed price range.
IWC ESTABLISHED IN LONDON
The 1949 agreement established the home of the International Wheat Council (IWC) in London. It was the first of a series of agreements. "When surpluses reappeared in the mid-1950s, major exporting countries insulated their mounting stocks from the market to keep prices within the limits specified under the agreement," the IGC said in its own brochure on its history and functions. "They also sought to expand sales on special terms to countries not yet able to finance large commercial imports. But in the mid-1960s, when repeated monsoon failures in the Indian sub-continent led to a sudden increase in trade and an unexpected drop in exporting countries’ stocks, the threat of shortage awakened international concerns about world food security," it said.
The response was the International Grains Agreement of 1967, which was concluded after the GATT cereals negotiations within the Kennedy Round, included the Food Aid Convention and the Wheat Trade Convention. Under the Food Aid Convention, governments were bound to provide minimum specific quantities of food aid in cereals, totalling 4.5 million tonnes. Of that total, the U.S. was to supply 1.9 million tonnes and the European Economic Community, the forerunner of the European Union, agreed to supply 1 million tonnes. The Food Aid Committee was established on July 1, 1968 to administer the Convention.
The 1967 Wheat Trade Convention was the last of the chain of agreements to include economic provisions. Governments had become less interventionist and following a period of abundant supplies with prices mainly below the levels specified in the Convention, the provisions were suspended in 1969, leaving the IWC with its modern role as a forum for the exchange of views and market information.
By the time U.S. President Richard Nixon wrote to the Senate transmitting the 1971 Wheat Trade Convention, the function of the IWC was becoming very familiar to modern readers. "The new Wheat Trade Convention continues international cooperation in wheat trade, maintaining the International Wheat Council and most of its functions and establishing a new Advisory Sub-Committee on Market Conditions charged with the task of continuously reviewing current market conditions and making prompt reports to the Executive Committee of the Council concerning the existence or threat of market instability," Nixon told U.S. legislators. "On the basis of such reports, the Executive Committee is to meet, review the situation, and consider the possibility of mutually acceptable solutions. The Council may also be convened to review such situations."
The 1971 agreement left out the idea of regulating international prices. "In contrast to previous wheat agreements, the 1971 Convention does not contain price provisions and purchase and supply obligations, principally because the exporting countries were unable to agree on the reference wheat or wheats to be used for setting minimum and maximum prices," Nixon said.
At the time, he was still expecting the rules to come back. "Major changes in the Canadian grading system made uncertain the trading relationships among the several top quality wheats that were being considered as reference wheats," he said. "The negotiating conference decided that progress on establishing minimum and maximum prices and the related supply and purchase provisions must await the establishment and the testing in trade of the new Canadian grading system."
In the 1970s, the world wheat situation was transformed into one of tight supplies and very high prices. One of the resolutions adopted by the World Food Conference in 1974 was to invite governments to enter into discussions on the feasibility of establishing grain reserves to be located at strategic points. In response, the U.S. government called a meeting of major grain producing and consuming countries at the headquarters of the IWC in early 1975. A preparatory group was established to examine the technical aspects of a possible grain reserve scheme. Following further discussions, the Council in 1978 requested the Secretary General of UNCTAD to convene a negotiating conference in Geneva.
These centered on a system of nationally held and internationally coordinated reserve stocks. Unfortunately, no consensus could be established on a number of key issues and the Conference was adjourned. One alternative approach subsequently examined by the Council during the years 1979-81 was for a more flexible system of operating reserve stocks. While regarded as technically feasible, this was not acceptable to all members.
In 1980, a new Food Aid Convention raised the amount donor members were obliged to provide to 7.6 million tonnes. In 1986, this was replaced by a new Convention, which was subsequently extended until 1995.
Under the Wheat Trade Convention of 1986, the Council was able to develop its information services and its committee structure. It also started to run its highly successful annual conferences in 1992, bringing together not only its members but also stakeholders from every part of the grain trading world.
IWC BECOMES IGC
The 1986 Convention was replaced by the Grains Trade Convention 1995. The word "grain" was used in the title of the convention for the first time in recognition that the Council had been covering coarse grains (maize, barley and sorghum), in addition to wheat, in its statistics. The International Wheat Council became the International Grains Council.
The membership of the Council has changed over the years as the world and the grain market have changed. The interests of the world’s one-time biggest importer, Britain, are now represented as part of one of the IGC’s exporter members, the European Union, a testimony to the increased efficiency of farming and grain processing over the last century. The other members of the IGC are Algeria, Argentina, Australia, Canada, Côte d’Ivoire, Cuba, Egypt, India, Iran, Japan, Kazakhstan, Kenya, Korea (Rep.) Morocco, Norway, Pakistan, Panama, Russian Federation, South Africa, Switzerland, Tunisia,Turkey, Ukraine, the United States and Vatican City.
The Food Aid Convention, also renegotiated in 1995, was further modified by the Food Aid Convention of 1999. Members’ total annual commitments were 4.8 million tonnes (wheat equivalent) and €130 million (around $171 million at current exchange rates) in value commitments. The convention’s list of food products was considerably broadened. The members of the Food Aid Committee are Argentina, Australia, Canada, the E.U. and its member States, Japan, Norway, Switzerland and the U.S.
This year on its anniversary, the IGC will formally add rice to the products covered by the Grains Trade Convention. This move brings along with it a change in calculating members’ financial votes, from July 1, 2009. It has also added coverage of oilseeds to its data, making IGC statistics recognize the importance of the interdependence of grains and oilseeds in world agriculture and on the world’s food market.
"In an increasingly interdependent world, the value of objective information is becoming more and more important," IGC Executive Director Etsuo Kitahara told World Grain.
The Council is still based in London, occupying offices in One Canada Square, also known as the Canary Wharf Tower, which is the tallest building in the United Kingdom, located in the former Docklands of east London.
For more information about IGC, visit www.igc.org.uk.
Chris Lyddon is World Grain’s European editor. He may be contacted at: