Recent sharp drops in farm commodity prices raise the question: Are investors and farmers being "played" by the giant multinational grain dealers? Colorado rancher and grain farmer Derral Schroder thought so -- and tried to move into the seemingly lucrative grain export business himself.
Working through his recently formed American Agricultural Movement, he shipped 800,000 bushels of grain to South America. But he found no profit.
Today Mr. Schroder is turning his grain into gasohol for domestic consumption. This is the only way, he figures, to make a profit both for himself and for the American economy. Otherwise, Schroder says, he's found in selling his grain that "you're selling to companies with a complete monopoly of our markets, and the only way you deal with the Cargills, Bunges, and Continentals [major grain dealers] is at their prices, which are normally set at the cost of production or less."
While Mr. Schroder is not alone in his view, others in agriculture disagree with him.
Spokesmen for Cargilll Inc. of Minneapolis point out that its size and experience enable it both to open up new overseas markets and retain these markets by proving a reliable supplier of competitively priced goods. Cargill assistant vice-president Robbin Johnson maintains that farmers, the government, and the grain dealers naturally share a common interest in "building demand for America's farm abundance."
And Winston Wilson, US Department of Agriculture deputy undersecretary for international affairs, says that one measure of the success of America's present marketing system is price: "When it comes down to comparing prices received by US farmers with those in Canada and Australia, the US farmer usually comes out much better."
At the grass-roots level, Missouri farmer Tom Mershon explains that in order to get the extra penny which can tip the balance from loss to profit he sells his cattle, hogs, and grain "only when the price is right, which means when other people aren't moving."
Mr. Mershon points out that his marketing approach would be worthless without America's year-around market that gives farmers freedom to decide the best moment to sell. Even the critics agree that this relatively steady market exists because Cargill, Continental, Bunge, and more than 30 other major purchasers are constantly bidding in open auction for farm products on the frantic trading floors of the Chicago Board of Trade and other commodity exchanges.
Farmers' cooperatives trying to expand their marketing operations and profits have made attempts to establish themselves as volume world grain traders. But Duluth's GTA co-op soberly reported that it found the exporting business a "high risk, low-margin enterprise requiring vast amounts of capital and expertise."
The difficulties of marketing of agricultural products can surprise newcomers. They can be fooled by the fact that over the past decade, 75 percent of the massive surge in world grain export trade has been supplied by US farmers.
This boom in US agricultural exports netted substantial profits for the major grain dealers. Critics charged the dealers with "windfall" profit-taking. Particularly in the case of the Soviets' "great grain robbery" in 1972-73, many thought US farmers and consumers were being shortchanged while dealers reaped vast profits on the basis of "inside information."
One result of those charges was the stiffening of federal and state regulation of the grain marketing industry.
But the charges persist today, and Cargill has become a center of criticism both on many farms and in some congressional committee rooms.
Along with the Continental Grain Company (New York), Andre (Switzerland), the Louis Dreyfus Company (France), and the Bunge Corporation (South America), Cargill has been charged with manipulating the international grain market to keep prices to the farmer down and the grain dealers' profits up.
The Cargill target seems particularly appealing to critics because the company has expanded well beyond the grain business. Its recent move into the meat packing industry brought it into a second area where the volume and intricacy of the business leaves room for manipulation by some operators.