As someone who just turned 50 this past winter, I have no personal memories of the Great Grain Robbery of the summer of 1972, only what I’ve heard and read.
The tongue-in-cheek name references the Great Train Robbery nine years earlier, when a Royal Mail train from Glasgow to London was relieved of 2.6 million pounds while in transit by a gang of proper, old-school, British villains out of an Ealing Studios gangster film.
The namesake grain robbery was, strictly speaking, legal, and magnitudes larger. It’s the tale of the co-ordinated purchase of 10 million tons of U.S. grain by the Soviet Union, which happened quietly and stealthily, preventing a price run-up.
The Soviets, the story goes, went to see several suppliers, giving each the impression they were negotiating exclusively with them. Once the deals were sewn up, the Soviets apparently then returned to the same suppliers asking for a bit more at the same price, which all the companies were happy to supply. Suddenly, however, it became apparent that the Soviets had bought out most of the available supply.
The impact on grain markets was swift and sure, with a run-up of grain prices. Over a 10-month period, soybeans rose from US$3.31 a bushel to US$12.90 a bushel. Food prices around the world rose 50 per cent in 1973.
One of the great ironies of the situation is that a group of swashbuckling capitalists were handed their hats by the Soviet communists, who taught them a thing or two about business.
One of the results of this Soviet strategy was that new rules were struck requiring large grain sales in the U.S. to be reported to the USDA.
It’s not the only example of a market strategy that many claimed bordered on manipulation. Just a few years later our own Canadian Wheat Board stood accused of a reverse grain robbery, in 1977.
That year the CWB saw big crops coming and correctly anticipated a price drop, dumping close to four million bushels on the trade, which was, in the words of one observer “… successful, but controversial.”
Both of these examples illuminate the reality of markets where knowledge, especially knowledge nobody else has, can become power and then money.
Through this lens, the ongoing acquisition of pork companies by Asian interests takes on a whole new significance. The largest and highest-profile deal came in 2013, when China’s Shuanghui Group (now renamed the WH Group) purchased Smithfield foods in 2013 for US$4.72 billion, more than its market value.
When the deal was struck, the Chinese company didn’t just acquire a meat-packing company. It acquired a vertically integrated juggernaut that controlled pork production, genetics and processing. The deal also, incidentally, made the new parent company the largest foreign owner of U.S. farmland.
Many speculated it was a move to buy production to feed demand in China, but Fortune magazine noted at the time that the numbers simply didn’t add up. While Smithfield was and is a big pork producer and processor, its total output amounted to just three per cent of annual pork consumption in China.
The magazine instead suggested the real motivation was looking forward to the environmental limits of China itself, strained in recent years by runaway development.
“It is really about owning access to America’s safe farmland and clean water supplies,” wrote author Minxin Pei, in a June 2013 column.
Some suggest it might be the pork equivalent of the Great Grain Robbery, as African swine fever promises to play hob with China’s domestic pork supply. So far, it has been found in every province there and resists control efforts.
Agriculture lender Rabobank has suggested there could be an unprecedented reduction in the Chinese swine herd of 30 per cent and a doubling of pork imports there in the next year. That could cause pork prices to launch to the stratosphere, positioning the new buyers nicely.
Others however, including those inside the deal, say it was under consideration well before the ASF issue was raised. CPF Foods has long been interested in expanding into North America, they say.
Much like the Smithfield deal, they’re acquiring a company with a significant production footprint here in Canada, and operations in the U.S., Mexico and China. It’s a sophisticated vertically integrated operation and no doubt made an attractive acquisition.
As at least one pork sector analyst noted in the story, in some ways it’s an endorsement of the direction of the sector.
Globalization is the future of pork, it would seem, and the fact it’s come here to Manitoba should be no surprise.