Considering that export trade in all grains (wheat and coarse grains combined) accounts for just 14 per cent of annual total disappearance, it is startling that outsized influence over prices is so often assigned to this share. Regardless of who the author may be of market analysis, government expert, financial press, industry authority or trade person, major market-moving power is frequently assigned to export demand even though that seems to deny statistical weight. For a time, this situation made mainly for analyses focused on questions about China as a likely major buyer or on availabilities from the Black Sea region. Recently though, commentators have expressed alarm about what they regard as the excessive influence of companies active in exporting. These concerns magnify trade as a target for blame when market moves are out of the ordinary.

The record-setting volatility of prices in recent years has prompted much of this fault finding. Of course, it is not just grains that have posted extraordinary fluctuations. Similar and even greater swings have occurred in other commodities. While bread and other basic food prices frequently move in tandem with wheat and other grain prices, it is oil and gasoline prices that attract headlines. Swings in motor car fuels, which have been especially pronounced recently, tend also to attract more political attention than food prices where processors and retailers have greater control.

While politics may account for much of the recent spate of questions being asked about the need for regulation of international commodity markets, a new force is at work that has great influence. That is the entry into the grain business of companies that once paid little heed to agricultural products, while being centered on petroleum products and metals. These companies include giants that in instances account for volumes that are multiples of the leaders in grains. Their entry has come in a variety of ways, ranging from hiring experienced grain traders to acquiring stakes in listed grain companies to taking over once proudly independent grain companies.

Even as the past quarter of a century witnessed great change in the companies engaged in grain trading, it is most recently that a transformation has occurred. Few of these new grain traders have acquired businesses with strong origination, usually emphasizing marketing into China, Southeast Asia and the Middle East. Holdings in port infrastructure and ocean shipping loom as important. Experience makes clear that an advantage may be derived from one or another of these trade aspects, presenting many interesting possibilities in this unfolding market.

The entry of these new trading enterprises into grain has prompted a range of reactions, none more fraught with possibilities than worrying about their profit-making. The Financial Times newspaper gave front page attention to its in-house research placing annual earnings of the “top 20 physical commodities trading houses” at $33.5 billion as well as a return on equity in a range of 20-30 per cent. In a description not universally shared, the newspaper described the present companies as “more aggressive” than previously. In citing the private ownership of many companies, the paper overlooks that grain trading includes publicly-owned companies and private ones that disclose their earnings.

Without declaring in favor of increased governmental regulation of commodity trading, the Financial Times quotes non-governmental and governmental officials as voicing alarm about an industry that has grown so large, so profitable and, yes, so powerful. It points to critics worrying about food and gasoline prices, including one calling for “closing the huge transparency gap of the commodities trading industry.”

Regretfully overlooked in this sort of analysis is the way that the present-day grain and, yes, commodity trading industry dealt successfully with the expanding food needs of a world where population and incomes are rising. It is not governmental controls and more regulation that are needed for growth, but policies that spur trade expansion suited to meet the demands of the future.