GRAIN TRADE

In Russia the dynamics of the grain trade depended on demand in the domestic and foreign markets. Before 1762 the export of grain was conducted under government supervision and depended on the domestic price level. If local prices exceeded an established level, export of grain was prohibited because of fears of further price rises. But even in the years of low prices, permission for the export of grain was required. The government considered grain a strategic commodity and gave this permission reluctantly. As a result, before 1762 grain trade was limited mainly to the empire's frontiers. Only after the declaration of freedom of grain trade in 1762 did a systematic growth of grain exports begin. Before the 1780s the export of grain was prohibited only in case of a substantial price rise, and by the 1790s export became virtually free. Domestic demand for grain came from the urban population, the army, industry (mainly distillation), and the rural population of provinces that experienced a grain deficit.

The demand for marketable grain was comparatively small because nearly 75 percent of the population, even as late as 1897, was engaged in agriculture and able to satisfy its need for grain with its own production. The urban population was not large (in 1914 only 15.3% of the population lived in towns, and a portion of the towns-people engaged in agriculture). The regular army was comparatively small (in 1719, 2.9% of the country's total population; in 1795, 2.5%; in 1850,1.5%; in 1913, 0.8%). The consumption of vodka was limited physiologically (in 1913 in Russia the consumption of vodka converted to spirit was only3.1 liters per capita) and the technology of distillation was improving. A constant demand for grain was felt only in the vicinity of big cities, industrial centers, and where arable land was scarce or soil poor. According to rough estimates, during the 1800s the urban population consumed 4.7 percent of all grain produced; in 1851–1860, 5.6 percent; and in 1912–1913, 9.1 percent; with industry consuming 4.1, 3.5, and 0.5 percent correspondingly; the army, 2.1, 2.1, and 1.2 percent; and exports1.0, 3.8, and 15.7 percent. During the 1800s the share of marketable grain was nearly 12 percent of the gross yield of grain; during the 1850s, 15 percent; and in 1892–1913, 26.4 percent.

The grain trade began to grow markedly after the abolition of serfdom. Domestic and, even more, foreign demand increased, both of which were stimulated by extension of the railway network. Of three most important factors stimulating the demand for grain, export was in the first place, industrialization the second, and urbanization the third. The export of marketable grain constituted 7 percent of the total grain trade during the early 1800s, 26 percent during the 1850s, and 60 percent in 1892–1893; in terms of weight the average annual export of grain amounted to 0.2 million tons, 1.1 million tons, and 10.7 million tons correspondingly. The export of grain acquired vital importance for Russia. The main export cereals were wheat, rye, barley, and oats. In the mass of exported grain in 1762–1802 the share of wheat was 48 percent; rye, 45 percent; barley, 3.9 percent; oats, 2.8 percent; other cereals, 0.3 percent; in 1841–1850, 66, 17, 4, 6, and 7 percent correspondingly; in 1912–1913, 37, 8, 41, 11, and 3 percent. Russian grain was mainly exported to Western European countries. Germany, Holland, Switzerland, and Italy imported mainly Russian grain, while England, Belgium, and France imported U.S. grain. Russia and the United States competed mainly in exports of red cereals: wheat and some barley. Grey cereals, rye and oats, were chiefly delivered from Russia and did not encounter U.S. competition.

During the post-reform period considerable success was achieved in the organization of the grain trade: A whole army of trade agents appeared; credit for marketable grain was created; great amounts of capital were mobilized; means of communication, ports, and the merchant navy were improved; a tariff system was designed; a fairly dense network of elevators and granaries was formed; a corporative organization of grain tradesmen emerged; grain exchanges

were founded in major centers of grain trade (St. Petersburg, Moscow, Voronezh, Elizavet-grad, Borisoglebsk); information on crops, grain exports, stocks, prices, and freights became widely available. Western European commercial ethics and trade customs were gradually adopted. Despite indisputable progress, the organization of Russian grain trade did not attain the high level of development that it did in the United States, Russia's main competitor in the world grain market. Elevators and granaries served merely as storehouses in Russia; classification of grains was not practiced there. Railways were not equipped with proper warehouses, rolling stock, and double track sections. Consequently, in good years, grain piled up at railway junctions, waiting for loading in the open, sometimes for up to two months. The quality of grain deteriorated, making it difficult for tradesmen to meet the conditions of contracts. The state of the roads along which grain was delivered to railway stations was unsatisfactory. Macadamized roads were few. In European Russia in 1912, there were 6 kilometers (3.7 miles) of them per 1,000 square kilometers (386.1 square miles); in the United States, 53 kilometers (33 miles); in Germany, 516 kilometers (320.6 miles); in Great Britain, 819 kilometers (508.9 miles); and in France, 1,073 kilometers (666.7 miles). Grain was brought to the stations not when it was profitable to sell it but when roads permitted. In ports there was a lack of warehouses for grain storage as well as a lack of facilities for grain reloading. All this raised overhead expenses and prices, and reduced the competitive capacity of Russian grain.

In Russia, foreign grain trade was in the hands of Western European tradesmen, and domestic trade remained in the hands of native tradesmen, mainly Jews, who purchased grain in the country and delivered it to ports for foreign exporters who gave credits and therefore dictated the conditions. The buyers-up were interested only in expanding and accelerating their turnovers. They did not attach much importance to the price level, since they made money on the difference between purchase and sale price. The sellers were peasants overburdened with various payments and landowners with big debts. They were short of liquid capital and, because of transportation conditions, not free to choose the moment of sale. Russian grain producers could neither wait for a favorable situation in the market nor exert influence upon prices, the level of which depended on crops and market competition of the sellers themselves. Inadequate organization of the grain trade resulted in the sale of Russian grain on world markets at less of a profit than U.S. grain. U.S. producers and sellers were to some extent able to regulate grain supplies to the world market, restraining the fall in prices in case of surplus grain supplies and maintaining high prices in a profitable market situation.

On account of great export (during the nineteenth and early twentieth centuries grain played the same role as did oil and gasoline during the late twentieth and early twenty-first centuries) the level of prices was of great significance for Russia. Incomes and solvency of peasants and landlords, the country's trade balance, and earnings from customs duties depended on the price level. From the eighteenth century to the early twentieth century, the situation in the world grain markets was for the most part advantageous to Russia. Russian local grain prices, expressed in grams of gold, rose 10.2 times from 1,707 grams (60.2 ounces) to 1,914 grams (67.5 ounces) (5.7 times during the eighteenth century), while the general index of prices for domestic goods rose 6.6 times (five times during the eighteenth century). By contrast, in European countries, despite cyclic fluctuations, grain prices and the general price index had a tendency to decline in this period. In eighteenth-century Russia, a phenomenal rise in grain prices (and generally in all prices) occurred. During the sixteenth and seventeenth centuries Russia had stood apart from the price revolution in Europe, but during the eighteenth century Russia entered world trade, and a belated price revolution took place. The Russian price revolution resulted in a leveling of Russian and world prices. At the turn of the eighteenth century, Russian prices were about nine to ten times lower than world prices, and at the turn of the twentieth century only 20 to 30 percent lower.

The leveling of Russian and world prices occurred under the influence of the market economy laws, which required, first of all, that prices for Russian goods correspond not only with national but also with world production costs, and, second, that they be determined by the relations between demand and supply both in the Russian and world markets. As Russia was joining the world market, local grain prices were becoming less dependent on local crops and local demand, and more dependent on the situation in the world market. During the late nineteenth and early twentieth centuries the dynamics of Russian grain prices were largely determined by the world market situation, and red grain prices were fully dependent on it. All of this attests that from the beginning of the eighteenth century Russia joined the international division of labor and gradually turned into a full member of the world economy and world market, and that the principles of the market economy penetrated the Russian national economy as early as the eighteenth century, long before the reforms of the 1860s. Hence, from the eighteenth to the early twentieth century the general line of Russia's socioeconomic evolution remained unchanged and consisted in commercialization of the economy and enhancement of the role of the market as a production regulator. Serfdom hampered and slowed down but did not prevent the development of capitalism in Russia, just as prior to 1865 slavery did not stop the development of capitalism in the United States. Grain prices exerted substantial influence upon numerous aspects of the economic, social, and political life of the country. They played an important part in the modernization of the national economy, development of social stratification of the peasantry, destruction of the peasant commune, and urbanization and industrialization of the country.

See also: agriculture; economy, tsarist; foreign trade; peasant economy.

bibliography

Herlihy, Patricia. (1986). Odessa: A History, 1794–1914. Cambridge, MA: Distributed by Harvard University Press for the Harvard Ukrainian Research Institute.

Mironov, Boris N. (1992). "Consequences of the Price Revolution in Eighteenth-Century Russia." Economic History Review 45(3):457–478.

Boris N. Mironov