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What Is the Grain Trade?

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  • Written By: Peter Hann
  • Edited By: Angela B.
  • Last Modified Date: 07 November 2016
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The grain trade is the sale or trade of grains and cereal crops, such as wheat and rice. It has existed since human civilization began and cities arose, because demand for grains in cities meant farmers could grow crops and transport their harvest to cities as cash crops rather than just growing food for their own consumption. Cereals initially may have been bartered but, with the development of a money economy, cereals began being sold for cash on the grain market. Owing to the difficulty and cost of transporting grain, much of human history has seen cereals being taken from farms to nearby market towns for sale. The modern grain trade is characterized by developing globalization, with farms increasing in size and transportation and export of cereals expanding on an international scale.

Modern production of crops such as corn, wheat, and barley in Europe and North America takes place on an industrial scale. Grain is transported in bulk in large trucks or by rail to seaports or inland dry ports for export. This large-scale production in the grain trade has given agricultural producers in the developed world an advantage stemming from economies of scale augmented by government subsidies. This has led to problems between developing and developed countries.

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The international grain trade has been the subject of negotiations between developed and developing countries in the World Trade Organization (WTO). Negotiations have the objective of phasing out subsidies for agricultural exports and cutting the support given by governments to their agricultural producers. Tariffs and subsidies may have a distorting effect on international trade and are a problem for developing countries, which cannot compete in the protected markets of Europe and North America. Developing countries aim to keep agricultural tariffs in place, because the tariffs protect their domestic farmers from international competition in the grain trade, while the major exporters in exporting countries such as the U.S., Canada and Australia have an interest in securing tariff cuts.

Other issues that may affect the grain trade on an ongoing basis include the increasing production of biofuel — which relies on corn and other plants — that may take large areas of land away from food production and reduce food inventories. The effects of climate change and unpredictable weather conditions are also a cause for concern. Other important issues include the controversy over genetically modified plant varieties, the increasing orientation of consumers to locally produced and organic food, and issues of food security.

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