Holy Roman Empire - Chapter 518

Chapter 518: Chapter 91, Detonation Crisis
 

After the close of the Austrian Agricultural Economics Conference, the Vienna Government announced to the world: before the harvest of the new grain, they would replace part of the strategic grain reserve.

This was almost an annual occurrence, except usually they would buy when the international grain prices were low and sell when the prices soared.

This time was clearly an exception, and even though it was not known how much grain the Vienna Government was prepared to sell off, it still triggered severe turmoil in the international grain market.

Compared to the beginning of the year, international market grain prices had already fallen by nine percent, and now, affected by the sell-off from the Vienna Government, the prices of grain plummeted another four points.

Capitalists with shaky funds couldn’t hold on any longer; the England and Russia trade caused them heavy losses, and Austria has now added another blow.

Fortunately, the Vienna Government had announced a replacement rather than a sheer sell-off, otherwise the impact would have been even more intense.

In the London Grain Trading Market, a middle-aged man dressed in luxurious clothes was, as usual, getting to grips with the prices in the market.

The middle-aged man was named James, a small capitalist who owned a flour mill. Ever since the England and Russia grain agreement was signed, he had become anxious.

Cheap Russian grain hadn’t entered the market yet, and the shares had already been divvied up by connected capitalists. By the time James caught on, it was too late.

Of course, even a quick response was of no use, as this kind of prime meat was not something he was qualified to share. James originally purchased domestic wheat for processing, but now that was not possible.

The domestic wheat was not so cheap, and if he were to push the purchase price down, he would probably be directly thrown out.

In search of cheap grain sources, James turned his eyes to the grain trading market. Influenced by the international grain prices, the decline here was indeed much more significant.

All of a sudden, he noticed Austrian wheat had appeared on the billboard; James immediately stopped in his tracks. It was known that Austrian wheat had rarely appeared in the international market for the last decade or so; what appeared was processed flour.

“Raul, what’s the problem with this batch of grain, why is the price so low? I remember that Austria does not export wheat; could this possibly be smuggled goods?”

James half-jokingly asked, his surprise not unwarranted as this was not just low but had hit rock bottom, a price beyond James’s imagination.

“Mr. James, you really have a way with words. If it really was smuggling, we wouldn’t smuggle grain! These kinds of bulk goods are inconvenient to transport, and with the low taxation, it’s simply not worth the risk.”

James didn’t buy Raul’s joking around, and picked up a handful of wheat to look at, preliminarily judging it to be outdated grain; but this was not the reason for the price to be so exceedingly low.

“Cut the crap, what’s the problem with this batch of grain? Don’t tell me there are such bargains to be had, and it’s still our turn!”

Raul smiled indifferently and handed James a newspaper.

“Mr. James, as you’ve already noticed, this batch of grain is outdated. Not long ago, the Vienna Government announced a change in the reserve grain, and the old grain from the storage was then sold off at a discount externally.

As a professional, you certainly understand that the price of outdated grain would be discounted. Now, this batch of grain has been stored for over three years; turning it into flour would definitely affect the taste.

In Austria, such grain is usually not processed into flour but used for brewing or turned into feed.

The inventory released by the Vienna Government this time was substantial, which is why it entered the international market. The reason for such a cheap price is, of course, the good work done by those bureaucrats in London.

With the Russians’ new grain being so cheap, these outdated grains can only be even cheaper, otherwise, who would buy them?”

It was apparent that Raul also harbored deep resentment towards the London Government. The England and Russia trade agreement allowed direct contracts between businesses and the Russians, cutting out middlemen like them altogether.

If they hadn’t managed to get the outdated Austrian grain to sell off, they would’ve been out of business. The prices of grain on the international market were not as cheap as Russian grain.

James put down the wheat in his hand and grabbed another handful, rubbing it between his palms.

“Are you sure there are no problems with this grain?”

Raul: “Of course, if there were problems, I’d be going to hell!”

Seeing James still hesitant, Raul added, “Mr. James, if in doubt, you can inspect it yourself.

Such an opportunity to pick up a bargain isn’t seen often, and international grain prices won’t fall as low in the future as they are now.

You should know, if it were sold at this price, farmers around the world would go bankrupt. This is already below the cost of production, and it’s just this batch.”

James was tempted. If there were no problems with the grain, and it was merely outdated, it definitely warranted a purchase. He bit his lip, as if making up his mind.

“I’ll take thirty thousand tons, can the price be lowered even further?”

This was nearly all the funds James could muster, but for the sake of greater profits, he decided to bet anyway.

The price of this batch of grain was fifteen percent cheaper than what the London Government had obtained from the Russians. On the surface, it was normal for there to be a price difference between old and new grain; in reality, however, this price was excessively low.

James wisely did not explore the deeper reasons. After all, as long as it made him rich, why should he care!

…

Beginning in May, cheap grain from Austria rapidly made its way to the UK market. These low-priced grains, once introduced, were eagerly sought after by unscrupulous capitalists.

All were smart enough to recognize that such prices were abnormal, and some even speculated that Austria intended to disrupt the trade between England and Russia, but that didn’t stop them from making a profit.

Grain is different from other goods; storing it for three to five years is not a problem. After all, old grain will still be old grain even if kept longer.

The deterioration in taste, that’s even less of an issue. As long as the flour made from it is a bit cheaper, it won’t lack buyers on the market.

Being able to fill one’s stomach was already good enough, the ordinary British citizens were not yet affluent enough to pursue the luxury of taste.

Such conspicuous activity naturally caught the attention of the London Government. However, this time Austria wasn’t acting alone, as a group of British capitalists were involved.

The trade between the London Government and the Russians didn’t benefit everyone, and many capitalists found themselves at a loss.

If no action was taken, by the time Russian grain poured in, survival for them would become extremely difficult.

Under these circumstances, they naturally didn’t mind cooperating with Austria. After all, it was all legal trade, and the London Government had no right to intervene.

Trying to set restrictions to stop Austria’s grain dumping? Sorry, but getting that through Parliament would be no easy task. Opponents, waving the banner of free trade for their own interests, thus left the Benjamin Cabinet helpless.

The free trade system could not be overthrown; it was at the heart of Britannia’s economic policy. Of course, this headache didn’t affect Prime Minister Benjamin much.

The results of a new round of elections had already come out, and he was now the former Prime Minister. This problem was for the forming Liberal Cabinet to worry about, effectively digging a pit for his political competitor, William Ewart Gladstone.

At this critical juncture of government changeover, the Benjamin Cabinet responded passively, and once the transfer of power was completed, it was too late for the London Government to take any measures.

Just in these few short months, Austria had dumped 8.5 million tons of rye, 3 million tons of wheat, 4.3 million tons of corn, and 3.2 million tons of soybeans onto Britain…

The events in Britain also affected the international grain market, which truly hemorrhaged, with a sudden drop of fifteen percent.

Before the Russians’ cheap grain even appeared on the international market, prices had already nearly bottomed out.

At the beginning of the year, rye was priced at 25 Divine Shields per ton on the international grain market, now it had fallen to 18.6 Divine Shields; corn had dropped from 18.8 Divine Shields per ton to 14.1 Divine Shields…

In short, the prices of all basic staples plummeted, dragging down the prices of other agricultural products with them. It was the people’s panic that was the foremost culprit behind it all.

At this point, it was time for everyone to lose money together. Everyone knew that the current prices were not the lowest yet; after the autumn harvest, grain prices would hit a new trough.

In a supply situation exceeding demand, the good times were over for all major grain-exporting countries. If it weren’t for the spark of the England-Russia grain loan agreement, and Austria’s grain dumping tactics, the agrarian crisis would have erupted slowly.

Now that was impossible; as the crisis neared, it detonated immediately. The year 1872 was doomed to be a tragic one, and grain stagnation would become a hot topic for the second half of the year.

It was no longer a matter of price, but that the grain simply could not be sold. The best way to stabilize grain prices was to reduce grain production and destroy excess agricultural products.

As a responsible great nation, Austria naturally had to take proactive measures. In July, Austria’s Agriculture Department called upon all the major grain-producing countries in the world, hoping they would reduce their grain production simultaneously.

On August 12, the Vienna Government enacted the “Land Fallow Law”, which explicitly prescribed by law that lands used for growing grain must remain fallow for a certain period, to be determined by local governments based on actual conditions.

This seemed like an effective piece of legislation, but its impact was extremely limited. Austria already had a tradition of agricultural fallow; this was just setting explicit regulations for it.

According to the Agriculture Department’s estimates, as a result, Austria’s grain production could be reduced by approximately two to three percentage points. This was no small number and could help alleviate the crisis of overproduction.

On August 15, the Vienna Government introduced the “Land Reclamation Law”, clearly stating that new land newly reclaimed within the European Region could not plant crops like wheat, corn, rye, or potatoes for the next five years.

All these measures were too far removed to quench the immediate thirst, regardless, there was no way to pull out the crops that had already been planted.

In 1872, Austria’s grain production would still not reduce, and it would not impact the international grain market prices in the short term.