The Wheat Problem
In 1914, just seven countries supplied over ninety percent of the world’s wheat exports. They were: Russia, Argentina, Canada, United States, plus Romania, Australia and India. In this excerpt from The War Lords and the Gallipoli Disaster, author Nicholas Lambert explores how this global economic reality fueled one of the worst defeats of the First World War.
During the first months of the war, wheat prices rose much less than had been expected. From about October 1914, however, as the international markets began to steady, price fluctuations became less violent, and the wheels of international commerce again began to turn, the Food Supply Committee spotted an abnormality in the market. At this time of year, with the European harvests mostly gathered, wheat prices normally fell. But in 1914 they rose. Although the increase was modest, fifteen percent above the normal pre-war price, the Food Supply Committee found the trend sufficiently worrying to contemplate imposing a maximum price on a loaf of bread — but summarily rejected it as “an impossible suggestion.” The political consequences of such action would be massive; besides, the administrative machinery for monitoring compliance and the legal authority for enforcement simply did not exist. Instead, the committee opted to dispatch agents overseas, further up the supply chain, to gather earlier information.
Throughout November 1914, the outlook progressively darkened. One by one, each of the seven major wheat exporters — collectively responsible for over ninety percent of wheat shipped internationally — reported difficulties. When Turkey joined the war, at the beginning of that month, the Dardanelles were firmly closed off to all commercial traffic, thus cutting off supplies from Russia and Romania. (Although, technically, the Straits had been closed since the end of September, the market had believed this would be only temporary — a belief which Turkish entry into the war ended.) Canada, which had promised to reserve Britain her entire surplus, was able to deliver far less than expected, as the harvest had been hit badly by drought. The early onset of winter meant that wheat from western provinces was locked up until the spring. The North American freeze also delayed transit of the US crop west of the Great Lakes. The Australian harvest, meanwhile, had been a near complete failure, with 1914 remembered as “the great drought”. Yields were barely a quarter of normal, meaning that there was no surplus whatsoever for export, and indeed for the first time in decades the island-continent become a net importer.
The South American crop was also unexpectedly poor. On 27 November, the Argentinian Minister of Agriculture published a statement announcing that the wheat harvest was projected to yield less than 5½ million tons, 5% less than the previous year — which likely would result in an almost 10% fall in exports. Traders, however, suspected that the minister was deliberately understating the magnitude of the drop in order to improve his bargaining position with foreign bankers for new loans. Indeed six weeks later, the Argentine crop estimate was revised a further ten percent downwards. By the end of November 1914, therefore, only the United States and India still possessed significant stocks on hand available for export.
Of all the troubles within the international wheat market, unquestionably the most important in driving up prices was the closure of the Dardanelles.
Then, in early December, India became the sixth of the big seven wheat exporters to report difficulties. Their problem was altogether different. On 8 December, Lord Hardinge, the Viceroy of India, notified London of his intention to place an immediate embargo on the exportation of wheat. This was quite unexpected, because the sub-continent had enjoyed a bountiful harvest. Yet the problem was that, because the world price was so high, exports had been too strong. Wheat had been sucked out of the interior, down to Karachi, and from there overseas. Additionally, anticipating still higher prices, farmers had sown an additional five million acres of wheat — utilizing as seed almost 300,000 tons of the previous years’ crop that ordinarily would have been sold to the consumer. Consequently, prices in the bazaars of the provinces had risen by more than fifty percent. “The Government of the Punjab,” the Viceroy exclaimed, “describe these prices as famine rates and inform us that very serious hardship is thereby entailed on the poorer classes and that a continuance of these prices involves danger of food riots in the larger cities.” With much of the army normally garrisoning India fighting abroad (including all the most reliable units), the prospect of large-scale food riots portended frightening political consequences. By imposing an embargo, the Government of India hoped to increase the domestic supply of wheat and so drive down prices in the bazaars.
One by one, each of the seven major wheat exporters — collectively responsible for over ninety percent of wheat shipped internationally — reported difficulties.
While an embargo might help to solve India’s wheat problems, it promised to make Britain’s much worse. In London, the news from India produced consternation. With the global price of wheat already rising, Board of Trade experts predicted that prices would skyrocket when the markets learned of a further contraction in the global supply. Lord Crewe, the Secretary of State for India, at once implored Hardinge to reconsider. By secret telegram dated 18 December 1914, he explained that London feared an embargo on Indian grain exports would “stimulate cornering operations in United States, where speculators are counting on poor Argentine crop [sic] with shortage and panic prices in May.” The Viceroy was unmoved. Believing large-scale social disorder was the greater danger, Hardinge responded that “it is politically of great importance in India to secure a fall of prices from the present famine rates.” He offered, nevertheless, to limit the embargo to only three months, until the end of March 1915, by which time the new crop would be harvested and the matter could be reconsidered. Not good enough, Crewe replied. Grudgingly, Hardinge agreed to release 100,000 tons for export. After a week passed with no reply from London, on 28 December Hardinge unilaterally issued a press communiqué announcing an embargo on the export of wheat from India. The global price leapt. London was furious.
Of all the troubles within the international wheat market, unquestionably the most important in driving up prices was the closure of the Dardanelles. During the five-year period immediately before the war, roughly a third of the global supply came from the Black Sea. This might not appear to matter much to the UK, because Ukrainian granaries rarely supplied more than 15% of Britain’s imports. Cutting the Dardanelles off from Black Sea supplies affected not only the Entente powers but also neutrals, most notably Greece, Spain, and Italy, which (along with France) routinely imported most of their wheat from Russia. As a result, these Mediterranean nations were instead forced to seek their daily bread in the Americas and thus to compete more vigorously in those markets with British buyers. It was most unusual to see, for instance, the charter of fifty steamers in January 1915 to transport 250,000 tons of wheat from the United States to Italy. Thus the British faced the expensive prospect of competing for a smaller-than-normal global grain surplus against nations that customarily had depended more directly on Russian (and Romanian) wheat.
Nicholas A. Lambert is the prize-winning author of Sir John Fisher’s Naval Revolution and Planning Armageddon: British Economic Warfare and the First World War. Between 2016 and 2018, he held the Class of 1957 Chair at the United States Naval Academy.
