Holy Roman Empire

Chapter 518: Triggering the Crisis

After the conclusion of Austria’s agricultural economic conference, the Austrian government announced plans to replace part of its strategic grain reserves before the new harvest.

This happened almost every year, typically done when international grain prices were low, with the government buying grain and then selling it when prices rose.

However, this time was different. Although no one knew exactly how much grain the Austrian government planned to sell, the international grain market experienced intense turmoil.

Compared to earlier in the year, international grain prices had already dropped by 9%, and now, under the influence of Austria’s sale, prices suddenly plummeted by another 4%.

The speculators and capitalists in the market were no longer able to hold on. The Anglo-Russian grain deal had already caused them significant losses, and now Austria had delivered another blow.

Fortunately, the Austrian government had announced this as a grain replacement rather than a straightforward sell-off, or else the impact would have been even more severe.

In the London grain exchange, a middle-aged man dressed in fine clothes was, as usual, checking the prices.

The middle-aged man, named James, was a small-time capitalist who owned a flour mill. Ever since the Anglo-Russian grain agreement was signed, he had been panicking.

Russia’s cheap grain hadn’t even entered the market yet, and well-connected capitalists had already taken the quotas. By the time James realized what was happening, it was too late.

Of course, even if he had reacted sooner, it wouldn’t have made a difference—such lucrative deals weren’t within his reach. James had originally been purchasing domestic wheat for processing, but now that was no longer feasible.

Domestic wheat wasn’t cheap, and if he tried to push the purchase price down, he would likely be thrown out.

In search of a cheaper grain supply, James turned to the grain exchange market. Sure enough, the price drop here, influenced by international grain prices, was much more significant.

Suddenly, he noticed Austrian wheat appear on the billboards, and James immediately stopped in his tracks. Austrian wheat had rarely appeared on the international market in the past decade. What was usually seen were already processed products like flour.

“Raul, is there something wrong with this batch of grain? Why is the price so low? I remember Austria doesn’t export raw wheat—this isn’t smuggled, is it?” James half-jokingly asked. His surprise was understandable, as the price wasn’t just low—it had hit rock bottom, a price far beyond what James had expected.

“Mr. James, you’re quite the joker. If we were smuggling, it certainly wouldn’t be grain! Bulk commodities like this are hard to transport, and the taxes are low. There’s no reason to take that kind of risk.”

James ignored Raul’s lighthearted comment and grabbed a handful of wheat, examining it closely. He could tell it was old grain, but that alone didn’t seem enough to explain the rock-bottom price.

“Cut the nonsense and just tell me what’s wrong with this batch of grain. Don’t try to convince me that a deal this good would fall into our laps!”

Raul smiled calmly and took out a newspaper to hand to James.

“Mr. James, you’ve already figured it out—this is old grain. Not long ago, the Austrian government announced they were rotating their reserve stock, so the older grain from their warehouses is being sold off at a discount.

As an expert in the field, you must know that old grain typically comes discounted. This batch has been stored for over three years, so if it’s milled into flour, the quality won’t be as good.

In Austria, this kind of grain usually isn’t turned into flour but is used for brewing or processed into animal feed.

The Austrian government released a large amount of this reserve grain, which is why it ended up on the international market. And the reason it’s so cheap? Well, you can thank those bureaucrats in London for that.

With Russian grain being so cheap, this older stock has to be even cheaper to sell. Otherwise, who would buy it?”

It was clear Raul was quite resentful of the British government. The Anglo-Russian trade deal allowed businesses to sign contracts directly with Russian suppliers, cutting out middlemen like Raul.

If they hadn’t brought back Austria’s old grain for sale, they would have had to close down. The prices on the international market were nowhere near as low as Russian grain.

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

“You’re sure there’s nothing wrong with this grain?”

Raul replied, “Of course. If there is, I’ll go to hell!”

Seeing that James was still hesitant, Raul added, “Mr. James, if you have any doubts, you can inspect the grain yourself.

Opportunities to snatch up deals like this don’t come around often. No matter how much international grain prices drop in the future, they’ll never sink this low again.

You should know that if we sold at this price on a larger scale, farmers across the world would go bankrupt. This price has already dropped below production cost—it’s just this batch.”

James was tempted. If the grain had no serious issues and was merely old stock, it would still be worth buying. After a moment of internal struggle, he seemed to make up his mind.

“I’ll take 30,000 tons. Can you give me a better price?”

This was nearly all the funds James could gather, but to secure a bigger profit, he decided to take the gamble.

The price of this batch of grain was 15% cheaper than the grain the British government got from the Russians. On the surface, it seemed normal for old grain to be priced differently from new grain, but in reality, this price was still excessively cheap.

James wisely chose not to dig deeper into the underlying reasons. As long as he could make a fortune, why worry about the rest?

...

Starting in May, Austrian grain quickly flooded the British market. The moment this cheap grain appeared, it was eagerly snapped up by unscrupulous capitalists.

***If you are able, you can support the translation at /dragonlegion***

Everyone knew that such low prices were abnormal, with some speculating that Austria intended to disrupt the Anglo-Russian trade agreement. However, this didn’t stop them from making a profit.

Grain, unlike other commodities, can be stored for three to five years without issue. Since it was already old stock, keeping it in storage longer didn’t change its status.

The fact that the taste had deteriorated was a minor concern. As long as the flour produced from it was cheap, there would be no shortage of buyers on the market.

For the average British citizen, being able to fill their stomachs was already good enough. They couldn’t afford to be picky about the taste.

Such large-scale action naturally caught the attention of the British government. However, this operation wasn’t solely orchestrated by Austria—there were also British capitalists involved.

Not everyone benefited from the trade deals between London and Russia and many capitalists had actually suffered losses. Without action, they would struggle to survive once the Russian grain flooded the market.

Under these circumstances, these capitalists didn’t mind cooperating with Austria. After all, it was all legal trade, and the British government had no right to interfere.

If they tried to impose restrictions to prevent Austrian grain dumping, Parliament would pose a significant hurdle. Opponents, waving the flag of free trade to protect their interests, left Benjamin Disraeli’s cabinet powerless.

The free trade system was not to be overturned, as it was the cornerstone of British economic policy. Of course, this issue didn’t trouble Prime Minister Benjamin too much.

The results of the new election had already been announced, and he was now the former prime minister. The person who had to worry about this was William Ewart Gladstone, who was forming the new Liberal cabinet. This grain crisis was essentially a trap set for his rival.

In the critical moment of the transition, the Benjamin Cabinet took a passive stance, and by the time the power handover was complete, it was too late for the British government to take effective measures.

In just a few months, Austria had already 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 the British market…

The events in Britain also had a significant impact on the international grain market, leading to a dramatic price crash, with prices plunging by 15% almost overnight.

Russian grain hadn’t even hit the international market yet, but prices had already dropped significantly.

At the beginning of the year, rye on the international grain market was priced at 25 guilders per ton, but it had now dropped to 18.6 guilders per ton. Corn had also fallen, from 18.8 guilders to 14.1 guilders per ton…

In short, the prices of all staple grains were plummeting, and this decline was dragging down the prices of other agricultural products as well. The root cause of all this was the widespread panic among people.

At this point, everyone might as well lose money together. It was clear to everyone that the current prices weren’t the lowest yet, and after the autumn harvest, grain prices were expected to hit new lows.

The oversupply of grain meant that the good times for major grain-exporting countries were over. If it weren’t for the Anglo-Russian grain loan agreement and the grain dumping by the Austrian government, this agricultural crisis would have developed more slowly.

But now, the crisis had been triggered immediately, even before it had fully arrived. The year 1872 was destined to be a tragic one, with the issue of unsold grain likely to dominate discussions in the second half of the year.

This was no longer just a pricing issue—it was a matter of not being able to sell the grain at all. The best way to stabilize grain prices was to reduce grain production and destroy the surplus agricultural products.

As a responsible major power, Austria naturally had to take active measures. In July, the Austrian Ministry of Agriculture called on the world’s major grain-producing countries to reduce their grain production simultaneously.

On August 12, the Austrian government introduced the “Fallow Land Act,” which legally stipulated that land used for growing grain must be left to fallow. The specific fallow periods were to be determined by local governments based on their circumstances.

Although the law seemed effective, its actual impact was limited. Austria already had a tradition of leaving agricultural land fallow, and this law merely formalized it.

According to the Ministry of Agriculture’s estimates, this could reduce Austria’s grain production by 2-3%, which was not an insignificant number, and could help alleviate the crisis of overproduction.

On August 15, the Austrian government issued the “New Land Cultivation Act,” which explicitly prohibited the planting of wheat, corn, rye, potatoes, and other crops on newly cultivated land in Europe for five years.

These measures were far from solving the immediate problem. No matter what, the crops already planted in the fields couldn’t be pulled out.

Austria’s grain production in 1872 would still not decrease, and the short-term impact on international grain prices would be minimal.