The Heirs of Joseph

Modern grain dealers can trace their roots to the Old Testament's Joseph, who advised the Pharaoh to store grain in bountiful times and release it during famines. Despite its ancient lineage, the risky business of buying, storing, shipping and selling grain has remained as obscure as it is enormous. Recently, half a dozen major grain-trading companies have been bobbing up in the news with unusual frequency because of their role as middlemen in the Soviet Union's billion-dollar purchase of U.S. wheat and other crops. The sale has also raised charges from Democrats that some Nixon Administration officials unfairly tipped the big grain companies to the impending deal, enabling them to buy wheat relatively cheap from unknowing farmers before news of the scope of the Russian deal drove up prices. Yet the Communists bargained shrewdly; it was by covering up the great size of their requirements until the last moment that they apparently bought at bargain prices.

The men with whom the Soviets wheeled and dealed were officers of the large grain-trading firms that are the main conduits for moving wheat, corn, soybeans and some other commodities from farm to market. The dealers buy from farmers and sell to customers as diverse as small millers, big feed-lot operators, overseas companies and foreign governments. Dealers can provide many services, from cleaning and storing to transporting the grain. They get most of their income from the fees they charge for those services. The dealers frequently operate on slender after-tax profit margins--about .5% of sales --but their often immense volume keeps them profitable.

Almost all the major grain firms are privately owned, and their officers have an understandable preference for secrecy as they play their complicated game against alert, swift competitors. Six firms account for 90% of U.S. grain exports, including Memphis-based Cook Co., Argentine headquartered Bunge Corp., Swiss-owned Garnac and French-controlled Louis Dreyfus Corp. The two giants, which share half the world's grain shipments, are Cargill Inc. of Minneapolis and

Continental Grain Co. of Manhattan. Continental is headed by French-born Michel Fribourg, 59, a shrewd, aggressive executive, whose family founded the firm in Belgium more than 150 years ago. Cargill was started a little over a century ago by W.W. Cargill, a Wisconsin farm lad. The company's present chairman, Irwin E. Kelm, has the distinction of being the first chief from outside the Cargill and MacMillan related families, who still hold 90% of the stock.

Cargill's semisecret operation is fairly typical of most big grain dealers. The company's headquarters, tucked away in a secluded suburban woodland, is a replica of a French chateau. From there, company officials supervise an empire that last year generated $3.2 billion in sales and $38 million in profits. Cargill has more than 12,000 employees in 350 offices, mammoth grain terminals and storage elevators around the world. To move its grain, the company owns one of the nation's largest fleets of towboats and river barges, and regularly rents a 115-car freight train.

No grain company can be better than its information. Banks of ever-chattering telex machines pump a daily flood of intelligence, some in intricate code, into Cargill's headquarters: a competitor's wheat bid in Latin America, weather conditions in Australia, political jockeying in the Middle East, rumored tax increases in Japan. In the chateau's former living room, a dozen or so executives scan an electronic quote board which tells them the price of soybeans in Chicago, wheat in Kansas City, rapeseed in Thunder Bay and oats in Winnipeg. On the basis of that information, Cargill executives decide what to buy, sell or hedge, often risking sums approaching $ 100 million.

Because six to nine months can elapse between the time a dealer buys from a farmer and sells to a customer, the value of the grain held in terminals can fluctuate wildly. If the price rises, the dealer can make a large profit. If the price drops just a few cents, a large dealer can lose millions. To hedge against such losses, dealers usually go into the commodities futures market and buy enough grain to cover each order, contracting to purchase the grain at a specified price six months to a year ahead. Shipping the grain itself from storage elevators--sometimes by a combination of rail, river barge and cargo ship--is an intricate exercise in logistics that requires precise timing. Delays caused by labor strikes or foul weather can eat into profits.

Yet for all the hazards, the chances of reaping a bonanza remain tempting, especially if the Government eases the way to profits. The Russian wheat deal was made possible by the Government drive to increase U.S.-U.S.S.R. trade, and Government subsidies helped

American farmers and traders to sell their goods overseas at a gain. Like any poker player, the men who wager in the grain-trading business are able to rest a bit more easily if they know they have an ace in the hole.

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