The World for Sale

Money, Power and the Traders who Barter the Earth's Resources...

By: Javier Blas & Jack Farchy

This is for my friends who like Business Stories and its Era of Evolution!

THE PIONEERS

As Theodor Weisser approached the Soviet border, he felt a shudder of fear. Travelling from Western Europe to the Soviet Union in 1954 would have been a daunting journey for anyone, but for Weisser it required particular courage. As a soldier in the German army, he had been captured by Soviet forces in the Second World War and made a prisoner on the Eastern Front. Now in his forties, but with the memories of his time in a Soviet prison camp still fresh, this trip would be his first to Russia as a free man. At the last minute, fearing that someone he’d encountered during the war might recognise him, he bought a red cap and pulled it down over his eyes.

Weisser was in ground-breaking territory. He was travelling to the capital of Communism at a time when the Cold War dominated public discourse in the West. Since a Soviet-backed coup in Czechoslovakia in 1948, Western Europe had become increasingly alarmed about the threat of an assertive Soviet Union on its doorstep. And America was gripped by the Red Scare whipped up by Senator Joseph McCarthy’s public denunciations of suspected Communists. But Weisser was not the kind of man to be easily deterred. He had set off from Hamburg determined to buy some oil, and he wasn’t going to leave without a deal. He made his way through Moscow’s wide, empty highways to one of the few hotels where foreigners were permitted to stay, and waited for the Soviet bureaucracy to take notice of him.

He didn’t have to wait for long. Soon, he had succeeded in securing a dinner appointment with Evgeny Gurov: the head of Soyuznefteexport, the government agency that controlled the Soviet Union’s oil trade. Gurov was an ideologue who recognised earlier than many others the potential for oil to be used as a strategic weapon. Weisser, on the other hand, was not motivated by ideology, but by profit. His company, Mabanaft, was a distributor of fuel across West Germany. And it was losing money. Weisser needed to find new sources of oil to sell to his clients, and that meant going where few others would dare. No record remains of where the two men dined or what they ate, but it must have been a peculiar affair: one of the Soviet Union’s top trade officials sitting at a table with a former prisoner of war, toasting their new acquaintance under the watchful eyes of the KGB.

There was a period of negotiation, but Weisser’s perseverance would ultimately be rewarded: Soyuznefteexport sold him one cargo of diesel for resale in West Germany. The trader’s pioneering spirit would prove costly, however, at least initially. On his return to Germany, his willingness to deal with the Cold War adversary meant he was shunned by much of the oil industry. The shipping companies he had been using to transport his fuel around the country refused to do business with him, on the grounds that their other customers didn’t want to charter ships that had previously held oil from the Soviet Union. But Weisser, a consummate networker with a broad, open face and a winning smile, knew he had secured the only thing that mattered from his trip to Moscow: a contact behind the Iron Curtain. His first deal marked the beginning of a relationship that would continue for years, underpinning the profits of his trading business.

In 1956, Gurov visited Weisser in return, and, in Munich, he signed a one-year contract to sell diesel to Mabanaft. Soon, the German trader was also buying crude oil from the Soviets. The early deals with the Soviet Union were a personal triumph for Weisser, a testament to his courage, tenacity and charm. But they were also a sign of how the world was changing, and the increasingly critical role that commodity traders like Weisser would play in it. After decades of economic depression, stagnation and war, the world was entering an era of stability and economic prosperity. The horrors of war had given way to a peace policed by the US’s growing military might – the Pax Americana. Where living conditions in the mid-1940s had been marked by price controls and rationing, by the 1960s a growing number of households in the US, Europe and Japan could afford televisions, refrigerators and cars. Between 1950 and 1955, more than half of the households in America bought a television.

Everywhere new trade routes were opening, as nationalism and protectionism gave way to free trade and global markets. The world economy was growing at the fastest rate on record, driving ever greater consumption of natural resources. The period became known as the Golden Age of Capitalism.

Weisser had understood that this new world held unprecedented opportunities for a company whose entire business was international trading – never before had a commodity trader been able to paint on such a global canvas. He was not alone. Around the world, a new generation of commodity traders was exploiting the opportunities created by the booming global economy.

In New York, Ludwig Jesselson, a brilliant and intense young metal trader who had fled to the US to escape the anti-Semitism of Nazi Germany, had a similar vision. He would lead his company, Philipp Brothers, to become so dominant that it took on the biggest banks on Wall Street, giving birth to a family of trading companies that still dominates the global commodity markets today.

In Minnesota, John H. MacMillan Jr, a grain trader who had taken over the running of his family company, was determined to turn its fortunes around. That family company, Cargill, would go on to become America’s largest private corporation, making MacMillan’s descendants some of the richest people on the planet.

These three men were the founding fathers of the modern commodity trading industry. Where their predecessors had focused on local niches, they saw that the whole world was becoming one market. Everything was for sale; potential buyers were everywhere. Decades before ‘globalisation’ became an economic buzzword, they created businesses that were based on it in all but name. As international trade expanded and became a central part of the modern economy, their companies would be its ushers, shaping it at the same time as profiting from it – and forging a business model that would define the commodity trading industry for decades to come.

Over the next twenty years, commodity trading would be transformed from a small-time business into one of the most important industries in the world economy. Traders such as Weisser, Jesselson and MacMillan would become paragons of the new economic order, amassing extraordinary wealth and being welcomed into presidential palaces around the world as masters of the earth’s natural resources. It was a revolution that largely went unnoticed by politicians and the wider public. Only after decades of quiet growth would the world understand how central the commodity traders had become to the global economy. When the realisation came, in the 1970s, it would bring the richest nations on the planet to their knees.

All of a sudden, policymakers would wake up to the fact that the commodity traders – a group they had barely realised existed – had accumulated unprecedented power over the world’s energy, metals and food. The history of commodity trading goes back to the dawn of mankind, when the first settled humans started to buy and sell stones and metals, perhaps in exchange for grains. Indeed, the tendency to ‘truck and barter’ – to trade – is seen by anthropologists as one of the activities that marked the beginnings of modern human behaviour. But the first commodity trading companies that bear any resemblance to today’s traders did not appear until the nineteenth century. For centuries, bands of merchant-adventurers had been travelling around the world seeking valuable resources to sell back at home – the most successful of them, the East India Company, governed the Indian subcontinent for several decades.

With the industrial revolution, however, the trade in resources was transformed. The invention of the steamship meant that, for the first time, long-distance commodity trading wasn’t at the mercy of the winds. The cost of transporting goods fell precipitously, and as a result it became viable to ship not just tea, spices and precious metals over long distances, but also lower-value goods like grains and ores. And the telegraph ushered in an era of near instant global communications.

In August 1858, the first telegraph line across the Atlantic opened, immediately cutting the time it took to deliver a message from London to New York from nearly two weeks to just a few minutes. With these technological developments came the first dedicated commodity trading companies. Merchants sprang up to buy and sell the scrap metal and residues that were the waste products of the burgeoning industrial age. And grain traders delivered food to the growing metropolises full of hungry workers.

The nineteenth-century metals trade grew up in Europe’s industrial heartlands, dominated by three German companies: Aron Hirsch & Sohn, Metallgesellschaft, and Beer, Sondheimer & Co. Philipp Brothers, the company that Ludwig Jesselson would later lead, grew out of this German tradition. Its founder, Julius Philipp, had begun trading from his apartment in Hamburg in 1901, and in 1909 his brother Oscar moved to London to establish Philipp Brothers. The first traders of agricultural commodities were more scattered, with different companies rising up to dominate particular regions or market niches. In the world’s breadbaskets, grain trading companies were set up to transport wheat and corn from the farms to the cities.

In the United States, their number included Cargill, founded when the son of a Scottish immigrant opened his first grain silo in 1865. The industry fell on hard times during the First and Second World Wars. Entire trading dynasties in Europe were lost, and the families behind some of them – many of which were Jewish – had to flee the advancing Nazi army. Not all of them got out in time: Julius Philipp was captured in Holland and died in 1944 in a concentration camp in northern Germany. When the war ended, it opened up a new horizon of opportunity for the commodity traders. The ruined cities of Europe and Asia needed rebuilding, and that would require steel, cement and copper. The trade in natural resources, which had been tightly controlled by wartime governments, would be slowly freed in the new age of peace. And the dominance of the US on the world stage would herald a new era of growth and open markets.

The pioneers of commodity trading had very different backgrounds and upbringings – MacMillan had been born into a wealthy family in the US Midwest; Jesselson was the son of a shopkeeper from southern Germany; and Weisser had grown up in a middle-class family in Hamburg. But what they shared was an instinct for internationalism and a willingness to travel the world in search of new opportunities. In the wake of the war, they set about building their companies into truly international enterprises, profiting from the globalisation of the world economy and shaping it in the process. That meant adopting an outlook that many of their successors in the commodity trading industry still subscribe to: go everywhere, leaving politics and, in many cases, morality to one side.

They traded with Communist and capitalist countries alike; with rapacious local businesspeople or government bureaucrats – the goal was to make a profit. As one of Philipp Brothers’ early traders put it: ‘One of the basic rules of Philipp Brothers is that business is supreme; political matters are not business.’ Of the three men, it was Ludwig Jesselson who most personified the globetrotting approach of the early traders. With a piercing gaze that magnified his ferocious intellect, Jesselson had arrived in the US in 1937 to escape the anti-Semitism sweeping Europe. He soon had a job trading scrap metal at Philipp Brothers in New York, and, while his fledgling career was put on hold by the Second World War, his ambition remained undimmed. In 1946, already a senior trader at Philipp Brothers and determined to build the firm into a global business, he set out on a round-the-world trip. In the devastation left by the war, Jesselson, then thirty-six and fizzing with energy, saw only opportunity.

From New York, he travelled to Japan and India, Egypt, Germany and Yugoslavia. It was years before commercial air travel across continents would become commonplace, and flights were irregular, long and bumpy. But Jesselson was unfazed by a little discomfort. Described by a colleague as the ‘spark plug of Philipp Brothers’, he had supreme confidence in his conviction of the coming economic boom. He set out to hire dozens of new traders and open offices around the world. With his bald head, boundless energy and intense glare from behind his thick-rimmed spectacles, Jesselson inspired respect and devotion from his band of young traders. ‘We all saw Jesselson as a father figure, somebody who gave young people a chance,’ says David Tendler, who rose up under his tutelage and went on to run Philipp Brothers in the 1970s and 1980s.

Under Jesselson, who took over running the company in 1957, Philipp Brothers would be transformed from a mid-sized scrap and ore dealer with a staff of about fifty into the world’s dominant metals trader. And the DNA of the company would be passed down from one generation of commodity traders to the next, creating a family of trading companies that still defines the global commodities industry. Just as Weisser had done in oil, Jesselson pioneered the metals trade with the Communist world. One of the first prizes was Yugoslavia, where he had travelled on his world tour in 1946. Philipp Brothers secured a contract with the state metals monopoly, Jugometal, to sell its entire metals output, linking the socialist government of Tito with capitalist America. By 1950, that was worth $15–$20 million of metals a year – more than the company’s entire sales just a few years earlier.

By the late 1950s, Philipp Brothers was also buying ferroalloys from the Soviet Union and pig iron from East Germany. In 1973, it was able to boast in its annual report that it had ‘for many years done a substantial business with the Soviet Union, as well as with other Eastern European countries’. As a result, it was one of the first ten American companies allowed to establish offices in Moscow. The traders even supplied the US military stockpiles with metal from its Cold War adversaries.

For Jesselson, the political implications were irrelevant: all that mattered was that it was profitable business. John H. MacMillan Jr was from a different world to Jesselson – he was more than a decade older, and he had grown up in a prosperous Midwestern family of Scottish origin. But the two men shared a passion for the business of trading, and a tireless energy that exhausted all who tried to keep pace with them. MacMillan – known to everyone as John Junior – was born into the commodity trade. His father had run Cargill before him, and his education took place on the floor of the Minneapolis Chamber of Commerce, where traders screamed orders at one another. It was a tough schooling, but an essential one: at Cargill, there was no greater insult than to be considered a ‘businessman’ rather than a ‘trader’. Always smartly turned out, with a square jaw and neat moustache, he looked the part of the head of a family enterprise. But behind his Midwestern poise was a driven businessman with a creative streak. He was an ‘enormously restless person, who was constantly inventing and creating’, according to his son’s account of him. ‘For my father, the corporation came first, even before family.’

And in the early 1950s, he realised the corporation needed a new direction. Cargill was an insular company, focused on the US market, and it was missing out on a boom in international trade. ‘We are all terribly upset over missing out on the big volume export business,’ MacMillan told his senior staff. In part that oversight was a function of Cargill’s good fortune to have been founded in one of the world’s most rapidly growing breadbaskets. The company had developed a solid business moving wheat, corn and soybeans from the Midwest to the growing metropolises on the east and west coasts. While its European and South American rivals had been forced to look overseas for new business, Cargill hadn’t needed to. MacMillan would change that. Like Jesselson at Philipp Brothers and Weisser at Mabanaft, he set out to expand across the world.

In 1953, he incorporated Tradax International, the unit that was to serve as his spearhead in the global market. In 1956, he opened the Geneva office of Tradax as Cargill’s hub for international trading. The city was chosen for its ‘excellent travel and communication facilities’, its multilingual tradition, and its ‘limited corporate taxes’. The opening of the Tradax office would mark the beginning of a long and profitable partnership between Switzerland and the international commodity traders. MacMillan’s strategy led Cargill – like Philipp Brothers and Mabanaft – to forge new economic links with the Communist world. But while the other pioneers were importing commodities from the Communist Bloc to the West, Cargill was building connections in the opposite direction, exporting American agricultural surpluses to the world – including to countries behind the Iron Curtain. The trade was encouraged by generous subsidies from the US government, seeking to support farmers whose everlarger harvests couldn’t all be absorbed at home.

Washington financed billions of dollars of exports, helping to spread the American diet around the world. And the grain traders helped deliver this wave of American grain: Cargill quadrupled the volume of its American grain exports between 1955 and 1965. Initially, the grain exports went to US allies. But soon Cargill and other grain traders were also selling to the Communist Bloc. First came Hungary, which bought $10 million of American grain in late 1963. Next, Cargill dispatched its traders to Moscow to negotiate a bigger deal – for $40 million of wheat. The new business with the Communist nations was a boon for Cargill: in 1964, the company reported its second-highest ever annual profit. The Russian business, it told shareholders, was ‘the underlying spark’. The sale of millions of dollars’ worth of American wheat caused a stir in Washington. Port workers went on strike and refused to load ships taking grain to the Soviet Union, and unions urged their members to boycott Cargill and the other commodity traders. Some lawmakers even tried to block the sales, without success.

The furore was one of the first demonstrations of the political nature of the commodity trade, and the power that the traders were accumulating as pioneers of international commerce. In the course of establishing new trade routes between east and west, Cargill and the other pioneers were driving a commercial rapprochement between the US and the Soviet Union that politicians weren’t prepared for.

Within a few years, however, the deals with Moscow in 1963–64 would seem like a practice run for a much larger – and much more politically explosive – series of deals. Cargill’s strategy of internationalism was a runaway success. MacMillan, who died in 1960, wouldn’t be around to see the company rise to the pinnacle of global trade, but there is little doubt that it was he who set Cargill on that path. ‘John MacMillan Jr was a genius who set up the international expansion of Cargill,’ says David MacLennan, the present-day CEO of Cargill. ‘He created the modern company.’

And then there was Theodor Weisser. If Jesselson and MacMillan were scions of the metals and grain trading industries that had been well established since the nineteenth century, Weisser was a maverick who invented a new business single-handedly. He had returned from captivity in the Soviet Union after the defeat of Nazi Germany only to discover that his old job at an oil company no longer existed. That was all the encouragement he needed to follow his dream of creating his own business. To kick-start his new project, he bought a dormant company called Marquard & Bahls for 70,000 Reichsmark (the equivalent of about $100,000 in today’s money), largely for its import–export licence, a thing of value in a country that was still formally under foreign occupation.

By the 1950s, when Weisser travelled to Moscow, the company was already well known throughout the primitive market for refined products by its telegraphic address: Mabanaft, a contraction of its trading name, Marquard & Bahls Naftaproducts. But Weisser did more than just pioneer a new trade route – he helped to create a new industry where previously there had been none. When Weisser set off for Moscow in 1954, there was no real international oil trade – just a handful of huge companies with near-unlimited market power. Oil trading had briefly flourished in the nineteenth century after the first discovery of oil in America at Titusville, Pennsylvania, in 1859. But the trade abruptly dried up when John Rockefeller bought up control of nearly all the refining capacity in America for his Standard Oil Trust. With only one buyer in town, there was no competition, and so no market. The price of oil was decided by Rockefeller. The US government broke up Standard Oil in 1911, but the oil market continued to be dominated by an oligopoly of large companies that were vertically integrated to include oil wells, refineries and retail outlets.

By the 1950s, the oil market was controlled by seven large companies. They came to be known as the ‘Seven Sisters’ – the forerunners of the companies that are today ExxonMobil, Royal Dutch Shell, Chevron and BP. Many of them were the descendants of Standard Oil, created in the wake of its break-up. Crude oil was purchased at ‘posted prices’ set by refiners in each region, a practice that had been started by Rockefeller. International trading outside the oligopoly of these major companies was virtually non-existent.

In the early days of the international oil market, the Seven Sisters avoided dealing with independent traders like Weisser, wary of any threat to their market power. Trying to break their clubby control of the oil market required creativity and a spirit of adventure – and Weisser was perfectly suited to the task. Known to his friends as Theo, he was a born adventurer with a taste for exotic travel, who thought nothing of the discomforts of setting out on a business trip for weeks or months at a time to unknown parts of the world. He would fly first class, booking a full row of seats so he could keep with him several large suitcases full of paperwork that he carried with him everywhere. In 1951, he set off on a three-month voyage through Africa, travelling across a continent that was on the brink of radical upheaval, as former French, Belgian and British colonies were soon to gain independence. From Tangier and Casablanca, he travelled to Dakar, then Elizabethville and Leopoldville (now Lubumbashi and Kinshasa) in the Belgian Congo. Everywhere he went, he negotiated contracts for Mabanaft to supply the African continent with fuel. When he struck his deals with Moscow, Weisser became the first independent trader to circumvent the oil majors’ club and trade crude oil outside their network of control. They punished him for his insolence, refusing to do business with him immediately after his return from the Soviet Union. And they had good reason to be concerned: Weisser’s trades not only marked the start of the rise of the international oil traders, but also the beginning of a major increase in Soviet oil exports. In 1954, when the Mabanaft boss first travelled to Moscow, Soviet oil production was relatively small, and almost entirely consumed within the Communist Bloc. It was outside the control of the Seven Sisters, but it did not impinge on their empires. Yet the export route that Weisser helped open would soon take on enormous significance for the global oil market.

Until the 1950s, the Soviet Union’s oil had come largely from Baku on the Caspian Sea, whose riches had been exploited since the nineteenth century. But now geologists began to develop new deposits in the Volga-Urals basin, and Soviet oil output doubled between 1955 and 1960. The Soviet Union displaced Venezuela as the second-largest oil producer in the world, behind only the US. This geological boon coincided with a shift in political winds in Moscow as Nikita Khrushchev, the Soviet leader, pushed for an increase in foreign trade. Soviet trading agencies, such as Soyuznefteexport, became more active. Soviet exports of crude oil and refined petroleum products to the socalled Free World rose from a mere 116,000 barrels a day in 1955 to about one million barrels a day in 1965. The oil export campaign became the most visible manifestation of what Western diplomats started to call the ‘Soviet Economic Offensive’.

With little fanfare, the commodity traders were helping to change the world economic order. They were forging trade links between Western markets and suppliers that had previously been sealed off behind the Iron Curtain, and in doing so they were helping to unpick the oligopolies that controlled many markets. Within a few years, the ripple effects would be felt across the world. Weisser, Jesselson and MacMillan were not just important because of their economic impact, however. They also created a model for the business of trading commodities that still holds today. Where previously traders had focused on particular locations or markets, Mabanaft, Philipp Brothers and Cargill aimed for global mastery of the commodities they traded. Before the Second World War, metal traders such as Philipp Brothers had focused on deals where they could buy a package of metal having already agreed a deal to sell it onwards. A junkyard might call up the firm and offer to sell it a few hundred tonnes of scrap metal. It would then send a cable around to other dealers, and if one could be found who was willing to buy at a price that would give Philipp Brothers a profit, the company would almost simultaneously agree deals to both buy and sell the metal.

Another line of business involved selling on behalf of a producer for a fixed fee per tonne. This was safe and predictable business, but had little potential for outsized profits. Under Jesselson, Philipp Brothers became more ambitious. The company started doing larger-scale and longer-term trades. It began to negotiate longterm deals to buy from producers, often in exchange for loans. Now the company had a global network of supply deals – a ‘trading book’ – that could be extremely profitable when market dislocations caused prices to move sharply up or down. ‘Always have something to sell,’ explained Ernst Frank, the company’s specialist in copper, lead and zinc. ‘Always be in the business, then sometimes a real shortage develops and if one has material to sell one can make real money.’ Trading on a larger scale required larger and longer-term contracts – and that required a large address book of suppliers and consumers of commodities.

The pioneers incessantly cultivated relationships, spending enormous amounts of time and money to woo crucial business contacts. This focus on the personal connection became an obsession in the industry, giving some trading houses an air of old-world charm that they maintained even after email and video conferencing overtook the face-to-face meeting as the main form of business communication. At metals trader Transamine, for example, it is still said that a trader is more likely to be fired for taking a contact out for a bad lunch than for losing money on a trade.

Networking was especially important in the emerging field of oil trading, where it was often in the hands of a few government officials to decide how to sell vast quantities of their country’s petroleum resources. And Weisser was a born relationships man, who could strike up a friendship with anybody. Every year, he’d throw a lavish party for all his oil contacts at the St Moritz Hotel on New York’s Central Park, replete with freely flowing Champagne and a banquet of delicacies from all corners of the globe. He had already built a relationship with Gurov at Soyuznefteexport, but he hardly restricted himself to the Communist world. In Pittsburgh, he schmoozed the hard-dealing executives of Gulf Oil. In Texas, he scored a contract with Hunt Oil, owned by the wealthy Hunt family. In the Middle East, he was on first name terms with all the most powerful sheikhs and oil officials, including Sheikh Ahmed Zaki Yamani, the Saudi oil minister, whom he counted as a personal friend. The savviest traders used such global networks of contacts to gain unparalleled insights into the state of the world economy. They invested not only in traders to staff their worldwide offices but also in communications systems to ensure that information could be rapidly shared across their companies. Dozens of staff spent their days sifting through telex messages to extract the gems of information. ‘Our communication system is probably the most sophisticated in the world, with the possible exception of the Defense Department or the Central Intelligence Agency,’ one Philipp Brothers executive boasted in 1981. With this sophisticated network of market intelligence came a culture of secrecy, as the traders sought to protect their insights. And the traders’ intelligence networks were enormously valuable, allowing them to make better-informed bets on the market than their competitors.

During the Suez Crisis in 1956, when Israeli, French and British troops moved into Egypt, Cargill’s traders in Geneva bet that shipping costs would rise. Then the crisis closed the Suez Canal, forcing ships to take the long route around Africa, and freight rates soared. Cargill’s ability to combine political and market insight had paid off. It was a neat distillation of the strategy that the early traders had pioneered: build as large a portfolio of contracts as possible, squeeze your network of contacts for information – and then exploit that information to trade profitably. But perhaps even more important than their business model was the pioneers’ approach to their employees.

The pioneers passed on to their successors a corporate culture that continues to influence traders to this day. While the early trading houses had different origins and different styles, they shared an emphasis on hard work, loyalty and partnership. Junior employees were put through gruelling apprenticeships. At Philipp Brothers, every youngster would begin his career doing the company’s most menial jobs, rotating through different departments until his bosses were convinced he understood the basics of the business and had proved his loyalty to the firm. Mendel Bernberg, who was hired by Julius Philipp as a lehrling – or apprentice – in 1919 at the age of fifteen, recalled that the average day began at 8 a.m., opening and sorting the mail, and ended at 10 p.m., after preparing the mail and cables and delivering them to the post office. Several decades later, not much had changed. Felix Posen, who joined Philipp Brothers in the mid-1950s and much later became a top executive at Marc Rich + Co, also started in the mail room, coding and decoding messages to be sent by telegram. ‘If you didn’t want to work hard, you shouldn’t join Philipp Brothers,’ he recalls. Generations of young traders went through this initiation. The experience taught the apprentices grit, meticulousness and humility, as well as the fundamentals of the commodity business.

Many went on to become some of the world’s top commodity traders – among them Marc Rich, who started as a trainee in New York in 1954. The long years of apprenticeship created a sense of loyalty at the trading houses. Weisser saw his staff as family, forgiving their shortcomings almost to a fault. But it was not just shared experience that made the Philipp Brothers traders so close-knit. It was also shared financial interest.

In 1956, the company had distributed shares to about forty of its employees, creating several millionaires in the process. This partnership structure, with dozens of shareholders and not one dominant voice, became a model for the trading houses that came later. It bound the company’s top traders together and created a greater incentive for them to devote their energies to the company. ‘We handle our people like a family,’ Jesselson said in 1981. ‘We always work as a team. Nobody forces his will through. That has always been the strength of the organization.’ It was a business model that worked. By the 1970s, the commodity traders had become significant participants in the new economic order. Cargill’s profits had risen from about $1 million in 1940 to $24 million in 1970. Philipp Brothers, which had made a profit of just $550,000 in 1947, was by 1970 making $38.7 million.

The traders did more than simply take advantage of the increase in global trade flows: they also facilitated it, organising shipping and financing and linking buyers with sellers across the globe. But even as the commodity traders grew in scale and profitability, the world paid little heed to their increasing power. After all, supply of commodities had been plentiful for years, and prices had been low. Few noticed that a handful of traders had assumed a role of enormous importance in the flow of natural resources around the world, a flow that was becoming ever more central to global prosperity. They would soon be jolted out of their complacency as, one by one, the prices of the world’s most important commodities shot higher in the 1970s. And the first shock came in the market for that most basic of commodities: grain.

In the summer of 1972, Cargill was riding high. Under the leadership of Erwin Kelm, the protégé of John H. MacMillan Jr, it had grown into a business with $5 billion in sales, claiming the title of the largest agricultural trader in the world. And it had weathered the criticism of its links behind the Iron Curtain impeccably. It hadn’t been an easy few years – the company had been wrongfooted by the market and barely covered its costs in the late 1960s. But Kelm, a steadfast proponent of Cargill’s global expansion, steered the company through the downturn with its appetite for international business undimmed. So when Nikolai Belousov – the head of Exportkhleb, the Soviet government agency in charge of trading grain – arrived in New York in the summer of 1972, Cargill didn’t think twice about working with him. In a meeting at the Hilton with Walter ‘Barney’ Saunders, Cargill’s head of grain trading, Belousov negotiated a deal to buy two million tonnes of US grain over the course of the next year. It seemed, at the time, like a good deal all round. But Cargill was in for a shock. Belousov – a grey, tall and slender man, who spoke perfect, almost unaccented English – may have been born and educated in the Communist system, but when it came to trading, he was as sharp as his American rivals. When he arrived in New York, he had called not just Cargill, but every single one of its rivals. Each of the trading houses sprang into action. Executives from Cargill’s competitors immediately flew in to New York from as far afield as Paris and Buenos Aires. Many remembered the sales of 1963–4, when the Soviet Union had bought $40 million of grain from Cargill.

But this time Moscow was aiming for much more: a drab Soviet bureaucrat was about to conclude the largest deal in the history of agricultural trading. One by one, Belousov negotiated with each of the largest grain traders. Before meeting Cargill, he had met with Michel Fribourg, the president and owner of Continental Grain Company, and struck a deal to buy $460 million of American wheat and other staples – one of the largest commodity trades that had ever been done. Later he met with Louis Dreyfus, Bunge, Cook Industries and André & Cie. Belousov bought from everyone. Each trading house thought it was alone in cutting a big deal with the Russians, largely unaware of how much others had sold.

When it became clear how much Belousov had bought, traders realised there wouldn’t be enough American grain to go around. In total, Belousov – spurred on by the risk of mass starvation at home after the Soviet crops had failed – bought almost 20 million tonnes of grains and oilseeds from the grain traders. The size of the wheat purchases was extraordinary: 11.8 million tonnes – equal to almost 30% of the US wheat harvest. When the market woke up to the sale, it was clear the US wouldn’t have enough grain to meet the combination of its own domestic consumption, the demand from traditional importers, and the extra purchases from the Soviet Union. Wheat, corn and soybean prices raced higher, triggering a bout of food inflation the like of which Americans hadn’t experienced in a generation.

On 3 July, just before the Russians started talking to Continental, milling wheat prices in Kansas were $1.44 a bushel; within ten weeks, the price had risen 60%. Worse was to come: in the year after the Soviet deal, wheat prices tripled. Corn and soybean prices also climbed. With grain prices rising, the price of meat shot higher too. The public was outraged. The episode became known as the ‘Great Grain Robbery’.

Cargill reacted to the outrage by trying to demonstrate that it hadn’t profited from the hunger of American citizens. For the first time in its 107- year history, it made information on its trades public. It even commissioned its auditors to compile a report demonstrating it had lost money on the Soviet sales. It was true: Belousov had outsmarted the Western grain traders. The very secrecy so loved by the industry had backfired. The companies had all kept their contracts secret, and so they all suffered when they realised that they weren’t the only ones with a deal. The traders had all sold grain they didn’t yet own, hoping to buy it later on the open market. So when they all tried to buy at the same time, prices jumped. Cargill told Congress it had lost $661,000 on the Soviet contract. But those losses masked what was, in reality, a golden period. What Cargill hadn’t told Congress was that it had made millions through speculative bets on the market. Cargill reported net income of $107.8 million in its 1972–73 fiscal year, up nearly 170% from the previous year. ‘It was a year of record profits, record dollar sales, record tonnage, record margins, record problems, record expense, record traffic jams, record prices and controls, record aspirin pills, and many record performances by a record number of people,’ a Cargill executive said. A lot of the profit hadn’t come from the traditional business of buying physical grain from farmers and selling to consumers, but from pure speculation. Cargill’s bets on the market were largely placed by Tradax in Switzerland. The traders at Cargill’s headquarters near Minneapolis rarely took bets on the direction of grain prices, known in trader-speak as the ‘flat price’.

But at Tradax it was a different story. Realising that the Soviet purchases would cause shortages of wheat, the traders placed enormous bets that prices were going to rise. ‘We took much larger flat price and premium position than ever before,’ Tradax said. Of course, their bets came good: Tradax recorded profits of $60.17 million in 1972, more than the earnings of American titans such as Boeing or Colgate-Palmolive in the same year. The sale of roughly $1 billion of grain to America’s biggest geopolitical rival right under the nose of the US government was a demonstration of the power that had accumulated in the hands of the commodity traders.

As the US had become the world’s dominant grain supplier in the decade after the Second World War, the trading companies were at the vanguard of a wave of US exports, acting as ambassadors for American grain around the world. Unlike actual ambassadors, though, the traders were not employees of the US government – not only did the government have little ability to regulate them, but it was almost entirely in the dark about the sales until after the fact. And thanks to generous export credits, the Soviet purchases made at rock-bottom prices had been funded to the tune of about $300 million by US taxpayers.

The public’s reaction was instantaneous and damning: ‘SOVIET GRAIN DEAL IS CALLED A COUP’, blared a headline on the front page of the New York Times in September 1972. Belousov’s deals in New York’s hotels had helped the world wake up to the power that had accumulated in the hands of the commodity traders.

After two decades of global growth, the world consumed more natural resources than ever. It was more dependent than ever on international trade of these resources. And that meant that the world was more reliant than ever on just a few men, the pioneers of trading, who had built their industry around this flow of commodities: Weisser, Jesselson, MacMillan and their heirs. But the Soviet Union’s surprise swoop on America’s grain stores was just a prelude to what was to come. Soon, the same sort of chaos that the grain market had just experienced would strike the most critical commodity of all to the twentieth-century economy, the resource that Theodor Weisser had coaxed out of the Soviet Union two decades earlier: oil.