The Annual Settlement and the Future of the Line Company
Before the annual settlement, I prepared a report stamped with the seals of two men. They were the two notaries waiting outside the salon: Spinola’s legal advisor from Genoa and Olivares’s chief accountant, Leonel. They existed here only through the wax seals on the documents.
They dared not enter this room. To them, the five titans gathered here were far too insignificant to approach.
"I shall now begin the settlement for the 1628 harvest and the status of our settlements."
A heavy silence hung in the air, waiting for my words.
"The number of settlers who have completed their transition in each settlement is between 2,500 and 3,000. Regarding agricultural production, the three major grains combined have yielded an average of 20,000 fanegas per settlement, totaling approximately 160,000 fanegas across our eight fully operational settlements. While some villages have begun producing fruits like quinces, the yield and marketability are still insufficient. I expect that by the third year, we will be able to produce marketable fruits up to the eighth settlement."
"Since this year was a bumper crop and grain prices are very low, we will drastically reduce grain sales in the market and focus on self-consumption and storage. Therefore, there will be no revenue from grain sales this year."
At the mention of no grain revenue, the Count-Duke, who had been checking the grain production figures on the document, spoke up.
"There has been a bumper crop throughout Castile. Considering that, the yield is lower than I expected, Marquis."
I felt a surge of irritation at Olivares, who knew nothing of the reality on the ground.
"Count-Duke, that is not the case. Our farms benefited from the climate, allowing both barley and wheat to yield an average of 14 fanegas for every 1 fanega sown. Beans were harvested at a ratio of 9 to 1, so we have certainly achieved a yield well above the average."
"Even fields that usually yield four or five for every one sown achieved seven, eight, or even ten this time. Shouldn't the Marquis's farms be hitting a ratio of 1 to 20?"
The Count-Duke, who used to be happy with a 1 to 10 ratio, was now blaming me for not achieving double that. If we had been alone, I would have torn his hair out, but with others present, I decided to endure it.
"If I may dare to predict next year, the general harvest in Castile will be poor."
"W-what! Why! Why is that?"
"It is because they have sown all their seeds this year, even on land that should have been left fallow for next year's wheat. You would be wise to adjust your harvest expectations downward for next year, Count-Duke."
At my words, the Count-Duke sighed. As a statesman, he seemed deflated by an expert's warning that food supplies would dwindle next year.
"As everyone here knows, direct grain export is virtually impossible due to the road conditions in this land. In the end, what will truly earn us silver coins are small, high-value goods."
I placed the company's main cash products—refined beeswax, honey, and alabaster ore—before them.
"Among them, the production of honey and beeswax is encouraging. Everything has been processed through Genoa."
As I looked at the old man from Genoa, he smiled.
"Those who were skeptical about investing in the company are now clamoring to increase their investment after seeing such profits from beehives kept as a side project while farming."
"I am always grateful for Genoa's steadfast commitment."
As I bowed my head, he raised a hand to stop me and said:
"However, this old man has a concern."
"The distribution costs are too high. I would like to make the reduction of these costs through road maintenance our goal for next year."
"I have calculated that out of the 500,000 reales in sales from the honey, beeswax, and sculpting gypsum purchased in Genoa, 200,000 reales simply melted away into distribution costs."
I replied timidly to his words:
"Your Excellency, the crushed stone road from Melgar to Burgos is already under construction..."
"That is not enough. Those distribution costs were only reduced thanks to the cooperation of Enrique and Velasco. If we had followed standard Spanish administration and customary law, more than half would have melted away into distribution costs, even for small, light goods."
In this land, distribution costs exploded every time one crossed into another region due to local customary laws. For instance, if a typical merchant transported goods along our Melgar-Olmillos-Burgos-Haro-Bilbao route, they would have to pay 10% in alcabala taxes every time they passed through a province. Or, they would have to sell from Enrique’s Melgar to my Olmillos, then sell again from my Olmillos to Burgos. Only after repeating this typical middleman profit-taking could the goods finally reach the port of Bilbao. By then, wheat that cost 10 reales at the source would have risen to 30 or 50 reales by the time it reached Bilbao.
He was telling me to improve the situation where 25% was still being lost purely to transport costs, even now that we had overcome the medieval customary distribution network through a cartel of powerful factions.
A large part of those terrible transport costs was due to Spain's low-quality red earthenware. If you put precious honey directly into earthenware, it leaks through the fine pores. So, you have to coat the inside with beeswax—that’s the first additional cost. And they break easily, causing the contents to spill—that’s the second additional cost.
"So, I have an idea, Your Excellency."
"Oh?"
"I am not confident about porcelain... but I intend to create Rhine-style stoneware that is better than the typical 'terracotta' red clay pottery used in this land."
"No, is that true? Is that possible?"
The Genoese banker could not hide his surprise.
"We have beer artisans who came through General Spinola’s introduction, and many of them want to bring their relatives. There are surely artisans trying to escape the war in the Holy Roman Empire, so I intend to track down stoneware artisans from the Rhine region."
"Would they migrate? And wouldn't you need that German clay and water to produce it?"
I thought of Aguilar de Campoo, a land with a feel similar to Gangwon-do. I was sure I could find decent soil there.
"I believe it is certainly worth a try."
At my words, the Count-Duke of Olivares and the royal financier, Asentista Real Sir Niccolò Pallavicino, raised their voices in debate.
"You must do it! Immediately!"
"Wouldn't it be better to just import our Genoese goods?"
"Are you going to give them to us for free?"
"Are you going to keep saying that even after you go bald?"
"Then, with a 100-year long-term bond..."
"Truly, this is not worth discussing! I shall pretend I didn't hear that!"
The commotion between the two only stopped after King Felipe intervened.
"Enough. The Empire shall not be stingy in creating new homes for the suffering Catholics of Germany."
""Yes, my King.""
After their bickering ceased, I began to speak again.
"Because it is an internal transaction within the Empire, it may seem weaker than visible silver coins, but the wheat stored in the company's central granary has exceeded 100,000 fanegas. The market price of the wheat collected as a 1% monthly storage fee is 200,000 reales per year during this bumper harvest, but it could reach 1,000,000 reales in a famine year."
"Isn't that a loss? Won't the grain rot or be wasted?"
To the cold banker's question, I answered with numbers.
"It is not a loss unless the spoilage exceeds 20% per year. And due to the nature of underground silos, the loss will not exceed 3% even after 10 years, provided there are no earthquakes."
"What if bumper crops continue? Wouldn't you suffer a huge loss?"
"As I mentioned before, it will be difficult for next year's harvest to be good. The farmers of Castile were too greedy this year."
I reminded them of the reality of Spain's backward two-field system, where if the land isn't allowed to rest, it lacks the fertility to produce grain.
"Are the Marquis's reclamation sites alright?"
Sir Pallavicino asked with a serious face. I was touched that even though that bald man didn't worry about my farms, someone who came from so far away was more concerned about them.
"If I may say so, I can confidently state that my farms currently have higher sustainability than any other farm in Europe."
To compete with my farms, you'd need the black soil of Ukraine, the irrigated Great Plains of America, or the reliably flooding Nile. You'd need at least that much.
"Especially in times like these when the weather doesn't help, they will be the strongest farms."
"That's a relief. I was worried because if the collateral value drops, I would have to seize a few more farms."
At the cold-blooded banker's words, I thought Olivares was actually the kinder one.
"Continuing on, the 9th and 10th temporary settlements are currently in the process of being settled. And for the locations of the 11th and 12th settlements, a special plan has been prepared."
"A special plan?"
Olivares’s eyes lit up at my words. It was the look of someone wondering if there was more money to be made.
"One is for wine. The other is a 'factory-type settlement' that will densely house Saxon spinning wheels and plain-weave looms, introduced with Genoa's cooperation. You can see the locations on the map on the last page."
"First, for the 11th settlement, I intend to focus on growing grapevines. As this is a business that requires a 10-year outlook, I request a 10-year 'cost deferment' for this settlement."
"Due to the influence of a lake near the swamp, malaria was frequent, but since we consistently drained the water and farmed fish, the mosquitoes have noticeably decreased. However, since the land in the area is sandy and difficult for growing wheat, I intend to produce wine by growing grapevines, which thrive in rough, sandy soil."
I don't know the exact cause of malaria. But people in this era also knew from experience that malaria was frequent near swamps where mosquitoes buzzed.
"The goal is not bulk wine, but high-end wine that can compete in Madrid and the royal court. For stable transport, I intend to introduce Low Country-style oak barrels. I will compete with a quality that is in a different league from wine stored in leather skins."
It might be hard to believe, but Spanish wine transport uses leather bags made from goat hides. Therefore, the scent of mud soaked into the leather was considered one of the wine's flavors, which is why high-alcohol, sweet wines that could overcome this became the mainstream in Spain. Delicate and rich French-style wine, when put into a romantic Spanish leather bag, degrades to the level of 'it's wine, anyway,' but strong, heavy Spanish-style wine overcomes it and sublimates it into flavor.
That is why white wine in Spain is a local specialty, and because long-distance transport is impossible, it is considered even more high-end. Red wine, containing the heavy scent and taste of the skins, is considered a more common drink.
"This Admiral would like to exercise the right of first refusal on the wine my brother-in-law is growing."
The Admiral, who loves wine as much as chocolate, believed that if it were grapes grown by that brother-in-law, "it's impossible to fail. It will definitely be wine of a grade that can enter the royal court."
"Admiral. We are still in the middle of the settlement."
"This Admiral was too impatient. But oak barrels? What are those?"
"I assure you, wine stored in oak barrels will have an aristocratic taste different from leather bags. That much I promise you, Admiral."
Admiral Enrique was curious about what the wine grown by that brother-in-law would taste like and found it difficult to wait 10 years.
"Lastly, the 12th settlement. This place is focused on manufacturing, not farming. An innovation that goes beyond the spinning business using traditional drop spindles! By densely placing Saxon spinning wheels to be introduced with Genoa's cooperation, we will mass-produce homogenized linen thread, and by introducing the latest Low Country-style looms, we will create patterned cloth."
I pulled back the canvas cloth that had been covering the Saxon spinning wheels I had prepared in advance. As the wheels hidden under the cloth were revealed, I took out the most important part: the 'flyer'.
"Through General Spinola’s connections, there was a devout Catholic who migrated from the Walloon region and had the technology to make this. With this, the Empire will no longer have to rely on Low Country textiles."
I took out a bolt of wool-linen blend cloth made as a sample and spread it out before the shareholders.
"The 'Merino-Linen' fabric to be produced here is no longer a low-grade textile for domestic use only. Mass-produced through the diligence of the people of Castile, this fabric will be made with homogenized quality and become the military uniforms to clothe His Majesty's army, and it will become the Empire's standard specification. If distribution costs are 25%, we can just increase the added value of the product by 200%, can't we?"
-Clap, clap, clap, clap
"Marquis Juan! I just need to hold on for 3 years, 3 more years, right? Yes?"
"That is correct, Count-Duke."
I calmed the tearful Count-Duke and said to everyone:
"And I have a request for the shareholders gathered here."
"I formally propose this. I request that two-thirds of the total 50% stake held by the royal family—33% of the company's total shares—be tied up as 'special shares that cannot be sold or used as collateral.'"
This business is a typical industrial cartel of collusion between politics and business. If the royal family leaves, these businesses will collapse in a chain reaction and turn to dust. I presented a way to prevent that and stop Olivares's runaway behavior.
"Count-Duke. I can no longer tolerate the Count-Duke taking out even the seed money to bake bread."
Author's Note:
Wow, 50 chapters already... I will work hard to write today as well! This is a serialization I am doing together with you all!
I intentionally left out specific production numbers. But adults like specific numbers.
It might be a bit of a complex topic... but it's a chapter I wrote because it's essential for the development. There's no 'high' from the story in this one.