Chapter 347 The future is long
"Boss, do you really want to make crude oil?"

Gaode had been looking forward to and paying attention to crude oil futures for a long time, but when the moment really came, it hesitated.

"Hey, weren't you and Yang Cheng the ones who kept urging me to pay attention to crude oil futures? Why are you backing off now that the time has come?"

"Shorting crude oil is different. The trading risk is very high." Gao De was very hesitant and said, "It has only been less than four years since the Z Aviation Oil incident. The lesson is too profound..."

No matter how deep the pain is, the same thing will happen again and again in the future. Guo Yang couldn't help but mutter in his heart.

Bank Z crude oil treasure, should it be called this? He couldn't quite remember, but that was the time when the epidemic broke out and financial news was in turmoil.

"I owed the bank 500 million yuan overnight."

"Everyone in the world ran away, except for Bank Z..."

All kinds of true and false news flooded the screen, and he also heard a lot of gossip.

It’s just that aviation fuel and crude oil treasure, one is short selling and the other is long selling, the latter is obviously more outrageous.

In futures trading, going long and going short are not equivalent.

Generally speaking, short selling has two inherent disadvantages. One is that the returns are unequal.

比如说，原油价格从100上涨10%是110，但110下跌10%却只剩99。

The second is that they may be forced to close their positions by large funds.

Being forced into liquidation is also the biggest risk for Jiahe in crude oil futures trading.

When conducting grain futures trading, Jiahe Grain and Oil has already carried out some international grain trade.

During the short selling period, grain was stored cautiously in or near futures delivery points such as Singapore.

When it comes to the stage of transaction settlement when short selling, Jiahe can also deliver the physical goods, and the grain is purchased at a low price. The loss of delivery can be tolerated, and the operation is both conservative and flexible.

However, Jiahe does not engage in crude oil trading. If it is forced to the delivery date and cannot produce the physical goods, it will be forced to cut its positions even if it makes the right decision.

The 2004 aviation fuel incident…was about short selling, and then being forced to close positions.

In fact, if aviation fuel had delivered the contract on time at the beginning, it could have stopped the loss, but it chose to extend the contract to 2005 and 2006.

However, the order volume of aviation fuel is very large, and its every move is under the attention of competitors. The account has become the target of public criticism.

Powerful interests drive more and more opponents to go long in one direction until the short positions of aviation fuel are closed. This has become a bottomless pit.

The result was that since the beginning of 2004, aviation fuel had been incurring losses and had to add margin all the way.

At the end of October, due to the inability to add margin, the position was forced to close, and the book loss eventually turned into an actual loss.

In November, the company continued to face liquidation.

On December 12, it filed for bankruptcy protection.

During this period, Aviation Oil had countless opportunities to stop losses, but faced with the manipulation of an international consortium, the parties involved may have been overwhelmed.

After reminiscing for a while, Guo Yang fell into deep thought.

Grain futures, as long as Jiahe is engaged in international grain trade, it will have to participate in this game.

But crude oil futures...not really necessary.

long silence.

Gao De pondered and said, "The crude oil futures market is full of experts. No one dares to place a big bet unilaterally without confidence and strength, unless they have enough financial resources to defeat all opponents."

"I don't think of placing a big bet on one side."

Guo Yang gave him a displeased look and started making tea. After he finished a cup of tea, he spoke again.

"The US subprime mortgage crisis is about to end. The market supply and demand relationship will change. A sharp drop in crude oil prices is inevitable, but the timing is uncertain."

"If crude oil prices plummet and the benefits of developing bioenergy fall short of expectations, international food prices will certainly not be stable."

"Shorting crude oil only shares the risk. If the positions are all concentrated in grains such as corn, soybeans, and wheat, the risk will be higher."

"Jiahe doesn't need to charge into battle. Just build up a smaller position and treat it as an observation market. You can still beat the fallen dog when the trend changes."

I have been studying for so many days, it is impossible to give up.

Guo Yang already understood the risks and would not act rashly, but he also did not want to miss this opportunity.

Gao De nodded with relief and sipped his tea in a very elegant manner. As long as he didn't place a large bet unilaterally, it would be difficult for Jiahe to have its positions blown up with its strong cash reserves.

"The tea brewed by the boss is still the best."

"Just keep talking nonsense." Guo Yang thought for a moment and asked, "How is the current trading activity of Dalian Commodity Exchange and Zhengzhou Commodity Exchange?"

"The No. 1 soybean and corn contracts are both on the rise," Gao De mused, "but it will take a long time for the bargaining power to rise."

Guo Yang smiled and said, "It's a good thing that the trading volume is active."

Gao De said: "The Americans have increased soybean and corn subsidies in disguise, and it seems that they are still not giving up on the domestic market."

"Anyone would have to struggle." Guo Yang chuckled, "But he hasn't even solved his own domestic production situation yet. Relying solely on South American production capacity, his influence is not as great as before."

"This corner of the wall still needs to be pried open little by little."

In the short term, CBOT's (Chicago Mercantile Exchange) position as a traditional agricultural product pricing center will remain difficult to shake.

Even with more than ten years of development, Dalian Commodity Exchange and Zhengzhou Commodity Exchange cannot catch up with others' hundreds of years of accumulation.

There is only one thing: China's capital and financial accounts have not been liberalized, and foreign investors are not allowed to enter the futures market, so the upper limit has been locked.

As for matters concerning the financial system, Jiahe has no intention of intervening for the time being.

The current solution is to start with production, reduce dependence on foreign imports, and at least ensure domestic pricing power.

At the same time, Guo Yang firmly believes that the destructiveness of Tribulus terrestris and red fire ants will not be brought under control so quickly by the Americans.

The peak of destruction will be in the next few years.

Its status as a major grain producer will certainly weaken, and as an international pricing center, CBOT's pricing power will naturally weaken as well.

Before the emergence of the futures market, the pricing of international commodities was mainly based on the supply and demand relationship between buyers and sellers.

After the futures market develops and matures, it is no longer limited to buyers and sellers, but reflects the price expectations of commodities by the whole society.

Pricing power is the power to influence prices to develop in a direction that is beneficial to oneself.

Just like domestic soybean processing companies import soybeans, they generally quote prices through international grain traders on CBOT.

As a result, international grain traders can easily grasp the priced and unpriced positions of domestic buyers, giving overseas funds a natural advantage in forcing a liquidation.

At the same time, international grain traders have monopolized the global soybean trade.

These grain traders generally have strong research teams and data collection and collation capabilities, as well as a complete data collation system and a long history of data collection and collation.

International grain traders have collected comprehensive and detailed information on the growth, yield, production, export, who imports, how much each company imports, and export conditions at various ports of soybeans in North and South America.

There is serious "information asymmetry" between domestic buyers and these international grain traders.

Jiahe was able to successfully steal chickens in the past because it also took advantage of the information asymmetry, such as the unexpected increase in domestic production and the sudden decrease in production in North American production areas.

It is almost impossible to have such an opportunity again.

Guo Yang and Gaode spent a whole morning talking about crude oil futures, grain production, processing and trade, and edible oil price wars.

These three factors have been highly correlated in the near term, and strategies for the next six months will be formulated on this basis.

Crude oil futures are a weather vane.

Crude oil price drops - bioenergy demand decreases - food prices drop;

Improvement of domestic planting structure - Conflict between domestic procurement and imports - Production reduction in North America and increase in costs...

Various factors are intertwined.

A price war is bound to be fought, not only for edible oil, but also for soybean meal and concentrated lecithin processed from soybeans!
This is the best time to seize market share and change the import situation.

Force coastal manufacturers to establish domestic soybean purchasing channels. If you insist on purchasing imported soybeans, you will be beaten into bankruptcy!

……

7 month 6 day.

Weiguang Company and Jiahe Grain and Oil began to cooperate to establish short positions in crude oil. Although they were very cautious, the upward trend of crude oil remained unchanged.

Therefore, losses occurred as soon as the position was established.

However, since the direction has been decided, the traders responsible for the transaction still maintain a regular position building speed of one lot every 5 minutes or one lot every 10 minutes.

On July 7, the crude oil price broke through $10 per barrel, at which time Jiahe already held a short position of 145 lots.

1 lot of 1000 barrels is equivalent to US$145000, while Jiahe’s average purchase price is US$142 per barrel.

In total, in less than 5 days, the company invested about 1.45 million U.S. dollars and lost about 300 million U.S. dollars.

A short order of 100 million barrels may attract some attention on the market, but it will never lead to an attack. Instead, it may be seen as bait or a test.

However, unexpectedly, more short orders appeared on the market.

Even though Guo Yang was not a professional, he could feel that the upward momentum had come to an end. There were slight fluctuations, but the market just couldn't go up.

The short sellers in the market are as eager to try as he is, but no one dares to get ahead, so they can only accumulate short positions little by little.

Guo Yang was not in a hurry either. Jiahe just wanted to get a piece of the market, so he just let the stalemate continue.

At the same time, the price war in the domestic edible oil market is still intense, and some small brands have fallen into a corner where no one cares about them.

In the first few months of this year, soybean and soybean oil futures prices rose by 200 to 300 yuan per ton almost every day, and sometimes even rose by more than 1000 yuan a day.

With the skyrocketing futures prices, everyone thought that the prices of soybeans and soybean oil would continue to rise, so many manufacturers stockpiled soybeans regardless of cost.

Jiahe Grain and Oil took advantage of the trend, but then withdrew and started a price war on edible oil.

Processing companies began to incur losses, and then the losses continued to grow.

Some companies that hoarded soybeans at high prices are now losing hundreds of yuan per ton.

...

Guangdong Province, Jiahe Grain and Oil Dongguan Mayong Factory.

Factory manager Lu An received a call from the group boss these two days, asking him to investigate the situation at the nearby grain and oil processing plant.

The last time I saw the boss, he came to check the tanker truck transportation situation for no apparent reason.

After so much time has passed, the Mayong factory only made a profit for a short period of time, and was mostly in the red for the rest of the time.

He has suffered heavy losses recently, but he is very excited.

Because the opponent is also in pain.

He has worked in the soybean processing industry in Guangdong Province for many years and is very familiar with the operations of the soybean processing plants here.

At the beginning of the century, there was only one oil factory with a processing capacity of 2000 tons in the Mayong area of ​​Dongguan, but in the past few years, the number has reached 10, and there are 13 registered factories in Guangdong Province.

They are all in the same circle and are rivals in the market, but at the information level, peers often communicate with each other.

It's just that he was the one who was ridiculed the most in the past.

Except for Jiahe, all soybeans in Guangdong Province are purchased internationally. In addition to price reasons, logistics is also an important factor.

If soybeans are to be transported from Heilongjiang Province to Guangdong Province, they need to be transferred by train to Dalian and then shipped by sea to the port of Guangdong Province. The total transportation cost is more than 450 yuan to 500 yuan per ton, while the import cost is 350 yuan to 500 yuan per ton.

In addition, Heilongjiang Province’s railway capacity is insufficient.

Jiahe also has a soybean base in the southwest, but at this time, the railway transportation capacity from Guangdong Province to the southwest hinterland is also insufficient...

The soybean purchasing department of other companies, also known as the futures trading department, is the most important department of the entire company. A large amount of the company's funds and profits and losses depend on purchasing.

The logistics department can only rank second.

In Jiahe's Dongguan factory, the logistics department is the most important, and the purchasing department ranks second, because logistics determines whether the factory can produce normally... This is unique in Guangdong Province or even the whole country.

In short, Jiahe’s insistence on processing domestic non-GMO soybeans in Dongguan is a very stupid thing to do in the industry.

Today, Lu An, who was labeled as "stupid", organized a short meeting of the purchasing department. "Within three days, I want the recent soybean shipments from several other soybean processing plants in Guangdong Province."

"Previous data is available. Zhizhiyuan needs to order three ships every two months, and Uni-Cargill needs one ship per month. But they are expanding and acquiring companies, so the information is outdated."

"The price of imported soybeans was high in the early stage, and the profit of soybean oil has dropped recently. We need to inquire about their order quantity information."

"Daily processing capacity, incoming shipments, approximate order time, these data must be verified and updated."

Meng Ruofei, the manager of the purchasing department, and other employees used to be from international purchasing, but they switched to internal purchasing in the past two years, and their work has become much easier.

But I have also been labeled as an outlier in the industry, and I have been feeling resentful for a long time.

Hearing Lu An's arrangement, everyone was shocked. Meng Ruofei asked, "Boss, are you going to take action on soybean meal?"

Lu An glared at him and said, "Don't ask around, and don't say anything when you get out."

"Oh~~"

Meng Ruofei let out a long "oh" and felt like he understood everything. His eyes rolled and he instantly had an idea.

"Boss, when we go to inquire, what do you think of deliberately spreading the news that our factory is also going to change its business strategy and purchase soybeans from overseas?"

Hearing this, the other buyers burst into laughter.

"Get lost, do whatever you want, I have no right to control you."

Lu An waved his hand and walked out of the meeting room, but he kept muttering in his heart that Meng Ruofei was quite resourceful and his guesses were quite accurate.

With such a sharp increase in the early stage, the other 12 stores should have stockpiled goods!

In the conference room, Meng Ruofei assigned specific tasks to the buyers.

There are a total of 12 registered soybean processing plants, but after several disturbances, Meng Ruofei knows of only four factions of factories that are still in production.

Dongguan Zhonggu Oils and Fats of Guoliang;
Unified Cargill Dongguan, Cargill (Dongguan), Cargill (Yangjiang); Zhanjiang Huanong acquired by Cargill...

Nantian Oil Meal, which is controlled by Wilmar International Holdings;
Plant-based oils in collaboration with Louis Dreyfus.

So the investigation task is actually not difficult. When the oil refinery recruits personnel, it will not poach people from the surrounding oil refineries. However, the first three factions are all involved in acquisitions, and some people in the purchasing department came out of them.

Only Zhizhiyuan was newly built in the past two years, and Meng Ruofei reserved this most difficult bone for himself.

After everyone had left, Meng Ruofei began to sort out Zhi Zhiyuan's information, and first called the familiar buyers and futures traders.

But these people still have some professional ethics. After deliberately inquiring, they gained nothing until the end of the get off work day.

Meng Ruofei ordered a Chinese medicine and looked through the materials related to Zhi Zhiyuan in the office.

"TMD, I won't believe Meng unless I kill you." Meng Ruofei was holding a newspaper in his hand, which contained a report of an interview with Zhizhiyuan Chairman Guo Bochun.

"Jiahe is a company without a bottom line. It disregards the interests of farmers. The soybean farmers are the ultimate victims of the price war."

Meng Ruofei looked at the full page of condemnation and was so angry that his teeth were itching.

Suddenly, a photo of the dock in the newspaper caught his eye. Zhizhiyuan Company is in Pengcheng, and Pengcheng's ocean-going soybean ships usually unload at Huangpu Port.

Judging from the newspaper, it seems to be a self-built berth, obviously not Huangpu Port.

This is easy to verify, and you can get a definite answer by just making a phone call.

In the past two years, Zhizhiyuan has put into operation a new factory with a daily processing capacity of 5000 tons.

However, it was impossible to find a site in the port, so it was finally built next to the Hongqili waterway in Nansha District, Pengcheng, with a self-built 3000t/d berth.

The ocean-going soybean ship arrives at Huangpu Port in Pengcheng and is then transshipped to its own dock.

The lighter should be mentioned in the newspaper.

The publication date is July 7th.

The lighter is less than 3000 tons, and the ocean-going ship is 6 to 7 tons. It needs to be lightered more than 20 times, and the port warehouse can store it for free for 20 days...

"Hiss... huh..."

The air was filled with smoke, and Meng Ruofei seemed to know why Guo Baichun was so angry.

From South America to my country, it takes three months from the time the deposit contract takes effect to the time the soybeans are collected and delivered to the port, and the sea transportation time is 3 to 20 days.

The goods that Zhizhiyuan was transporting were purchased four months ago, that is, three months ago by pressing the key.

At that time, the price was about 5300 to 5500 yuan per ton.

As Jiahe launched a price war, the price of soybean oil plummeted, and Zhizhiyuan was also in the red at the time of the interview.

What we need to check now is how many orders Zhi Zhiyuan has placed in the past few months, and whether there is any possibility of placing more orders...

After sorting out his thoughts, Meng Ruofei found the direction.

The next day, I asked my colleagues from the logistics department to go straight to the dock warehouse and found Jiang Dongcai, the director of the port branch.

The fees for tobacco, alcohol, tea and water pave the way.

"Manager Jiang, we at Jiahe may need to order a few ships of South American soybeans. We may have to trouble you with the loading and unloading and warehousing at the port."

Jiang Dongcai pursed his lips and said, "Don't talk nonsense. Just say what you have to say. Your acting skills are a bit poor."

Meng Ruofei smiled and said, "Hehe, Manager Jiang has a keen eye and can really hide nothing from you."

"Isn't that nonsense?" Jiang Dongcai said disdainfully, "Your factory is in Mayong, and you came to Huangpu Port to unload the goods? Can you be more fake?"

Meng Ruofei was not embarrassed at all. "Then I'll be frank. I want to find out about the ordering pattern of Xiazhiyuan in the past few months."

Jiang Dongcai raised his eyebrows, and Meng Ruofei ordered Huazi at the right time.

"Manager Jiang, this is nothing to you."

Jiang Dongcai took a sip and said with a smile, "That's easy to say, but you have to get me some of your Cistanche deserticola later."

Meng Ruofei was stunned. Has the news spread to Pengcheng?
"No problem. I'll send you to Manager Jiang this afternoon."

"Just call me Brother Dongcai."

"Okay, Brother Dongcai, how did you know about Cistanche deserticola?"

Jiang Dongcai smiled and said, "Several coal traders highly recommend it. In Guangdong, we have to import all our coal. Isn't the coal used in your crushing plant also imported from abroad?"

Meng Ruofei couldn't help but sigh that the circle of coal bosses was really powerful.

After some trouble, Meng Ruofei successfully got the data he wanted, and it was not difficult to make the guess.

After the expansion, Zhizhiyuan’s production capacity increased from 2800 tons per day to 7800 tons.

年初行情大好，3月份的时候订了4船货，4月3船，5月4船，6月3船，就算到7月都还硬着头皮订了4船…

Basically maintain the scale of 7 ships every two months.

When Lu An learned about this data, he couldn't help but shake his head, "It doesn't seem like a big deal to let Guo Baichun scold me a few times."

Meng Ruofei sighed, "Zhi Zhiyuan is too stubborn. Other small factories know to limit or stop production, but he is doing the same thing. For the sake of market share, he is still producing at full capacity."

"Soybean meal has been rising in the past few months and has only started to fall recently, but soybean oil has fallen sharply, and it has been hedged. With Zhizhiyuan's strength, it can indeed support it."

Lu An analyzed it and said, "But once the capital chain is broken, the result will be hard to predict."

"What about the others?"

"They are almost the same." Meng Ruofei said, "We maintain the normal purchase frequency. They are betting that our logistics and production costs are higher than theirs."

Lu An: “This is true.”

"Can we hold on in Guangdong Province?"

"Are you not used to losing yet?" Lu An smiled indifferently, "No matter how much I lose, as long as I can play the role of the chess piece, it's a good loss."

...

On July 7, crude oil futures prices reached an all-time high of $11 per barrel.

On July 7, there was a slight decline.

On July 7, it continued to fall.

At this time, all the soybean import information collected by Jiahe from various places was summarized on Guo Yang's desk.

The data includes who imported, how much each company imported, and the inventory status of each port.

It may be that the situation was better at the beginning of the year and the import rhythm of large processing enterprises has not changed, so this matter makes sense.

After looking at the situation for a while, Guo Yang called Gaode and said, "Soybean meal can be slowly started."

"Yes!" Gao Dezhen said.

Since soybean meal prices remained high for a period of time at the beginning of the year and prices of livestock and poultry end products were sluggish, the breeding industry had no choice but to "shrink".

Therefore, the sales volume of domestic soybean meal market did not see any growth in July, which was the peak season.

The demand for soybean meal is at a relatively low level, and oil mills are in a relatively passive situation, so price cuts are reasonable.

Jiahe Grain and Oil is like a catalyst, sounding the clarion call for a major reversal in the international market.

On July 7, soybean meal prices in various provinces and cities nationwide were 3 to 4700 yuan per ton;

7月13，报价4600~4720元/t；10天，降幅约100元~140元/吨。

On the next day, July 7, Jiahe Grain and Oil's quotations across the board dropped by 14 yuan per ton.

7月15日，再次下挫100元，到了4400元~4500元/t。

On July 7, it dropped again by 16 yuan.

When the market reverses, the oil and fat factories are already relatively passive, while the feed factories are like "daughters-in-law who have been working for many years and have become mothers-in-law", they can hold on to their money and wait to buy, and calmly select the best ones.

What is excellent?
The price and quality are naturally excellent.

When soybean meal prices were high, feed mills and the livestock industry sought alternatives in many ways. One was fish meal, and the other was high-protein alfalfa meal.

Choosing Jiahe is a good decision.

Jiahe’s oil factory even put out a slogan: In the same region, there is no soybean meal that is cheaper than mine.

There are also wave after wave of price cuts and promotions on edible oil in major supermarkets.

The people at Jiahe Grain and Oil seemed to have returned to the days when they would lose 900 yuan when processing one ton of domestic soybeans.

It’s just that the mentality is completely different.

Last time, I passively took a beating and watched others eat meat;

This time, they took the initiative to get beaten and dragged others along with them. Even others will always suffer more losses than Jiahe.

For manufacturers who are experiencing this kind of loss for the first time, it is like being cut by a blunt knife.

By July 7, the reporter found that all small oil refineries with daily oil pressing capacity of several hundred tons had basically stopped production.

However, small oil mills are more flexible. If they made money last year, they can stop operating for 2 to 3 years and close down until the environment improves before continuing.

In order to maintain their market share, large oil refineries must continue production.

Processing plants in Guangdong and Shandong provinces have complained in the media that they suffer losses of more than 400 yuan for every ton of soybeans processed.

The people from Jiahe Grain and Oil Factory were stunned after seeing this. It seemed that we didn’t lose that much.

However, the remarks made by Zuo Qing, technical director of Zhizhiyuan, made people feel difficult.

"This year's soybean oil market will clean up the entire industry very thoroughly. No matter farmers, traders or oil mills, they will all suffer losses."

"By the end of this year or next year, more oil mills and soybean importers will go bankrupt, the industry concentration will further increase, and group operations will become more obvious."

Like Zhizhiyuan, oil refineries controlled by Cargill, Bunge and Louis Dreyfus also appear very confident in the face of difficulties.

When Lu An and Meng Ruofei saw this, their hearts sank, but they soon smiled at each other.

After experiencing the loss of 900 yuan or even more for every ton processed, looking back on these, I can only say that there is still a long way to go.

(End of this chapter)