Chapter 890: Domestic Side Story 5: Soybean Pricing Power, Decisive Battle International Four

In 2000, on May 19, China solemnly signed the agreement on the World Trade Organization (WTO), formally reaching a bilateral agreement.

On December 11, 2001, China formally became the 143rd member of the World Trade Organization (WTO).

With China's entry into the WTO, the torrent of the world economy began to impact the originally relatively closed embankment of China.

Vehicles, electronics, finance, food...

In this rolling wheel of history,

The soybean industry was one of the crucial roles.

Northeast China had always been the main soybean producing area in China.

Although the soybean production in the Northeast had always been considerable, with the rapid development of the domestic economy and the gradual improvement of residents' living standards, the domestic demand for soybeans and their products was growing day by day.

Soy milk, tofu, yuba, soy sauce, fermented beans, fermented bean curd, bean paste... and so on, had become an indispensable part of people's daily lives.

And in feed processing plants, soybeans, as a high-quality protein source, were used in large quantities for the production of livestock and poultry feed.

Thus,

The demand gap for soybeans was getting bigger and bigger.

And then they started importing.

The import share was getting more and more.

……

……

At the beginning of 2001, Director Director Director Guan Zu Zu wrote an internal reference titled "Analysis and Suggestions on the International Impact and Risk Prevention Faced by Key Industries in Our Country After Joining the WTO," which was sent to Beijing.

The internal reference included industries such as automobiles, finance, electronics, food, etc., because after joining the WTO, they would face international dumping impacts.

Among them, the internal reference mainly used the development history of soybeans in Argentina and Brazil as examples.

"In the late 1980s, Argentina was deeply mired in a debt crisis, and its domestic economy was weak."

"The four major grain merchants in the US (ADM, Bunge, Cargill, Louis Dreyfus) united with Monsanto (a US seed giant) to gradually infiltrate Argentina's soybean industry with 'technical assistance + market commitment' as bait."

"The four major grain merchants promised to sell Argentina's soybeans, solving farmers' sales concerns, guiding farmers to expand soybean planting areas, and traditional pastures in the Pampas were largely transformed into soybean plantations."

"With the expansion of Argentina's soybean planting scale, the four major grain merchants and Monsanto jointly launched genetically modified soybean seeds, claiming that their yield per unit area was more than 30% higher than traditional varieties. In order to quickly open up the market, Monsanto adopted a 'letting water raise fish' strategy: tacitly allowing local seed companies in Argentina to imitate its genetically modified seeds at low prices, and even secretly supporting farmers to resell seeds on the black market, lowering the planting threshold."

"Within just 5 years, the proportion of genetically modified soybeans in Argentina's soybean planting area soared from less than 5% to 99%. At the same time, the four major grain merchants adopted an 'agricultural material bundling sales' model, supplying fertilizers, pesticides, and seeds in packages; if farmers chose their seeds, they could enjoy agricultural material credit sales discounts, further deepening their dependence on their supply chain."

"When Argentina's soybean industry became completely dependent on genetically modified seeds, the US seed company Monsanto suddenly made trouble, demanding that the Argentine government collect patent fees from farmers planting genetically modified soybeans in the country on the grounds of 'patent infringement,' causing Argentina's soybean exports to Europe to drop by 30%."

"At this time, the four major grain merchants had already controlled more than 80% of Argentina's soybean processing enterprises and storage facilities through acquisitions, mergers, etc., taking the opportunity to hoard soybeans in the name of 'guaranteed price acquisition,' forcing farmers mired in sales difficulties to accept their low-price terms. Thus, Argentina was reduced to a passive role of 'only producing raw materials, without pricing power'."

"And Brazil, at this time, experienced the same thing; currently, Brazil has completely become the harvesting ground for the four major grain merchants."

"At this time, the world's soybean production: the US occupies 60 million tons, Brazil 50 million tons, Argentina 35 million tons, China 10 million tons... the fifth, India, 3 million tons..."

"In soybean production, the four major grain merchants have already occupied 85% of the world's share."

After the internal reference made the world soybean pattern clear,

It started to analyze:

"As a country with 1.2 billion people, the four major grain merchants will not let go of such a big market and will inevitably take advantage of the opportunity of joining the WTO to attack according to the methods of Argentina and Brazil..."

"In addition, besides soybeans, other grains will still be like this..."

"In addition, industries such as China's automobiles, electronics, finance, etc., will also encounter..."

……

After the internal reference was sent to Beijing,

A month later, that is, from April 2001, China Grain Reserves started to increase the procurement of soybeans from the US, Brazil, and Argentina.

Pretending that domestic soybean production had decreased and demand was expanding, confusing the four major grain merchants.

In reality, 60% was used for supply, and 40% was used for storage, to deal with the dumping war in the future.

……

……

Two and a half years later,

July 15, 2003,

Chicago,

Top floor conference room of Cargill Group headquarters.

Outside the floor-to-ceiling window was the sparkling light of Lake Michigan.

Core representatives of the four major grain merchants sat at both ends of the long table, each with a report marked "Confidential" on global soybean production areas spread out in front of them.

Cargill Group President Alan Foster spoke first:

"The weather reports for North and South America are out; this year is an absolute harvest year. The US Midwest has sufficient rainfall, and the soybean growth in the Cerrado region of Brazil exceeds expectations; conservatively estimated, the production of the three countries will increase by 15% compared to last year."

ADM Vice President Mark Hansen picked up his coffee cup.

"Although a harvest is a good thing... but I hope our four companies will not fight a price war because of this."

"Yes, we can't fight a price war."

"This will only hurt ourselves."

Cargill President: "This harvest, we want to make it a 'bigger good thing'..."

"Everyone... I suppose you are all very greedy for that big country in the East, right?"

"That big country in the East, since 2001, the demand for soybeans has increased significantly, and they are all imported from us; this is our opportunity."

The other three heard this and smiled one after another.

Too familiar!

Familiar field!

Then, Cargill President held up an analysis report on China's soybean industry.

"Everyone has this material in front of you."

"After two years of investigation, China now has more than a thousand large and small crushing plants, and 80% of the raw materials rely on imports. Their enterprises are too scattered, and their ability to resist risks is poor, just like Argentina and Brazil back then."

"But China is different from South America," the Louis Dreyfus Vice President interrupted, "Directly copying the set of controlling South America takes too long. We need to break their industrial chain first."

ADM Vice President smiled slightly: "The way to break it is very simple—push up the price."

"Our four companies can join forces and buy a large amount of soybean futures in CBOT (Chicago Futures, the world's largest soybean trading market). At the same time, we can unite with the US Department of Agriculture to release news, saying that US soybean stocks may hit a 20-year low, and push the price up."

"The soybean raw material inventory of Chinese enterprises definitely won't last too long. When the price rises to the point where they can't hold on, they will take the initiative to come to us to buy goods."

"Next is the key step; we must force them to sign long-term supply contracts, and the price must be set high enough."

"After they sign long-term high-price contracts, when the harvested soybeans go on the market, we will turn around and short them, smashing the price down. At that time, they will definitely suffer heavy losses, and their capital chain will break."

"More than a thousand factories, at least 70% will collapse. After their local enterprises go bankrupt, we will then acquire China's high-quality production capacity at low prices and control their industrial chain step by step, just like we acquired oil mills in Argentina and controlled logistics in Brazil."

The four people, you say a word, I say a word.

The air was filled with a happy atmosphere.

They had long coveted China's agricultural market, and this time they could just give China a big one.

Soon,

The four opened champagne,

Alan Foster stood up and raised his glass: "For the harvest, and also for the new 'territory'."

"Cheers!"

"Cheers!"

Ding~~~

Four glasses collided lightly in the center of the conference table, the sound crisp.

……

The third day, evening,

The four major grain merchants invited the Secretary of the US Department of Agriculture to have dinner together.

After the Secretary heard their plan, he shook his head repeatedly: "This won't do... our Department of Agriculture still has authority in the world..."

"My professional ethics do not support me in doing such things!"

The four major grain merchants: "We'll add money!"

Secretary: "Ho ho ho~~~ Happy cooperation!"

Handshake!

Tight handshake!

……

Soon, it was August.

The US Department of Agriculture suddenly claimed to the outside world that due to bad weather, US soybean stocks would drop to the lowest level in nearly 20 years.

As an extremely authoritative institution in the global agricultural field, after this "production reduction" news from the US Department of Agriculture spread, the panic about soybean supply shortages in the market spread rapidly.

The fastest reaction was the Chicago Board of Trade (CBOT),

It was the core place for global soybean futures trading... well, China's was at the Dalian Exchange.

With the fermentation of the news from the US Department of Agriculture, Wall Street financial crocodiles quickly seized this "business opportunity" and frantically bought soybean futures contracts in the CBOT market—buying long.

The influx of a large amount of funds pushed the price of soybean futures to rise rapidly.

Director Director Director Guan Zu Zu had long let Li Jie, Xiao Fu, and Jimmy pay attention to this matter, and relying on his relationship network, he quickly entered the market and secured a large batch of long contracts.

You want to earn, I also want to earn.

Jie jie jie~~~~

……

The news soon reached China.

The fastest reaction was still the futures market.

China Dalian Commodity Exchange,

"Open the market! Open the market!"

The traders stared at the screen, their fingers hovering over the keyboard.

At 9 o'clock sharp, the main soybean futures contract opened with a jump, soaring from yesterday's closing price of 2060 yuan/ton to 2110 yuan/ton, and within just ten minutes, the trading volume exceeded 100,000 lots.

"It rose, it rose! It can still rise!"

Someone shouted to add long orders, and the price curve on the screen rushed up like a rocket.

Before noon, the price had touched a high of 2400 yuan/ton, and many retail investors who followed the trend earned until their eyebrows smiled.

Buy long!

Buy long!

Buy long!

And at this time,

China's domestic physical trading market was also in a mess.

In Rizhao, Shandong, Wang Jianguo, the boss of a medium-sized crushing plant, squeezed his mobile phone, his palms full of sweat.

On the other end of the phone, the trader's voice carried deliberate urgency: "Mr. Wang, hurry up and place an order! The US side says stocks are about to bottom out, and the price will rise by at least 20% next month!"

A group of executives were sweating with anxiety,

"There's only half a month's worth left in the raw material warehouse!"

"If we don't buy, the factory will have to stop work!"

"Order! Order five thousand tons first!"

At the same time, by the wharf in Zhangjiagang, Jiangsu, procurement managers of several large oil mills were arguing until their faces were red and ears were red with representatives of international grain merchants.

"Can you lower it a bit more? This price is too high!"

"Can't lower it, it will rise even more tomorrow!"

In the end, several factories gritted their teeth and signed high-priced procurement contracts for thousands of tons. ===== CHAPTER 891 =====