"Sir, if Huang He actually proceeds with this plan and incurs significant losses, my job would be in jeopardy…" Hao Jianguo said with some apprehension.
"Worry not, your job is safe, because Huang He won't lose money!" the old man said with a slight smile. "This is just a deal slightly exceeding 10 billion US dollars, and the actual operations are handled by the Western Mustang Foundation. Even if all this money is lost, it won't cripple the Jiangnan Group. Otherwise, do you think Huang He would trust a newcomer like you?"
"And this soybean operation has nothing to do with our family, so even if Huang He loses 10 billion, what does it matter to me? On the other hand, you can use this opportunity to further gain Huang He's trust in your abilities. Perhaps then you'll be able to enter the core leadership of the Jiangnan Group, where you'll be of greater use!" the old man stated frankly.
"Yes! Thank you, sir!" Hao Jianguo was ecstatic. This meant the old man was willing to sacrifice those American financial institutions to advance his own position, and that he was truly set for life.
"Go now! Don't come here too often. Although Huang He won't have much influence in the US, it's always better to be cautious!" the old man said. "If anything comes up in the future, we'll just contact each other online!"
"Yes!" Hao Jianguo nodded and then carefully left. A short while later, the butler appeared, and the old man handed the plan to the butler, instructing him to create a new plan while stating indifferently, "Have our team create an additional follow-up plan. After these institutions and enterprises suffer their losses, we'll directly intervene. Acquire what we can, and increase our stake in what we can't. We can't just do good deeds without making a profit, can we!"
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"Genius, truly a plan worthy of a genius!" Huang He exclaimed as he looked at the plan, showering Hao Jianguo with unreserved praise. Little Swift, standing nearby, felt a pang of jealousy, but he too had to admit, grudgingly, that this was indeed a highly feasible plan.
The plan itself was quite simple: to have the manipulators continue their speculative activities.
A crucial element in how international financial speculators profit is built upon the assumption that Chinese soybean enterprises will buy at high prices, firmly believing that soybean prices will remain above $600 for an extended period. They are banking on the absence of a rapid and massive price drop that would leave soybean futures contracts, bought at high prices, stranded in the hands of Chinese soybean companies.
As long as soybean companies don't enter the market and refuse to buy your high-priced soybeans, the speculators wouldn't lose much. After all, they originally acquired them at low prices and would sell them at low prices again.
Unless, of course, these international financial speculators continuously maintain the illusion of high soybean prices by constantly acquiring large volumes of soybean futures from the international market. Because the prices have already been driven up, these financial institutions are forced to grudgingly buy more expensive soybeans from the market, gradually increasing their own holding costs. By the time they realize it, the price of soybeans in their hands would have already risen to over $450.
If the price then collapses instantly, these international speculators would be completely ruined.
While this operation sounds very simple, it actually presents two difficult problems to solve.
The first is how to make those international speculators foolishly continue acquiring, thereby constantly increasing their holding costs.
The second is how to control domestic soybean processing enterprises, preventing them from foolishly falling into the trap.
The latter seems simple enough; Mr. Wang could just announce the trap to everyone, and all soybean enterprises nationwide would naturally avoid it.
However, if Huang He were to make such an announcement, those international speculators would simultaneously retreat, merely losing a small amount in transaction costs.
More importantly, with such an operation, the Jiangnan Group and the Western Mustang Foundation would gain no profit. Huang He would essentially be doing this out of goodwill.
These two problems are interconnected. Attempting to solve one inevitably impacts the other, making it very tricky, which is why Hao Jianguo considered it such a difficult issue to resolve.
However, after careful consideration, Hao Jianguo's proposed solution perfectly addresses this problem: let nature take its course.
It's important to note that at this time, domestic soybean trading doesn't involve directly purchasing from the international futures market and then transporting it to China. This is only feasible for large corporations. Most domestic soybean enterprises are smaller companies. They don't have people stationed at futures trading centers like oil or petrochemical companies, nor do they hire hundreds of large oil tankers to transport goods.
They procure through domestic trading centers, buying soybeans directly from warehouses within China. These soybeans are collectively purchased by domestic intermediaries and then resold to soybean processing enterprises.
The addition of an intermediary naturally increases costs. This intermediary charges a certain transportation fee. Given the large volume of soybeans, they occupy significant space and weight, making transportation costs consistently high. The transportation cost for one ton of soybeans is approximately 300 RMB, or about $40, accounting for nearly 10% of the total price.
Furthermore, it's not unreasonable for the intermediary to add another 10% profit. Therefore, the prices at which many companies purchase domestically are actually about 20% higher than on the futures market.
Thus, in Hao Jianguo's plan, the Jiangnan Group needs to find someone to organize a collective purchasing group within China to procure from the US futures market, and then charter entire transport ships for collective shipment back to China. This way, sea freight costs can be halved, amounting to about $20 per ton. Moreover, there are no intermediary platform transaction fees, saving about half, or around 300 RMB per ton.
Don't underestimate this figure. Typical processing enterprises process thousands of tons of soybeans monthly, and large enterprises process hundreds of thousands of tons. This represents tens of millions in expenses.
Coupled with the recent surge in soybean prices, if someone takes the initiative to establish this purchasing group, almost all domestic soybean processing enterprises will immediately respond and come to the US to procure together.
In his past life, it was largely the same. Everyone felt that purchasing from intermediaries was too expensive and wanted to procure directly from futures markets for better prices. However, there was no concept of collective purchasing. Instead, individual enterprises were misled into placing orders directly on the futures market through computers and agents, holding not actual soybeans, but pieces of paper.
Furthermore, they believed that soybean prices would remain at a high of $600, and intended to stock up on more soybeans, exceeding actual production. This led to storing a substantial amount of soybeans.
Even if only one soybean was stored in a warehouse, it would incur significant warehousing fees.
Once they started paying these fees, soybean prices would plummet, and everything would be ruined.
To be honest, in 2004, Chinese enterprises, especially many unsophisticated agricultural enterprises, understood nothing about futures markets or trading. At that time, they were lured by immense profits and blindly purchased futures through agents.
If, at this juncture, a trustworthy group were to proactively help them with unified procurement, these enterprises would undoubtedly entrust their procurement rights to the organizers of such an event.
On the other hand, when those international speculators see Chinese enterprises voluntarily organizing a delegation to procure from the futures market, they will certainly believe that the Chinese have taken the bait and are waiting for the cooperating delegation to arrive and purchase. As long as this delegation doesn't actually place an order and keeps stringing these speculators along, they will never rashly give up.
After all, the core of capital is greed. Unless facing certain doom, they won't let go if they aren't making money.
Meanwhile, the Jiangnan Group will acquire soybeans through other channels and inject them into the futures market in small, steady amounts. These international speculators must maintain high soybean prices, even driving them up continuously, otherwise, how could they possibly trick the Chinese!
Therefore, these international speculators will undoubtedly and unhesitatingly continue to acquire these soybeans until they accumulate so many that their costs skyrocket to unimaginable heights, at which point they will realize they have fallen into an extremely dire trap.
It's a perfect plan, fully exploiting the greed of international speculators, but there remains a crucial, fatal issue: how to obtain those low-priced soybeans.
After all, almost all soybeans currently circulate through the international futures market. Obtaining soybeans on a small scale is possible, but acquiring them in large quantities is simply impossible.
This is a problem that Boss Huang himself cannot solve. However, Hao Jianguo confidently guaranteed that he had a way to obtain plenty of low-priced soybeans, thereby perfecting the plan!!
"How do you plan to get cheap soybeans?" Huang He asked curiously.
"We'll simply short the soybean futures market to borrow them!" Hao Jianguo chuckled. "Shorting futures is the same as shorting stocks. It means acquiring a large quantity of soybeans by borrowing them at the current price. Then, at the agreed-upon time, you simply return the same quantity of soybeans!"
"We can purchase soybeans under the guise of shorting, then turn around and deliver them to the futures market, and then slowly sell them to those international speculators. Once the price collapses in the future, we can quickly acquire the same soybeans at a low price and return them!"
"I've calculated it. If we use the short-selling method to buy 1 million tons of soybeans at the current price of $600 for three months, it would require paying $50 million in interest. However, if we can acquire a batch of soybeans at the normal price of $300 to return to them, we would make a net profit of $300 million. With one transaction in and one out, that's a $250 million profit!" Hao Jianguo explained his grand plan with a beaming smile.