July 25th.
In just nine trading days, the price of wheat futures for September delivery has fallen from a high of 770 bushels per cent to 290 bushels per cent, more than halving.
Compared to last year's price, it's nearly a quarter less.
It was at this time that a large-scale liquidation of wheat futures contracts for September delivery occurred, with trading volume gradually increasing to dozens of times its usual level. During this operation, tens of thousands of short contracts in Chen Dong's account were also liquidated, resulting in a total profit of nearly $4.5 billion.
Of course, Chen Dong cannot simply choose not to close his position if he doesn't want to.
As mentioned earlier, the September contract for international wheat futures expires in September. This means that if Chen Dong does not close his position at this time, he will need to provide a sufficient quantity of wheat according to the contract requirements and trade it to the other party at the contract price.
This is also known as spot trading.
If you trade at a price of 290 bushels per cent, you will definitely lose money. It's like you have a batch of goods and sell them to someone at three-quarters of the price, which is equivalent to a 25% discount. When the price returns to normal, the other party will make a fortune, while you will lose that profit.
Futures are essentially paper transactions. Only buyers and sellers who actually need the physical goods will take delivery upon expiration. Such purely speculative behavior usually involves processing the settlement order before the settlement date.
The Lin family courtyard.
When Chen Dong came in, the staff member in charge of Lin Lao's health was packing up the equipment.
Upon seeing Chen Dong, Old Lin waved to him and said with a smile, "Why are you here at this time instead of dealing with work?"
Upon hearing this, Chen Dong, as if they were old friends, pulled up a stool and sat down opposite Elder Lin, replying, "Elder Lin, there's something on work that I need to report to you. Also, the international wheat futures market has closed, and the remaining spot market issues will depend on your assistance."
When it came to business, Old Lin composed himself, then called over Secretary Wang to take notes. He then looked at Chen Dong and smiled, "I'm getting old. If I don't write it down, I'm afraid I'll forget it later. Tell Secretary Wang what happened. I'll go inside and change my clothes first."
Secretary Wang smiled at Chen Dong and said, "Chen Dong, just say what you have to say. I'll take notes first and then tell Elder Lin about it later."
“Okay!” Chen Dong didn’t care about that and casually repeated what he had just said to Old Lin. He continued, “Secretary Wang, we should not delay. It would be best to arrange for people to go out and make the purchase as soon as possible. Of course, there is no need to be in such a hurry. The price of wheat in the international futures market has dropped sharply. It has not really reached its peak yet, but we still have to be conservative, after all, the purchase volume is very large.”
“That’s right.” Secretary Wang nodded and said, “How much wheat do you think we need to import from abroad to achieve the expectations you mentioned at the beginning?”
Secretary Wang's words were also a test for Chen Dong. After all, everyone has their own perspective, and looking at it from a capital perspective is more objective.
Chen Dong shrugged and said, "From a capital perspective, it's enough for the country to have enough grain reserves for half a year. But China is a populous country and also an agricultural country. I believe Secretary Wang knows this better than I do."
Secretary Wang nodded, signaling Chen Dong to continue. At that moment, Old Lin also came out of the house after changing his clothes. Hearing Secretary Wang's last sentence, he was also looking forward to Chen Dong's eloquent speech.
"The reason why we say that from a capital perspective, it is enough to guarantee domestic demand for more than six months is based on data from other countries. However, China is different. If we follow this approach, it is only a matter of time before we are held hostage."
In fact, Chen Dong knew better than anyone that the Western bloc, led by the United States, had always been eyeing China covetously, and would try every means to strangle China in terms of military, technology, and food.
Are they crazy?
No, it's not that. Rather, 5,000 years of history have proven that the Chinese nation is an indomitable people, having reached the pinnacle of history countless times. It is precisely because they fear this that they make things difficult for the Chinese.
"Six months is only to ensure that new food supplies are replenished during this period. What if there is a disaster and no harvest, or what if the outside world does not provide assistance and uses this as a bargaining chip for the government? Would China agree to that?"
Secretary Wang nodded and then shook his head. The nod indicated that Chen Dong's words made sense, while the shake of his head meant that China would not agree to it.
At this moment, Old Lin, who was standing behind him, suddenly spoke up: "Then how much grain do you think China should prepare to meet any external factors?"
"Two years."
These words shocked not only Secretary Wang, but also Elder Lin.
In their view, storing up to one year's worth of grain already exceeded the grain reserve policies of other countries. They didn't expect Chen Dong to be even more ruthless, saying two years right off the bat.
Does he even know what two years means?
Based on the calculation that each of China's 1.4 billion people consumes one kilogram of grain per day, over 365 days a year, this figure would be astronomical. And this doesn't even include consumption of poultry, alcohol, and other items.
Chen Dong nodded firmly and said in a resolute tone, "No matter how large the number is, we must prepare enough to meet the country's food needs for at least two years. Only in this way can we avoid going hungry, regardless of any external interference."
"Moreover, even if a food price war like the one we are in now were to occur again in the future, China would still be invincible."
"You really think so?" Old Lin asked in surprise, pondering Chen Dong's words carefully. Indeed, as Chen Dong said, once China has sufficient food reserves, it can cope with wars, natural disasters, and man-made calamities in the outside world.
However, having a large amount of grain reserves also means that we need to build larger, more, and more advanced grain storage warehouses. Only in this way can we truly guarantee food security.
"I've already had Secretary Wang take notes on what you said. I'll submit today's content at the subsequent meeting so we can all discuss it together." Old Lin didn't agree immediately; food security is a matter of great importance, and it's not something he can decide alone.
Chen Dong nodded in understanding and said, "I just told Secretary Wang that we can take advantage of the current drop in international wheat prices to buy up a large amount of wheat and fill the previous gap."
"Besides, Elder Lin, actually, I didn't come here for this matter."
Chen Dong thought about it for a while before finally deciding to bring up the currency crisis, hoping that the country could take a leading role in dealing with it.
......
Continue read on readnovelmtl.com
