I'm in the county town, and you say I'm a big shot?

Chapter 729 "Debate with the Confucian Scholars"

"Okay, Mr. Ning." Yang Fan opened his laptop, and soon a clear chart appeared on the projection screen hanging on the wall:

He looked at everyone: "Ladies and gentlemen, this is the fund flow data. The above shows the CBOT soybean futures position report (COT) analysis. 'ADM and its affiliated funds have established a net short position of over 120,000 contracts in the more distant (July) month contract, the highest level for this time of year in the past five years. Moreover, their average cost of establishing these positions is between 980-1000 cents per bushel.'"

"After speaking, he tapped the cost line on the screen: 'Please note this cost range. Our current far-month contract price is still fluctuating around 1010 cents. This means that most of ADM's short positions are still at a floating loss, but they show no signs of closing out; on the contrary, they are continuing to add to their positions. What does this indicate?'"

Sun Xudong, the head of the group's risk management department, who was sitting next to him, picked up the conversation, his tone filled with worry:

"This shows that ADM has extremely strong confidence and is prepared for a price drop. They are using their financial strength to suppress prices, willing to incur short-term losses, in order to drive prices down!"

“That’s right!” Yang Fan nodded emphatically, switching to the technical analysis chart. “Looking at the technicals, the price of the far-month contract has effectively broken below the key six-month moving average support of 1020 cents. Our quantitative model shows that once the psychological level of 1000 cents is broken, the downside will open up, with the next support level at 950 cents, and possibly even testing 920 cents.”

"Yes, according to our risk assessment, our current long positions in the far-month contracts have an average cost of 1015 cents. If the price falls to 950 cents, our potential losses will exceed $1.2 million, which would far exceed the maximum drawdown limit set for us by headquarters for a single month. If the price does fall to 920 cents…"

He didn't say anything more, but everyone understood what it meant.

Yang Fan summarized, his tone almost earnest: "President Ning, the data doesn't lie. ADM's massive short positions, the breach of key support levels, and our huge risk exposure... all indicators are flashing red. Closing the position now will result in a loss of approximately $1200 million. Although it hurts, it's within a manageable range. If we continue to hold or even add to the position, the consequences could be unimaginable if we misjudge the situation! This is the 'decisive stop-loss' approach that aligns with risk control logic."

The meeting room was silent, save for the hum of the air conditioner. Yang Fan's data and rigorous logic constructed an almost impeccable reason for "the necessity of cutting losses."

No one discussed it; instead, they looked at Fang Qingye, the expert that President Ning had invited!

Fang Qingye slowly sipped his tea. Seeing everyone's eyes on him, he calmly said, "My opinion is the opposite of Mr. Yang's. I believe that in the futures market, we should not only not close out our positions to hedge against risks, but we should also appropriately increase our long positions in the far-month contracts."

These words caused an uproar in the conference room, with everyone discussing them. Sun Xudong, the head of the group's risk management department, stood up and loudly retorted: "ADM's short positions are coming on strong. If we go long against the trend, it's like putting our heads in a noose! This is the most basic trading discipline! President Fang, I heard you've been fighting in the futures market for several years. You can't possibly not understand this simple principle, can you?"

The other party's tone was unfriendly, and Fang Qingye frowned upon hearing it, but said nothing. President Ning, who was sitting at the head of the table, frowned.

"Minister Sun, let's speak properly and stick to the facts!"

Fang Qingye spoke calmly, looking at Sun Xudong: "If everyone can see the direction, it is likely not the direction of profit, but the direction of a trap. ADM wants everyone to think this way."

The meeting room was filled with hushed whispers once again.

At this moment, Yang Fan pulled up another data chart, projected it onto the screen, and said in an unusually calm tone: "President Fang, please take a look! This is the production trend over the past ten years, and this is a correlation analysis between ADM's position data and price trends. The model shows that the risk factor for continuing to hold long positions in the far-month contracts has exceeded the limit. According to our internal risk control guidelines, we must reduce our positions!"

Fang Qingye didn't look at the screen, but at President Ning sitting in the head seat: "President Ning, the data and models are based on history and conventional logic. But ADM is playing a calculated game this time. All their strategies are built on our 'rationality' and 'risk control.' If we play by the rules, we'll fall right into their trap."

He paused, then emphasized, "He predicted that we would cut our losses due to risk control, and that we would be afraid because of the data. What we need now is not a better data model, but a strategic judgment that can break free from his trap."

“There are three reasons,” Fang Qingye said, holding up a finger, her points clearly stated:
"First, psychological warfare. We need to disrupt ADM's rhythm. He expects us to panic and follow, but we show unusual firmness and confidence. This will confuse him and make him doubt his own judgment, wondering if there are some benefits he doesn't know about. This uncertainty is our weapon in itself."

"Second, it's a cover for our actions in the spot market. We're going long against the trend in the futures market, which ADM sees as a desperate gamble or a cover for our last struggle in the spot market. He'll focus more on analyzing our 'foolish' actions, thus ignoring our real actions on the flanks of the spot market, namely in those small and medium-sized production areas and logistics links. This is called 'feinting to the east while attacking the west.'"

"Third, and most importantly, we are not gambling; we are sowing the seeds for the eventual short squeeze."

Fang Qingye's eyes sharpened. "Gentlemen, futures prices will eventually converge with spot prices. ADM made a fatal mistake—they hoarded a massive amount of spot goods, but Brazil's logistics system is a well-known bottleneck. Our goal is to block key transportation nodes."

"Imagine this: ADM, as a short seller, signed a large number of short futures contracts, promising to deliver soybeans on the delivery date. Meanwhile, in the spot market, we only need to do three things: Snatch up the 'good grain': We pre-purchased all the high-quality soybeans with the highest protein content. This means that the soybeans in ADM's hands are not of good enough quality and may not meet the redemption standards for 'grain coupons'."

Creating a "traffic jam": This blocked a critical transportation route. Even though ADM had qualified soybeans, it was unable to transport them to the port warehouse and exchange them for "warehouse receipts" before the end of the month.

COFCO will announce a "shortage" to the market: "There is a severe shortage of high-quality soybeans that meet the standards at the ports!"

At this point, he looked at President Ning and said, "Once we successfully create the expectation that 'spot goods cannot arrive at the port for delivery on time due to logistical problems,' the market will find that ADM's warehouse receipts are 'illusory' and cannot be converted into cash in time. At that time, these seemingly strong short positions will instantly turn from a noose into a rope that strangles them! The long positions we buy now are the fuse that will ignite all of this in the future!"

"Therefore, this purchase is not blind speculation, but part of a strategic counterattack, a financial flanking maneuver launched in conjunction with the spot market. What we need to do is believe that our spot market strategy will succeed, and then patiently wait for our prey to walk into the trap in the futures market."

There was silence in the conference room.

A crazy plan!
Because Fang Qingye has completely integrated futures trading into the overall strategic game, this goes beyond the scope of conventional financial analysis.

After a while, everyone started discussing it again. The majority supported Yang Fan, believing Fang Qingye's idea was too risky, even somewhat "gambling." Those who supported Fang Qingye, however, were mostly anxious about the unsolvable current situation.

Fang Qingye didn't care and slowly sipped her tea.

This was a solution he came up with himself after repeated communication with Qiao Yongfeng and Ouyang Shaoqiang over the past few days.

I've already put forward my opinion; if it's adopted, I'll cooperate; if it's rejected, I'll immediately pack up and leave.

Sitting here in a boring meeting is no better than going fishing.

At this moment, President Ning spoke up, rubbing his temples as usual, "Let's take a half-hour break. Everyone, calm down and think it over. Qingye, come with me for a moment."

There was a balcony at the end of the corridor. The two of them stood on the balcony and had a panoramic view of the capital city.

Nearby, the steel forest of the CBD gleams coldly in the sunlight. The curved surface of the China Zun reflects the flowing clouds, while the CCTV building stands frozen in the air with its strange geometric shape.

Looking westward, Chang'an Avenue cuts straight through the buildings. The golden roofs of the Forbidden City appear as a continuous expanse in the thin haze, shining brightly in the western sunlight.

"Want a cigarette?" President Ning took out half a pack of cigarettes and handed one to Fang Qingye.

"no thanks."

"Actually, the doctor doesn't allow me to smoke either, because I have heart problems." Mr. Ning said, but still lit one, took a puff, and watched the grayish-white smoke slowly dissipate in front of him. He looked into the distance and unconsciously flicked the ash with his fingers.

"The sunset is infinitely beautiful, but it's only a short time before dusk," President Ning suddenly remarked.

Fang Qingye was surprised that he suddenly brought this up. Could it be that he was about to retire?
This was a difficult question to answer, so I remained silent.

After finishing his cigarette, President Ning looked at Fang Qingye, who was silent beside him, and suddenly asked a question.

"Qingye, what are the chances of your plan succeeding? To be honest, it's not that I don't trust you, but I have to be responsible for the country's funds."

(End of this chapter)