Homo Sapiens

July 23, 2020.

The night a large-scale downy mildew outbreak appeared in North American soybeans.

Britain.

The London Stock Exchange.

David stared at the market board. The prices of soybeans and soybean meal had skyrocketed in an instant. His hands trembled, and he no longer dared to issue any short orders.

”Quick, dump all the short orders—”

”It’s too late!”

In reality, the ABCD companies had already secretly notified David and the others, but they were still a step too late. The long-position forces in the market today were attacking with the ferocity of a bursting dam.

David, who had just been on the phone, could only watch helplessly as the futures prices for soybeans and soybean meal on the market board shot up like a rocket.

In less than ten minutes, the price had soared by 230%, and the upward trend showed no signs of stopping.

Other financial investment institutions and speculators, after a moment of stunned disbelief, frantically used every connection they had to dig up information.

Soon, news that the North American soybean crop might be a total loss this year reached many of these institutions.

At that, these financial institutions and investors, like sharks and piranhas smelling blood in the water, went into a frenzy, going long on soybean and soybean meal futures. Even the futures prices for corn, wheat, and rice surged along with them.

As the world’s major grain traders, it would seem that this massive spike in soybean and grain prices would be extremely beneficial to the ABCD companies.

But in reality, the ABCD companies were about to cough up blood.

They had been margin called.

Because they held too many high-leverage short positions in soybean and soybean meal futures, their tolerance threshold for price fluctuations was a maximum increase of 15% for soybeans. Now, the soybean futures price had soared by nearly 300%.

If they weren’t getting a margin call, who would?

Within a dozen or so minutes, the ABCD companies had lost tens of billions of US Dollars on the international futures market.

Among them, Cargill and Bunge suffered the heaviest losses.

What was even more terrifying was that the delivery dates for the soybean futures were set to expire starting next month. Currently, there were a total of 33.72 million tons of futures orders on the market with expiration dates in August and September.

Regardless of how the futures prices fluctuated, the ABCD companies would have to deliver the soybeans and soybean meal when the time came.

The problem was, North America was one of the world’s largest soybean producers. With its crop suddenly wiped out, the soybeans from South America and Lucia had already been pre-ordered by Huaguo buyers.

If the ABCD companies couldn’t deliver the 33.72 million tons of soybeans and soybean meal, they would face default.

For example, Luzon had purchased 6.3 million tons of soybeans from the ABCD companies through channels in Xiangjiang and Xing Island, preparing to diversify its edible oil and animal feed supply chains.

This particular deal had a maximum default penalty clause of 1.3 times the contract value. The contract was priced at 330 US Dollars per ton at the time, for a total transaction value of 2.079 billion US Dollars.

Moreover, this was a long-term contract for an annual supply of 6.3 million tons over five years.

If they defaulted, the ABCD companies would be liable for a penalty of nearly 600 million US Dollars this year alone.

On top of that, Homo Sapiens Company had also used several publicly listed shell companies in Europe to place orders for tens of millions of tons of soybeans from the ABCD companies, citing reasons like developing artificial meat, plant-based protein, animal feed, and biofuels.

In other words, if the ABCD companies couldn’t find enough physical soybeans this time, they wouldn’t be able to profit from the physical soybean market either.

The financial markets are ruthless.

The big international investment sharks couldn’t care less that the ABCD companies were bleeding out. They only cared about their own pockets; in fact, they would love for the ABCD companies to bleed even more.

The effect of the margin calls was that the futures prices for soybeans and grains continued to skyrocket.

By the end of the day.

On the international futures market, the price increases for various major agricultural commodities were staggering: soybeans were up 327%, soybean meal up 272%, corn up 127%, wheat up 108.3%, and rice up 105.7%.

And although the ABCD companies managed to mitigate some of their losses on the futures market through reverse trading, they still lost over 13.5 billion US Dollars that day.

David’s company, Louis Dreyfus, lost 1.8 billion US Dollars. He and the entire futures trading department fell into a stunned silence.

It was a bloodbath.

Louis Dreyfus’s estimated profit for the entire year was only around one-point-something billion US Dollars. Today, in one fell swoop, the entire year’s profit had been wiped out.

”The company has already convened a board meeting. Everyone, brace yourselves,” David said, his head hung in defeat.

...

If Louis Dreyfus Company’s losses were heavy...

...then Archer Daniels Midland, Cargill, and Bunge were crippled.

After all, Louis Dreyfus had no soybean operations in North America; it had only been slaughtered in the financial markets.

But ADM, Cargill, and Bunge had extensive assets in North America, including numerous soybean farms, oil mills, feed mills, and plant-based protein extraction factories.

The executives and boards of the three companies held emergency meetings that went late into the night.

Of the three, the privately held Cargill was slightly better off, as it didn’t have to explain the situation to stock market investors, but its losses were just as severe.

Cargill’s chairman, William Wallace Cargill, Jr., glared at President Vid, his eyes practically shooting fire. ”Tell me how much we’ve lost.”

”Four... 4.3 billion...” Vid’s voice trembled.

BANG! Little William slammed his fist on the oak table, his face the color of liver, and roared maniacally, ”4.3 billion! What is the company’s profit for this year? And what about the contracts expiring in August and September? How do you plan to solve this?”

”Mr. Chairman, there was nothing I could do. No one could have predicted such a severe outbreak of soybean downy mildew would happen so suddenly.” Vid clearly had no intention of taking the blame for this.

Little William’s face grew even redder. ”I want to hear how you’re going to solve the problem and mitigate our losses, not listen to you make excuses. Understand?”

The crowd of executives buried their heads in their documents like ostriches. None of them had any intention of speaking up.

No one in the room was a fool. With such massive losses and a huge production shortfall, they couldn’t just work magic. Even if they replanted now, it would be too late.

Cargill’s soybean inventory in North America was 15.37 million tons, and in South America, 12.39 million tons. All of this was already earmarked for delivery to customers or for use in the company’s own factories.

Of course, there was another option: they could scramble to buy up soybeans from Eastern Europe and Lucia and use that supply to fulfill their deliveries.

However, the spot price for soybeans had already broken past 530 US Dollars per ton. At that price, it would be better to just pay the default penalties.

This was one of the reasons the executives dared not speak. The problem was clear: either purchase soybeans from other regions to fill the gap, or default and compensate the clients directly.

Little William felt a wave of exhaustion.

Suddenly, President Vid thought of a way. ”Mr. Chairman, perhaps we can make up for the losses elsewhere.”

”What way?” Little William asked urgently.

Vid explained, ”Does everyone remember the food war in Luzon? I estimate Luzon’s grain reserves don’t exceed 5 million tons. Plus, after two consecutive quarters of our suppression tactics, their domestic rice and corn cultivation areas have shrunk significantly. I think now is the time to launch our offensive ahead of schedule.”

”Luzon? The grain? Wasn’t that planned for next year?” Little William was clearly aware of the plan’s details.

Vid shook his head. ”Next year will be too late. The international price of rice is also spiraling out of control now. Although launching early will be less effective, we don’t have any other choice at the moment!”

After a moment of thought, Little William also saw the problem.

Previously, the ABCD companies had maintained a strategy of dumping rice at low prices to suppress the international market. But now, the soybean catastrophe had triggered a chain reaction throughout the entire grain market.

After all, since soybeans are a key raw material for edible oil and animal feed, buyers naturally look for substitutes when prices soar.

This, in turn, drives up the prices of rapeseed oil, sunflower oil, palm oil, corn, wheat, and rice.

This had inadvertently sabotaged the ABCD companies’ low-price rice strategy.

If they didn’t act now, Luzon could easily encourage its farmers to increase their rice cultivation area again, rendering all their previous efforts useless.