The month May in 2019 is memorable because when our Middle East customers are celebrating the Ramadan, there are also subtle changes on the price of canned broad beans.
1)Story with Mr. Z.
On May 5th, I received inquiry from Mr.Z, 4 containers as usual. But as the price of raw broad bean was comparatively higher then usual, he did not accept my quotation. Instead, we started to discuss the reason of the high price.
Through the emails from May 6th to May 10th, we analyzed the price about the canned broad beans produced outside China, and other quotations from different suppliers. In a word, I was trying to tell Mr.Z that even now I could not cut down the price because of the expensive raw material, my price was still competitive.
May 13th, a good chance to lower the price came as the trade friction between China and US depreciated 0.25RMB against USD. This is a good chance to benefit the customer and I emailed him immediately.
On the early morning of May 14th, I got the notice from the factory that because of their fully loaded production plans, now they have stopped confirming new orders. The earliest ETD will be on July, even Aug, Tragic!
I told Mr.Z about this delayed ETD right on that day.
May 15th, I was travelling to the factory to study the market for about 3 days with a wish to win over a good ETD for Mr.Z. Unfortunately, the even worse news laying before me: the raw material price increased again.
May 21th, I reported this situation to Mr.Z and he replied politely indicating that he did not want to change the supplier but our price was really too expensive.
This is the thread of the story. I don’t want to let Mr.Z feel that I deceived him because I cut down the price on May 13th and failed the ETD on May 14th. But the fierce situation is truly there.
2)In the following I’d like to talk about the overall background of 2019:
(1)The influence of Sino-US trade friction, not to mention others, obviously is the rapid depreciation of RMB in MAY. It was good to export though, who knows it would return sharply some day.
(2)The shock from the oversea broad bean factories to China. In previous years, I heard that there were already some factories built in Saudi Arab who supply broad beans. The advantage of these local factories is TAX FREE, with the raw material imported from Egypt and Australia.
Comparing the price of chinese broad beans goes higher, their price advantage is more obvious. However, it is said that Australia’s raw material is not as good as ours, and to this point I will try to get the sample and check.
(3)The imbalance of domestic productivity. Early this year, one big factory who mainly does canned broad beans suddenly stopped this item which lead a huge order shift to other factories. So I was informed by my factory on May 14th that they were not able to fulfil the ETD because one day earlier, they suddenly got an order around 300 containers and became over occupied with production and massively needed the raw material.
(4)The adjustment of domestic VAT. From 16 to 13, it is good for domestic firms as the tax is lower. However, to the foreign trade companies like us, the TAX Refund is lower while the price of the goods we buy is the same, which adds the cost.
3)Summary
The situation of 2019 is really very special. I had tried my best for the order with Mr.Z but there should be some points of improvement. For example, I’ve confirmed one container order with another customer on May 13th . At that time, the contract was already signed with the factory, they could not pull back the order, therefore my one container had been put into the production schedule of the 300 containers. If I had also added Mr.Z’s order to them, thing might be different. After this experience, would I be more courageous at work then?
The foreign trade field is very interesting whose orders, even the tiny ones are affected by the large background of the international relationship,the medium background of the price fluctuation of the bulk farm-products and the variation of the exchanging rate.
Overall, it was a good experience to row a small boat in the terrifying waves, right?