Spilling the Beans on Tariffs: The Untold Story of Soybeans Part II

My apologies for the double post. I believe my first post got deleted for failing to share a screen shot. That's fixed (hence the part 2).

I've got some deep seeded DD here, so lentil me your eyes. I promise to keep this brief, because I'm lazy as shit. Soybeans are my play, and we are closing in on the last days to get in the game. Why, you say?

Because of Tariffs of course. Many of you, may not realize that soybeans account for one of the US's largest exports. And many also may not realize that the largest importer (by far) is China.

Presently, China purchases [approximately 50%](https://farmdocdaily.illinois.edu/2024/02/the-united-states-brazil-and-china-soybean-triangle-a-20-year-analysis.html) of US soybeans. However, during the last trade war, Chinas purchases dropped from 60% to just 18%.

What's happened since? China has invested heavily in Brazil's soybean infrastructure. Brazil is presently the largest soybean exporter, surpassing the US.

And China has been [stocking up](https://www.reuters.com/markets/commodities/china-pivot-us-farm-imports-bolsters-it-against-trade-war-risks-2024-11-01/#:~:text=About%20half%20of%20American%20soybeans,to%20the%20U.S.%20Census%20Bureau.).

What does that mean for soybeans here? Well, presuming China increases it's dependency on other nations to produce soybeans, it means the cost of soybeans goes down and the US soybeans go to waste.

But what about the biofuels tax credits? It's incentivizes vehicles that run on soybean based fuels for US consumers? Guess what? [It expires soon](https://insidetrade.com/daily-news/treasury-issues-guidance-biofuel-credit-punting-final-rules-trump) and Trump will be deciding whether to renew Biden's credit for renewable fuels. Think that's likely?

And let's not forget that the [second largest importer of soybeans has historically been Mexico](https://unitedsoybean.org/issue-briefs/global-markets/). And guess what he's proposing to do to Mexico? That's right, Tariffs. The last time this happened, Mexico responded with retaliatory tariffs on [US agriculture](https://www.ers.usda.gov/amber-waves/2022/march/retaliatory-tariffs-reduced-u-s-states-exports-of-agricultural-commodities).

In addition, [soybean farming is dependent on illegal immigrants](https://www.ers.usda.gov/topics/farm-economy/farm-labor#:~:text=Roughly%20Half%20of%20Hired%20Crop,declined%20to%20about%2040%20percent.). Guess what Trump's plan is? Deportation.

As to current production, [the current yield was down](https://www.ers.usda.gov/topics/farm-economy/farm-labor#:~:text=Roughly%20Half%20of%20Hired%20Crop,declined%20to%20about%2040%20percent.), which led to temporary price increases on the presumption of supply and demand. However, Brazil is up.

Last time there was a trade war, the price per bushel was around 9.30 prior to the tariffs and about 8 after.

Are there any potential upcoming catalysts? Yes! Donald Trump gets sworn into office on Tuesday. He has promised to levy these tariffs day 1.

So what did I invest in? Puts on SOYB. This is a composite of the price of soybeans.

During the last trade war, it went from ~$19 to ~$15 in 3 months and bottomed out at about $13 at the peak of the trade wars.

As a result, I presently don't like this stock, so I have 137 puts expiring in May.