Yesterday the department of agriculture announced a $12 Billion emergency aid to farmers to ease retaliatory tariffs. A way to play this is in the Soybean ETF SOYB.
Think about it like this. China is hurting itself by putting tariffs on our soybean exports. Obviously, the China defenders are running for cover now. It’s impossible to defend China as being a friend of the U.S. when they won’t even negotiate down to parity a chronic $550 billion annual trade deficit. Worse, China is penalizing their own people with the tariffs which effectively makes food more expensive in China. We don’t pay the tariffs, the Chinese people do. Furthermore, food is an inelastic good meaning people still need to eat so what do you think is going to happen with soybeans and other farming products? The food items will find new ways to China. For example, a scalp country that China has not put tariffs on can buy soybeans from the U.S., mark up the price, and sell them into China. New import/export deals are being worked out right now between the U.S. and scalper countries. In other words, because people still need to eat and demand for food products is mostly inelastic, our farming exports will find new ways into China.
Not only do I expect Soybean demand to stay strong but the $12 billion in aid from the U.S. government will further put a bid under the price of soybeans and other agricultural and food exports.
We don’t want to try and catch a falling knife. I would wait for the Twiggs Money Flow to go positive and for the price to break above the $16.43 pivot. For now, SOYB should be added to your watch list.