Sunday, February 7, 2010

Protectionism and Tariffs

We posted a "cycle of deflation" way back when.

We are still somewhere in the mid-portions of the downward movement.

Now with China attacking US Chickens, things have heated up alot.  This trend should continue, with tariffs and other  new "creative fees" being implemented, and countries also try to devalue their own currencies so they can sell more easily to other countries.
This is very negative overall.   It adds to everyone's "actual cost" of goods because in some cases the most efficient producers are facing a headwind, and less efficient producer's are effectively rewarded.

Short Tyson chicken at the open?  Maybe this news escaped most people's attention because of Superbowl.   I would like to do a little research on what kind of foreign sales the big Chicken companies have, esp to China.  See attached table, getting ready for tomorrow.

I am thinking that there could be some put sellers who have ask prices out there, and they may not change them by the morning.   It may be possible to pick up some chicken puts on the cheap.

 All three ticker above had large increases Friday, SAFM is the speculative chicken producer with around 10% short float, PPC was bankrupt last year, TSN is heavily exposed to China.

TSN has decent option liquidity
SAFM has low liquidity on options, but the big /ask spread is not that bad.
PPC has very low liquidity on options, spooky low.

And something unusual to keep in mind.   Chinese love chicken feet.   Americans don't.   This revenue source could be almost completely eliminated.

The US is a food producer.  That will be a good thing for the future.

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