Soy Beans – Commodity

Min Spread *
Target Spread *
Swap point Long/Short
-114.37 / -113.23
Nominal Value of one lot
1 000
Trading hours
03:00-15:45 & 16:30-21:25

Instrument description

Soybean is one of the major agricultural crop that is grown in most parts of the world and also recognized as a commodity similar to coffee, wheat, rice, sugar, and cocoa. Soybeans also called soya beans and belong to the legume family of plants and a native crop of East Asia. Soybeans are an edible seed and one that not only has nutritional value but also used for soy milk from which tofu and tofu skin are made.

Soybeans are an important protein source that makes them an essential food source and ingredient in a wide range of meals and food dishes. The soybeans, along with its by-product, soybean oil, and soybean meal, have become a popular commodity. The United States is the biggest producer of soybeans and accounts for nearly one-third of the entire global soybeans supply. The U.S, along with Brazil and Argentina, account for more than 80% of global soybean production each year. The top five largest soybean production countries are

  1. The U.S.A.
  2. Brazil
  3. Argentina
  4. China
  5. India

The countries that import soybeans the most are China, Japan, Mexico, and E.U countries. The soybeans contain almost 18% of oil. On average, a bushel of soybeans is 60 pounds and yields 47 pounds of soybean meal and 11 pounds of oils. Soy milk and tofu are also products of soybean and used as food sources. The common use of soybeans are:

  • The soybean oil extracted from the soybeans is refined to make cooking oil, and it is also used in making margarine, mayonnaise, and salad dressings. Soybean oil is also used to make bread, cookies, cakes, and pie. Soybean oil is used by biodiesel producers to make fuels
  • Once the oil is extracted from the soybean, the remaining product is called soybean meal, which can be prepared as a meal for farm animals such as cattle and poultry.
  • Soy is used in many other products such as laminated plywood, bio-composite building material, lumber products, carpets, upholstery, crayons, inks, solvents, and industrial lubricants.

History of Soy Beans

The Chinese were considered the first ones to farm soybeans in 1100 B.C, and since then, soybeans have been planted and cultivated in various parts of the world and known as a vital food source. It was in the 1920s when A.E Staley Manufacturing Company first began processing or rather crushing soybeans, which resulted in two products, Defatted Soybean Meal and Unrefined Soybean Oil. Of the two, the unrefined soybean oil became a necessary ingredient in the making of margarine, while the defatted soybean meal was used as livestock feed.

The soybean plants can easily grow in any climate, but most grow best when the plants receive an ample amount of sun and plenty of rainfall. The farmers usually plant the seeds in rows, and within a week, the seeds grow into plants. In the U.S, the planting season is from May till July, and harvesting occurs in September when the soybean has fully grown.

The soybeans and corn grow in similar weather conditions, which is why many farmers grow both the crops on the same cultivable land. However, the farmers have a decision to make on which crop to grow at the start of the planting season. The farmers usually decide by comparing the future value of the two crops. The new crop month for soybeans is November, while it’s December for corn.

The corn-soybean spread is quite popular among the farmers, and it defines as ‘the number of bushels of corn needed to purchase a bushel of soybeans’. A bushel is a measurement unit and one bushel equal to 60 pounds. If the ratio of the corn-soybean spread is 2.2:1, it means that corn is expensive, and if the ratio is 2.4:1, then soybeans are expensive.

Supply and Demand of Soy Beans

Like all agricultural commodities, the supply and demand of soybeans are crucial in determining its present and future value. As the world population is increasing, so is the subsequent increase in demand of food sources. The use of soybean as a food ingredient and livestock feed has already established the growing demand of soybean. However, only a constant supply can fulfill global demand. The U.S is the global leader in the production and export of soybeans, and factors influencing the U.S economy also influence the price of soybeans.

How to read the price change of Soy Beans

Soybean represents a quite volatile and liquid market. Soybean is actively traded on all the major commodity exchanges that include Chicago Mercantile Exchange (CME), Brazilian Mercantile and Futures Exchange (BM&F), and the Tokyo Grain Exchange (TGE)

Soybean is traded 24 hours and 6 days a week on the CME Globex, which is a global electronic trading platform. The symbol of soybean on the CME Globex is ‘ZS,’ the price quotation in USD per Bushels, and the contract unit is 100 bushels. The trading hours are 22:00 to 20:59 (GMT). The Future contract months are January, March, May, July, August, September, and November. The soybean price is traded in USD/BU, where USD is for U.S Dollars and BU stands for bushels.

When we analyze the soybean price chart, we see the soybean prices trading from $860 to $960 per bushels from the second week of September 2019 to the third week of January 2020. The highest value of soybean in recent months was $898.255/BU on March 4, 2020. There are constant price fluctuations in soybeans in the following months—the lowest value of $838.245/BU on March 17, 2020. The soybean prices steadily began to see Bullish trends from July 2020, and currently, the price of soybean is $894.250/BU. The Bid price is $895.21/BU. while the Ask price is $893.43/BU

How to Trade Soy Beans

Trading in soybeans can be quite effective in diversifying your investment portfolio. A way to lower the risk of financial loss is to invest in a basket of commodities other than soybeans, which can be metals or other energy commodities. A group of commodities prevents the volatility of any individual commodity. Some of the popular ways of trade in soybean are by Futures Contracts, Options, Contract for Difference (CFD), Exchange Traded Funds (ETFs), and Shares.

Soybean Future contract is traded on the CME Globex with a contract size of 5000 bushels. Futures is a derivative contract that allows you to make leveraged bets on the prices of soybean. If prices fall, then you have to pay additional money to maintain your trading position. At expiration, the contract is settled with physical delivery of soybeans. You have to consider the interest rate and storage costs when trading in Futures contracts.

One of the most popular ways to trade soybean is through CFD which allows you to predict the underlying price of the asset. The potential profit results from the difference in prices of soybean from start to closing of the trade if your prediction is correct. Trading CFDs gives you the advantage of using leverage and no hassle of buying or storing soybeans. You can also trade on both the Bullish and Bearish trends to try and profit . With CFDs, you have a chance to maximize the profits, but with a certain degree of risk of losing your invested capital.

Another way to invest in soybeans is by buying shares of companies that are operating in agribusiness and make fertilizers and pesticides for the farmers. Some of the famous companies to buy shares from are Monsanto, Potash Corporation, and Mosaic Company.

What causes the price change of Soy Beans?

The price of soybeans in the commodity market is directly related to the prices of other grain commodities that include wheat and corn. The economic factors that affect the soybean prices are

  • Soybean Production in the U.S.

The United States is the largest producer of soybeans in the world and also the global exporter of soybean. Economic growth and macroeconomic factors play an important part in determining the price of soybean. The political situation and crop subsidies also affect the value of soybeans. The sudden weather changes can also affect the supply of soybeans. U.S exports nearly 40% of the produced soybeans.

  • Value of U.S Dollar

U.S Dollar is the world’s first reserve currency and the reason why nearly all the commodities are denominated in U.S Dollars. As the U.S is also the global leader in soybeans, so the value of USD influences the price of soybeans. If the USD weakens, then the price of soybeans will rise, and if the USD strengthens, then the price of soybeans will fall. The U.S Federal Reserve Bank maintains low-interest rates and controls the value of U.S Dollar to avoid inflation.

  • Demand from Emerging Market

As most of the countries are progressing, the demand for soybeans is increasing. For instance, China consumes more soybeans than it produces. The demand for soybeans is also increasing due to emerging economies in Asia and Africa. The soybean meal is used for livestock feed that also results in a rise in soybean prices.

  • Alternative Oils

Apart from soybean oil, many other oils are used as alternatives such as cottonseed, rapeseed, linseed, and castor. The price of soybean is impacted by the price and availability of alternative oils.

  • Ethanol Subsidies

The U.S government offers subsidies to farmers who produce corn and soybean that can boost ethanol production. The farmers have the option to grow either soybean or corn at the start of the planting season. If the subsidies on corn end, then the farmers may grow soybeans on most of the agricultural land. The increased supply of soybeans can influence the price of soybeans in the commodity market.

  • Health News

The benefits or side effects of consuming soybeans can directly impact the prices of soybean in the long run. The traders should closely monitor the medical news related to the consumption of soybean.

The demand for agricultural commodities will always increase to fulfill the food demand for consumers and also for livestock feed. A strengthening U.S Dollar will lead to a lowering of soybean prices. The overproduction of soybeans could also lead to an increase in supply and a decline in soybean prices.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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