These financial instruments trade as shares on exchanges in the same way that stocks do. A crush spread is a commodity trading strategy in which the trader takes a long position in soybean futures against short positions in soybean meal futures and soybean oil futures to establish a processing margin.. Soybeans are processed into two products—meal and oil—through a process called “crushing”, which is where the term stems from. Between 71.00%-89.00% of retail investor accounts lose money when trading CFDs. He also presents his simplified version of the Crush. Some trade the soybean crush using a 1:1:1 ratio of Soybean, Soybean Meal, and Soybean Oil futures contracts. If recent weather patterns continue, the world’s supply of food may not be able to meet demand in the years ahead. Your use of the site is at your sole risk. Trading in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing. In essence, these traders benefit if supply and demand factors lead to a rise in the price of the finished products relative to the input costs (soybeans). The value of the crush equals the Soybean Oil futures price plus the Soybean Meal futures price, minus the price of Soybean futures. Traders who go long with the crush spread will buy soybeans and sell soybean oil or soybean meal. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Other popular spread trades involve trading soybeans against other grain crops, such as corn or wheat. If you don't have time to read the entire article, you can always bookmark it for later. A Pairs Trade is placed by a trader not interested in picking direction. These are called spread trades and they involve simultaneously buying and selling two different soybean contracts. © 2010-2020 Commodity.com. Traders should also consider the risks of trading in soybeans: Experts see both potential risks and rewards from trading in soybeans. The crush spread is used to determine the difference between the price of the raw soybeans and its by-products such as soybean oil and soybean meal, which tend to be more expensive. The report contains the following information that market participants watch closely: *The report breaks out on-farm and off-farm storage because it uses different survey methods for gathering storage data from farms and off-farm locations. This report does not show any slow-down in soybean demand. The majority of agricultural commodities are staple crops and animal products, including live stock. To more precisely weight each component, the exchange facilitates the board crush that consists of a total of 30 contracts; 10 Soybean, 11 Soybean Meal, and 9 Soybean Oil. The funds serve as a margin against the change in the value of the CFD. A crush spread as a trading strategy involves taking a long position on soybean futures and a short position on soybean oil and meal futures. I expect another record crush to be reported. Crush Spread Soybeans are processed into soybean oil and soybean meal in a process known as crushing. To more precisely weight each component, the exchange facilitates the board crush that consists of a total of 30 contracts; 10 Soybean, 11 Soybean … Soybeans are a way to bet on a weak US dollar and higher inflation. Trading in agricultural commodities is a way to benefit from this trend. It’s free, It’s informative, It’s on the money. We present a number of common arguments for and against investing in this commodity. This is also known as the board crush. As with futures, options have an expiration date. Precious metals have many use cases and are popular with commodity traders. We also discuss why some traders choose to trade soybeans and what experts say about trading them. There are no pure-play public companies engaged exclusively in the production and sale of soybeans. Commodity.com makes no warranty that its content will be accurate, timely, useful, or reliable. The seller of the contract agrees to sell and deliver a commodity at a set quantity, quality, and price at a given delivery date, while the buyer agrees to pay for this purchase. “In general, I think the commodity complex is poised to move higher.”, – Robert Chesler, vice president of the foods group at INTL FCStone. The United States Department of Agriculture (USDA) produces its grain stocks report four times each year. The content is provided on an as-is and as-available basis. Thus, according to the quote above, a "price" of "526" actually means 52-3/4 cents/bushel. In this guide to trading soybeans, we’ll explain how and where you can trade this popular commodity with a list of regulated brokers that are available in your country. Find out more about precious metals from our expert guides on price, use cases, as well as how and where you can trade them. Understand how CME Group can help you navigate new initial margin regulatory and reporting requirements. Looking at the trade guesses there is about a thirteen-million-bushel range of estimates. This report, which details the capacity of on- and off-farm storage for all grains, is arguably the most important information for soybean traders. Many producers of soybean oil or soybean meal use the crush spread as a means to hedge the risk that the prices they receive for their final products will fall in value. However, there are many large agribusinesses that provide products such as fertilizers, pesticides and seeds to soybean producers: One of the ways to trade in soybeans is through the use of a contract for difference (CFD) derivative instrument.