How to trade soybean prices online

Fields being ploughed
Rebecca Cattlin
By :  ,  Financial Writer

Soybeans are one of the most-traded commodity markets after oil and natural gas. This makes soybean futures liquid but also volatile. Learn more about how to trade soybeans and what moves their price.

 

What are soybeans?

Soybeans are a species of legume, native to East Asia. They’ve been cultivated for thousands of years but were only really introduced into Western diets in the 20th century. Now soybeans and soybean products are some of the most important commodities in the global marketplace.

Soybeans have seemingly endless applications. Although they’re primarily used as a food product, around 2% of produce is used to create biofuels alongside other grains, such as corn. Soy is also used in wax products, such as crayons, candles and inks.

There are three main types of soybean markets that you can speculate on:

  1. Soybeans
  2. Soybean meal
  3. Soybean oil

The prices for each asset can vary greatly due to the differing levels of supply and demand. We’ll take a look at each market in more detail later on.

 

Why trade soybeans?

Soybeans are one of the most widely grown crops, and thanks to their range of uses, one of the most in-demand commodities. Research suggests that the global soybean market will be worth $215.7 billion by 2025.

This growing popularity of soybeans means the market tends to be incredibly liquid, which keeps spreads low. It also means that the price of soybeans can be incredibly volatile – especially as so many factors can impact the market price.

 

What moves soybean prices?

The soybean price is affected primarily by the supply of and demand for the commodity. It’s important that you understand the different drivers of soybean prices because they can cause rapid fluctuations.

Factors that influence soybean prices include:

  • US dollar strength – the price of soybeans is quoted in USD, which means that a weaker dollar will lead to higher prices and a strong dollar would cause lower prices
  • Producing countries – the US, Brazil and Argentina are the largest producers and exporters of soybeans, so political and environmental factors in each country can influence global supply
  • Weather – agricultural commodities are at the mercy of weather conditions. Events such as hurricanes and droughts can hamper the supply of soybeans and inventory levels
  • Emerging market economies – countries with rapidly expanding economies, such as India and China, fuel demand as they eat more meat and require more feed for livestock
  • Trade disputes – political tension can impact the trade flow of soybeans as import and export levels change. For example, during the 2019 US-China trade conflict, soybean volumes traded between the two nations slowed down as talk of tariffs escalated
  • Health benefits – the growing knowledge around the health benefits of soy has created a boost in demand. Any new developments in medical knowledge could influence prices
  • Biofuel – demand for biofuels, and any issue in biofuel supply chains, can cause volatility in the price of soybean oil
  • Ethanol subsidies – corn and soybeans both demand a lot of acreages to produce. Currently, ethanol makers receive grants from the US government which makes corn (the base of ethanol) a more attractive venture. If this changes, soybean production could rise instead
  • Alternative oils – soybean oil competes with other cooking oils such as rapeseed, castor and sunflower. Changes in the availability of other oils can impact the demand for soybean oil

 

What are soybean futures?

Soybean futures are contracts to exchange bushels of the raw agricultural commodity. A trader is entering an agreement to buy or sell a certain number of soybean bushels at a certain price on a set date of expiry.

Learn more about futures contracts

These contracts are for the edible legume crop, which is used to make foods like soy milk, tofu, miso paste and soy sauce.  Only a small fraction of soybean production is for human consumption, as almost 75% of soybeans are used as animal feed.

Unlike other futures markets, soybean contracts do not expire every month – the expiration is set in the months of January, March, May, July, August, September, and November. The last trade date is the 15th of the month of expiration. At the point of expiry, you can decide to continue to hold your position or settle in cash.

Soybean futures are fully electronic, traded on the Chicago Board of Trade (CBOT) – owned by the CME Group.

Soybean futures contract specs

Contract unit

5000 bushels (136 metric tons)

Price quotation

US cents per bushel

Product code

ZS

Trading hours – CME Globex

Sunday to Friday 19:00 - 7:45 and Monday to Friday 8:30 – 13:20 CT

Monday to Friday 00:00 – 12:45 and Monday to Friday 13:30 – 18:20 GMT

 

What are soybean meal futures?

Soybean meal futures are contracts to buy or sell a specific weight of soybean meal at a set price on a set date. Soybean meal is a coproduct of soybean oil extraction, and is mainly used as animal feed, although has increased in popularity as a protein supplement.

Soybean meal expiries follow the same monthly pattern as standard soybean futures – the last trade date is the 15th of January, March, May, July, August, September, and November. At the point of expiry, you can decide to continue to hold your position or settle in cash.

Soybean meal futures contract specs

Contract unit

100 short tons (92 metric tons)

Price quotation

US dollars and cents per short ton

Product code

ZM

Trading hours – CME Globex

Sunday to Friday 19:00 - 7:45 and Monday to Friday 8:30 – 13:20 CT

Monday to Friday 00:00 – 12:45 and Monday to Friday 13:30 – 18:20 GMT

 

 

What are soybean oil futures?

Soybean oil futures are contracts to buy or sell a specific weight of soybean oil at a set price on a set date. This market is for the oil that is extracted from the seeds of the soybean and used in foods and as a cooking oil.

The last trade date for soybean oil futures is the 15th of the month of expiry – which are January, March, May, July, August, September, and November. At the point of expiry, you can decide to continue to hold your position or settle in cash.

Soybean oil futures contract specs

Contract unit

60,000 pounds

Price quotation

US cents per pound

Product code

ZL

Trading hours – CME Globex

Sunday to Friday 19:00 - 7:45 and Monday to Friday 8:30 – 13:20 CT

Monday to Friday 00:00 – 12:45 and Monday to Friday 13:30 – 18:20 GMT

 

What is the soybean spot price?

Soybean spot prices represent the cost of exchanging the commodity – be it soybeans, soybean meal or soybean oil – immediately, or ‘on the spot’. Normally, you’d receive the physical delivery, but just like futures, they’ve become more commonly cash settled and used to speculate on the market price.

Learn about the differences between futures and spot prices

We price our non-expiring commodity markets (spot prices) using two sufficiently liquid futures contracts on the soybean market, which are usually the two with the nearest expiry date.

Learn more about our pricing.

As our spot soybean markets have continuous charting, it means you can perform technical analysis over much longer timeframes than you could with the monthly futures expiries.

 

How to trade soybeans with City Index

You can speculate on soybean markets with City Index in just four easy steps:

  1. Open a City Index account, or log in if you’re already a customer
  2. Search for ‘soybeans’ in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade

Or you can try soybean trading risk free by signing up for our demo trading account.

The most common way of trading soybeans is via the futures contracts that we’ve covered already. But you can also speculate on the price of soybean futures and spot prices via CFDs.

Soybean CFDs enable you to take a position on the underlying futures or spot price – whether that’s of soybeans, meal or oil – without ever needing to worry about the physical delivery of the asset. CFD positions are always cash settled.

Your profit or loss is calculated on the difference between the price at which you open the position, and the price at which you close it – multiplied by your position size.

For futures contracts, you’ll need to decide on the quantity of the commodity to buy or sell in advance of the expiry. At the point of expiry, you can decide to continue to roll your position into the next expiry or settle in cash.

For a spot contract, simply choose the number of contracts you would like to trade and decide, based on your strategy and analysis, whether to go long or short.

 

 

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