Soybean Futures: How to Trade Soybeans

Soybeans are a versatile and economically significant commodity used in food and industrial production. They account for two-thirds of the global output of protein feedstuffs.

Due to their importance, traders and investors may look for opportunities to profit from fluctuations in soybean prices. One way to do this is through Soybean Futures contracts, which are offered by Plus500 and detailed in this article.

TL;DR

• Soybeans are versatile legumes used for food, animal feed, fuel, and consumer products.
• Soybean Futures are contracts based on the price of soybeans, and they come in two main types: Soybean Oil Futures and Soybean Meal Futures.
• Soybean prices are influenced by weather, supply and production, global demand (especially from China), government policies, currency fluctuations, geopolitical factors, and energy prices.

What Are Soybeans?

Soybeans are legumes that stem from the pea family and are used for various purposes, like:

• Food consumption
• Feed for animals
• Fuel source
• Consumer goods production (like shoes, tyres, and more).

Soybean Futures

What Are Soybean Futures?

Soybean Futures are exchange-traded contracts that derive their value from the price of soybean (the underlying asset).

Futures trading involves the buying and selling a financial asset at a predetermined price and time (in the future).

Types of Soybean Futures

There are two types of Soybean Futures; Soybean Oil Futures and Soybean Meal Futures.

Soybean Meal is a high-protein byproduct used primarily in animal feed. In contrast, Soybean Oil is a fat-rich product mainly used for human consumption and some industrial applications. Each has distinct compositions and purposes.

As such, each type of Futures contract derives its value from the abovementioned types of soybean products.

Factors Affecting Soybean Futures Price

Soybean Futures prices can be affected by the following factors:

Weather Conditions

• Growing Seasons: Soybeans are very sensitive to weather, especially during planting and growing seasons. Extreme weather, like droughts or heavy rain in key farming regions (such as the US, Brazil, and Argentina), can hurt crop yields and push prices higher.
• El Niño/La Niña: These weather patterns can disrupt global growing conditions. For example, El Niño might bring droughts to some areas while causing floods in others, which could harm the crops.

Supply and Production

• Global Yield: The amount of soybeans grown each year plays a major role in price changes. A good harvest generally means lower prices, while a poor one can send prices soaring.
• Farmers' Choices: If farmers decide to plant more soybeans or focus on other crops, it directly affects future supply and, consequently, prices.

Global Demand

• Animal Feed: Soybeans are a crucial ingredient in animal feed, especially for livestock like pigs and poultry. If demand from the livestock industry rises, soybean prices often follow.
• Soybean Oil & Meal: Beyond animal feed, soybeans are processed into products like oil and meal. Strong demand for this product, whether for food, biodiesel, or other uses, can drive up prices.
• China's Role: China is the world's largest importer of soybeans. If China increases or reduces its soybean imports, it can have a major impact on the global market.

Government Policies

• Subsidies & Tariffs: Government actions like agricultural subsidies, tariffs, or export restrictions can shift supply and demand, influencing prices.
• Biofuel Demand: Policies encouraging the use of biodiesel (often made from soybeans) can increase soybean demand, affecting prices.

Currency Fluctuations

Since soybeans are traded internationally, changes in currency values can impact prices. For example, a stronger US dollar makes soybeans more expensive for foreign buyers, which can lower demand, whereas a weaker dollar tends to have the opposite effect.

Futures Market Speculation

Traders in different kinds of Futures can also drive price swings. News about weather, trade relations, or crop reports often prompts speculators to react, sometimes leading to large price changes even if actual supply and demand are steady.

Geopolitical and Economic Factors

Trade relations between countries, particularly major players like the US and China, can have a big impact. Political tensions or sanctions can disrupt the global flow of soybeans and change the dynamics of the market.

Other Crop Prices

The prices of other crops, like corn or wheat, also influence soybean prices. If another crop becomes more profitable to grow, farmers might switch crops, reducing soybean supply and pushing prices higher.

Energy Prices

Since soybean oil is a key ingredient in biodiesel, energy prices can affect soybean demand. When oil prices rise, more people turn to biodiesel as an alternative, which in turn boosts demand for soybeans.

How Do I Trade Soybean Futures?

Trading Soybean Futures can be done with a Futures provider like Plus500 using these steps:

• Open a trading account
• Deposit funds
• Access the platform
• Search for Soybean Futures in the platform's search bar or go to the commodities section and select it there
• Place a buy or sell order and start trading!

Crush Spread - What Is Soybean Crushing?

Soybean crushing is the process of extracting oil and meal from soybeans. The oil is used in cooking, food products, and biodiesel, while the meal is primarily used as animal feed.

The crush spread refers to the difference between the cost of soybeans and the combined value of the oil and meal produced. It serves as a key indicator of profitability for crushing operations, influencing soybean prices and market demand.

Traders often use the crush spread to gauge market conditions and potential profit opportunities.

Conclusion

Soybeans are a vital global commodity, with wide applications in food, animal feed, fuel, and industrial products. Given their significance, soybean Futures offer a way for traders and investors to capitalize on price fluctuations.

Traders can make informed decisions by understanding factors like weather, global demand, and geopolitical events.

Platforms like Plus500 provide an easy way to trade soybean Futures, while tools like the crush spread offer valuable insights into market conditions. Whether you're an experienced trader or just starting, keeping an eye on these factors is essential to navigating the soybean Futures market effectively.

Now that you know more about Soybean trading, you can try trading Soybean Futures with a Plus500 demo account today.