The soybean was first introduced in Europe in the 1700s, it has since made a mark for itself globally by providing oil and protein source worldwide. America produces 55% of the world soybeans while they export 37% of the same, which has since become a staple food for many countries.
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Soybean trading market
Most soybean produced is used for the extraction of the oil, used for culinary purposes. The soybean meal that is the leftover after the oil has been extracted, is used for agricultural feed for livestock.
Exchanges that deal in Soybean trading both in an open outcry format and electronically are the CME Group (Chicago Mercantile Exchange (CME), e-CBOT), National Commodity and Derivatives Exchange (NCDEX), Mercado a Termino de Buenos Aires (MATba), Dalian Commodity Exchange (DCE), the Brazilian Mercantile and Futures Exchange (BM&F), Kansai Commodities Exchange (KANEX), and the Tokyo Grain Exchange (TGE). Whole soybeans are also a tradeable commodity at AvaTrade.
- Soybean trading hours: 01:00-13:44 and 14:30-19:14 (GMT)
- Margin: 3.00%
- Spread: Fixed
- Minimum trade size: 1
- Contract size: Bushels (100)
- Ticker symbols: Open Outcry S (CBOT) Electronic: ZIS (eCBOT)
- MT4 symbol: SOYBEAN
- Price Quote: cents per bushel
- Tick size: 0.25 cents per bushel
The soybean produces two main byproducts: the soybean oil and the soybean meal, where both have their own supply and demand prices that impact futures prices.
When trading soy, many traders employ a strategy known as crush spread to counter this issue, whereby they can purchase one contract of soybean meal and sell one contract of soybean oil, therefore, reducing market exposure and hedging their investment.
When trading this commodity, traders are advised to keep their eye on the soybean daily price trading charts, for sudden market changes and to monitor future trends.
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As a soft commodity there are several factors that influence the price of the soybean. Annual yielding of most agricultural crops like grains or sugar relies on the weather. Poor weather conditions before a harvest will result in a decrease in supply thus setting the price of soy higher. Another agricultural pest is the soybean rust, a fungal disease that of late has lowered crop produce.
Main producers of the soy products are the USA, Brazil, Argentina, China and India. These countries make up 90% of global production. The US is noted to be the leading producer, with output of 108 million metric tons, followed by Brazil at 86.8 million. Argentina comes in third with 53.4 million. The top importers are China accounting for over 41% of imports and Europe’s import figure at 22%.
Owed to a general increase in demand for soy products, that is due to increased population growth, economic developments etc., most of the soy consumption of 75% is for animal feed. On the other hand, the highest commercial interest is the oil and protein produced from soy.
The composition varies due to climate and location as well as how the product is farmed. Asia currently is the largest consumer of soy consumer products as they replace meat and milk with soybeans, in the form of tofu and soy milk.
Soybean trading tip
As this commodity is highly volatile it is most recommended that traders be alert to weather conditions and other external factors per country, that directly have an impact on the crop production. These influences are peripheral and cannot be controlled, but will have an impact on the price of soybeans. Technical indicators such as the moving averages are recommended to gain clarity on each market trend. Demand will often depend on the lack of other crops or substitute products. For example, if meat products prices decrease, there may be less demand for soy products, if grains are more available for livestock then soy in this respect may also have a decrease in the demand for the products.