Commodities: Soybeans and Soybean Oil

Nearly 100 years ago, the A. E. Staley Manufacturing Company began to crush soybeans, a key innovation that led to the creation of soy oil – used in cooking – and soy meal – used for feeding chickens and hogs. Today, the soybean is one of the world’s most important legumes and is an important source of protein.  

Many soybean traders use a strategy called the crush spread, in which they buy one contract of soybeans while simultaneously selling one contract of soybean oil and one contract of soybean meal. This is done to create a hedge against supply and demand factors.

Contract Specifications – Soybeans

Contract Specifications – Soybean Oil

Production

The majority of soybean crops are allocated for vegetable oil and animal feed. While tofu, soy milk and other soy products have gained popularity in recent years, only a small portion of the crop is used for such foods. The U.S. produces more soybeans than any other country, followed by Brazil, Argentina, China, India, Paraguay and Canada.

In the U.S., soybeans are the dominant oilseed crop (others include cottonseed, sunflowerseed and canola), accounting for about 90% of total oilseed production. Most soybeans in the U.S. are planted in May and early June and harvested in late September and October.               

Price Drivers

Soybean prices are influenced by the following factors:

• the demand for biodiesel
• strength of the U.S. dollar
• real and perceived health hazards
• emerging market demand
• growing conditions