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Soybean Trading – 30 Things I Wish I Knew Before I Started (Strategies and Backtest Analysis)

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Last Updated on 23 July, 2024 by Trading System

Soybean futures are trading through Chicago Mercantile Exchange (CME) trading platform. Here is some information about Soybean trading. Stuff I wish I knew before I started trading the Soybean futures.

Soybean futures trading is a highly lucrative and exciting way to participate in the global commodity market. As one of the most widely traded agricultural products in the world, soybeans are a vital component of the global food supply and are used in everything from livestock feed to biofuels. Trading soybean futures can be a great way to take advantage of price fluctuations and make a profit, but it also requires a deep understanding of the market and the factors that influence soybean prices. In this article, we’ll explore the basics of soybean futures trading, including the mechanics of the market, the key players, and the factors that can affect soybean prices. Whether you’re a seasoned trader or just getting started, this guide will provide you with the information you need to make smart, profitable trades in the soybean futures market.

1. What is soybean trading?

Soybean trading is the buying and selling of soybean contracts or instruments in order to make a profit. Soybeans are legume grown for their edible bean. The plant is native to East Asia, and there is evidence that it was domesticated in China as early as 1100 BC. But over the years, soybean production has spread to other parts of the world. Over 12 billion bushels were produced in 2017/18.

2. What are soybean futures?

The term soybean futures refers to futures contracts that allow traders to buy or sell a contract today to be settled at a future date. Soybean futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of soybeans (eg. 5000 bushels) at a predetermined price on a future delivery date.

3. How is soybean traded?

Soybean futures contracts are offered on the Chicago Mercantile Exchange (CME), and they can be traded from any part of the world through the Globex electronic trading platform. One soybean futures contract is equivalent to 5,000 bushels (about 135 metric tons) of soybean, and the price quotation is in cents per bushel.

4. How do you start trading soybean futures?

To start trading soybean futures, all you need to do is to create an account with the exchange through your futures broker and deposit the required margin. Since it is a leveraged instrument, you need not have the full dollar worth of the contract before you can trade it. However, you have to be cautious about leveraged instruments — while you can make more money with them, you can also lose more.

5. What are soybeans trading at?

Prices of soybeans can be found here.

6. What is the current price of soybeans and soybean futures?

You can also find the current soybean prices here.

7. When does the Soybean contract expire?

Soybean futures trade for delivery or expiration during the months of January, March, May, July, August, September, and November.

The last trade date is the 15th of the month of expiration.

8. Whats soybean futures trading hour?

Sunday – Friday 7:00 p.m. – 7:45 a.m. CT and

Monday – Friday 8:30 a.m. – 1:20 p.m. CT

9. Where can I find trading charts?

Here you can find soybean trading charts.

10. Soybean Trading Strategies

The soybean futures market is one of the most popular markets with futures traders, and finding a trading strategy on the market isn’t too hard. Many of our own trading strategies trade the soybean futures market, and it blends in nicely with the other markets we trade.If you’re interested in trading strategies for the soybean futures market, we recommend that you have a look at our edge membership where you get edges for different markets every month, including the soybean futures market!

11. What are the trading symbols for soybeans?

CME Globex: ZS

CME ClearPort: S

Clearing: S

12. What is the specification for the soybean futures contract?

specification for the soybean futures contract

13. Why Should You Trade Soybeans Futures Contracts

Trading soybeans futures contracts can be a profitable venture if you know why you are trading it and how to play the soybeans market. Traders and investors have different reasons for trading soybeans futures, but here are the common ones:

Diversifying your portfolio: Experienced investors know that investing only in one financial market, such as the bond market or the stock market can be very dangerous, even when invested in multiple securities in that market. Certain factors can cause an entire market to crash — systemic risk. So, it is important to diversify your portfolio to other asset classes, such as commodities, and soybean is a great place to start from.

Speculating on soybean demand growth: As the economy of the emerging market countries continues to grow, the demand for soybeans is likely to increase since there will be more need for livestock feed and vegetable oils. Also, the need for renewable energy can push up the demand for the commodity, adding more liquidity to the market.

Hedging against inflation: Soybeans, like other commodities, have tangible value and the price will increase when there is rising inflation. So, one can use the commodity to hedge against inflation, especially if the U.S. Federal Reserve keeps lowering interest rates

14. What are soybeans used for?

Soybeans futures contracts are widely traded because the commodity can be used in so many ways. Here are some of the uses of soybeans:

Soybean oil: Most of the soybeans produced in the world are processed to extract soybean oil. The oil is either refined to make cooking oil or used to make food products, like margarine, shortening, mayonnaise, salad dressings, cakes, cookies, pies, and crackers. It is also used in producing biodiesels.

Soybean food products: Soybeans can be eaten whole or processed to get other products. Both soybeans and soybean products are commonly seen in Asian diets, especially Japan, China, and Korea. For instance, the whole bean is prepared with salt and served as an appetizer in Japan. The beans can be processed in various ways to get tofu, tempeh, soy milk, soy sauce, soy flour, soy lecithin, soybean meat, and textured vegetable protein (TVP), which are very important protein sources for vegans.

Soy-based infant formula (SBIF): This is usually prepared for infants who are allergic to pasteurized cow milk. It is also used for infants on a vegan diet.

Soybean meal: The part of the soybean that is left after the extraction of soybean oil is known as soybean meal. It is mostly used to make livestock feed due to its high protein content.

15. What are soybeans?

Soybeans are a legume grown for their edible bean. The plant is native to East Asia, and there is evidence that it was domesticated in China as early as 1100 BC. But over the years, soybean production has spread to other parts of the world. Over 12 billion bushels were produced in 2017/18. Since the 1920s, two important commodities are produced from soybeans — soybean oil and soybean meal. Both the whole soybeans and its two main products are traded on the commodity exchanges.

16. How do you invest in soybeans?

You can invest in soybeans via futures contracts, options, CFDs or ETF.

Soybean Trading - 30 Things I Wish I Knew Before I Started (Strategies and Backtest Analysis)

17. Are there an ETF for investing in soybeans?

There is an ETF that offers pure-play exposure to soybean prices.

SOYB – Teucrium Soybean Fund

SOYB tracks an index of soybean futures contracts. It reflects the performance of soybeans by holding Chicago Board of Trade soybean futures contracts with three different expiration dates.

18. Where can I find news about soybeans futures?

Here is a good source for soybean news.

19. What factors affect soybean prices?

Soybean Futures Price Factors

There are many factors that can influence soybeans prices, and they include the following:

Weather Condition: The US and Brazil account for about 70 percent of soybeans export, so adverse weather situations in those countries can affect soybeans prices.

Key reports: Certain market reports significantly move soybeans prices, and they include:

the USDA World Agricultural Supply and Demand Estimate (WASDE) Report, which forecasts the demand and supply from various regions
the USDA Prospective Planting Report, which indicate the crop farmers prefer to plant
Grain Stocks Reports, which offers updates on stocks of soybeans
Crop Production Reports

Ethanol subsidies: Sometimes, the U.S. government subsidizes corn farming to boost ethanol production. When the subsidies end, farmers tend to devote more acres to soybeans, thereby increasing supply and pushing down prices.

20. Are soybeans a commodity?

Yes, soybeans are a commodity.

21. What is the all-time high of soybeans?

The all–time high in the soybean futures market is $17.9475 per bushel. It occurred in 2012.

22. Who are the Largest Producers and Consumers of Soybeans

Soybean Futures

Although soybean is native to the Asian region, the Americas now dominate the soybeans market. According to the U.S. Department of Agriculture (USDA), the United States tops the list of soybeans producers and exporters, accounting for about 35 percent of the global production and over 44 percent of the exports. Other top producers include Brazil, Argentina, China, India, Paraguay, Canada, Mexico, and the EU.The largest consumers of soybeans include China, the US, Brazil, India, Argentina, the EU-27, Bangladesh, Mexico Egypt, and Algeria. China imports the most soybeans, and it is followed by the European Union, Mexico, Japan, and Taiwan. The trades are carried out via futures contracts.

23. How do you trade soybean futures?

The best way to play the soybeans market is by trading the soybean futures contract. The contract is traded on:

Brazilian Mercantile and Futures Exchange (BM&F),
Tokyo Grain Exchange (TGE)
Mercado a Termino de Buenos Aires (MATba), Kansai Commodities Exchange (KANEX)
Dalian Commodity Exchange (DCE), National Commodity and Derivatives Exchange (NCDEX),
and of course, the Chicago Mercantile Exchange (CME)

On the CME, a soybean futures contract is equivalent to 5,000 bushels (136 metric tons) of soybeans, and it normally expires in the months of January, March, May, July, August, September, and November. Settlement, at expiration, is by physical delivery of the commodity. A trader who doesn’t want to deal with the physical asset can roll over his position to the next contract month.

The soybean futures contract can be traded electronically via the CME Globex electronic trading platform. Aside from trading the futures contract, other ways of playing the soybean market include soybean options, soybean ETFs, and soybean CFDs, and here is how they compare.

24. What is the seasonality of soybeans?

Below you see a chart of the seasonal patterns in the soybeans market. This is great information if you want to start trading soybeans and make soybeans trading strategies.

Soybeans harvest begins in September and continues through October into mid-November.

Soybeans follow a pattern where prices begin to decline in the July-August time frame, continuing through February before reaching their highs in the summer.

seasonality of soybeans

25. What are soybeans classed as?

Soybeans are classified as a legume

26. How do I buy stock in soybeans?

You cannot buy soybean stock. However, you can buy an ETF that is following the prices of Soybeans. ETFs are traded on the stock markets.

27. Is it risky to trade soybeans?

Yes, trading soybeans can be risky. A strong US dollar could make soybean prices go lower. Overproduction by large suppliers could also make it go lower.

28. What is the contract size for soybean futures?

It is currently: 5,000 bushels (~ 86 metric tons)

29. What is the tick size of soybean futures?

Tick size is $6,25 for soybean futures. Point value is $50.

What is the minimum price fluctuation?

The minimum price fluctuation is $6,25 per contract.

30. What is the Daily Limit on Soybean Futures?

The daily limit on soybean futures is $1.00/bushel. The limit was expanded in 2021 from $.70/bushel.

Limit-down refers to the maximum amount the price is allowed by an exchange to fall in one trading day. In other words, it is the maximum decline in price permitted before trading is curbed.

Final thoughts

Soybean is an edible legume used for extracting vegetable oil, producing protein-rich diets for vegans, and making livestock feed. The best way to trade soybeans is via the futures market, and soybean futures contracts trade on many commodity exchanges around the world.

Here is our archive with articles about other tradeable futures markets.

FAQ

What are soybean futures?

Soybean futures are standardized contracts allowing traders to buy or sell a specific quantity of soybeans at a predetermined price on a future delivery date. These contracts are traded on exchanges like the Chicago Mercantile Exchange (CME) and play a crucial role in managing price risk for farmers and traders.

How do you start trading soybean futures?

Soybean futures contracts are traded on the Chicago Mercantile Exchange (CME) through the Globex electronic trading platform. Each contract represents 5,000 bushels of soybeans, and trading can occur globally. To start trading soybean futures, create an account with a futures broker, deposit the required margin, and familiarize yourself with the market dynamics. While leverage can amplify gains, it’s crucial to be aware of the associated risks.

How do you trade soybean futures effectively?

Effective trading involves understanding the seasonality of soybeans, staying informed about market news, and utilizing different trading instruments such as soybean options, ETFs, and CFDs. It’s crucial to be aware of the market’s seasonality and patterns. Trading soybeans futures contracts can be profitable for reasons such as portfolio diversification, speculation on demand growth, and hedging against inflation.