Soybeans Explained: An Introduction to Soybeans Trading

Soybeans often referred to as the “King of beans” transcend their role as the world's largest source of protein and vegetable oil. It also serves as an important raw material for the production of various industrial and consumer goods. In 2023, the oil seed crop held the largest share of global agricultural trade, surpassing other major soft commodities like corn and wheat. Therefore, it is important to have a comprehensive understanding of soybean financial markets, including their supply and demand factors and the various trading instruments available.

Main Points:

• Soybeans are a member of the leguminous family containing approximately 40% protein and 20% oil.
• Soybeans are primarily used for animal feed, edible oil, biofuels, and various industrial and consumer products.
• The major varieties of soybeans are yellow soybeans, green soybeans, and black soybeans.
• Soybeans can be traded through various financial instruments such as futures contracts, options contracts, contracts for differences (CFDs), etc.

What Are Soybeans?

Soybeans, originating from East Asia, are a member of the legume family and an annual plant cultivated for their nutritious oil seeds. Unlike grains, soybean seeds are housed in pods and have a near-spherical shape. They offer a concentrated source of protein (approximately 40%) and oil (approximately 20%).

Major Use Cases of Soybeans

Although soybeans are well-known to be a source of protein, their applications extend far beyond food products like shoyu, miso, and soy milk. Here are some notable use cases for soybeans:

• Animal Feed: Almost 75% of soybeans are used primarily as a source of protein for livestock feed in the meat and dairy industries.
• Edible Oil: About 18% of soybeans are processed into oil, which is used extensively as cooking oil and an ingredient in various dishes.
• Biofuels: The use of biofuels is experiencing significant growth due to increased demand for renewable energy sources. Approximately 2% of soybeans harvested are channelled into the production of biofuels.
• Industrial and Consumer Products: Soybeans also serve as a non-toxic raw material for petroleum-based consumer products. They are used in the production of crayons, candles, composites, inks and lubricants.

What Are the Different Types of Soy Beans?

Soybeans come in various types, each with unique characteristics and uses. They include:

• Yellow Soybeans: This is the most common species of soybeans produced. They are used to make a wide range of processed soy products, including soy flour for baking.
• Green soybeans: The unripe soybeans of this kind, called edamame, are very popular. They are found in salads, stir-fries, and soups and are often steamed to be eaten as appetisers.
• Black soybeans: In several Asian cultures, black soybeans are used to make simmered soybeans. This is usually a must-have in the traditional Japanese New Year feast.

Where Are Soybeans Mostly Produced?

Soybeans thrive in a wide range of climates, from the cool and temperate regions of North America to the warm and humid tropics of Asia and South America.

Throughout 2021, the US, central Brazil, and southeast-South America combined, generate over 80% of the soybeans production worldwide. In 2019, Brazil surpassed the United States in terms of soybean production with a volume of 128.5 million metric tons and remained top on the chart in 2024, with a production volume of 156 million metric tons.

The table below presents the soybean production data for the 2021/22, 2022/23, and 2023/24 periods in million metric tons.

Where Are Soybeans Largely Consumed?

Soybean exports hold the largest share of global agricultural trade. In 2023, soybeans had a total market valuation of approximately $28 billion. The table provided below showcases the top 10 soybean export markets by total export value in 2023.

What Are the Factors Affecting the Price of Soybeans?

Soybean prices, like most agricultural commodities, are primarily driven by supply and demand. However, many of the broader economic and trade factors that influence agricultural markets as a whole can also have a significant impact on soybean prices. These factors include the following:

• Producing Regions: Soybean prices are highly sensitive to economic, political, and environmental factors within major producing countries like Brazil and the United States. Therefore, a positive economic, political, and environmental condition in major producing countries may support soybean production and lower prices. This holds true in the opposite scenario.
• The US Dollar: The strength or weakness of the US dollar is a major factor that affects soybean pricing. Given that global commodity trade is primarily conducted in US dollars, a stronger dollar translates to soybean producers receiving less for their products in their local currencies. Conversely, a weaker dollar results in higher earnings for these producers.
• Emerging Market Demand: China's appetite for soybeans is a major driver of global demand as it consistently relies on imports to supplement its domestic production. Beyond China, emerging economies like India and Africa also have a growing need for soybeans as a direct protein source for consumption and livestock feed.
• Crop Subsidies: Due to increasing demand for biofuels like ethanol, the US often incentivise the cultivation of corn to support ethanol production. These subsidies influence farmers' decisions to cultivate either corn or soybean at the start of the growing season. A reduction or elimination of corn subsidies could lead to increased soybean acreage, oversupply and lower prices.
• Trade Disputes: The 2019 trade conflict between the US and China exemplifies the susceptibility of soybean prices to geopolitical tensions. Escalating talk of tariffs between the US and China led to a decline in soybean trade between the two nations. This demonstrates how geopolitical factors can introduce uncertainty and price fluctuations in the soybean market.
• Other Market Forces: Other supply and demand factors that affect the price fluctuation of soybeans are increased soy meal consumption due to awareness of its nutritional benefits, demand for biofuel, and the competitive position of soy oil in the cooking oil market.

How Can I Trade Soybeans?

Different financial instruments provide opportunities for traders and investors to speculate on the volatility of soybean prices. However, the choice of instrument depends on the entity or individual. As such, you may consider trading either of the following instruments:

• Soybeans Futures Contract
• Soybeans Options Contract
• Soybeans CFDs
• Soybeans-related Shares
• Soybeans ETFs

Trade Soybeans Futures Contract

Soybean futures are mostly traded for hedging or investment purposes by businesses and investors involved in soybean commodities. They are traded as contract agreements to buy or sell bushels of soybeans in advance on a specific date for a predetermined price. When the specific date is due and the agreed-upon transaction must be settled, traders will decide to either settle the transaction in cash or take physical delivery of the commodity or extend their positions to the following trading month.

Trade Soybean Options on Futures

Traders can also engage in options trading based on the price of soybean futures. A holder of a soybeans options contract is given the right to buy (or sell) bushels of soybeans at a specific price, anytime until the option expiry date.

With Call Option, you can buy soybeans at the strike price, anytime before the option expiry date. For a call option to be profitable, the price of soybeans must have moved higher than the chosen strike price, and the premium cost.

On the other hand, Put Option lets you sell soybeans at the strike price, anytime before the expiry date. For a put option to be profitable, the price of soybeans must drop lower than the chosen strike price, and the premium cost.

Trade Soybeans CFDs

Individual speculators and retail traders often trade soybean CFDs in the short term. This financial instrument enables you to speculate on the price movement of soybean futures contracts without the obligation to receive physical delivery of the asset. By trading contracts for differences on Soybean futures, your positions are always cash-settled and the resulting profit or loss is determined by the difference between the price at which you open the position, and the price at which you close the position.

Trade Soybeans-Related Shares

Trade Soybeans-Related Shares There are public agricultural companies directly and indirectly involved in the consumption and production of soybeans. Hence, the share prices of these companies can be affected by fluctuations in soybean prices. Therefore, traders can also gain exposure to fluctuations in soybean prices by trading the share CFDs* of public agribusinesses like Corteva Inc (CTVA), Bayer AG (BAYN.DE) and the Mosaic Company (MOS).
*Availability subject to regulation.

Trade Soybeans Exchange Traded Funds (ETFs)

An alternative means to gain exposure to the price movement of soybeans is through soybean ETFs. While there are agricultural exchange-traded funds (ETFs) with varying amounts of exposure to soybeans, the Teucrium Soybean Fund (SOYB) is the only ETF that invests exclusively in the soybeans market.

Understanding the Soybeans Financial Markets

• Soybeans Futures Market and Contract Specification

  To effectively interpret soybean pricing, it is important to review the contract specifications offered by the Chicago Mercantile Exchange (CME), a leading financial market for commodities including soybeans.

  The CME provides exposure to three distinct soybean markets: Soybeans, Soybean Meal, and Soybean Oil. However, for soybeans specifically, CME offers standard and mini soybean futures contracts (for smaller investors). They are fully electronic and traded on the Chicago Board of Trade (CBOT) – a subsidiary of the CME Group.

  The specifications for the standard and mini soybean futures contracts are given in the table below.

Specification	Standard Soybean Futures Contract	Mini Soybean Futures Contract
Ticker Symbol	ZS	XK
Contract Size	5,000 bushels (36 metric tons)	1,000 bushels (27 metric tons)
Price per Bushel	U.S. cents per bushel	U.S. cents per bushel
Tick Value	$12.50 per tick	$1.25 per tick
Minimum Tick Size	1/4 of one cent (0.0025) per bushel = $12.50	1/8 cent (0.00125) per bushel = $1.25
Multiplier	50	10
Margin/Maintenance	$2,640/2,400	$528/480
Daily Limit	85 cents per bushel ($4,250 per contract)	85 cents per bushel ($850 per contract)

In addition to the Chicago Mercantile Exchange (CME), several other exchanges facilitate open outcry and electronic trading on soybeans futures prices. These include:

• The Brazilian Mercantile and Futures Exchange (BM&F) in Brazil
• The Dalian Commodity Exchange (DCE) in China
• The Mercado a Término de Buenos Aires (MATba) in Argentina
• The National Commodity and Derivatives Exchange (NCDEX) in India
• The Kansai Commodities Exchange (KANEX) and the Tokyo Grain Exchange (TGE) in Japan.

• Soybeans CFD Market and Contract Specification

  Many CFD brokers offer access to the price movements of soybean futures contracts. These contracts allow traders to speculate on the future price of soybeans without directly buying or selling the physical commodity. With Plus500, you can trade contracts for differences (CFDs) on soybean futures prices based on the leading CME - CBOT futures market.

  The specification for soybean CFDs on the Plus500 platform is given in the table below.

Specification	Plus500 CFD Derivative of Soybeans
Unit Amount	25 Bushels
Ticker Symbol	Soybeans (ZS)
Price Quote	USD (0.01 USD per 25 bushels)
Tick Size	0.0004 USD per bushel (0.01 USD / 25 bushels)
Initial Margin	10.00%
Maintenance Margin	5.00%

What Are Soybeans’ Available Trading Hours?

The CBOT (CME Group) offers varying trading sessions for soybean futures and options contracts. However, it's important to note that these session times can change throughout the year due to Daylight Saving Time in Chicago and London while Singapore operates on Singapore Standard Time (UTC+8) without any changes throughout the year.

Trading Hours for Soybeans CFDs

For individuals trading soybeans CFDs, the market remains accessible beyond the hours of future contract exchanges. By using the Plus500 app or WebTrader platform, traders can monitor and trade soybean CFDs from Monday to Friday, between 12:00 UTC and 15:45 UTC and 16:30 to 21:20.

* Note that trading hours and choice of instruments are subject to individual operators.

How to Monitor and Track the Price Movement of Soybeans

You can monitor the live price of soybeans via our CFD trading platform. Plus500 offers the CFD derivative of CBOT Soybean futures, with a ticker symbol represented as Soybeans (ZS). The platform not only displays the price movement of Soybeans (ZS) but also provides valuable tools to conduct technical and fundamental analysis.

How to Track the Live Price of Soybean CFDs in 4 Steps:

1. Open a trading account with Plus500
2. Log into the Plus500 trading platform.
3. Type “Soybeans” in the search bar to find the "Soybean CFDs".
4. Select "Soybeans" and analyse the price movement on the live chart.

If CFDs trading intrigues you, you can trade Soybean CFDs with Plus500.

Conclusion

Soybeans, native seeds of East Asian origin, not only play a major role in food production and other industrial uses. They are also some of the most significant commodities in the global financial market providing opportunities for traders and investors to diversify their portfolios and potentially profit from the agricultural sector.

Based on preferences, traders and investors can speculate on the price movement of soybeans via futures contracts, options, CFDs, or ETFs. However, it is important to have a well-defined trading and risk management plan in place before engaging in any one of these soybean financial instruments and be able to recognise and manage the risks involved in CFD trading.

Frequently Asked Questions:

Can I Use Soybeans as a Hedge Against Inflation?

During periods of inflation, as the value of currencies decreases, the price of commodities like soybeans tends to rise. Therefore, traders can buy soybeans or soybean-based financial instruments as a hedge to offset the effect of inflation on currencies.

Why Is Asia the Largest Consumer of Soy Products?

Since the history of soybeans, Asia has been the largest consumer of soy products due to the region's dietary preferences, which favour soybeans in the form of tofu and soy milk as substitutes for meat and milk.

Who Are the Top Importers of Soybeans?

In 2023, China accounted for over 50% of soybean imports, followed by the European Union, Mexico and other Asian countries.

What Correlation Does Soybeans Have?

The price of soybeans is often highly correlated with the prices of other soft commodities like corn and wheat. This is due to overlapping factors like weather patterns, global supply and demand, and government policies.