How to Trade Soybean Oil: Essential Guide for ZL Trading
Date Modified: 15/12/2024
Soybean oil (ZL) plays a pivotal role in the food industry and the growing biofuel sector, making it a commodity of global importance. With fluctuating weather conditions, shifting agricultural practices, and rising global demand influencing its market value, staying informed about these dynamics is key for traders looking to navigate the market effectively.
This guide will share factors influencing the price of soybean oil to help traders make informed decisions when trading through CFDs.

TL;DR
- Soybean oil is a widely consumed vegetable oil, second only to palm oil globally, with significant use in cooking and biodiesel production.
- Soybean oil futures can be traded on the Chicago Mercantile Exchange (CME) under the ZL ticker.
- Trading soybean oil futures through CFDs allows traders to speculate on price movements without owning the physical commodity, offering flexibility in rising and falling markets.
What Is Soybean Oil?
Soybean oil is a vegetable oil extracted from the seeds of the soybean plant, primarily through pressing techniques. It is the second most-consumed edible oil globally, following palm oil, due to its versatility in various cooking methods such as frying, baking, and roasting. Soybean oil contains several antioxidants, including tocopherol, particularly α-tocopherol, which plays a significant role in its health benefits. The oil is also known for its high smoke point, making it a preferred choice for high-temperature cooking.
Soybean oil is also a significant component in biodiesel production, where it serves as a key feedstock due to its ability to burn cleanly and efficiently. Additionally, the oil's moisturising properties have led to its increasing use in the cosmetics industry, which is utilised in products like lotions and creams.
Soybean Oil Market: Overview and Global Significance
In the 2022/23 period, global soybean oil production reached approximately 59.18 million metric tons. The Asia Pacific region, particularly China, dominated this market, with China alone consuming approximately 17.8 million metric tons in 2023. This dominance is driven by the region's large population and expanding middle class, which have led to greater demand for edible oils, including soybean oil, in both households and the food service industry.
In the United States, soybean oil had the highest level of consumption of any edible oil in 2023, with Americans consuming about 12.25 million metric tons of soybean oil, compared to about 1.9 million metric tons of palm oil. This highlights the significance of soybean oil in the U.S. food sector, where it is extensively utilised for cooking, frying, and as an ingredient in processed foods.
The rising health consciousness among consumers has spurred demand for soybean oil, particularly for its favourable fatty acid composition, which is considered heart-healthy. Furthermore, the global shift towards renewable energy sources has bolstered the demand for soybean oil in biofuel production, particularly biodiesel, which has seen significant growth in countries like the U.S. and Brazil. Soybean oil futures can be traded on the Chicago Mercantile Exchange (CME) under product code ZL.
Factors Influencing Soybean Oil Futures Prices
The value of soybean oil is shaped by a complex interplay of supply and demand factors, each contributing to its price fluctuations in the global market. To better understand these dynamics, let's explore the key elements that influence futures prices of soybean oil.
Supply Factors Influencing Soybean Oil Futures Prices
Global Soybean Oil Production
Soybean oil production is closely tied to the availability of soybeans, which can fluctuate due to factors like drought and adverse weather conditions. In 2023, the U.S. Midwest faced its worst drought since 2012, reducing soybean production by nearly 106 million bushels, tightening the soybean oil supply and potentially raising futures prices.
Agricultural Practices & Crop Yields
Advances in agricultural practices have increased the amount of oil extracted per bushel of soybeans, with U.S. extraction reaching a record 11.84 pounds per bushel in 2021/22, boosting production. However, poor yields, such as those caused by Argentina's 2023 drought, can reduce the supply of soybean oil, driving up futures prices.
Weather Conditions
Weather significantly impacts soybean oil production. For example, Argentina's 2023 drought led to a 27% drop in crushed soybeans, sharply reducing oil production and influencing futures prices. Conversely, favourable weather can increase supply, potentially lowering prices.
Demand Factors Influencing Soybean Oil Futures Prices
Global Demand for Soybean Oil
Soybean oil is widely consumed globally, particularly in developing countries where rising incomes drive greater consumption of processed foods and cooking oils. This growing demand can lead to higher futures prices as supply struggles to meet consumption needs.
Biofuel Demand
The use of soybean oil for biofuel production has surged, with nearly 40% of U.S. soybean oil in 2021/22 used for biofuels, supported by policies to reduce greenhouse gas emissions. This increased demand could drive up futures prices, though the availability of soy meal as a byproduct may offset some cost impacts in other sectors.
Economic Factors
Inflation and raw material costs influence futures prices of soybean oil. Rising grocery costs can push oil prices higher, while economic growth in developing regions boosts demand. Conversely, economic downturns could reduce demand, potentially lowering prices.
Availability and Pricing of Substitutes
The availability of alternative oils like palm oil affects soybean oil futures. A low supply of alternatives, as during droughts in Canada, increases competition for soybean oil, driving up prices, while an abundant supply of cheaper substitutes could lower prices.
Trading Soybean Oil Futures Through CFDs
Trading soybean oil futures through contracts for difference (CFDs) offers traders the flexibility to speculate on price movements without owning the actual commodity. CFDs enable traders to potentially benefit from both rising and falling markets by taking a long position if they anticipate price increases or a short position if they expect prices to decline and the price moves in their favour.
A key feature of trading soybean oil CFDs is leverage, which allows traders to control a larger position with a smaller initial capital outlay. However, while leverage increases exposure to the market, it also amplifies potential losses, making effective risk management essential.
Steps to Trade Soybean Oil CFDs with Plus500:
- Select Your Market: Choose soybean oil as your preferred commodity to trade.
- Decide on the Trade Direction: Go long if you expect prices to rise, or go short if you expect them to fall.
- Set the Trade Volume: Determine how many units of soybean oil you want to trade.
- Apply Risk Management Tools: Use Stop Loss and Take Profit orders to manage your trading risk.
- Monitor Your Position: Regularly check your trade status and adjust as necessary.
Soybean Oil Price Conclusion
Understanding the various factors influencing soybean oil futures is crucial for traders looking to make informed decisions. The global demand for soybean oil, its role in biofuel production, and the impact of agricultural practices and weather conditions all play significant roles in determining its market value. By monitoring these elements, traders can better anticipate price movements and optimise their trading strategies.
For those seeking to speculate on soybean oil price fluctuations, trading through CFDs offers a flexible and accessible approach. CFDs allow traders to engage with the market dynamically. However, employing effective risk management strategies to mitigate potential losses is important due to the inherent risk of CFD trading, especially when utilising leverage.
If you're interested in soybean oil CFD trading, you can start trading ZL CFDs with Plus500.
*Past performance is not indicative of future results
FAQs
Soybean oil futures can be traded on the Chicago Mercantile Exchange (CME) under product code ZL. Trading hours on CME Globex are Sunday to Friday from 7:00 p.m. to 7:45 a.m. CT and Monday to Friday from 8:30 a.m. to 1:20 p.m. CT. Hours on the Plus500 platform may differ.
Weather conditions, such as droughts or favourable growing seasons, significantly impact soybean yields and, consequently, soybean oil production and pricing.
Rising global demand for soybean oil, particularly in developing countries, can lead to higher futures prices as supply may struggle to keep pace with consumption.
Related News & Market Insights
Get more from Plus500
Expand your knowledge
Learn insights through informative videos, webinars, articles, and guides with our comprehensive Trading Academy.
Explore our +Insights
Discover what’s trending in and outside of Plus500.
Stay up-to-date
Never miss a beat with the latest News & Markets Insights on major market events.