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Soybean Futures and Options

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Soybean Futures - Soybeans are vital for a diverse array of food and industrial products. They provide the raw material for livestock feeds, cooking oils, and salad dressings, not to mention industrial products, fungicides, and antibiotics. In the United States alone, farmers grow about half the world's supply, and they remain a leading dollar-earner among U.S. agricultural exports.

As important as they are, price stability becomes essential for those businesses that rely on soybeans for their manufacturing processes. Global supplies fluctuate continuously due to planting decisions made every spring, as well as variations in temperature and precipitation throughout the growing season. In addition, demand never ceases to change. As a result, prices can vary substantially from day to day.

Ironically, futures markets are perceived for their volatility, but, in reality, provide the mechanism to ensure fairly consistent pricing of soybean and soy products. The price of cooking oil, for example, does not rise or fall to the degree of prices for unprocessed soybeans.



Soybean Futures: The Diversity of Soybeans

Q - What is meant by the term soybean complex?

A - The term refers to the soybean, its two principal by-products: soybean oil and meal, and their special interrelationship throughout the production, processing, and marketing processes.

Whole soybean products are especially appreciated in Asia and among natural-food devotees in Europe and the United States. Soybeans provide the basis for low fat sources of protein such as tofu, miso, and soymilk.

Soybean oil remains the most widely used edible oil in the United States, with consumption exceeding that of all other fats and oils combined. It is a major ingredient in cooking oil, margarine, mayonnaise, salad dressing, and shortening. Lecithin is a natural emulsifier derived from soybean oil and, without it, chocolate would separate from cocoa butter and spoil many sweet moments.

Soybean meal is the dominant protein supplement used in U.S. livestock and poultry feeds. Soy products are also used to make baby food, diet-food products, beer and ale, and noodles. Technical uses include adhesives, cleansing materials, polyesters, and other textiles.

Futures markets supply the mechanism for long-term business planning, which can lead to operational profitability for farmers, processors, livestock producers, and food manufacturers.

Soybean Futures Indispensable Financial Tools

Q - Who can trade soybean futures and options?

A - Virtually everyone. Farmers, merchandisers, processors, and other hedgers in the agricultural commodity pipeline use CBOT futures and options to manage prices. Futures and options contracts are designed to promote better business planning, more consistent product quality and service, and increased operational profitability. Speculators also trade in the pursuit of profitable returns on their investments, even though they may not have direct involvement in agribusiness.

Here are some specific examples of why people trade soybean futures and options:

  • A soybean processing plant uses soybean, soybean oil, and soybean meal futures to hedge its gross processing margin - the difference between the cost of soybeans and the eventual revenue of the finished oil and meal. Buying soybean futures protects against rising inputs costs. Selling soybean oil and meal futures protects against falling prices for the later sales of meal and oil. The risk-management program helps to stabilize costs and pricing, thereby giving the processor a competitive advantage in the marketplace.
  • Pursuing greater return on capitol, an attorney decides to trade commodities futures. After analyzing different data, she anticipates soybean prices to rise and, with the help of a broker, buys a soybean futures contract. Three weeks later, weather conditions reduce the harvest forecast and soybean prices rise. The investor sells her futures contract at a price greater than what she paid for it, thereby profiting from the transaction even though her profession has no direct link to farming or food production. By participating in the trading process as a speculator, she adds liquidity to the marketplace and provides hedgers with an outlet to transfer their risk.

Soybean Futures Contract Specifications

Soybean Futures

Size - 5,000 bushels

Tick Size - $0.025/bu

Daily Price Limit - $0.70/bu

Strike Price - $0.25/bu

Contract Months - Jan, Mar, May, Jul, Aug, Sep, Nov

Last Trading Day - Seventh business day preceding the last business day of the delivery month.

Expiration Day - N/A

Trading Hours - Sunday to Friday: CME Globex trading from 7:00 p.m. to 7:45 a.m. CT
Monday to Friday: Break in CME Globex trading from 7:45 a.m. to 8:30 a.m. CT
Monday to Friday: Floor and CME Globex trading from 8:30 a.m. to 1:15 p.m. CT

Mini-sized Grains trades til 1:45 p.m. CT

Ticker Symbol - S

Soybean Futures Options

Size - One CBOT Soybean Futures

Tick Size - 1/8c/bu

Daily Price Limit - $0.70/bu

Strike Price - N/A

Contract Months - Jan, Mar, May, Jul, Aug, Sep, Nov

Last Trading Day - Last Friday preceding the first notice day of the corresponding soybean futures contract by at least five business days

Expiration Day - Unexercised options expire at 10 a.m. on the first Saturday following the last trading day.

Trading Hours -
Sunday to Friday: CME Globex trading from 7:00 p.m. to 7:45 a.m. CT
Monday to Friday: Break in CME Globex trading from 7:45 a.m. to 8:30 a.m. CT
Monday to Friday: Floor and CME Globex trading from 8:30 a.m. to 1:15 p.m. CT

Mini-sized Grains trades til 1:45 p.m. CT

Ticker Symbol - CZ- call;-PZ- put


See Also: Soybeans Special ReportGrain Futures, Corn Futures,  Wheat Futures