Soybean Futures and Soybean Options
Market
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Dear clients and students of the commodity markets, the
following information should answer all of your questions about Soybean Futures
and Options. You may also call 800-915-4716 or email
tkfutures@earthlink.net your soybean future
and soybean options questions to be answered by a seasoned professional.
The History of Soybeans and CBOT Soybean Futures Trading
Soybean future and soybean option contracts are traded on the
Chicago Board of Trade. Soybeans originated in China
but over the centuries have been cultivated in many
temperate areas around the globe. George Washington
Carver first tested soybeans, among other plants, to
find out uses for them and diminish the dependence
on cotton as the single commodity of the Southern economy. He invented soybean based
varnishes, paints, inks, mayonnaise, salad dressings,
linoleum, plastic and even fuel.
Soybean based inks are currently being used in over 3000 various newspapers across
the U.S. including the LA Times.
Henry Ford and Mr. Carver
partnered up and used soybeans to make plastic
window handles, gas pedals and even dent proof trunk
covers for many of the Fords built in the 1930's and
40's. The original diesel engine, invented by
Rudolph Diesel, actually ran off of peanut oil based
on Carver's research and today's diesel engines can
run almost entirely on soybean oil. Using soybeans as a fuel
product is just recently becoming investigated again
because the high petroleum prices have made it
economically feasible to use green fuels such as
ethanol made from corn and sugar and bio diesel fuels made
from soybean oil.
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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 just under half the world's supply,
and they remain a leading dollar-earner among U.S.
agricultural exports. Soybean futures contracts and
soybean option contracts are
one of the most active of all the agricultural
futures markets.
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Price
stability is
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. Many savvy farmers use soybean futures and soybean options to hedge
their crops against adverse soybean futures price movements.
Ironically, soybean futures markets are perceived for their
volatility, but, in reality, the markets 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.
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.
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.
Soybean futures,
soyoil futures, and soybean futures markets supply the mechanism for long-term
business planning, which can lead to operational
profitability for farmers, processors, livestock
producers, and food manufacturers.
To
see other grain futures visit
corn futures and wheat
futures.
commodity
broker, commission,
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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 soybean futures and options to
manage prices. Soybean 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 soybean 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 futures 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 futures prices rise. The investor sells her
soybean 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 soybean futures trading process as a
speculator, she adds liquidity to the
marketplace and provides hedgers with an outlet
to transfer their risk.
Soybean Future Contract Specifications
Soybean Futures
Size -
5,000 bushels
Tick Size -
$0.025/bu
Daily Price Limit -
$0.50/bu
Strike Price -
$0.25/bu
Contract Months -
Jan, Mar, May, Jul, Aug, Sep, Nov
Last Trading Day -
Seventh business day proceeding the last business
day of the delivery month.
Expiration Day -
N/A
Trading Hours -
9:30 a.m. - 1:15 p.m.
Ticker Symbol -
S
Soybean Options
Size -
One CBOT Soybean Futures
Tick Size -
1/8c/bu
Daily Price Limit -
$0.50/bu
Strike Price -
N/A
Contract Months -
Jan, Mar, May, Jul, Aug, Sep, Nov
Last Trading Day -
Last Friday proceeding 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 -
9:30 a.m. - 1:15 p.m.
Ticker Symbol -
CZ- call;-PZ- put
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CBOT South American Soybean Futures
Soybean production in South America has matches North American production.
Additionally, North American soybean production is
forecast to stabilize while South American
production is anticipated to grow by 60% during the
next five years. Although the current CBOT Soybean
futures contract is an effective hedge for many
users, the Chicago Board of Trade is interested in
meeting the needs of customers who want a soybean futures
contract with a higher correlation to the South
American soybean market.
The Chicago Board of Trade has worked cooperatively with federal
and state governments, local and global agribusiness
firms, port officials, multinational banks,
exchanges and trade associations in
South America to develop a new CBOT Soybean futures
contract that will serve as an effective hedging
tool for buyers and sellers of South American
soybeans
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