Soy trading via contracts for difference
The soybean was first introduced in Europe in the 1700s, it has since made a mark for itself globally by providing oil and protein source worldwide. America produces 55% of the world soybeans while they export 37% of the same, which has since become a staple food for many countries.
Advantages for trading Soybean with AvaTrade
- Up to leverage on soybean CFD trading
- Trade on a 17.5 hours a day market
- 24/5 support in 14 languages
- An internationally regulated forex broker
- Both manual and automated trading platforms available
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Soybean trading market
Most soybean produced is used for the extraction of the oil, used for culinary purposes. The soybean meal that is the leftover after the oil has been extracted, is used for agricultural feed for livestock.
Exchanges that deal in Soybean trading both in an open outcry format and electronically are the CME Group (Chicago Mercantile Exchange (CME), e-CBOT), National Commodity and Derivatives Exchange (NCDEX), Mercado a Termino de Buenos Aires (MATba), Dalian Commodity Exchange (DCE), the Brazilian Mercantile and Futures Exchange (BM&F), Kansai Commodities Exchange (KANEX), and the Tokyo Grain Exchange (TGE). Whole soybeans are also a tradeable commodity at AvaTrade.
- Soybean trading hours: 01:00-13:44 and 14:30-19:14 (GMT)
- Minimum trade size: 1
- Contract size: Bushels (100)
- Ticker symbols: Open Outcry S (CBOT) Electronic: ZIS (eCBOT)
- MT4 symbol: SOYBEAN
- Price Quote: cents per bushel
- Tick size: 0.25 cents per bushel
Trading the soybean market can be extremely volatile yet can be one of the most liquid in the commodity futures market, followed by corn and natural gas trading. The soybean produces two main byproducts: the soybean oil and the soybean meal, where both have their own supply and demand prices that impact futures prices. When trading soy, many traders employ a strategy known as crush spread to counter this issue, whereby they can purchase one contract of soybean meal and sell one contract of soybean oil, therefore, reducing market exposure and hedging their investment. When trading this commodity, traders are advised to keep their eye on the soybean daily price trading charts, for sudden market changes and to monitor future trends.
As a soft commodity there are several factors that influence the price of the soybean. Annual yielding of most agricultural crops like grains or sugar relies on the weather. Poor weather conditions before a harvest will result in a decrease in supply thus setting the price of soy higher. Another agricultural pest is the soybean rust, a fungal disease that of late has lowered crop produce.
Main producers of the soy products are the USA, Brazil, Argentina, China and India. These countries make up 90% of global production. The US is noted to be the leading producer, with output of 108 million metric tons, followed by Brazil at 86.8 million. Argentina comes in third with 53.4 million. The top importers are China accounting for over 41% of imports and Europe’s import figure at 22%.
Owed to a general increase in demand for soy products, that is due to increased population growth, economic developments etc., most of the soy consumption of 75% is for animal feed. On the other hand, the highest commercial interest is the oil and protein produced from soy.
The composition varies due to climate and location as well as how the product is farmed. Asia currently is the largest consumer of soy consumer products as they replace meat and milk with soybeans, in the form of tofu and soy milk.
Soybean Trading Main FAQs
- What influences the price of soybeans?
Since it is an agricultural commodity the weather has a huge impact on the price of soybeans, particularly during the planting season. We’ve also seen a significant uptick in demand as consumers in Europe and the U.S. switch to a more plant based diet. This could have a long-term impact on the price of soybeans, which are an excellent plant-based protein source. Soybeans are also impacted by corn supply and demand since farmers often switch their fields from one to the other depending on the pricing of each. Farmers look to generate the best profits and will plant more soybeans if prices are high, but paradoxically this can lead to lower soybeans prices later in the season as supplies rise dramatically.
- Why should I trade soybeans?
Soybeans are considered to be a good hedge against a weak U.S. dollar and rising inflation. With both expected over the coming months and years in response to the huge U.S. deficits a focus on soybean trading could be a way to both diversify and to create a profit stream. Plus the growing global population and increasing interest in a plant based diet promises a trend in growing soybean demand. Soybeans are also used in the production of biodiesel fuels, and the increasing move towards green energy will help foster demand for soybeans as well.
- What is the best soybeans trading strategy?
Soybeans are usually traded as futures contracts or as options where traders take advantage of the spreads between sot beans and its two main products – soybean oil and soybean meal. To take direct advantage of changes in soybean prices the best strategy is to trade CFDs. These are a pure play on the price of soybeans, and come with far lower fees than futures. CFDs allow a trader to easily go long or short based on whether they feel the price of soybeans will rise or fall.
Soybean trading tip
As this commodity is highly volatile it is most recommended that traders be alert to weather conditions and other external factors per country, that directly have an impact on the crop production. These influences are peripheral and cannot be controlled, but will have an impact on the price of soybeans. Technical indicators such as the moving averages or MACD are recommended to gain clarity on each market trend. Demand will often depend on the lack of other crops or substitute products. For example, if meat products prices decrease, there may be less demand for soy products, if grains are more available for livestock then soy in this respect may also have a decrease in the demand for the products.
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