What Are Soybean Futures?
Soybean futures are an exchange traded and regulated futurescontract in which the buyer agrees to take a delivery on a pre-determinedamount of soybeans for a pre-determined price on a pre-determined date. Soybeanfutures are traded on the Chicago Board of Trade and are a useful tool thatprovide traders with exceptional liquidity and hedging possibilities.
How Are Soybean Futures Used? (How Do I Trade Soybean Futures?)
Soybean Basics
Soybeans and in turn, soybean futures contracts are used in avariety of manners that are crucial to all reaches of the globe. Soybeansthemselves are used in everything from livestock feed, to meat substitutes, andfor soybean oil. As the global demand for soybeans increases, we are seeing theprice for soybean futures contracts increase. Because of this, soybean futureshave become an increasingly popular commodity as they offer an extremely liquidway to trade futures and are often used as a day-trading tool.
Soybean Futures Contract Specs
In order to trade soybean futures, one must learn the soybeanfuture contract specifications. A standard soybean futures contract is for5,000 bushels of soybeans, with the mini-soybean contract being worth 1,000bushels. The tick size for soybean futures is $12.50 and the initial margin is$4,725. That means you are controlling 5,000 bushels of soybeans for as littleas $4,725 which affords you a ton of leverage which makes soybean futures ahighly lucrative contract.
Factors Impacting Soybean Futures
Soybean futures follow a strict cycle of planting, podding, andharvesting every year. While this portion and schedule for soybeans ispredictable, the outside factors impacting soybean growth, harvest, and demandare not.
One of the largest factors that impacts soybean futures isunsurprisingly planting. Planting occurs in the months of March and May andgive a good prediction of what that year’s supply will look like. The USDA willpublish a planting-expectations report every year and if the actual plantingnumbers meet the expected number in that report, the price of soybean futureswill usually increase. However, if the actual planting numbers are lower thanthe expected numbers, it may drive prices lower.
The next factor is podding. Podding is when the soybean seedsstart to sprout, and this usually happens sometime in August. Podding gives amore accurate prediction of what the final crop will be as not every seedplanted will pod. A strong or poor podding number will impact underlyingfutures prices.
Another factor the greatly impacts soybean futures prices isharvest. Harvesting usually occurs in October or November and the number ofbushels harvested will impact the price of soybean futures depending on howmany bushels are accounted for. Delays in harvesting, diseased crops, andsmaller yields can all impact price.
The last and possibly most important factor the impacts the priceof soybean futures is global demand. Almost 50% of all global soybean importscome from China, making them the biggest factor impacting global soybeandemand.
To help fully understand the movement and seasonality of soybeanfutures it is important to follow the various reports the are publishedyear-round. We recommend taking a look at the Grain Stocks Reports, USDA Reports,and WASDE Reports to start. Those reports will show soybean futures quotes andforecasts for the year to help you get a better idea of the condition of themarketplace.
How Do You Read Soybean Futures Prices?
In order to read the price of soybean futures, you must first findthe price quote on a chart. RJO futures has a great customizable quotes featureon our website you can use to start looking at different charts.At the time of this writing, that chart shows that soybeans are trading at1279, which means they are valued at $12.79/bushel, but that is not the totalvalue of the contract. The total value of the contract would be$12.79 x 5,000(5,000 bushels per contract) for a value of $63,950. It is important to note,that just a quarter cent movement in the per bushel price equals a $12.50 movein the value of the contract. This is known as the tick size.
When Do Soybean Futures Trade?
Soybean futures trade Sunday-Friday from 7:00 p.m. – 7:45 a.m. CTand Monday-Friday 8:30 a.m. – 1:20 p.m. CT. It is important to note that unlikeother futures contracts, soybean futures contracts do not have expiration everymonth. Soybean futures trade for delivery or expiration during the months of January,March, May, July, August, September, and November. The last trade date is the15th of the month of expiration. For example, if you wanted to buy aNovember soybean contract the last day you could purchase that contract wouldbe November 15th. Soybean futures can be purchased for deliveryunlike some other futures contracts.
How Many Soybeans are in a Soybean Futures Contract?
Soybean futures contracts are bought and sold at a value of 5,000bushels per contract. So, the total dollar value of the contract is the priceper bushel multiplied by 5,000. For smaller traders, the CME also offers a minisoybean futures contract that is 1/5th the size of a full contract.A mini contract accounts for 1,000 bushels of soybeans.
How Much Does a Soybean Futures Contract Cost?
A soybean futures contract’s price changes by the minute based ona variety of factors. As it stands right now, soybeans are trading at$12.82/bushel. So that means a soybean futures contract cost would be $64,100dollars. However, you are not responsible for that amount of money up front. Youare only responsible for the initial margin which is $4,725. This leverage ispartially what makes soybean futures contracts so lucrative, you are controlling$64,000 worth of soybeans for a hair under $5,000.
What is the Daily Limit on Soybean Futures?
In futures, the daily limit refers to maximum price range allowedin each trading session. If the price fluctuates more than the daily limitallows trading may be halted until the limit can be expanded. The daily limiton soybean futures is $1.00/bushel. This limit was expanded in Spring of 2021from $.70/bushel.
How Can I Trade Soybean Futures?
RJO Futures offers a variety of tools and a team of willing andexperienced Senior MarketStrategists that will help you get started trading soybeans. Our FREE AgriculturalInvestor Kit is a great piece that will help you understand what is goingon in the ags markets right now and help you decipher ways to approach trading.If you have any questions, please feel free to reach out to us andbroker will contact you shortly!
