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Basic Fundamentals


What Market Fundamentals Can Affect The Soybean Oil Futures? 

The two basic products of soybeans are soybean oil and soybean meal. Soybean oil is the most widely used edible oil in the United States. The consumption of soybean oil exceeds that of all other fats and oils combined. More than 90% of the soybean oil is used in edible products such as cooking oil, margarine, mayonnaise, salad dressing, and shortening. The rest is used in industrial products such as paint, varnish, linoleum, and rubber fabrics.

Soybean oil is a market with acceptable volitility. When you are considering a trade in soybean oil market some of the basic fundamentals that you should consider are:

1. Soybeans Each bushel of soybeans produces about 48 pounds of soybean meal and 11 pounds of soybean oil so the soybean oil market is often closely tied with developments in the soybean market. It is important to look at the soybean crop size and crop conditions, and the level of surplus or shortfall in the U.S. and Brazil.

2. Bio-diesel Soybean oil is the primary component of bio-diesel fuel, an increasingly important new source of energy. Because of bio-diesel, there is a growing correlation between soybean oil futures and heating oil futures. Just like there is a growing correlation between corn futures and unleaded gasoline futures because of ethanol.

3. Dried Distillers Grain With Soluble (DDGS) The production of bio-diesel creates a byproduct know as DDGS. DDGS can be mixed into livestock feed the same way that soybean meal is. DDGS is becoming a major direct competitor of soybean meal. The more bio-diesel that is produced, the more DDGS that comes into the market. DDGS lowers demand for soybean meal and its price, and increases the demand for the soybean oil and its price.

4. USDA Crop Reports The USDA publishes several key crop reports that are helpful in your research and trading of soybean oil futures and soybean oil options. In addition to the USDA crop reports, the National Oilseed Processors Association releases a monthly soybean crush report. The Soybean Crush report provides a sense of the amount of soybeans that are being processed into soybean oil and soybean meal.

These are just some of the basic fundamentals to keep in mind when you are considering a trade in the soybean oil market. Before opening up a commodity account to trade soybean oil you should consult with a licensed commodity broker that follows the soybean oil market to discuss investment strategies.

CBOT Soybean Crush Reference Guide

Click on the link above to download a very informative .pdf brochure entitled "CBOT Soybean Crush Reference Guide". It was published by the Chicago Board of Trade. The crush spread is often used by processors to hedge the purchase price of soybeans and the sales prices of the soybean meal and soybean oil. It also offers many opportunities for speculators, as the spread relationship between the raw material and its products varies over time. This is a must read guide for any speculator or hedger considering an trade in the soybean oil futures or soybean options.

Click here to contact a licensed commodities broker with experience in the soybean oil markets.





Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Carefully consider the inherent risks of such an investment in light of your financial condition. Past results are not necessarily indicative of future results. Please do your own research before investing in the futures market. This site contains no investment recommendations. The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness.