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How to trade soybean futures

You can trade futures by opening a trading account with a trusted broker who handles futures trading. CME Globex, CME Clear Port, AmeriTrade and Etrade are some well known online platforms for trading futures.

Most brokerages will charge the National Futures Association fees, which is roughly around $0.02 per side, along with a commission (which can range from $0.025 to $3 and more, per contract per side). You will also have to pay an exchange fee, which will vary depending on the exchange and the specific contract you are trading. Be sure to look at the fine print and add up all the fees into your cost.

Some traders can experience losses due to sudden price movements in the soybean futures market, however there are large profits to be made if futures traders employ smart strategies and carefully hedge the risks mentioned below:

  • Soybean creates two main byproducts—soybean meal and soybean oil. Each of these byproducts has its own supply and demand equation that can impact soybean futures prices. To counter this, soybean traders can employ a strategy known as crush spread. They can purchase one contract of soybean and sell one contract of soybean oil and one contract of soybean meal. This can help traders reduce market exposure and hedge their investments.
  • Genetically Modified Organism (GMO) soybeans have increased by 80% over the past decade. This has the potential to turn off some buyers who wish to purchase organic soybean only.
  • The price of soybeans is correlated with the corn market, so any changes in the corn market can cause price fluctuations in the soybean market as well.
  • Soybean oil is used as a biodiesel. As oil prices soar higher, they exert an upward push on soybean prices as well.
  • The U.S. is a major exporter and producer of soybeans. As the dollar’s strength changes in the market, it has a direct impact on soybean prices.
  • Some scientific studies indicate that soy products containing high amount of estrogen, can be harmful for health. This might impact the prices of soybeans in the futures market.
  • Soybean, like all other agricultural commodities, is affected by weather. Too much or too little rain, too much or too little heat can all affect soybean yield and supply.
  • Some environmental groups like Greenpeace and WWF have stated that soybean cultivation is slowly eroding Amazon rainforests in Brazil. This may impact soybean prices, specially in the case of environmental regulations.
  • Soybeans are extremely vulnerable to bacteria, diseases, funguses, viral diseases and parasites. The corn earworm moth is a common pest that has plagued soybean crops.
  • There are also the risks typical to financial trading. Soybean futures have a lot of leverage, which allows traders to control a large amount of commodities for a small amount of investment. However, it also means that even a small, unfavorable change in the prices of soybean can drastically impact a traders’ entire equity.
  • Reports by the United States Department of Agriculture (USDA) can impact futures prices. Prospective Planting, which comes out in March, shows how many crops will likely be planted by farmers in the next season. A monthly Crop Production report details soybean demand and supply. The Grain Stocks report is also another important report for traders to consider.

The upside is that soybean futures are incredibly liquid, and if traders manage their risks adequately, there is much profit to be made in the soybean futures market.

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