Soybean Commodity Trading, Follow The Food And Energy Crop
With increasing global demand for oilseed crops for bio ethanol, soybean commodity trading will maintain its high profile as an important and exciting sector of the commodities universe.
As a major oilseed crop, soybean futures are followed closely by producers and the wide range of end users, for hedging purposes and for traders looking to make profits.
The top 5 producers in the world are USA, Brazil, Argentina, China and India. Soybean is a major global crop and a source of oil and protein in the diet. The soybean is also crushed into a meal which is used as livestock feed.
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With recent panic over rises in global food prices once again, soybean futures reached an all-time high price in Spring 2008, and protests by farmers in Argentina over export taxes led to volatility in the price of this commodity.
Added to the concerns over food prices is the growing use of grains and oilseed such as soybean as a source of ethanol for biofuels to displace petroleum based gasoline.
Soybean production in the USA The main US soybean growing states are Iowa, Illinois, Minnesota and Montana.
Timing is important in planting with regard to achieving optimum yields, and preventing the soybean seedling from being killed.
While yields have been shown to improve with early planting, this seems to work so long as the soil temperature is not too cold (below 55 Fahrenheit). From late April to early May seems best though air temperatures below 28 degrees Fahrenheit can kill the soybean seedling.
So how can you follow what is happening in soybean markets and use this information to inform your soybean commodity trading decisions?
The United States Department of Agriculture (USDA) produces a number of reports that cover soybean planting projections for the US as well as statement of stock levels.
Prospective Plantings Report
This is a comprehensive report which is published by the USDA around March and is a survey of farmers. The report shows answers to questions on how many acres farmers intend to plant for soybean as well as the other crops.
Remember the figures which show each state are only indicative and the outturn can be different due to numerous factors such as a farmer changing his plans, unusual weather patterns and crop infestation.
As an example, the Prospective Plantings Report March 2008 showed that soybean acreage planted in 2007 was 63.4 million (m), while estimated acres to be planted for 2008 was 74.8 m, an increase of 18%.
Among the main producing states for soybean, Iowa was estimated to have 9.8 m acres planted (+15%), Illinois 8.8m (+7%), Minnesota 7.1m (+14%) and Montana to come in at 5.2 m (+11%).
From a soybean commodity trading perspective, other things being equal, this increased acreage over the previous year would suggest that soybean futures prices could fall over the coming months.
The Prospective Plantings Report also shows similar data for wheat, barley, oats, corn and other crops, with the US total and broken down state by state.
Monthly Crop Production This USDA report is issued around the 10th of each month and provides the latest estimates for the use (demand) of soybean and soybean production levels (supply) and data for other crops such as corn, rice, cotton, and wheat both in the USA and the rest of the world. For example, the USDA monthly report for August 2008 sees an increase in world soybean production (9%) and use of soybean (3%) for 2008/9 compared to 2007/8. In the US, production is forecast to increase 15% to 80.90 million metric tons in 2008/9 compared to 2006/7, while for the same period US soybean use increases 5% to 53.89 million metric tons. Estimates are also updated on the basis of changes in yield and harvest acreage forecasts. So for example, there is a decrease of 440,000 metric tons between the July and August 2008 reports for world soybean production.
Other agricultural and soft commodities Grain Stocks Report This USDA report gives information on the latest stock levels of soybean and other crops in the USA and the world. As an example, the June 2008 issue points out that soybean stocks were at 676 million bushels on 1 June 2008, a drop of 38% on 1 June 2007.
Combining the above data with commodity trading chart information and your chosen trading system is a good way of making informed decisions as part of your commodity trading plan. Exposure to the price action for soybean futures, soybean oil and soybean meal futures can be through an electronic trading system or by open outcry on CBOT.
As an alternative to open outcry you can now use the electronic route via CME Globex.
An alternative to trading soybean futures contracts on CBOT would be to gain exposure to the grains through an ETF which tracks the sub-sector of an agricultural commodity index containing the main grain commodities. The future of soybean commodity trading looks exciting because greater use of electronic trading has increased the volume of futures contracts traded. Related Articles: With the challenges presented by a growing world population and the pressure from demands for higher acreage for grains to supply alternative fuels for transport, the soybean sector looks very promising for commodity traders going forward.
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