Soybean future and soybean option contracts are traded on the Chicago Board of Trade. Soybeans originated in China but over the centuries have been cultivated in many temperate areas around the globe. George Washington Carver first tested soybeans, among other plants, to find out uses for them and diminish the dependence on cotton as the single commodity of the Southern economy. He invented soybean based varnishes, paints, inks, mayonnaise, salad dressings, linoleum, plastic and even fuel. Soybean based inks are currently being used in over 3000 various newspapers across the U.S. including the LA Times. Henry Ford and Mr. Carver partnered up and used soybeans to make plastic window handles, gas pedals and even dent proof trunk covers for many of the Fords built in the 1930's and 40's. The original diesel engine, invented by Rudolph Diesel, actually ran off of peanut oil based on Carver's research and today's diesel engines can run almost entirely on soybean oil. Using soybeans as a fuel product is just recently becoming investigated again because the high petroleum prices have made it economically feasible to use green fuels such as ethanol made from corn and sugar and bio diesel fuels made from soybean oil. These fuels are renewable annually and can greatly lessen our dependence on foreign oil. Bio diesel fuel is being used more and more as an alternative to pure petroleum based diesel. Bio diesel biodegrades as quickly as sugar and is 10 times less toxic than salt.  Soybeans many uses make it one of the most versatile agricultural commodities.

Soybeans are vital for a diverse array of food and industrial products. They provide the raw material for livestock feeds, cooking oils, and salad dressings, not to mention industrial products, fungicides, and antibiotics. In the United States alone, farmers grow just under half the world's supply, and they remain a leading dollar-earner among U.S. agricultural exports. Soybean futures contracts and soybean option contracts are one of the most active of all the agricultural futures markets.

Price stability is essential for those businesses that rely on soybeans for their manufacturing processes. Global supplies fluctuate continuously due to planting decisions made every spring, as well as variations in temperature and precipitation throughout the growing season. In addition, demand never ceases to change. As a result, prices can vary substantially from day to day. Many savvy farmers use soybean futures and soybean options to hedge their crops against adverse price movements.

Ironically, futures markets are perceived for their volatility, but, in reality, the markets provide the mechanism to ensure fairly consistent pricing of soybean and soy products. The price of cooking oil, for example, does not rise or fall to the degree of prices for unprocessed soybeans.

The Diversity of Soybeans

Q - What is meant by the term soybean complex?

A - The term refers to the soybean, its two principal by-products: soybean oil and meal, and their special interrelationship throughout the production, processing, and marketing processes.

Whole soybean products are especially appreciated in Asia and among natural-food devotees in Europe and the United States. Soybeans provide the basis for low fat sources of protein such as tofu, miso, and soymilk.

Soybean oil remains the most widely used edible oil in the United States, with consumption exceeding that of all other fats and oils combined. It is a major ingredient in cooking oil, margarine, mayonnaise, salad dressing, and shortening. Lecithin is a natural emulsifier derived from soybean oil and, without it; chocolate would separate from cocoa butter and spoil many sweet moments.

Soybean meal is the dominant protein supplement used in U.S. livestock and poultry feeds. Soy products are also used to make baby food, diet-food products, beer and ale, and noodles. Technical uses include adhesives, cleansing materials, polyesters, and other textiles.

Futures markets supply the mechanism for long-term business planning, which can lead to operational profitability for farmers, processors, livestock producers, and food manufacturers.

To see other grain futures visit corn futures and wheat futures.

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Indispensable Financial Tools

Q - Who can trade soybean futures and options?

A - Virtually everyone. Farmers, merchandisers, processors, and other hedgers in the agricultural commodity pipeline use CBOT futures and options to manage prices. Futures and options contracts are designed to promote better business planning, more consistent product quality and service, and increased operational profitability. Speculators also trade in the pursuit of profitable returns on their investments, even though they may not have direct involvement in agribusiness.

Here are some specific examples of why people trade soybean futures and soybean options:

• A soybean processing plant uses soybean, soybean oil, and soybean meal futures to hedge its gross processing margin - the difference between the cost of soybeans and the eventual revenue of the finished oil and meal. Buying soybean futures protects against rising inputs costs. Selling soybean oil and meal futures protects against falling prices for the later sales of meal and oil. The risk-management program helps to stabilize costs and pricing, thereby giving the processor a competitive advantage in the marketplace.

• Pursuing greater return on capitol, an attorney decides to trade commodities futures. After analyzing different data, she anticipates soybean prices to rise and, with the help of a broker, buys a soybean futures contract. Three weeks later, weather conditions reduce the harvest forecast and soybean prices rise. The investor sells her futures contract at a price greater than what she paid for it, thereby profiting from the transaction even though her profession has no direct link to farming or food production. By participating in the trading process as a speculator, she adds liquidity to the marketplace and provides hedgers with an outlet to transfer their risk.

Soybean Future Contract Specifications

Soybean Futures

Size - 5,000 bushels

Tick Size - $0.025/bu

Daily Price Limit - $0.50/bu

Strike Price - $0.25/bu

Contract Months - Jan, Mar, May, Jul, Aug, Sep, Nov

Last Trading Day - Seventh business day proceeding the last business day of the delivery month.

Expiration Day - N/A

Trading Hours - 9:30 a.m. - 1:15 p.m.

Ticker Symbol - S

Soybean Options

Size - One CBOT Soybean Futures

Tick Size - 1/8c/bu

Daily Price Limit - $0.50/bu

Strike Price - N/A

Contract Months - Jan, Mar, May, Jul, Aug, Sep, Nov

Last Trading Day - Last Friday proceeding the first notice day of the corresponding soybean futures contract by at least five business days

Expiration Day - Unexercised options expire at 10 a.m. on the first Saturday following the last trading day.

Trading Hours - 9:30 a.m. - 1:15 p.m.

Ticker Symbol - CZ- call;-PZ- put

 CBOT South American Soybean Futures

Soybean production in South America has recently surpassed North American production.  Additionally, North American soybean production is forecast to stabilize while South American production is anticipated to grow by 60% during the next five years.  Although the current CBOT Soybean futures contract is an effective hedge for many users, the Chicago Board of Trade is interested in meeting the needs of customers who want a futures contract with a higher correlation to the South American soybean market. 

The Chicago Board of Trade has worked cooperatively with federal and state governments, local and global agribusiness firms, port officials, multinational banks, exchanges and trade associations in South America to develop a new CBOT Soybean futures contract that will serve as an effective hedging tool for buyers and sellers of South American soybeans