Soybeans are one of the most popular oilseed products in the world and are used in the manufacture of plastics, solvents and other industrial products. Additional uses include livestock feed, edible oil and other foods. In the U.S, Soybeans were not used as a food product until after the 1920’s. However, Soybeans were essential to Asian cultures for hundreds of years before Western cultivation began.
The three main producers in the world are, in the following order: the U.S., Brazil, and Argentina. In the U.S., Soybeans are planted from May through mid-July. The crop flowers between July and late August while the harvest occurs at the end of September through the end of November. In contrast, Soybeans are planted from September through mid-December in Brazil. The Brazil crop flowers between January and the beginning of March while the harvest occurs from the end of March through the end of June.
Soybean futures provide a way to effectively manage the price risk that Soybean merchandisers, producers, food processors, livestock operations, importers and others have related to the purchase or sale of Soybeans. Futures contracts provide opportunities to identify short and long-term cyclical price and volatility patterns. Soybean futures traders are able to take advantage of arbitrage and spread opportunities with other commodities, including related grains, oilseeds and livestock.
The Soybean contract trades at the Chicago Board of Trade (CBOT), part of the CME Group. The electronic futures contract trades on Globex from 7:00 PM CT to 7:45 AM Sunday through Friday. As well as the primary hours of 8:30 AM CT to 1:20 PM Monday through Friday.
One Soybean futures contract is 5,000 bushels, or approximately 136 metric tons. The previous settlement price (May 21, 2012) for July 2012 Soybean futures was 1412’4, or $70,625 per contract. The most common contract symbol is ZS.
One futures contract price increment or “tick” is ¼ cents per bushel. A one “tick” move is $12.50. The next tick after 1412’0 downward is 1411’6 followed by 1411’4. Therefore, a one-cent move from 1412’0 to 1411’0 is $50. 1411’6 reads as fourteen dollars and eleven and three-quarter cents.
The performance bond or initial margin requirement to initiate one futures contract position is $2,860 (as of November 11, 2015). To control that futures position going forward the maintenance margin is $2,600 (as of November 11, 2015).
The Daily Price limit is $0.60 per bushel, expandable to $0.90, when the market closes at limit bid or limit offer. For example, if the market closes at limit offer, or 1352’4, on Wednesday, May 22, 2012, the next session’s Daily Price Limit would increase to $0.90. If the following trading session fails to close at the limit, the next session’s Daily Price Limit reverts to the $.60 cap. The exchange resets daily limits for Soybeans in May and November of each year, based on a percentage of the average settlement price of benchmark contracts during a roughly nine-week observation period.
The futures contract month listings are January (F), March (H), May (K), July (N), August (Q), September (U), and November (X). “New crop” refers to the November futures contract as that is the month in which Soybeans in the ground are harvested. “Old crop” refers to the tradable contracts (July, August, and September) covering last year’s crop.
The futures contract’s Last Trading Day (LTD) is the business day prior to the 15th calendar day of the contract month. The July 2012 Soybean futures contract LTD is July 13, 2012 for example. The First Notice Day (FND) for that same contract is June 29, 2012.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.