Soybeans - How to invest in soybeans? [Guide]

Soy is not a very well-known plant in our culture. It is in vain to look for dishes with soy in traditional recipes and dishes that we know every day. This vegetable only reached Europe at the end of the 60th century and was used in the production of animal feed. Only since the XNUMXs, we have observed a dynamic growth in soybean crops, related to the growing demand for meat.

Soybeans are a plant that has been cultivated in Asia since prehistoric times. It is valued for the richness of nutrients, a very high content of proteins (30-50%) and fats (approx. 20%). The composition of the amino acids contained in soy protein corresponds to the full human needs. This is why it is so readily used in a vegetarian and vegan diet.

The use of soybeans

Soybeans are considered to be the most important oil-producing plant in the world. Soybean oil is used in salads, frying, making cakes and margarine. In industry, it is used in the production of soap, paints and lubricants. However, above all, it is the most important plant used as feed for fattening animals.

It is estimated that 80% of the world's soybean harvest is used as feed for livestock. According to data provided by WWF, about 1 kg of soybeans are used to produce 0,5 kilogram of pork. In turn, to produce 1 kilogram of poultry meat, slightly more than 1 kg of soy is used.

Soybeans - requirements and cultivation

Soybeans are a demanding plant to grow. Requires a very fertile soil with high humidity. It also needs constant, large sun exposure for proper growth. It is very susceptible to bacterial and fungal diseases. Therefore, a large amount of pesticides are used to grow it.

The most important growing areas

The main soybean growing areas are the Central Mississippi Basin in North America, the Manchurian Lowlands, China and Yangtze Valleys in Asia, and the La Plata Lowlands in South America.

Most, almost 70%, of the world's soybean production comes from the USA and Brazil. The other significant soybean producers are Argentina, China and India. Environmental organizations have pointed out that Brazil's extensive soybean farming is leading to aggressive deforestation in the Amazon.

Transgenic soybeans

Today, most of the soybeans grown is transgenic. In 2010, the share of GMO soybean in global production was 93%.

Investing in soybeans

Awareness and interest in the raw materials market, especially the so-called soft commodities, which include soybeans, are just growing among Polish investors. The soybean market is highly volatile and hence many investment opportunities.

In the case of soybeans, it is difficult to imagine investing in a physical product, just as you can do with gold, silver or currencies. The price of soybeans is too low in relation to the space that such physical goods take up and the issue of shelf life. However, we have at our disposal financial instruments such as futures, ETFs and CFDs on soybeans.

Futures contracts

The oldest and most famous commodity exchange where soybean contracts were traded is the Chicago Board of Trade (CBOT) established in 1848. Since 2007, CBOT has been linked to and is part of the Chicago Mercantile Exchange (CME) CME Group.

Other exchanges where soybean futures are listed include:

• SAFEX,
• DC,
• KEX,
• RGE,
• KCX,
• NCDEX,
• ROFEX.

Exchanges will find soybean futures that expire 7 times a year. So we will find contracts ending in January (F), March (H), May (K), June (N), August (Q), September (U) and October (X). Soybean is traded in bushels.

One contract is for 5000 bushels of soybeans. It is assumed that 1 bushel of soybeans is 27.2 kg.

CFDs

Investing in soybean futures on exchanges is rather reserved for large investors due to the large amount of capital required to buy one contract. The situation is different on the market CFDs, available from Forex brokerswhere we can trade a fraction of one contract and use leverage (usually 1:10).

How to buy soybeans - CFD Brokers

Below is a list of the offers of selected brokers offering the best conditions for trading soybean (CFD).

Broker
End	Poland	Australia, Mauritius, Cyprus	Denmark
Soy symbol	Soybeans	Soybeans	Soybeans
Min. Deposit	PLN 0 (recommended min. PLN 2000 or USD 500, EUR)	200 USD	0 PLN / 0 EUR / 0 USD
Min. Lot value	price * 300 USD	-	b / d
Commission	-	-	-
Platform	xStation	MT4/5, cTrader	SaxoTrader Pro Saxo Trader Go
	REVIEW	REVIEW	REVIEW
	CREATE AN ACCOUNT	CREATE AN ACCOUNT	CREATE AN ACCOUNT

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. From 72% to 89% of retail investor accounts record monetary losses as a result of trading CFDs. Think about whether you understand how CFDs work and whether you can afford the high risk of losing your money.

ETF for soybeans

We can also invest in soybean futures using ETF. However, in this case it seems to be an unattractive option due to the small selection of ETFs from this sector and high operating costs. In fact, the only ETF in this sector is the Teucrium Soybean Fund, abbreviated SOYB.

[SOYB] Teucrium Soybean Fund

• • Issuer: Teucrium
  • Annual fees: 3.75%

Very high fees and low liquidity for an ETF does not seem to be the best choice for the average small investor. The fund's strategy is to hold three soybean futures. The fund buys October (35% of the portfolio value) of the current year and March (35% of the portfolio value) and May (30% of the portfolio value) of the following year. The remaining contracts are excluded from the fund basket due to low liquidity. The fund rolls contracts four times a year.