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), now part of the CME Group. The pit futures contract trades on the floor from 9:30 AM CT to 1:15 PM CT, Monday through Friday. The electronic futures contract, on Globex, trades side-by-side with the pit contract. In addition, soybeans can trade during extended hours electronically from 5:00 PM CT to 2:00 PM CT, Sunday 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 performance bond, or initial margin requirement, to initiate one futures contract is 4.78% or $3,375 (as of May 22, 2012). To control that futures contract going forward, the maintenance margin becomes 3.54%, or $2,500 (as of May 22, 2012).
One futures contract price increment or “tick” is 1/4th 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 point move, from 1412’0 to 1411’0, would be $50.
The Daily Price limit is $.70 per bushel expandable to $1.05 and then to $1.60 when the market closes at limit bid or limit offer. For example, if the market closes at limit offer, or 1342’0, on Wednesday, May 23, 2012, the next session’s Daily Price Limit would increase to $1.05. If the following trading session fails to close at limit offer, the next session’s Daily Price Limit reverts back to the $.70 cap.
The futures contract month listings are January (F), March (H), May (K), July (N), August (Q), September (U), and November (X). “New crop” currently refers to the November futures contract as that is month in which soybeans in the ground are harvested. “Old crop” currently refers to the listed trading contracts (July, August, and September) that cover last year’s crop.
The futures contract’s Last Trading Date (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.
Significant fundamental reports to be aware of are the United States Department of Agriculture (USDA) Crop Progress reports, typically released at 3:00 PM CT on Monday’s, and the periodic Crop Production and USDA Supply/Demand reports, released at 7:30 AM CT.
Use stop loss and target orders as this particular market trades around the clock (the electronic contract trades during the Asian and European daytime market hours) and with potential large trading ranges due to fundamental factors.
Visit our Markets section for additional contract specifications and market information regarding the Soybean futures market.
The risk of loss in trading futures contracts or commodity options can be substantial. View the risk disclosures below.
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STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.