The two basic products of soybeans are soybean oil and soybean meal. Soybean
oil is the most widely used edible oil in the United States. The consumption of soybean oil exceeds that of all other fats
and oils combined. More than 90% of the soybean oil is used in edible products such as cooking oil, margarine, mayonnaise,
salad dressing, and shortening. The rest is used in industrial products such as paint, varnish, linoleum, and rubber fabrics.
When you are considering a trade in soybean oil market some of the basic
fundamentals that you should consider are:
1. Soybeans Each bushel of soybeans
produces about 48 pounds of soybean meal and 11 pounds of soybean oil so the soybean oil market is often closely tied with
developments in the soybean market. It is important to look at the soybean crop size and crop conditions, and the level of
surplus or shortfall in the U.S. and Brazil.
2. Bio-diesel Soybean oil is
the primary component of bio-diesel fuel, an increasingly important new source of energy. Because of bio-diesel, there is
a growing correlation between soybean oil futures and heating oil futures. Just like there is a growing correlation between
corn futures and unleaded gasoline futures because of ethanol.
3. Dried
Distillers Grain With Soluble (DDGS) The production of bio-diesel creates a byproduct know as DDGS. DDGS can be mixed into
livestock feed the same way that soybean meal is. DDGS is becoming a major direct competitor of soybean meal. The more bio-diesel
that is produced, the more DDGS that comes into the market. DDGS lowers demand for soybean meal and its price, and increases
the demand for the soybean oil and its price.
4. USDA Crop Reports The
USDA publishes several key crop reports that are helpful in your research and trading of soybean oil futures and soybean oil
options. In addition to the USDA crop reports, the National Oilseed Processors Association releases a monthly soybean crush
report. The Soybean Crush report provides a sense of the amount of soybeans that are being processed into soybean oil and
soybean meal.
These are just some of the basic fundamentals to keep in mind
when you are considering a trade in the soybean oil market. Before opening up a commodity account to trade soybean
oil you should consult with a licensed commodity broker that follows the soybean oil market to discuss investment
strategies.
