SOYBEANS ARE PRICED PER BUSHEL AND ONE BUSHEL OF SOYBEANS IS AROUND 60LBS.


The crush value traded in the futures market (often referred to as the Board Crush) is an inter- commodity spread transaction in which soybean futures are bought and soybean meal and oil futures are sold, or vice versa. This exchange provided spread provides the crusher with the ability to hedge against falling processing margins, and do so without having to trading the individual legs. It avoids slippage and helps with the complexities relating to different pricing conventions and contract sizes of each of the components.


SOYBEAN FUTURES (ZS) 5,000 bushels (136.08 metric tonnes), priced in cents


per bushel.


SOYBEAN MEAL FUTURES (ZM) 100 short tons (91 metric tonnes), priced in dollars and cents per short ton.


SOYBEAN OIL FUTURES (ZL) 60,000 pounds (27.216 metric tonnes), priced in


cents per pound (Chart 2).


At 50,000 bushels and $125 per tick, this is a big contract. It is deliverable into the underlying components and as a result needs to be this size in order to accommodate (10 soybean futures, 11 soybean meal futures and 9 soybean oil futures). The board crush leans on the underlying futures markets, when trading it you may be matched with another participant trading the other side of the crush or even participants trading the outright legs.


(Soybean Meal x 0.022) + (Soybean Oil x 11) – Soybean price = GPM.


Selling the crush is going short Soybean Oil (ZL) and Soybean Meal (ZM), and long Soybeans (ZS). This is the trade typically used by hedgers.


Buying the crush (also known as the reverse crush) is buying Soybean Oil (ZL) and Soybean Meal (ZM), selling Soybeans (ZS). This is typically traded from a speculative perspective.


Whether you are physically crushing soybeans and looking to manage your price risk, or have a view on crushing margins and looking to profit from that perspective, this exchange provided inter-commodity spread is a great way to access the market.


Ryan Easterbrook E: ryan.easterbrook@admisi.com T: +44(0) 20 7716 8054


Chart 2: Implied Soybean Crush Futures - Contract Specs CONTRACT UNIT PRICE QUOTATION


MINIMUM PRICE FLUCTUATION PRODUCT CODE


LISTED CONTRACTS SETTLEMENT METHOD


50,000 bushels (~1361 metric tons) Cents per bushel


1/4 of one cent per bushel ($125.00 per contract)


CME Globex: SOM Clearing: SOM


January (F), March (H), May (K), July (N), August (Q), September (U), October (V), & December (Z)


Deliverable Source: CME Group: https://www.cmegroup.com/markets/agriculture/oilseeds/soybean-crush.contractSpecs.html


The board crush is based on a ratio of contracts that approximates the equivalent yields of meal and oil that’s produced from one bushel of soybeans. In order to price this, we need to convert each components price into a common unit.


Soybeans are priced per bushel and one bushel of soybeans is around 60lbs. One bushel of soybeans produces around 44lbs of soybean meal. Since soybean meal is priced per short ton, multiplying it by 0.022 will give you the price per 44lbs. The same bushel also produces around 11lbs of soybean oil. Since soybean oil is priced in cents per pound we multiply this by 11 to give us a per 11lbs.


11 | ADMISI - The Ghost In The Machine | Q2 Edition 2024


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