are interested in trading Soybean Oil futures it is helpful to become familiar with the history of the Soybean Oil market.
The great majority of the world's soybeans are processed by the soybean crushing
industry to produce crude soy oil (also called "crude soybean oil") and soybean meal. The value of the soybean lies
in the fact that there is a strong demand for both these ingredients. The separation of these two major components has given
rise to the soybean crushing industry.
Unlike the seeds of most other legumes (except the peanut), the soybean is rich in oil, and is often
called an "oilseed." After separation, the oil is degummed (to remove the lecithin) and usually refined, bleached,
partially hydrogenated, deodorized, and often winterized to make a variety of popular products, such as salad and cooking
oils, shortenings, and margarine. Soy oil also finds limited industrial use, as in paints, varnishes, and soaps.
A soybean processing plant
can use soybean, soybean oil, and soybean meal futures to hedge its gross processing margin - the difference between the cost
of soybeans and the eventual revenue of the finished oil and meal. Buying soybean futures protects against rising inputs costs.
Selling soybean oil and soybean meal futures protects against falling prices for the later sales of soybean meal and soybean
oil. This risk-management program can help stabilize costs and pricing for the hedger, and can create a profit opportunity
for the speculator willing to take a risk.
Click here to contact a licensed commodities broker with experience in the soybean oil market.