What is Bean Oil?
Bean oil derives from the soybean. The oil is then sold as a vegetable oil and the by-product (which is the soybean meal), is often given to animals as a source of feed. Bean oil is also a main source of biodiesel.
Uses of Bean Oil
One of the by-products which comes for the production of the bean oil is Lecithin. This is a natural lubricant and emulsifier, this is used in a large array of foods, industrial and commercial applications. This is also used in chocolate bars to keep the cocoa butter and cocoa from separating.
Another use of bean oil is in pharmaceutical products and protective coatings.
Bean oil is also used in the production of:
- Salad dressing
- Non-dairy coffee creamers
Bean oil is often used in processed foods. Processed foods are becoming one of the most harmfully portions of the modern age diets and have been attributed to disease and poor health.
Risks of Bean Oil
Like any futures contract, there is always the possibility that the underlying asset i.e. bean oil will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of Rice to rise), if this were to happen and the corn fell in price, your long position in corn will decrease in value.
Cultivation risks associated with growing soybeans such as low rain falls, insects, snails, disease, temperature, wind and solar radiation. All these factors can affect the level of output a farm is able to produce hence affecting the price of the soybeans.
Demand and supply can also form a large part of bean oil as being a by-product from the soybean plant, this should also be taken into consideration for investors.