What is Soybean?
Soybean is one of the most important beans on a global scale. The soybean is able to provide oil and protein. Soybean can be used in areas such as vegetable oil, animal feed and foodstuffs. With the Soybean being in such demand it has been seen as a stable source to be used in the futures market.
Uses of Soybean
A large portion of the world's soybean crop is processed into soybean meal and soybean oil. Any by-product which leftover is then processed in other ways or eaten whole. Soybeans are used in Tofu and Soymilk production.
Soybeans have also been used by farmers to replenish the soil after different types of crops e.g. corn (maize). The soybean plantation brings the nitrogen levels of the soil back up to a fertile level ready for the next crop to be planted.
Different verities of soybeans can include:
- Soya 791
With each of these variants used in different regions and for different purposes such as food grade beans down to manure option only beans.
Risks of Soybean
Like any futures contract, there is always the possibility that the underlying asset i.e. soybean will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of soybean to rise), if this were to happen and the soybean fell in price, your long position in soybean will decrease in value.
Cultivation risks associated with growing commodities like soybeans are: low rain falls, insects, 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.