How to Invest in Soybeans
The soybean is a legume native to Asia, known for an edible bean that is an efficient source of protein. Soybeans are used in the production of numerous foods, including soybean oil, soy meal, and various meat and dairy substitutes.
Soybeans have some appeal as investable assets, though many prefer to employ other agricultural commodities to hedge against rising food prices.
Options for investors seeking exposure to soybeans are somewhat limited; though this commodity is included in several ETFs, there are no pure play options available. There is a market for soybean futures that allows pure play exposure.
Ways to Invest in Soybeans
There are 3 ways to invest in Soybeans: ETFs, Futures, and Stocks. Click on the tabs below to learn more about each alternative.
What are Soybeans ETFs?
There is currently one U.S.-listed ETF that offers a pure play on soybeans, the Teucrium Soybean Fund (SOYB). This product offers exposure to multiple soybeans futures contracts and features a unique roll methodology that helps the fund mitigate the negative impact of contango.
This commodity is i also ncluded in many broad-based agricultural products. The most popular ag ETF is the PowerShares DB Agriculture Fund (DBA); this product includes a base weight to soybeans of about 12%. Other agricultural ETFs include the UBS E-TRACS CMCI Agriculture ETN (UAG), which includes weightings to soybeans, soybean oil, and soybean oil.
International investors may have more options available to them; ETF Securities offers pure play soybean ETFs, including products delivering inverse and leveraged exposure.
What are Soybeans Futures?
Investors with the ability to roll holdings and understanding of the nuances of future markets can utilize futures contracts to gain exposure to this commodity. There is a very liquid market for soybean futures on the Chicago Mercantile Exchange; contracts representing 5,000 bushels (about 136 metric tons) of #2 Yellow soybeans are priced in cents per bushel. Deliverable grades also include #1 Yellow at a 6 cent/bushel premium, and #3 Yellow at a 6 cent/bushel discount.
Contract months include January (F), March (H), May (K), July (N), August (Q), September (U), and November (X), and the last trade date for each month is the business day prior to the 15th calendar day of the contract month. Soybeans trade on the CME Globex under the symbol ZS and in Open Outcry trading under the symbol S.
How to Buy Soybeans Stocks
For some commodities, such as precious metals, it is possible to gain indirect exposure through an investment in companies that are engaged in production or extraction. Because there are no publicly traded companies focused exclusively on growing soybeans, achieving exposure through this strategy is challenging.
There are, however, some options available. Many agribusiness firms provide products and services to farmers, and the profitability of these companies often shows a correlation to agricultural spot prices. Some of the largest agribusiness firms include Potash (POT), Monsanto (MON), and The Mosaic Company (MOS). Agribusiness stocks are certainly not a pure play on soybean prices, but can be used to gain exposure to agricultural commodities in certain environments.
Soybeans in the News
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