CME Group » Agriculture » Implied Soybean Crush Spreads
Implied Soybean Crush Spreads
Soybean, Soybean Oil and Soybean Meal Futures in a Single Instrument

Effective trade date Monday, August 3, 2009, implied Soybean Crush spreads will be listed on CME Globex.

Soybean Crush Spreads: What They Are and How They Are Used
Soybean Crush spreads allow traders to better manage risk using combined components of the Soybean, Soybean Oil and Soybean Meal futures markets in a single instrument. The board crush spread is often used by processors to hedge the margin between the purchase price of Soybean futures and the combined selling price of the Soybean Meal and Soybean Oil futures. It also offers opportunities for other traders, as the spread relationship between soybeans and the soybean by-products varies over time.

How Soybean Crush Spreads Are Traded
The crush spread is quoted as the difference between the combined sales value of soybean meal and soybean oil and the price of soybeans. Soybean futures are traded in cents per bushel, Soybean Meal futures in dollars per short ton, and Soybean Oil futures in cents per pound. As a result of these differences in units, conversion of meal and oil prices to cents per bushel is necessary to determine the relationship of the three commodities and potential trading opportunities. When trading the Soybean Crush, the trader buys or sells the equivalent of 50,000 bushels of the Soybean Crush, or 10 Soybean futures contracts, 11 Soybean Meal futures contracts, and 9 Soybean Oil futures contracts. This is the smallest ratio of contracts that accurately represents the equivalent yields of the three commodities.

Therefore, the new implied Soybean Crush spread on CME Globex will be a fixed 3-legged spread consisting of:

  • Leg 1: Soybean Meal futures – 11 contracts
  • Leg 2: Soybean Oil futures – 9 contracts
  • Leg 3: Soybean futures – 10 contracts

The Soybean Crush price will be calculated using the respective different fixed quantities as follows:

Soybean Crush = Leg 1 (Soybean Meal Price x 0.022) + Leg 2 (Soybean Oil Price x 11) - Leg 3 (Soybean Futures Price)

The spread price will be anchored by leg 1, Soybean Meal futures, based on current market conditions.

How the Implied Functionality Works
Outright orders in the Soybean, Soybean Meal and Soybean Oil futures will be used to create implied Soybean Crush orders. However, trades will only be matched in the specified fixed ratio of contracts. Implied bids are always rounded down to the nearest tick and implied offers are always rounded up to the nearest tick.

Explicit Soybean Crush spread orders entered into CME Globex, will be calculated as implied orders into the Soybean, Soybean Meal and Soybean Oil futures markets. These implied bids and offers become eligible quotes but they are not publicly disseminated.

The Soybean Crush will feature the Modified K algorithm, the same as all CME Group Commodity products.

Contract Delivery Month Combinations
Soybean Crush Jan Mar May July Aug Sep Oct Dec
Soybeans Jan Mar May July Aug Sep Nov Nov
Soybean Meal and Oil Jan Mar May July Aug Sep Oct Dec

November Soybeans are shared by October and December crush spreads

New strategy type: SI
Product Code: SOM
Crush Tick: ¼ of a cent

For more information, please contact:

Chicago Office
Rich Jelinek
Associate Director
CME Group Products and Services
312-930-2320
richard.jelinek@cmegroup.com

London Office
Jeffry Kuijpers
Associate Director
Commodity/Alt. Investment Products
011 (44) 207-796-7108
jeffry.kuijpers@cmegroup.com

Chicago Office
Brenda Tucker
Associate Director
CME Group Products and Services
312-454-8304
brenda.tucker@cmegroup.com

Singapore Office
Nelson Low
Director
Commodity Products Asia
11-656-550-9621
nelson.low@cmegroup.com