Updated on July 23, 2024

Soya. Food also known as plant meat. However, soy does not have to serve only as food for vegans and vegetarians. Soybeans are also a popular commodity to trade. And you can also invest in it as a small trader. In this article, we will first introduce you to soybeans and their uses. And then we will look directly at how it is possible to trade soybeans. You will learn when it is a good time to trade this commodity and what indicators it is necessary to monitor.

Soybeans – properties and uses

Growing soybeans

Soy is a cash crop. Legumes to be exact. So we can say that soybeans grow in our fields. These are the fruits of a plant called leguminous soybean. This cash crop, originally from China, is grown in countries with a warmer climate. That is, in tropical and subtropical regions. But it is also possible to grow it in a temperate zone. But only in warmer areas.

Legume soybeans are sensitive to too low, but also too high temperatures. For example, if it is located in an area where temperatures drop below 18 °C, this can negatively affect their growth and flowering. Likewise if their ambient temperature exceeds 34 °C. The amount of precipitation can also affect the flowering of this economic crop. While in the past there was no need to artificially irrigate soybeans, nowadays natural rainfall is often not enough. In addition, artificial irrigation of soybeans contributes to higher flowering. And thus also a higher production of soybeans.

Soy producers

Now let’s take a look at which countries are famous for producing soybeans. As already mentioned, these are states that are located in the tropical and subtropical zones. And if the country in question has favorable temperature conditions, it can also lie in a temperate climate zone.

Two states are in the lead by a large margin. And those are the USA and Brazil. Soybean production in these two countries exceeds 100 million tons. These two largest producers of leguminous soybeans are followed by Argentina, China, India and Paraguay.

Soybeans and their uses

When you think of soy, you probably think of the modern way of eating. It is consumed in various forms by vegans, vegetarians, but also by people who just want to diversify their diet with this food. Among the well-known food products made from soybeans is mainly tofu . It is a food from which it is possible to prepare various dishes. It is mainly used as a meat substitute. In addition, soybeans are used to produce, for example, soy milk, soy oil or soy sauce.

Soy is a traditional ingredient for Asian cuisine. Europeans may experience various problems when consuming soy. For example, allergic reactions are common. In addition, due to the high content of allergens and other substances, it may be unsuitable for children. But soy is not only consumed by humans. It also serves as fodder for farm animals. Soybeans are a rich source of vegetable protein. This crop contains up to 35% of them.

Soybeans are mainly known as a raw material that is used in the food industry. But there are a number of other sectors where soy finds its application. We can name, for example, the production of cosmetic products. For example, soaps and body oils. However, soybeans are also used as an ingredient in the production of biodiesel and plastics.

History of soybeans

As already mentioned, leguminous soybeans originate in Asia. Specifically in northern and central China. It is said to be one of the oldest commercial crops, whose wild predecessor was already known 25 thousand years ago. As archeological findings confirm, soybeans should have been an important food item for the then inhabitants of the Chinese territory. If we were to look at when people began to purposefully grow leguminous soybeans, it happened roughly 5 thousand years ago. The first written mention of soybeans comes from books called Pen-Cao-Kong-Mu. These date back to 2,800 years ago.

Soybeans did not reach Europe and America until the 18th century. While it reached Europe, specifically Holland, thanks to the botanist Karl von Linnaeus, it was brought to America by Samuel Bowen. And although this crop came to the US as early as the 18th century, China was the main producer of soybeans until World War II. After World War II, however, the situation changed. Most soybeans are now produced in the USA and Brazil.

How to trade soybeans         

Now you know everything you needed to know about soybeans. So how can you trade with them? There are several options. It depends on you which one you choose.

Soybeans and CFD trading

Small individual traders do not normally trade on a commodity exchange. Why? Because it is where soybean producers meet those who need to actually own them. However, individual traders do not need to physically own them. And that’s why there are CFD contracts. It was they who opened the market to small traders.

When trading CFDs, or trading contracts for difference, you do not buy any physical commodities. You don’t even sell. Soybeans act only as an underlying asset in this type of trading. And it is up to you as traders to speculate on the development of the price level of this commodity. So if you think the price of soybeans should rise, then you “buy” them. If, on the other hand, it should fall, then you “sell” soybeans.

In both cases, you conclude a contract with a broker. Both parties thereby undertake to pay the other party the difference between the purchase and sale price of the asset. So if you speculated correctly, the difference will be paid by the broker to you. And the earnings will not miss you. Otherwise, you will have to pay the difference to the broker. And in that case you will lose.

Soybeans and Stock Trading

Another way you can invest in soybeans is to buy stocks . And that of companies whose activity is based on soy production or its further processing. By purchasing these shares, you become a shareholder in the company of your choice. What are the benefits? First, you get the right to vote at general meetings. And thus the possibility to indirectly participate in the further direction of the company.

And secondly, you are entitled to a dividend. The point is that shareholders usually get a certain percentage of the company’s income. But it doesn’t always have to be like that. You must note that companies are not obliged to pay dividends. So if the company goes bankrupt, your dividend goes down too. Alternatively, there may not be any.

There are even companies that do not pay dividends to their shareholders. On the contrary, they reinvest all their earnings into their development. This increases the value of the given company. And with it, the value of the stock you hold also rises. The fact that the company does not pay dividends does not always have to be harmful. As a result, you can earn precisely on the difference between the purchase and sale price of the share.

And if for some reason you don’t want to own a classic stock, you can also trade stock CFDs. In that case, again, you do not actually own any specific share. You are only speculating on the development of its price level.

Beware of risks

As with any other investment, investing in soybeans should be aware of potential risks. The risk, of course, is that the price of soybeans will move in the opposite direction than you anticipated. So it may happen that your investment in the shares of a company dedicated to the production and processing of soybeans will come to nothing.

However, with CFD trading, the risk is even higher. It consists in the fact that when trading CFDs, you are trading with financial leverage. It can multiply your resulting profit and loss. How high a number? That depends on how high leverage you are trading. Therefore, always check its amount. Because the higher the leverage, the higher the risk.

How to begin

Starting a soybean business is not a science. First of all, you need to monitor the soy market. So you should have an overview of what is happening in the market now. Above all, you should monitor indicators that can affect the value of this commodity. What indicators are these? This will be discussed in the next part of the text.

Another starting point for a successful entry into the world of investment in soybeans is also the appropriate choice of broker. You will find a really huge number of them on the web. Choose between them carefully. Not every one of them will offer you the same conditions. Moreover, you might find scammers among them. First of all, you should check if the broker allows you to trade this commodity. After that, you still need to check the fees and security. Be sure not to skimp on studying reviews.

After finding the ideal broker for your trading, be sure to take advantage of the benefits that most brokers offer these days. And that is the practice demo account. On it you can test whether your estimates of the development of the price level are correct. At the same time, you can also familiarize yourself with the trading platform of the broker even before you start trading soybeans in earnest.

What affects the price of soybeans

Now let’s look at what factors can affect the price of soybeans. Since this is an agricultural commodity, you should definitely keep an eye on the weather. If soybeans do not have suitable growing conditions, you cannot expect a bumper crop. Therefore, you should monitor whether it is not too hot or, on the contrary, cold.

And you should include humidity in your research as well. You should watch the weather especially in the main producers of this crop. That is, on the territory of the USA and Brazil. Expect that the smaller the harvest of this commodity, the higher its value.

Another variable that determines the value of this commodity is seasonality. The current price of soybeans therefore depends on the time of harvest. And you should also follow the current political and economic situation in the world. The price of this commodity could be affected by export restrictions or the imposition of customs duties.

Soybeans – current online chart

How is the value of this commodity? On the chart you can see its current price as well as its development over the past years.

Development of interest in the commodity

When is it appropriate to sell soybeans and when, on the contrary, to buy them? It’s usually the same every year. It depends on the harvest time. It takes place in the fall. Usually during September to October.

Soybeans – Summary

So is it worth trading soybeans? If you are properly prepared, familiarize yourself with the trading platform and regularly monitor market events, it can definitely pay off. Additionally, since it is an economic commodity, you can derive the appropriate time to buy and sell from regular seasonal trends. These depend on the time of harvest.