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Analysis of the soya price on the stock markets

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Among the different agricultural commodities on which you can trade online using CFDs we find soya which is in fact increasingly popular with investors. This plant is mainly cultivated for its oil and is actually the largest produced oil bearing bean or seed in the world. In this article you will learn all you need to know about trading in soya with a presentation of the principal characteristics of this stock market commodity as well as advice for analysing its price in the best way possible.  

Elements to consider before investing in this asset

Analysis N°1

The soya market presents a positive correlation with that of oilseed in general given that these oils and cake can be substituted for each other. We would therefore monitor the other oilseeds and their market prices.

Analysis N°2

The price of soya is also sensitive to the climate conditions in the producing countries such as those of South America. These conditions will of course strongly influence the world supply such as in 2011 and 2012 when the drought drastically reduced the supply and therefore led to a rise in the price.

Analysis N°3

Given that soya is used for the production of two other by-products, oil and flour or cake, it is important to monitor the demand in these two sectors to be able to correct predict the price.

Analysis N°4

Finally, we know that many investors apply a crush spread trading strategy on soya. This means that they buy a soya flour contract and simultaneously sell a soya oil contract which reduces their risk exposure on the market and enables them to cover their investments. This data should therefore be taken into account in your analyses.

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General presentation of the soya commodity:

As stated in the introduction, soya is an agricultural commodity the price of which is quoted on the stock markets. To better understand how the quotation of this commodity works you will need to first understand the major characteristics of this agricultural commodity In terms of supply and demand.

Concerning supply, we know that soya is the most produced oilseed throughout the world. We also note that soya oil, extracted from the seed or bean represents 18% of this total and is the second most produced vegetable oil worldwide, just after palm oil.

We also note that it is in Latin America that the majority of soya is produced as the culture of this agricultural product has been rapidly developed there over the last few decades. Brazil is the largest producer of soya worldwide with an output of over 90 million tons each year which represents over 36% of the market total. The second largest producer of soya is the United States with 89.5 million tons per years. In third position of this global classification is Argentina which produces just over 52 million tons per year.

In Argentina and the United States it is the GMO soya that represents almost the entire soya production. Over the last 40 years the global production of soya has multiplied by five.

Concerning demand, we know that soya beans are mainly used to produce cooking oil and margarine. They are also used in the production of bio-diesel and in certain industries. The cake which is the residue obtained through the extraction of soya oil, is also used as a source for protein for animals in numerous countries including those of the European Union which are the largest importers due to a low local production of protein rich foods for animals.

Over recent years we also observe an increase in soya consumption in all its forms, notably due to the rise in popularity of eco-fuel and the rise in consumption of meat throughout the world. Among the largest importers of soya we find China which alone accounts for 50 million tons per year. This country is also one of the largest for the transformation of this commodity and in fact, over time has become the largest producer of soya oil and soya cake, even overtaking the United States in this sector.


Quotation and history of soya on the stock markets:

The price of soya is quoted on the CBoT, or Chicago Board of Trade, in the same manner as for other agricultural commodities such as wheat and corn. The price is quoted in American dollars per bushel.


Some information on soybean prices before investing:

First, and as stated briefly in the introduction, soya is a particularly volatile commodity on the stock markets. Therefore you need to ensure you monitor certain fundamental indicators that are particularly important to ensure you do not overlook a trend or trend inversion.

One of the most significant indicators to follow relates to the meteorological conditions in the major soya producing countries such as Brazil, Argentina and the United States. This is the same for all factors that could influence the production. In fact, the demand for soya doesn’t tend to vary greatly and it is mainly the supply that will enable you to determine the significant trends in the price of this commodity.

However, relating to demand it is possible that it is influenced by other factors. This would notably be the case for other oilseeds that are lacking in quantity or where the demand increases given that soya is a major substitution product. In the same way, and if the production of other cereal crops destined for animal feed increases, this would generate a lower interest and therefore a possible significant drop in the price.

Just the fundamental analysis will not be enough to point you to the strategy you need to adopt for trading in the soya price due to the high volatility of this type of asset. Due to this fact it is very important to systematically complete, before taking position at any time, a comprehensive technical analysis of this asset. To do so you will probably wish to use certain technical indicators such as the mobile averages which will provide you with a more precise understanding of each market trend.

Frequently Asked Questions

On which markets is the price of soya quoted?

The price of soya is currently quoted on the Chicago Board of Trade, or CBoT, market which was created in 1848 and which is the second oldest trading market in the world after the rice market in Dojima. This American financial marketplace references over 50 options and futures contracts on soya and other agricultural commodities such as wheat, corn, coffee and cacao.

Is it possible to physically purchase soya?

Apart from the soya you find in trade which is destined for consumers you will not be able to buy soya physically on the stock markets as these transactions are reserved for the industry professionals. However you can take buying or selling positions on this food commodity using specific contracts such as CFDs, or Contracts for the Difference, and thereby profit from a rise in the price of this commodity.

How has the price of soya evolved over the last ten years?

Over the last decade we are able to observe a falling trend in the price of soya on the stock markets. In fact, the price per bushel decreased from 11.10 dollars to 8.35 dollars over a ten year period. However we can observe a major historical peak in 2012 to over 17 dollars per bushel. We can therefore note from the historical stock market charts of this asset that it is extremely volatile.

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