Besides being an ingredient in sushi, soybeans are used to make soy milk, vegetable oil and feedstock. You can invest in soybeans in different forms including beans, oil and meal (coarse flour). Most investors opt for soybean futures, but you can also invest in futures options, exchange-traded funds (ETFs) and companies that deal with soybean-containing foods and products.
Soybeans are a commodity. Because they are used to make staple pantry products and animal feed, they continue to have demand even when the market is struggling, which could make them a good investment. Of course, with the recent coronavirus outbreak, it’s at a relatively low price. But it’s expected that this will recover towards the end of the year.
You might be more familiar with soybeans with their Japanese name, “edamame.” These are often offered in sushi restaurants—delicious with a sprinkle of salt and a little soy sauce! Soybeans aren’t just used for food, though. Oil can be extracted from soybeans and used to make vegetable oil, margarine and shortening, which many people have in their cupboards.
Soybeans is also made into a coarse flour, or meal, which can be used to feed poultry and livestock. It’s also used to make protein alternatives and soy milk. On the industrial side, it can be found in paint, resins, plastics and biodiesel fuel.
The majority of the global supply of soybeans comes from the United States, Brazil and Argentina. Soybeans are the third largest field crop in Canada based on the amount of cash income and direct program subsidies that it generates.
There are 4 main ways that you can invest in soybeans:
This can work in your favour, if you buy the futures contract while the prices are low and they increase before the agreed date, then you make a profit. It can also go the other way, though!
To buy soybean futures, you agree to buy a set number of bushels of soybeans at a set price. On the date of expiration, the transaction is made.
Upon expiration of the contract, you’re often required to actually receive the delivery of soybeans, so (unless you’re hungry or own a sushi restaurant or otherwise have a need for a ton of soybeans), you’d need to exit your position prior to this.
Futures options give you some of the benefits of buying soybean futures, without getting any soybeans delivered to your home. Futures options are the right to buy or sell futures in a specific time period at a set price. Options can be traded, and become worthless if they aren’t used.
Exchange-traded funds are a popular investment choice. They’re aimed at tracking the performance of an asset, in this case, soybeans.
ETFs can be traded on an exchange in the same way you could trade equities on the stock exchange.
The main soybean ETF is Teucrium Soybean (NYSEArca: SOYB), which is a fund aimed at giving direct exposure to soybeans without futures contracts. It can be purchased on the NYSE Arca. The Invesco DB Agriculture Fund (NYSEArca: DBA) is an ETF that isn’t solely focused on soybeans but still provides some exposure to the crop.
The following companies deal with soybeans and may be worth investing in if you want to back the products and processes that rely on the crop.
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