How to invest in soybeans in 2023
This page provides you with a step-by-step guide on how to invest in soybeans. We have supplemented this guide by also emphasising the factors you must consider before making your investment. Following through shall set you up for your first dip into the market.
Where can I invest in soybeans online?
You must first register with an online broker to begin your journey of investing in soybeans. Our commodity experts have picked out the top brokers in the market. To begin investing, click the links below, or continue scrolling to learn more.
77% of retail CFD accounts lose money.
Why invest in soybeans?
Soybeans are extremely versatile legumes and as such, there are multiple reasons why they are a value-add for your portfolio. For instance, most investors invest in commodities to hedge against inflation. The pivotal reasons why you should invest in soybeans are outlined below.
- Hedge against inflation. The risk of a rising rate of inflation poses concern for investors. Inflation occurs as money loses its value over time; however, as this occurs, the prices of essential commodities increase and prove more profitable for investors. As soybeans are multi-functional, adding this commodity to your portfolio can hedge against the risk of inflation.
- Diversify your portfolio. You diversify your portfolio when you invest in commodities like soybeans. Doing so effectively enables you to hedge against specific-asset loss. As soybeans are foundational to a range of essential goods, adding them to your portfolio can hedge against the risk of loss from under-performing assets.
- US demand. US demand accounts for 50% of the global demand for soybeans. The commodity is multi-purpose and is used to make everything from vegetable oil to poultry feedstock, and is even consumed whole. With US demand consistently rising and the US being a leader in the world economy, soybeans can be profitable to an investment portfolio.
5 top tips for investing in soybeans
We have provided guiding steps to making your investment below. Continue reading and follow through to learn how to invest in soybeans.
- Decide on an investment strategy. Before investing in soybeans, you must decide whether you want to be a passive or an active investor. Doing so will determine your appetite for risk.
- Do your research. You must do your due diligence on any asset you are considering for your portfolio and soybeans are no different. Do your homework and come up with a plan using information we have provided on this page for ways to invest in this commodity.
- Set a budget. Never invest more than you can afford to lose. Your risk tolerance should determine your budget.
- Choose between the long term and short term. Whether you invest with a long or short term view depends on your financial goals. If you go with a short term view, consider obtaining a technical analysis. If you go with a long term view, consider obtaining a fundamental analysis.
- Find an investment platform. Not all brokers offer access to investing in soybeans, and you must find one that does. Our expert analysts have selected the top of the market that can start you off today. Click on the button below to find out more.
Ways to invest in soybeans
There are various ways by which you can invest in soybeans. The approach you take should depend on your budget and your experience as an investor. We have picked the best ways for you to get started and the benefits of each as outlined below.
Invest in soybean stocks
The best way to invest in soybeans is by purchasing shares in companies that deal with the market for soybeans. This is because the price of these company shares tends to be directly correlated with the price of soybeans. Examples include: CHS inc. (CHSCP), Norfolk Southern Corporation (NSC), and FMC Corporation (FMC).
Invest in soybean ETFs
An Exchange Traded Fund (ETF) that tracks the performance of the agricultural industry is a great means to gain exposure to the market for soybeans. The price of such ETF shares is usually correlated with the price of soybeans. Examples include: Teucrium Soybean Fund (SOYB), Elements Linked to the Rogers International Commodity Index — Agriculture Total Return ETN (RJA), and Invesco DB Agriculture Fund (DBA).
Invest in soybean mutual funds
Soybean mutual funds are akin to ETFs, the only difference being that fund managers use their expertise to buy and sell shares within a managed fund. Mutual funds exist that specifically focus on agriculture. Examples include: mutual funds that hold stocks of companies that harvest soybeans, mutual funds that hold stocks of companies that produce products made from soybeans, etc.
Invest in soybean futures
Futures contracts are intended as power plays for the experienced investor. Soybean futures enable you to tap into the market through a contract – you must buy or sell a specific quantity of soybeans on a specific date. The caveat is that you must have sufficient understanding of the volatile nature of the market before using futures to invest in soybeans.
How does the soybean market work?
It functions according to the economic principle of supply and demand regulating the price. There are notable factors that determine the supply and demand for soybeans. We have listed the most significant factors that you should track before adding this commodity to your portfolio.
- Weather. Changes in the global climate affect the growth and harvest of soybeans. Extreme weather adversely impacts yield, which then impacts the price of soybeans. If farmers are unable to meet the global demand for soybeans for weather reasons, the overall supply shall drop, and there shall be a rise in the price of the commodity.
- Consumer taste. There is an ongoing trend in the perception of raw soybeans being beneficial for health. For instance, raw soybeans are known by the Japanese as Edamame, an appetiser/ snack that is internationally acclaimed and sells at premium prices. As soybeans are valuable at all stages (raw, refined, and manufactured), there are contentious driving forces to demand for the commodity.
- Southeast Asian demand. Soybeans are the backbone to a range of Southeast Asian staple foods, i.e. tofu. The Southeast Asian market is heavily reliant on the production of soybeans, and the production of soybeans also heavily relies on Southeast Asian demand. If this demand goes up, so will the price of soybeans, and vice versa.
- US dollar. This commodity is quoted in US dollars and therefore, its price is correlated with the strength of the dollar. If the price of the dollar goes up, so does the price of soybeans, resulting in a win for investors. However, if the price of the dollar goes down, so does the price of soybeans, resulting in a loss for investors.
When should you invest in soybeans?
Invest in soybeans when inflation is on the rise. As mentioned above, investing in commodities provides a strong hedge against the risk of inflation. Therefore, a rise in the rate of inflation is the prime time to invest.
In the section above, we have highlighted the most notable factors that impact the soybean market. It is worth your while to stay on top of these factors when planning your investment. For instance, an increase in Southeast Asian demand for tofu (made from soybeans) will result in a drive to produce more soybeans, resulting in an increase in the price of the commodity.
Are soybeans a good investment in 2023?
Yes, but you need to do your homework before you buy into the soybean market. This page has covered the factors that are most likely to impact the price of soybeans this year. For example, if severe weather conditions adversely affect the yield of the legume, global supply shall fall short of demand and the price of the commodity shall increase. All withstanding, the most important factor when determining investment, is the rate of inflation.
What should I do now?
If you are ready for your first investment in soybeans, register with an online broker that enables your access to the commodity. You can also review our Learn Hub – a platform of our courses on stocks, currencies, and crypto. If you prefer to learn about how to trade soybeans instead, you can click the link below for our page on how to do so as supported by our expert analysis.
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