A beginner’s guide to soybeans: Price, uses & market overview

Explore a thorough overview of the soybeans market, learn how it works in simple terms and get to grips with its significance as a popular global commodity.
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Updated: Dec 4, 2023
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On this page, we explore everything you need to know about soybeans. Gain insights into soybeans market trends, pricing mechanisms, and the environmental impact of soybeans. 

Read on to learn more about this popular commodity and find links to beginner friendly guides explaining how you can get involved in soybeans. 

What are soybeans?

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A soybean is a bean that forms the basis of foods and chemical products. It holds the hallowed title of ‘most economically important bean in the world’, as it’s packed full of protein and used to produce foods like tofu and soy sauce as well as animal feed.

That makes soybeans an important part of the global ecosystem. It’s relatively interchangeable with grains like wheat, corn, and barley, which can also be used to provide food for humans and animals, but it is always going to have value as the population of both keeps growing.

Native to East Asia, Soybeans are a globally traded agricultural commodity. The versatility of soybeans has fueled production in recent years, with global output reaching 257 million metric tons in 2020. 

Soybeans market overview

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Soybeans became popular around the world in the early 1900s when Chinese soybean oil reached Europe. The futures market emerged shortly after in the 1930s as exchanges like the Chicago Board of Trade started offering contracts to mitigate harvest and weather risks. CBOT Soybeans are at the forefront of global trading, with hundreds of millions of tons moving between exports like Brazil and the US to importers like China and Europe. 

Extreme weather and the supply or price of other crops like corn impact the value of soybeans. Poor weather conditions destroy harvests, while it’s easy for farmers to switch crops at the start of a planting cycle depending on what offers a better price. Both factors cause demand to outstrip supply and push the price up.

Sentiment can also play a big role in the market. Agriculture commodities are often traded a few months before they’re actually harvested. There are regular releases from government departments detailing expectations for the next harvest, which in turn prompt people to buy or sell based on those future numbers.

Are soybeans valuable? 

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Yes, soybeans are a valuable commodity and there are numerous reasons why investors are attracted to the market. We have highlighted some of these key fundamentals below, explaining what they are and why they matter.

  • Hedge against inflation. The risk of a rising rate of inflation poses a 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 underperforming 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. 

How to invest in soybeans

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You can invest in soybeans by using a commodity trading platform. These platforms offer a range of commodities and are very easy to use. There are different platforms suitable for specific requirements. 

Some let you buy soybeans, others let you trade soybeans, and many are designed for investing in the grain. Visit our dedicated guide to discover how to invest in soybeans.

Soybeans in your investment portfolio

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A diverse investment portfolio can help protect you during market uncertainty, and the inclusion of soybeans can add value while allowing you to spread your money across various markets. 

Soybeans often move independently to traditional investments like stocks and bonds. You can include soybeans in your portfolio as a hedge against potential losses. During times of economic uncertainty, investors view commodity grains such as soybeans as attractive options. 

Soybeans’s long history and the fact it is a versatile commodity used across the world, make it a good long term play.

Soybeans vs other commodities

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Soybean is an agricultural commodity like wheat, corn, and coffee. Each commodity is unique in its own way and offers different features for investors and traders. You can learn more about specific agricultural commodities using our dedicated guides below. 

  • Wheat. Wheat is a grain that is grown around the world and is used for various foods. 
  • Corn. Corn is one of the most versatile commodities with many uses, including livestock feed, biofuel, oil, and food. 
  • Rice. Rice is the most popular grain commodity and a staple for half the world’s population 
  • Coffee. Coffee is the most consumed and popular beverage in the world. 

FAQs

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Prash Raval
Financial Writer
Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.