How to trade & invest in soybeans for beginners 2024

Learn how to make your first soybeans investment and get practical tips for both short-term soybeans trading, and how to invest in soybeans long-term.
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Updated: Jan 8, 2024
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In this guide, we explore the foundational aspects of soybeans investments, from the factors that drive soybean prices to the various investment vehicles available, such as spot markets, futures contracts, stocks of soybean companies, and exchange-traded funds (ETFs).

Can I invest in soybeans?

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Yes, investing in soybeans is straightforward and available to anyone using an online trading platform. Investing in soybeans and trading soybeans represent different approaches with varying time horizons. 

Soybean investing involves a long-term perspective with the main aim of growth and diversification. Soybean trading, on the other hand, focuses on short-term price movements for quick gains. 

You can invest or trade soybeans through many different avenues, including physical ownership, soybeans exchange traded funds, or CFDs. To decide on the best approach, you will need to consider your goals and time horizon before aligning your strategy with your specific objectives. 

Where can I trade soybeans online?

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Before you invest in soybeans you’ll need to register with an online broker. Our experts have selected some of the top soybeans trading platforms. Check out any of the links below to get started in just a few minutes.

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eToro offers real assets only, no CFD products. Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Invezz.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD.

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Interactive Brokers (U.K.) Limited is authorised and regulated by the Financial Conduct Authority. FCA Register Entry Number 208159. Products are only covered by the UK FSCS in limited circumstances.

What is soybeans investing?

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Soybean investing gives investors a unique avenue for portfolio diversification and capital growth. As an investment, soybeans can serve multiple purposes. 

Many investors use soybeans as a store of value, as a way to hedge against inflation, or for diversification. soybeans’s historically low correlation with other assets like stocks and bonds makes it a top choice for investors looking to reduce overall risk. 

Although soybean prices can fluctuate in the short term, investors generally focus on the potential for steady and long term growth. This long term focus is what differentiates soybeans investors from traders. When [trading] asset, you are more interested in short term price fluctuations than long term performance. Before taking the first step, it’s important to learn how to invest in soybeans and understand market dynamics. 

What is soybeans trading?

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Soybean trading can take many forms. Speculators, or retail traders capitalise on short term price fluctuations to earn profits. Producers or other entities involved in the soybeans industry can use trading strategies to hedge against future price changes and ensure safety for their business operations. 

Long term investors look to hold positions for extended periods to profit from soybeans’ future growth. Futures contracts, spot markets, options, and various derivative instruments are standard methods for trading soybeans. In the following sections, we’ve explained the different ways you can trade soybeans so you can find the most suitable method. 

Ways to invest in soybeans

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There are several options available when it comes to investing in soybeans and the one you should pick depends on your budget, experience, and the timeframe for seeing returns. Here’s a look at the various ways you can invest in soybeans.

  • Invest in soybeans stocks. Perhaps the simplest way of gaining exposure to soybeans is investing in public companies that are involved in the soybeans industry. The share price of these companies will correlate somewhat with the price of soybeans. You will mainly be looking at companies such as manufacturers, producers, and sellers. 
  • Invest in soybeans ETFs. Exchange traded funds (ETFs) are funds that trade on the stock exchange like any ordinary stock; however, they contain a selection of different stocks, providing a diversified blend for investors. You can also invest in soybeans commodity ETFs, which are funds that have their value pegged to physical soybeans. Our guide on the best agriculture ETFs has a selection of funds to invest in. 
  • Invest in soybeans funds. Mutual funds are created when capital from many different investors is pooled together and a fund manager takes control, using their expertise to decide what soybeans assets to invest in and when to sell them. This can be a great way of investing in soybeans without the strain on your own knowledge and experience.
  • Trade soybeans futures. Futures contracts are the most common way to speculate on short term price changes. They are an agreement to make a trade at a future date for a pre-agreed price. Soybean futures contracts require a detailed understanding of what impacts short term prices, and are most suited to someone with experience in the market.
  • Trade soybeans CFDs. Contracts for Difference (CFDs) are a popular way to speculate on soybeans price movements without having to own the physical asset itself. This makes them ideal for commodity trading, where it’s not practical to own and store large quantities of soybeans. With CFDs, you can profit from both rising and falling prices. CFDs also offer leverage, which can amplify your exposure to soybeans markets. 
  • Trade soybeans options. Options let you buy or sell soybeans contracts at a predetermined price on or before a specific future date. Soybean options trading requires some expertise but allows traders to capitalise on price changes and manage risk, which makes it popular with people familiar with the soybeans market.

How to invest in soybeans – a step-by-step guide

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Investing in soybeans is a simple process. Before you begin, you’ll need to register with an online broker to access the soybeans market. Follow the steps below to learn how to invest in soybeans. 

Step 1. Define your investment timeline

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You should clarify your investment objectives as the first step. Are you seeking long-term capital growth, portfolio diversification, or short-term speculation? Your investment timeline will influence your soybeans investment strategy. 

Step 2. Open a soybeans trading account

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Choose an online broker that offers the soybeans market. We recommend eToro as the best soybeans trading platform. It has one of the widest selections of derivatives available, so you’ll find multiple ways to invest in soybeans. 

Step 3. Choose your investment vehicle

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You can invest in soybeans in many ways. Use our guide above to help you decide which option is most suitable for you. Once you’ve selected, search for your chosen investment using your broker’s search feature. 

Step 4. Analyse the soybeans market

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Before investing, take the time to analyse the soybeans market thoroughly. You can look at factors such as supply and demand dynamics, geopolitical events, and technical analysis. You can use your analysis to help develop an investment or trading strategy. 

Step 5. Make your investment

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It’s time to place your trade when you’ve completed your research and defined your strategy. Search for the market you want to invest in and visit its trading page while logging into your brokerage account. 

Check its price and enter your trade details. You can click buy if you’re investing in soybeans stocks or funds. If you’re trading soybeans using CFDs or futures, consider including a stop loss and take profit level to help protect your position. 

Step 6. Monitor your investment portfolio

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Regularly review your portfolio and its performance. You may want to consider rebalancing if necessary and be prepared to adjust your strategy as the soybeans market conditions change. 

 

Invest in soybeans

What to consider before making a soybeans investment

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When investing in soybeans, it’s important to approach with a well thought out strategy. Considering a range of factors before investing can save you time and money in the long run. Use the helpful tips below to plan your soybeans trading or investing strategy. 

What are your investment goals?

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Before you begin, you should clearly define your investment objectives. Are you seeking quick gains, long term wealth appreciation, or steady income? Knowing your goals before you start can help guide you in your strategy and also which soybeans derivative to use. 

Does soybeans suit your risk tolerance?

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Commodities like soybeans often experience large price fluctuations due to supply and demand dynamics, global events, and economic changes. Make sure you’re comfortable with the potential for market fluctuations. If you’re a short term trader, then ensure you’ve checked the historical price chart for soybeans to determine if it’s volatile enough for day trading. 

Will investing in soybeans add diversification to your portfolio?

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For long term investors, diversification is one of the core principles to follow. When you invest in soybeans and add it to your portfolio, make sure it complements your existing investments. For example, if you already own several soybeans stocks, you may be better off choosing another commodity. 

Take the time to study the soybeans market dynamics. 

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Like many commodities, soybeans have unique characteristics and supply and demand fundamentals. To trade soybeans, studying the broader soybeans market, especially historical price trends is essential. Before you invest in soybeans, you will need to understand the factors that influence their value. 

Choose the right investment vehicle.

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We’ve already discussed the options available to you to buy soybeans. Each has its own advantages, so you should select the one most suited to your investment goals. For example, trading soybeans is best done via futures, options, CFDs, and spot. If you invest in soybeans, stocks or ETFs are the way to go. 

How does the soybeans market work?

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The soybeans market functions similarly to other commodity markets. However, not all commodities move in the same way and soybeans have a number of unique features that make them independent. Below are some of the key factors at play.

  • 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. 
  • Supply and demand. Like all markets, the biggest driver of soybean prices is the principle of supply and demand. Many factors impact the supply and demand of soybeans, including production levels, consumption, and even geopolitical events. 
  • Exchanges. Soybeans are traded on several exchanges where buyers and sellers transact. The price of soybeans may be slightly different between exchanges. The main soybean exchange is the CBOT.
  • Hedging. The soybeans market is often used for hedging purposes. Producers of soybeans may use futures contracts to protect against future price fluctuations, resulting in stability for their business practices. 
  • Speculators and investors. Retail investors and traders can impact soybeans prices. This is especially the case for short-term movements, where speculators provide liquidity to the market and impact near-term price dynamics. 

Is soybean a good investment?

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This really depends on the key supply-demand drivers, the status of the global economy and your own needs and desires as an investor. Soybeans have many benefits that make it a good choice for investors. Its main advantage is its role in diversification. It also has a low correlation with traditional assets such as stocks and bonds, which means if you include soybeans in your portfolio, you’ll spread risk and add stability. 

You can also use soybeans as a hedge against inflation. When inflation rises, the value of soybeans historically appreciates. The real world use of soybeans also creates constant demand. However, it’s important to remember that soybeans investing is not totally risk-free. 

A wide range of factors influences its price, so you’ll need to have a solid understanding of market dynamics before investing. 

What are the risks of trading soybeans?

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Trading soybeans has the potential for significant rewards but also carries risks you need to be aware of. These risks are the same across the overall commodity market, but for soybeans, several more specific ones apply. Below, we’ve explained the main risks of soybeans investing.

  • Volatility. The soybeans market is known for its price volatility. Compared to other markets, the price of soybeans can widely fluctuate daily. It can be costly if you’re unprepared for the volatile nature of the soybeans market. 
  • Macroeconomic factors. Soybean prices are affected by several macroeconomic factors, such as industrial demand, inflation, interest rates, dollar strength, and geopolitics. Before trading soybeans, you should have a good understanding of these. 
  • Soybeans have no yield. Unlike with other investments such as bonds or dividend stocks, soybeans do not provide any income yield. So, any returns you make rely entirely on its value increasing over time. You may encounter long periods of flat prices that can reduce your profits. 
  • Low liquidity. In general, commodity markets have less liquidity than more mainstream assets like stocks or currencies. Low liquidity can be problematic, especially if you’re a trader, as you may have wide bid-ask spreads, which could impact the ability to enter or exit positions. 
  • Regulatory risks. Government policies can play a role in the way soybean prices move. Export restrictions or changes in tax regulations could introduce unforeseen risks. 

Bottom line

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Soybean investing offers the opportunity for diversification and portfolio growth. soybeans have potential benefits as a store of value and hedge against inflation, but it’s essential to weigh the risks such as price volatility and market uncertainty before investing. 

One of the key benefits of the soybeans industry is the various ways you can get involved. There is an investment vehicle for everyone, from soybeans stocks and ETFs for long term investors to soybeans futures and CFDs for short term traders. A trusted and regulated trading platform is a must if you want to navigate the soybeans industry successfully. 

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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.