The Learn About Futures Insider for August 25, 2011: Soybeans

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Contract Size: 5,000 Bushels
Price Quote & Tick Size: Cents per bushel; minimum fluctuation is ¼ cent per bushel ($12.50 per contract)
Contract Months: January, March, May, July, August, September, November
Trading Specs: Trades open outcry and Globex (electronic) per the following schedule:
Electronic: 6:00 pm - 7:15 am and 9:30 am - 1:15 pm Central Time, Sunday - Friday
Open Auction: 9:30 am - 1:15 pm Central Time, Monday - Friday
Daily Price Limit: $0.70 per bushel expandable to $1.05 and then to $1.60 when the market closes at limit bid or limit offer. There shall be no price limits on the current month contract on or after the second business day preceding the first day of the delivery month.
Trading Symbols: Open Outcry - S; Electronic - ZS

Soybean Facts

Soybeans have been cultivated for food and other uses for nearly five millennia. Originally native to eastern Asia, the modern farming areas for this oilseed occur on nearly every continent. In the United States they were originally considered an industrial product and after their initial introduction to North America they were grown for hay. It was only during the twentieth century that America began to use soybeans as a food product.
Since soybeans are produced in large quantities in both the northern and southern hemispheres, crop news and weather is relevant nearly all year. Cultivation is most successful in climates with hot summers and plenty of sunshine – up to and over 14 hours per day – can be important to the flowering stage of a soybean plant.

Price highlights for this market include:
- Soviet purchases of grains in 1972 sparked a rally in soybean prices that went from less than $4 per bushel to more than $12.
- A shift in the US government's policies and a jump in Brazil's soybean production led to a drop in prices after 1973's high.
Volatility remained, bolstered by the Soviet Union's 1979 grain embargo.
- In 1988, prices topped $10 per bushel again as drought was forecast to cut production by almost 40 percent. The following year soybean prices dipped back below $6.
- Prices peaked again in 1997, driven by strong exports causing concerns for potentially low ending stocks in the US.
- Bumper crops towards the end of the 1990s brought prices back down towards $4 per bushel.
- Back to back seasons of lower production, and damage from aphids brought renewed fears of low supplies of soybeans in 2004. This helped spike prices back over $10 per bushel.
- 2008 delivered fresh demand for soybeans in biodiesel and other applications, and flooding in US growing areas helped propel the market to fresh highs around $16.60 per bushel. A strong sell off ensued, but prices stayed above the levels seen in the early 2000s.

Key Concerns

Weather – As with most field crops, soybeans have sensitivities to light, temperature, and moisture. When planting, soybeans perform best when soil has warmed to 50 degrees Fahrenheit or better since they are susceptible to frost damage. Early planting in cool, wet soils reduces the likelihood of germination and increases risks of disease. During the full maturity stage, anywhere from five to ten days of dry weather are required to reduce moisture levels in the soybeans to less than 15 percent. Long storage periods will mean less moisture is desirable in beans to prevent mold and spoilage issues.
Genetic Modification – With the advent of biotechnology and the ability of scientists to adjust and modify plants for particular traits comes controversy over the impact on biodiversity. Roundup Ready crops allow farmers to sow seeds directly and possibly reducing soil erosion with no-till farming; however, there are theories that breeding the gene directly into many soybean cultivars may reduce genetic diversity, which can open up a whole host of problems - including disease resistance. Many countries do not allow GM crops, which causes export issues; especially when no GM stocks are cross contaminated with GM crops.
Disease and Pests – Again, as with most field crops, soybeans can play host to any number of plant and bean devastating molds or pests.Some diseases may destroy parts of the plant while others threaten the soybeans directly. Of the most widely recognized issues, a few are listed below
Phytophthora Root Rot – Spread by spores from infected plants in soil and occurs most frequently in areas of clay soils and in flooded soils. Kills roots.
Soybean Cyst Nematode – A microscopic roundworm that infects soybeans roots and causes significant loss in soils where it is abundant – as much as 20 bushels an acre can be lost in a dry year and in sandy soils.
Septoria Brown Spot – A common leaf disease that can lead to up to fifteen percent yield losses.This fungus spreads in warm, humid weather.