Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

As Soybean Prices Climb, Here’s An ETF That Focuses On The Oilseed

By Investing.com (Tezcan Gecgil/Investing.com )ETFsMay 06, 2021 04:09AM ET
www.investing.com/analysis/as-soybean-prices-climb-heres-an-etf-that-focuses-on-the-oilseed-200577720
As Soybean Prices Climb, Here’s An ETF That Focuses On The Oilseed
By Investing.com (Tezcan Gecgil/Investing.com )   |  May 06, 2021 04:09AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

There are several thematic exchange-traded funds (ETFs) for investing in agricultural commodities. And we have previously discussed a few (here, here and here). Now, as soybean prices are at multi-year highs, let’s extend the discussion to another agricultural fund that focuses on this commodity.

Soybeans Monthly
Soybeans Monthly

Soybean is an oilseed crop. About 85% of soybeans cultivated are used as animal feed. The rest is used for direct human consumption.

When the oilseed is crushed, the result is soybean meal and soybean oil. Archer-Daniels-Midland (NYSE:ADM) and Bunge (NYSE:BG) are among the leading names that process soybeans.

According to the US Department of Agriculture (USDA):

"Processed soybeans are the world's largest source of animal protein feed and the second largest source of vegetable oil. The United States is the world's leading soybean producer and the second-leading exporter."

The top exporter of soybeans is Brazil. On the other side of the equation is China, the world’s most populous nation. It is the largest soybean importer worldwide. Around 60% of the US agricultural produce exports to China are soybeans.

Otsuka Pharmaceutical, which is part of Japanese Otsuka Holdings (OTC:OTSKY), highlights:

"The world's biggest soybean producer, the US, produces about 73 million tons per year. Its population, however, only consumes on average about 40 grams of soy per person per year. This is less than the amount eaten in one day by the average person in Japan."

In other words, the Western diet does not use soybeans as much as Japan or China, the country that primarily affects the demand and hence the price of soybeans. China is also seeing a strong hog herd recovery from the swine fever epidemic that affected previous quarters. As a result, the nation has an increased demand for soybean meal-based animal feed.

Before agricultural ETFs became widely available, investors would typically trade derivative contracts on soybeans at futures and options exchanges, such as the CME Group. ETFs have introduced a new (and potentially easier) way to invest in such commodities.

Many financial planners point out that commodity investment can help diversify traditional stock and bond portfolios. With that information, here's our fund that could appeal to a range of investors.

Teucrium Soybean Fund

  • Current Price: $23.37
  • 52-Week Range: $13.38 - $23.39
  • Expense Ratio: 2.34% per year

The Teucrium Soybean (NYSE:SOYB) gives investors exposure to soybean futures contracts without the need to open a futures trading account. The fund started trading in September 2011, and assets under management are around $93 million.

SOYB Weekly
SOYB Weekly

SOYB tracks the performance of three soybean futures contracts (with different expiration dates) that are traded on the Chicago Board of Trade. In other words, it does not track the spot price of soybeans.

So far in 2021, SOYB is up close to 20% and hovering at multi-year highs. Soybean bulls might want to put the fund on their radar and consider buying the dips. However, they also need to remember that the fund has a high expense ratio.

Finally, whenever we cover commodity-based ETFs that are based on futures contracts, we remind readers that investment in futures contracts (even through funds) can be volatile.

Farmers and agricultural firms use futures markets to hedge their risks. Therefore, these markets have an important purpose. However, each commodity also has unique trading characteristics as well as supply and demand properties. Therefore, prior to investing, individuals would need to do proper due diligence.

Several concepts, such as “rolling-over,” “contango” and “backwardation,” which we have discussed before, are important for appreciating how futures contracts usually behave. Futures traders regularly roll from one futures contract to another. Otherwise, they could be subject to physical delivery of the commodity. This rolling over creates either a positive (in backwardation markets) or negative (in contango markets) roll yield.

In simple terms, backwardation typically means demand exceeds supply, i.e., markets want the produce now. So when the soybean market is in backwardation, farmers would want to sell their produce today as opposed to a future date. They do not have an incentive to store soybeans to sell in the future.

Bloomberg recently reported that commodities, including soybeans, are in steep backwardation. Therefore, the current demand might continue to push up prices. However, potential investors would need to keep a close eye on the balance between global supply and demand.

As Soybean Prices Climb, Here’s An ETF That Focuses On The Oilseed
 

Related Articles

As Soybean Prices Climb, Here’s An ETF That Focuses On The Oilseed

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Rodolfo Barraco
Rodolfo Barraco May 06, 2021 9:45AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Been looking for soy investing vehicle for months! Good article. Hope it came out back in dec-jan
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email