How to Profit from Soybeans

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.
Soy bean field in Santa Cuz, Bolivia

You may be most familiar with soybeans as the snack, edamame, served at your favorite Japanese restaurant or as a dairy-free alternative to milk in your morning coffee. As a commodity, however, soybeans are ubiquitous in the American food supply. Soybeans appear as protein-rich flour in processed foods, vegetable oil and meal for animal feed. In addition, various forms of fermented and prepared soy are staples of many Asian diets. One ETF that tracks the price of soybeans is Teucrium Soybean (SOYB).

This fund is designed to mirror the daily changes of the weighted averages of the closing settlement prices for three soybean futures contracts traded on the Chicago Board of Trade (CBOT). It normally uses direct investment in those futures contracts, but it may also invest in options on exchange-traded soybean futures contracts or in soybean-based swap agreements.

While soybean demand remains high worldwide, soybean production has more than met the demand, depressing prices. Therefore, the fund is down 3.49% for the year. It was up 0.09% in 2012, after a drought.


As a fund tracking a single commodity, this ETF doesn’t own stock in companies, but it instead has weighted holdings in soybean future contracts, specifically: second-to-expire CBOT Soybean Futures Contract (currently March 2014), 35%; third-to-expire Sobyean Futures Contract (currently May 2014), 30%; and the November CBOT Soybean Futures Contract following the third-to-expire contract, 35%.

Soybeans are a major agricultural commodity, but investing in them is usually done through the medium of futures contracts. Now is not the moment to do so, since, in addition to a good start to the U.S. crop, both Brazil and Argentina have planted soybeans in record numbers. But if you do hear about a problem with the soybean crop or a new industrial application that makes these multi-faceted beans even more valuable, Teucrium Soybean (SOYB) is the ETF tool for taking advantage of that news.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing advisory service. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

Read my commodity-based ETF Talk from last week about how commodites could affect the market in 2014. I also invite you to comment about my column in the space provided below.

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