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How Agriculture Crush Spreads Act as Real-Time Indicators

Crush spreads, which have been trending, are barometers of soybean supply and demand and a real-time indicator of processor profitability.
Soybean crush spread

Soybeans are a member of the legume, or pea, family of vegetables. The beans have been a staple of Asian cuisines for thousands of years. While beans have many applications, the raw soybean is rich in protein. Tofu, soymilk, edamame, soy nuts, and sprouts are unfermented foods. Fermented soy products include miso, tempeh, natto, and soy sauce.

Brazil and the United States lead the world in annual soybean production. The most significant uses include cooking oil, animal feed, sustainable fuel, and everyday household products. Soybean processing involves crushing the raw soybeans into two forms: meal and oil. Soybeans trade on the Chicago Mercantile Exchange’s CBOT division.

The exchange also offers contracts in soybean meal and soybean oil. The crush spread is the price difference between the products and the raw beans. While edamame and other raw soybean products are popular, meal and oil have far more applications, making the crush spread a significant factor for the path of least resistance of raw soybean prices. 

Crush spreads signal real-time soybean fundamentals 

  • Crush spreads are real-time indicators of the demand for soybean products.
  • Rising oil and meal prices and outperformance compared to soybean prices indicate increased demand for soybeans and can be a bullish indicator.
  • Falling oil and meal prices and underperformance compared to soybean prices translate to declining demand for soybeans and can be a bearish indicator.
  • Soybeans, meal, and oil contracts trade on the CME’s CBOT division. 

The crush is a real-time indicator of bean processor profits

  • Archer Daniels Midland (ADM) processes soybeans into soybean products in the U.S., a leading soybean-producing country.
  • Bunge Ltd. (BG) crushes soybeans into soybean products with a significant presence in Brazil, a leading soybean-producing country.
  • Crush spreads are an earnings indicator for ADM and BG. 

Crush spreads rallied to a record high in 2023

  • The crush spreads rose to a record 355.50 cents per bushel during August 2023.
  • Crush spreads have been trending higher over the past decade, reaching record highs in 2021, 2022, and 2023.
  • Green energy initiatives have pushed crush spreads higher as soybean oil is a primary ingredient in biodiesel, an alternative fuel.
  • Rising demand for animal proteins has caused increased soybean meal prices, as the meal is the primary ingredient in animal feeds.

Current crush spread levels indicate robust bean demand 

  • At 249.25 cents per bushel in mid-September, crush spreads are at the pre-2022 highest price level.
  • Crush spreads indicate the increased demand for soybeans and oilseeds.
  • The crush spread also translates to higher profits for ADM and BG.
  • Since the March 2020 pandemic-inspired lows, ADM shares appreciated over 175%, from $28.92 to over $80 per share.
  • Since the March 2020 pandemic-inspired lows, BG shares appreciated over 295%, from $29.00 to over $115 per share.

Crush spreads are barometers of soybean supply and demand fundamentals and a real-time indicator of processor profitability.

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