How is crush spread calculated?

The crush spread is a dollar value quoted as the difference between the combined sales values of the products and the cost of the raw soybeans. This value is traded in the cash and futures markets based on expectations of future price movement of soybeans versus the components.

What is a commodity crush spread?

A crush spread is an options trading strategy used in the soybean futures market. A soybean crush spread is often used by traders to manage risk by combining separate soybean, soybean oil and soybean meal futures positions into a single position.

What does crush mean in agriculture?

The term “crush” comes from the soybean processing sector where soybeans are crushed to produce oil and meal. Traders use the soybean, soybean oil, and soybean meal futures to find and mange profit opportunities as the three related markets trade months before the beans are physically processed.

What is a crush trader?

Trading the Crush Selling the crush means selling Soybean Oil and Soybean Meal, and buying Soybeans. This is the trade typically used by hedgers. Buying the crush, which is also known as the reverse crush, means buying Soybean Meal and Soybean Oil, and selling Soybeans.

What is soy bean crush?

The Soybean Crush In the soybean industry, the crush refers to both the physical process of converting soybeans into oil and meal and the difference in value of the soybeans to that of those products.

What is ethanol crush margin?

The crush margin measures the cost of ethanol against the cost of feedstock corn used to produce the biofuel. A simple crush margin can be calculated by dividing the cost of corn per bushel by 2.8, the number of gallons of ethanol that a bushel of corn can produce.

What are crushed soybeans used for?

About 85 percent of the world’s soybeans are processed, or “crushed,” annually into soybean meal and oil. Approximately 98 percent of the soybean meal that is crushed is further processed into animal feed with the balance used to make soy flour and proteins.

What is oilseed crush?

In the past, crushing was done between mill stones that later became steel rolls. Hence the factories are known as oil mills and the process as oil milling or oilseed crushing. The pressure exerted in the process squeezes out the oil.

What is a squeeze crush?

A squeeze crush has a manual or hydraulic mechanism to squeeze the animal from the sides, immobilizing the animal while keeping bruising to a minimum. A sliding entrance gate, operated from the side of the crush, is set a few feet behind the captured animal to allow for clearance and prevent other animals entering.

How is ethanol crush margin calculated?

A simple crush margin can be calculated by dividing the cost of corn per bushel by 2.8, the number of gallons of ethanol that a bushel of corn can produce. The resulting number is the cost of corn per gallon of ethanol.

What is the definition of a crush spread?

A crush spread is a commodity trading strategy in which the trader takes a long position in soybean futures against short positions in soybean meal futures and soybean oil futures to establish a processing margin.

What does the crush spread mean for soybeans?

The physical crush is the process of converting soybeans into the by-products of soybean meal and soybean oil. The crush spread is a dollar value quoted as the difference between the combined sales values of the products and the cost of the raw soybeans.

What is the value of the corn crush spread?

The physical crush is the process of converting corn into the byproducts of ethanol and distillers’ dried grains (DDGs). The corn crush spread is a dollar value quoted as the difference between the combined sales values of the products (ethanol and DDGs) and the cost of corn.

Who is the crush spread strategist at Investopedia?

James Chen, CMT, is the former director of investing and trading content at Investopedia. He is an expert trader, investment adviser, and global market strategist. A crush spread is an options trading strategy used in the soybean futures market. The general term for this is a gross processing margin.