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|This article describes a commodity traded on a commodities exchange. View articles referencing this commodity.|
The United States grows more soybeans than any other country in the world, accounting for 32% of the world's production. Its fields yield 2,585 million bushels of soybeans every year.  Farmers in the rest of the world are closing the gap, however, enticed by a continued rise in soybean prices. In 1980 the U.S. it produced 60 percent of the world's soybeans, but by 2005 it produced only 39%. .
Despite increased world supply, the price of soybean futures has increased more than 80% in 2008 because of soybean oil's use in biodiesel and as feed for fish farming. Another factor in soybeans' rise is China's urbanization, as Chinese cities buy large quantities of tofu and other soy products.   As soybean prices rise, agricultural companies benefit, while companies that use soybean products and derivatives face higher production costs.
Unlike other Commodities, derivative components of soybeans are also bought and sold by hedgers and speculators on futures markets. These derivative soybean products are soybean meal and soybean oil. Both are the result of pressing and seperating soybeans into their oil and meal components.
Soybean meal can be processed into soy flour or soy protein, but in general the meal is used as livestock feed.
Soybean oil is used as an edible oil for cooking and salad dressings, as well as a component of butter substitutes such as margarine.
While the prices of the two derivative commodities are generally strongly correlated with each other and the prices of underlying Soybeans, a move of the price of one derivative commodity against the other is indicative of extremely high demand for one resultant product. Note that, as the processing of Soybeans necessarily results in the production of both soybean meal and soybean oil, the total supply of each will always remain constant relative to the other.
Note also that a consumer of one of the derivative products could acquire meal or oil by beginning with whole soybeans and processing them herself, thus an increase in demand for one of the derivatives will necessarily correlate with an increase in the demand for the underlying beans.
The following table illustrates world production of Soybeans in 2007.
|World Production of Soybeans in 2007||Million Bushels||Million Metric Tons|
Soybean prices have nearly doubled in 2008, due to lower production and the increased usefulness of soybeans. Last year, demand for ethanol and rising corn prices caused many farmers to use all their fields for corn. Usually, corn farmers plant half corn and half soybean. By the laws of supply and demand, fewer soybeans mean higher soybean prices. The summer of 2008 has seen increased soybean production once again, to compensate for scarcity.
Below are some factors that impact supply and demand for soybeans:
The current short supply of soybeans could be somewhat exasperated by the spread of Soybean Rust in the Americas. Soybean Rust has been identified in 15 states and throughout South America. It is a wind-borne fungal disease that attacks soybeans and other plants.  There is a growing body of research aimed at treating Soybean Rust, but no definitive solution exists. During the 2003 growing season, the pathogen was detected in most of the soybean growing regions of Brazil with a conservative yield loss estimate of 2.2 MMT, or approximately 5% of the annual production. 
Soybeans are processed by companies like Archer-Daniels-Midland Company (ADM) and Cargill, which use machines to split the soybeans' proteins from their oils. These oils may be used for cooking, and the creation of biodiesel. Increasing gas prices have made biodiesel far more attractive, thus increasing soybean prices. Because heavy machinery is used in soybean harvesting, increasing gas prices make soybeans more expensive to produce, and thus boost their prices.
While the growing need for alternative fuel has boosted corn and soybean prices, the increase in soybean prices can also be attributed to its unique industrial applications. Once the oil is extracted from soybeans, its protein is used to enrich animal feed. Because of its high protein content, the booming farm fishing industry uses soy to replicate the meat which many fish are accustomed to eating. Farm fisheries once used fish meal, which is far more expensive than soy meal even with its recent price shock. Soy is combined with newspapers to create quality building materials which replace wood in furniture, flooring and countertops...
Scientific investigation of soy has now made its use incredibly wide spread. Soy is the main ingredient in many types of particleboard, laminated plywood, commercial carpet, auto upholstery, clean-burning diesel engines, environmentally friendly solvents, industrial lubricants, cleaners, paints, non-toxic crayons, candles, ink cartridges, high-quality lubricants, hydraulic fluids, and foams. As of October 2007, new Ford Mustangs use soy foam in their seats.  Soy can usually substitute for petroleum in most senses, and it is often cheaper to do so. As science develops more effective way to use the soybean, its price will increase along with its demand. Increased soy production will mitigate the price increase.
Millions of gallons of soy-based biodiesel are already being produced in the United States every day, and the fuel is used in over 200 US fleets. It is slightly less powerful than petroleum diesel, but burns much cleaner with much higher lubrication. This means fewer engine maintenance expenses and less pollution. Biodiesel is significantly more powerful than ethanol, yielding 120,000 BTUs per gallon versus 80,000 BTUs.   Because Biodiesel has higher energy content, and is best produced with soybeans, soybean prices will increase as it becomes more demanded.
While the use of bio-fuels like ethanol and biodiesel has benefits (especially when mixed with normal diesel due to enhanced lubrication), it has garnered world controversy because of its perceived role in the world food crisis. As a growing number of countries approach the brink of mass food shortage, biofuel development will face more significant moral opposition. Any legislation or international move to curtail biofuel development will lower the price of soy-beans, because they would be less valuable as food than as a potentially viable substitute to gasoline. 
Besides moral issues, many scientific reports claim that soy is actually not fit for human consumption. Reputable studies have found that soy products are very dangerous to infant health due to large amounts of the female hormone estrogen. Soy contains significant amounts of genistein and daidzein, which are known to cause genetic damage, and cancer. Soy is often blamed for increasing incidence of breast cancer among other health harms. Soy also contains the "anti-nutrient" phytic acid (blocks the intake of important vitamins and minerals), trypsin inhibitors, toxic lysinoalanine and cancer causing nitrosamines. These supposed health hazards are bitterly disputed by soy producers, but have merited further investigation by the FDA as well as the German Government. If soy is proven to be dangerous to eat, its prices may drop significantly. Its growing number of industrial applications may cushion this possibility. 
2008 United States soybean production is projected to drop 105 million bushels to 3 billion bushels, because less harvested area and yield. The USDA predicts 2008/09 ending stocks for soybeans to be 140 million bushels, down 35 million from last month. 
Expert analysis notes that predicted year-end inventories for soybeans are dangerously low. Despite increased acreage dedicated to soybeans, it is possible that burgeoning global demand for soybeans may be halted completely by a supply shortage in 2008/2009. In the worst case scenario, soybean prices could rise to $19 or more per bushel, depending on the South American yield which is currently uncertain.