Soybean Futures Reach New Contract Highs: An ETF to Play the Move

Soybean futures reached a new contact high recently, possibly noting that traders expect more upward price pressures ahead as record inflation continues.

“Several factors are creating this rally,” a Successful Farming article noted. “First is the rumor of large corn and soybean sales to China. Second is the large fund buying by investors that are seeking an inflation hedge. Third, end users are buying because of the hot weather forecasts.”

Another factor is the ongoing conflict between Russia and Ukraine. Ukraine is a soybean exporter, and Russia currently has a stranglehold in the Black Sea, preventing exports from reaching other parts of the world.

As such, economic factors of supply and demand are at work. With Russia practically holding soybean exports hostage by occupying the Black Sea, high demand can only be met once Russia allows exports to leave Ukraine — thus, prices have been on the move higher.

While there have been negotiations between Russia and Turkey, nothing substantial is yet in place to allow for exports to leave Ukraine. The larger ramifications of this blockade could mean a global food crisis, so soybean and other commodity traders will be watching this event closely.

“Various ideas have been put out for the export of Ukrainian grains to the market and most recently is the UN plan [including] a mechanism that can be created between the UN, Ukraine, Russia and Turkey,” Turkish diplomat Mevlüt Çavuşoğlu said. “We see it as reasonable.”

An ETF to Play Soybean Prices

Whether for short-term trading or as an inflation hedge if rising consumer prices are persistent, one way to play rising soybean prices is via exchange traded funds (ETFs) that offer exposure to the commodity. This is available via the Teucrium Soybean Fund (SOYB).

Via a dynamic investment vehicle — the ETF — SOYB can offer similar exposure to what investors could obtain by trading in soybean futures contracts themselves. For investors looking at ways to mute the impact of inflation, commodities may also be beneficial for inflationary periods, according to experts, making them a valuable hedge against the recent surge in the prices of goods and services over the past year.

For more news, information, and strategy, visit the Commodities Channel.