By-products of processing soybeans include soybean oil and soybean meal. The crush spread is created to measure the profit margin of the soybean processor.
The crush spread currently being monitored is the January (buy 2 contracts) soybeans/March (sell 5 contracts) soybean oil/March (sell 22 contracts)soybean meal. This ratio creates the greatest accuracy for real world soybean processing margins.
The crush spread has been on an upward incline since the beginning of September. This upward move would imply soybean processors are offsetting risk by selling soybean oil and soybean meal. An increase in the crush spread would also imply soybean processors are expecting expanded processing of soybeans. With record projections of 3.42 bushels of soybeans harvested this year and Brazil on pace to pass the U.S. in Soybean production this year as well, soybean processors should stay very busy for the forseeable future. If this is the case, major profits from the soybean crush spread could be ahead.