Term
| What is the most prevalent method for crushing soybeans? |
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Definition
Uses a solvent to extract the oil from the soybean.
Beans are pretreated
Flaked to destroy cell walls
The crude oil further processed to remove the solvent and other compounds to leave only the pure soybean oil |
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Term
| What happens to the soybean flakes after extracting oil |
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Definition
| ground into meal for high protein livestock feed |
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Term
| What is soybean oil's primary use? |
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Definition
| A food-grade product. Blended in with other edible oils like canola and corn to make "cooking oil" |
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Term
| How is partially hydrogenated soybean oil made? What is it used in? Why is it a perfect ingredient for processed foods? |
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Definition
add hydrogen to the vegetable oil
used in processed foods like baked goods, crackers, and frozen foods
solid at room temperature, never goes bad unlike natural soybean oil |
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Term
| Why is the use of partially hydrogenated soybean oil decreasing? |
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Definition
| it is a trans fat which increases LDL cholesteral and herat disease so the FDA announced a ban on most added trans fats which will take effect in 2018 |
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Term
| What is one very minor use of soybean oil? |
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Definition
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Term
| What is soybean meal's only use? |
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Definition
| livestock feed, mostly for animals other than beef cattle |
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Term
| Why is the oilseed crushing business competetive? |
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Definition
| Because the inputs (soybeans) and outputs (oil and meal) are both commodities and because the production technology is easy to replicate and well understood. |
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Term
| In long run firms in a competetive market with identical technology (identical production functions), what is true of expectation of gains and losses? |
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Definition
| no gains or losses in long run |
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Term
| What needs to be considered when determining price relationship of soybeans to meal and oil? |
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Definition
| Need to convert soybean meal from $/ton to $/lb |
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Term
| What does the expression for the Crush Spread represent. What do industry participants use it for? |
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Definition
Represents the Gross Processing margin for the soybean crushing plant.
Used to guage profitability in the industry and to signal expansion or contraction in the crush business |
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Term
| When the Soybean Crush Spread is calculated with futures prices instead of spot prices, it is called what? |
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Definition
| Board Crush of Board of Trade Crush |
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Term
| How do speculators trade on the Broad Crush? |
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Definition
| selling (buying) oil and meal and buying (selling) soybeans |
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Term
| What do oil processors use the Board crush for? |
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Definition
| hedge their positions in the cash markets for oil, meal, and soybeans to lock in processing margins |
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Term
| What is buying the Spread? When does it make money? |
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Definition
1-1-1 spread where
Buy 1 contract soybean oil
Buy 1 contract soybean meal
Buy 1 contract soybeans
Makes money when the spread widens, oil and meal go up while soybeans go down
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Term
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Definition
1-1-1 spread where
Sell 1 contract soybean oil
Sell 1 contract soybean meal
Buy 1 contract soybeans
Makes money when spread narrows, oil and meal go down and soybeans go up |
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Term
| What are the futures contracts quantities for soybean crush? What does this imply for the 1-1-1 spread? |
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Definition
Soybean oil = 60,000 lbs
Soybean meal = 100 short tons or 200,000 lbs
Soybean = 5,000 bushels
does not represent equivalent quantities of the three things |
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Term
| What spread do the oil procesors use? |
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Definition
9-11-10
9 contracts oil
11 contracts meal
10 contracts soybeans
The quantities match more closely
10,000 lbs short on oil coverage |
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