The Soybean Crush Spread
A soybean is worth more taken apart than whole — crushed into soybean meal and soybean oil — and the crush spread measures exactly how much more, which is the margin a processor earns and the trade a spread trader chases.
Prerequisites: Agricultural Futures and Crop Cycles, Crack Spreads
A soybean isn't sold as a soybean for most of its economic life — it's crushed. A processing plant breaks it into two separate products, soybean meal (mostly used as livestock feed, roughly 80% of a bean's weight by the standard conversion) and soybean oil (used in cooking oil, biodiesel, and other products, roughly 11% by weight after milling losses), and sells both separately. The crush spread measures the difference between the value of those two products combined and the cost of the beans it took to make them — it's literally the processor's gross margin, and it trades as its own instrument on the futures exchange.
The crush spread equals the combined value of soybean meal and soybean oil produced from a bushel of soybeans, minus the cost of that bushel. It is the processor's raw margin before operating costs, and standardized industry conversion factors (about 11 lb of oil and 44 lb of meal per bushel of soybeans crushed, roughly) let it be quoted and traded as a single spread on the exchange.
Why the spread, not the beans alone, is what a processor actually trades
A soybean processor's business is buying beans and selling two derivative products whose prices don't move in lockstep with beans or each other — meal demand is driven by livestock feed economics, oil demand by cooking oil and biodiesel policy, while soybean prices reflect the broader crop balance. A processor is really running a margin business, and that margin can be positive or negative regardless of which direction soybeans move, because what matters is the relationship between beans, meal and oil, not any one price alone.
The exchange formalizes this by quoting a standard "board crush": using conversion factors of roughly 11 lb of oil and 44 lb of meal per bushel, a trader can construct the crush spread directly from futures prices without ever handling physical beans — buying soybean futures while selling meal and oil futures locks in that period's crush margin as a tradeable position.
Worked example
Soybean futures trade at $13.20/bushel. Soybean meal futures trade at $390/short ton, and soybean oil futures trade at $0.52/lb. Convert to a per-bushel basis: meal value = 44 lb × ($390 / 2,000 lb) = 44 × $0.195 = $8.58/bushel. Oil value = 11 lb × $0.52 = $5.72/bushel. Combined product value = $8.58 + $5.72 = $14.30/bushel. Crush margin = $14.30 − $13.20 = $1.10/bushel.
A processor crushing 100,000 bushels can lock this margin in today by buying the beans forward and simultaneously selling meal and oil forward at these prices, capturing roughly $110,000 in gross margin before crushing costs (energy, labor, capital), regardless of which direction all three prices subsequently move together.
What this means in practice
Processors use the crush spread to hedge their operating margin directly, rather than hedging beans, meal, and oil separately and hoping the net result works out. Spread traders take positions on the crush itself when it looks unusually wide or narrow relative to typical processing costs, betting the spread reverts to normal — a bet on the relationship between three prices, not on where any one is headed.
A wide crush spread doesn't necessarily mean processors are making outsized real profits — the "board crush" ignores actual operating costs (energy, labor, plant capacity, transportation), which vary by processor and region. It's a standardized benchmark margin, not any single processor's actual bottom line.
Further reading
- CME Group, 'Soybean Crush' reference guide