The output of soybean affects the price of soybean meal every year. When the soybean harvest is good, the price of soybean meal will fall, and when the soybean harvest is bad, the price of soybean meal will rise. At the same time, there is also a correlation between soybean oil and soybean meal. When the price of soybean oil is good, soybean meal falls, soybean oil is unsalable, soybean meal output decreases and soybean meal price rises.
The benefit of soybean crushing is one of the important factors that determine the supply of soybean meal. For the press manufacturers, higher profits will expand production and increase the demand for soybeans. At this time, the supply of soybean meal and soybean oil will increase relatively, resulting in a relative increase in soybean prices and a relative decrease in soybean meal and soybean oil prices. Similarly, when the crushing profit is too low or even at a loss, manufacturers will reduce the production scale, thus reducing the demand for soybeans. As a follow-up product, the supply of soybean meal and soybean oil is bound to decrease.
According to this, there is a classic cross-species arbitrage strategy-squeeze arbitrage strategy. Press arbitrage includes soybean forward press arbitrage and reverse press arbitrage. When the crushing profit is high, investors can buy soybeans and short soybean meal and soybean oil arbitrage. This market behavior is called forward squeeze arbitrage. When the crushing profit is low, investors can arbitrage by short selling soybeans and buying soybean meal and soybean oil at the same time. This kind of market behavior is called directional squeeze arbitrage.
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