An Introduction to Soybean Oilshare Futures and Options
Soybean Oilshare futures, listed on the Chicago Board of Trade, are a cash-settled derivative based on the CME Soybean Oilshare Index® (codes COSI1-COSI9), which represents the share of soybean crush revenue attributable to soybean oil. Expressed as a percentage, the Soybean Oilshare Index® is calculated via the daily settlement price of Soybean Oil futures divided by the combined value of Soybean Oil and Soybean Meal futures, in standardized units.
Soybean Oilshare futures settle each day using a volume-weighted average price calculation during the daily settlement period of 1:14 – 1:15 p.m. CT, while final settlement of Soybean Oilshare futures is based on the relative Soybean Oilshare Index® value. Soybean Oilshare futures and options cease trading on the last Friday, which precedes by at least two business days, the last business day of the calendar month preceding the contract’s named expiry month, while Soybean Oil and Soybean Meal futures continue to trade into the named expiration month. Soybean Oilshare options exercise into the future.
Soybean Oilshare futures and options will allow market participants to trade the relative value of Soybean Oil to Soybean Meal simply and efficiently, with lower margin costs than legging a spread between Soybean Oil and Soybean Meal futures. Soybean Oilshare futures and options will closely follow the contract specifications of Soybean Oil futures and options and provide 15 monthly contracts of Jan, Mar, May, July, Aug, Sep, Oct and Dec.
Understanding the crush
Soybean crushing is the process of crushing whole soybeans to produce soybean meal and soybean oil. Soybean meal is used as a high-protein animal feed while soybean oil is a vegetable oil used in various food, fuel and industrial applications.
In order to compare the relative value of Soybean Oil to Soybean Meal, common units must first be established. Soybean Oil futures are priced as cents per pound while Soybean Meal futures are priced as dollars per 2,000-pound short ton and Soybean futures are quoted in 60-pound bushels. When a bushel of soybeans weighing 60 pounds is crushed, the conventional result is 11 pounds of soybean oil, 44 pounds of 48-percent-protein soybean meal, four pounds of hulls and one pound of waste. The common method to compare soybean oil prices directly with soybean meal is to convert the Soybean Oil futures price to the price per 11 pounds and convert the Soybean Meal futures price to the price per 44 pounds, or the outputs from crushing one bushel of soybeans.
Calculating Oilshare
Historic front-month Oilshare
The CME Soybean Oilshare Index,® on which Soybean Oilshare futures and options ultimately settle, represents the share of soybean crush revenue attributable to soybean oil, using Soybean Oil and Soybean Meal daily settlement prices.
While the Soybean Oil futures price is officially quoted as cents per pound it can also be interpreted as the price in dollars per hundredweight – that is a price of 60.00 is officially 60 cents per pound but can also be interpreted as $60 per hundredweight. Multiplying this price by 0.11 (11 / 100) converts the price of Soybean Oil futures from the price per 100 pounds to the price per 11 pounds. Similarly, the Soybean Meal futures price is the price per short ton (2,000 pounds). Multiplying this price by 0.022 (44 / 2,000) converts the Soybean Meal futures price to the price per 44 pounds.
Accordingly, the CME Soybean Oilshare Index ® is calculated accordingly in the CBOT Rulebook:
Where:
BO = Settlement price for the referencing Soybean Oil futures
SM = Settlement price for the referencing Soybean Meal futures
For example, at a Soybean Meal settlement price of $286.90 per short ton, the price of meal converted to 44 lbs equals $6.31 (286.90 * 0.022). That same day, Soybean Oil settled at 41.72 cents per pound (or dollars per hundredweight), equivalent to $4.59 per 11 lbs (41.72 * 0.11). At these prices, Soybean Oilshare should be 42.10%, or (4.59 / (6.31 + 4.59)).
Example Soybean Oilshare calculation
|
Soybean Oil (BO) futures |
Soybean Meal (SM) futures |
BO per 11 lbs |
SM per 44 lbs |
Total Crush Revenue |
Oilshare |
|---|---|---|---|---|---|
|
41.720000 |
286.900000 |
(BO * 0.11) = $4.59 |
(SM * 0.022) = $6.31 |
($4.59 + $6.31) = $10.90 |
($4.59 / $10.90) = 42.10% |
The value of the CME Oilshare Index ® using front-month Soybean Oil and Soybean Meal futures prices has vacillated between 25.8% on September 9, 2014, and 52.7% on May 11, 2022. The index value saw dramatic increases in 2021 as soybean oil became increasingly valuable as a feedstock under domestic and international policy to encourage biofuel production.
Presenting a forward curve of relative value
Soybean Oilshare futures and options (OSF and OSO) are listed for 15 contract months of Jan, Mar, May, July, Aug, Sep, Oct and Dec, presenting a robust forward curve and mirroring the listing cycle of Soybean Oil and Soybean Meal futures.
Presently, Soybean Oilshare is demonstrating backwardation, a condition whereby the nearer-expiring price is higher than the prices of longer-term expirations. Backwardation suggests higher present demand for an asset, and with Oilshare understood as a proxy for the relative value of Soybean Oil to Meal, higher near-term demand for soybean oil relative to meal.
Soybean Oilshare forward curve on March 10, 2025
For more on the fundamental value of oilshare, see What Is Oilshare? To learn more about Soybean Oilshare futures and options, visit https://www.cmegroup.com/markets/agriculture/oilseeds/soybean-oilshare.html
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
