crush spread

The purchase of soybean futures and the simultaneous selling of soybean oil and soymeal futures, or vice versa. It is an inter-commodity spread, which is the difference between the prices of a commodity, soybeans, and its two products, soybean oil and soybean meal. Crush strategies can be a profitable way to take advantage of price differences between the underlying product and those that are derived from it. Spreads typically are traded by commercial users such as food manufacturers. By trading spreads, hedges can be moved from one contract month to another. Trading spreads also provides a method to recover costs such as storing or financing inventories.