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Mean reversion of the soybean crush spread: A new model and trading strategies

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  • Abdoh, Hussein
  • Chitavi, Michael

Abstract

The U.S. Department of Agriculture (USDA) reports have long provided vital information influencing commodity prices. However, no study has examined how intraday deviations of soybean products from the processing relationship reflected in USDA estimates affect the soybean crush spread. We introduce a new market-based measure that captures these deviations in the short term. They significantly explain transitory movements in the crush spread, temporarily departing from its long-run equilibrium. Our simulations demonstrate that trading strategies based on these findings would have been profitable, even after accounting for transaction costs. This analysis is based on 8650 trading days from September 1990 to May 2021.

Suggested Citation

  • Abdoh, Hussein & Chitavi, Michael, 2025. "Mean reversion of the soybean crush spread: A new model and trading strategies," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003491
    DOI: 10.1016/j.iref.2025.104186
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    More about this item

    Keywords

    Gross crush margin (GCM); Soybean; Mean reversion; USDA; Intraday data; Soymeal; Soyoil;
    All these keywords.

    JEL classification:

    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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