A crush spread is a commodity trading strategy in which the trader takes a long position in soybean futures against short positions in soybean meal futures and soybean oil futures to establish a processing margin.
Soybeans are processed into two products—meal and oil—through a process called “crushing”, which is where the term stems from. The crush spread is the difference between the combined value of meal and oil and the value of the original soybeans. The crush spread is a gauge of the soybean processor's profit margin, or the gross processing margin from crushing soybeans.
The soybean processor will be interested in the crush spread as part of its hedging strategy, traders as part of its risk management strategy, speculators will look at the crush spread for trading opportunities.
Soybeans processors can use the crush spread in order to lock in a gross profit margin, and cover the risk of adverse price fluctuation: inflation of soybeans inputs and deflation of