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.
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.
[2] To calculate the crush margin of one unit of soybeans, take the % value of the soybean meal and oil futures (e.g., in CNY/metric ton purchased on the Dalian Commodity Exchange) and subtract the value of the soybeans (e.g., in USD/bushel purchased on the Chicago Board of Trade): This requires making two conversions—from bushels to metric tons and from USD to CNY.