Work

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

Year: 2025

Type: article

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.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.104186

Authors: Hussein Abdoh, Michael Chitavi

Institution: Citadel

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Zero hunger

Open Access status: gold

Estimated APC paid: $1,930