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Liquidity Insights: Soybeans Respond to Trade War

Report: Systematic Strategies

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(Partner Content from CME Group) – As a staple of livestock feed and cooking oil, soybeans are a critical component of diets in some of the world’s largest countries. Many market participants appear to rely on Soybean futures and options to manage the risk of price fluctuations, particularly as uncertainty increases. As a crop, there are a variety of factors that can affect the price of soybeans including: weather, trade patterns, the price of substitutes, and world population growth.

Recently, changes in the global political landscape have had a large effect on the Soybean futures market as well, particularly as the Sino-U.S. trade war has heated up. China has long been the largest market for U.S. soybean exports,1 and increasingly threatening rhetoric regarding tariffs beginning in April 2018 that fueled market uncertainty drove futures volumes to record levels. Even after tit-for-tat tariffs were implemented and the trade tension escalated, April 4, 2018 remains the highest volume day for the CME Group Soybean future since the beginning of the dispute.

In December 2018, the Chinese and American governments agreed to a pause in any additional tariffs while they negotiated a trade deal within the original U.S.-set deadline of March 1, 2019, which now is set to be delayed. Amid the uncertainty of a deal, robust liquidity during recent trade war- related news suggests that CME Group’s Soybean futures markets will remain a central liquidity hub for participants looking to execute trades and manage risks.

Figure 1 – Soybean Futures Volume

Hourly Price and Volume

Retaliatory Chinese tariffs were reported several hours ahead of Chicago trading hours on April 4, 2018. Asian and European traders were able to position themselves using CME Group Soybean futures, with a volume spike at 2 am Chicago time. CME Group’s round-the-clock liquidity allowed traders around the world to promptly take positions in the market in response to the news that signaled that both sides in the dispute were digging in their heels.

Figure 2 – Hourly Price and Volume

Price Movement

Even as volumes spiked at 2-3 am CT, prices dropped and the minimum and maximum prices pulled away from one another. This is typical of a significant market event, but notably the gaps stayed below 2% throughout the Globex session. While the initial news created a gap between maximum and minimum prices, as at the start of the U.S. trading day, markets stabilized throughout the European and American trading sessions until the end of the Globex session at 1:20 pm CT.

Figure 3 –Hourly Maximum and Minimum Prices

Note: Price Range is calculated as:

Bid Ask Spread

In the wake of the tariffs from the Chinese government, spreads for Asian traders widened slightly off from the minimum one tick. This is understandable given the rapid change in the price of futures as participants absorbed the news. What is significant is how quickly the spreads returned to near the minimum of one tick. Looking at two views from the CME Liquidity Tool, the evolution in bid/ask spread on April 4 is clear. During Singapore trading hours, 8am – 8pm SGT, the bid/ask spread increased moderately to about 1.23 on average, as shown in figure 4. In figure 5, showing the bid/ask spread for U.S. trading hours, 7am – 4pm CT, the bid/ask spread for April 4 had already reverted to near one tick. This demonstrates not only the relatively small impact on Soybean futures bid/ask spread in the immediate aftermath of the announcement, even as volumes were spiking, but also the speed of the market’s recovery to near minimum bid/ask spread during the same Globex session.

Figure 4 – Soybean Bid Ask Spread 8am – 8pm SGT

Figure 5 – Soybean Bid Ask Spread 7am – 4pm CT 2


The Sino-U.S. trade war caused price uncertainty for the 2018 soybean crop, especially on April 4, 2018 when the Chinese government announced its first retaliatory tariffs on U.S. agricultural products. Many market participants used Soybean futures to take positions amid this uncertainty, leading to huge volumes traded throughout the day on April 4. Even as the market was moving substantial volumes, CME Group’s markets remained liquid in all time zones, as observed in the bid ask-spread throughout the Globex session. With more news on the trade war expected into the spring of 2019, CME Group’s around-the-clock liquidity will be critical to traders in every region as they position themselves to respond to the results of the on-going negotiations.

Bottom Line

  • In an international trading day, news from any time zone can move markets in CME Group’s products.
  • As the Sino-U.S. trade war has evolved, statements from the Chinese government, made before the Chicago trading day opened, have had a significant impact on volumes and prices.
  • Liquidity during international time zones has allowed traders in all regions to position themselves in response to market-moving tariff announcements.
  • The CME Liquidity Tool shows the impact on average bid/ask spreads during Singapore trading hours and their recovery by the close of the Globex session at 1:20pm CT.

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author(s) and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.


  1. https://www.ers.usda.gov/topics/crops/soybeans-oil-crops/trade/
  2.  Note: the liquidity tool defaults to label Chicago trading hours as 7am – 4pm; the Soybean futures session ends at 1:20pm CT.

Picture: (c) by Aedka Studio — shutterstock.com


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Partner Content from CME Group
Partner Content from CME Group
As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. Through its exchanges, CME Group offers the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. CME Group provides electronic trading globally on its CME Globex platform. The company also offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives through its clearinghouse, CME Clearing. CME Group's products and services ensure that businesses around the world can effectively manage risk and achieve growth.

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