Soybeans Futures Trading Basics

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Contents

How To Trade Soybeans

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Last Updated on August 16, 2020

3 Reasons You Might Invest in Soybeans

Investors purchase agricultural commodities such as soybeans for a variety of reasons, but the following are most common:

  1. Inflation and Weak US Dollar Hedge
  2. Bet on Demand Growth
  3. Portfolio Diversification

Can Soybeans Serve as a Hedge on Inflation and Weak US Dollar?

Soybeans are a way to bet on a weak US dollar and higher inflation.

Since agricultural commodities, such as soybeans, are priced in US dollars, the performance of the world’s largest economy plays a crucial role in their pricing. Easy-money policies from the US Federal Reserve Bank have kept the US dollar weak. Furthermore, US central bankers are likely to continue these policies to support consumer borrowing and spending.

A weak dollar could stoke inflation concerns and bolster soybean prices.

Will the Demand for Soybeans Rise?

Soybeans are likely to be a big beneficiary of strong global growth, especially in emerging market economies. Their demand for livestock feed and in oils will probably grow as the developing world becomes richer. Demand in the developed world may also outstrip supply in the coming years. And factors such as growth in biodiesels could contribute to this demand.

Diversifying Your Investment Portfolio

Most traders have the vast majority of their assets in stocks and bonds. Commodities such as soybeans provide traders another way to diversify and reduce the overall risk of their portfolios.

Should I Invest in Soybeans?

Investors who want exposure to soybeans should consider buying a basket of commodities that includes other agricultural staples such as wheat, corn, barley, and sugar. For true diversification, they should add metals and energy as well.

Purchasing a basket of commodities helps protect traders from the volatility of any individual commodity. It also adds overall diversification to an investment portfolio.

There are two specific trends that could boost soybean prices in the years ahead:

Soybeans and Emerging Market Demand

The development of emerging economies could boost soybean demand. As people in these countries accumulate wealth, they will probably start eating a more varied diet. The demand for livestock feed, soybean oils, and soy food products may grow.

Soybean Products via Publicdomainpictures.net

How Will Climate Change Affect Soybean Production?

Global warming trends have the potential to wreak havoc on the production of many different crops including soybeans. If recent weather patterns continue, the world’s supply of food may not be able to meet demand in the years ahead. Investing in agricultural commodities is a way to benefit from this trend.

However, traders should also consider the risks of investing in soybeans:

  1. A strong US dollar could drive prices lower.
  2. Overproduction by large suppliers could depress prices. This scenario could unfold, for example, if the United States ends corn subsidies.
  3. More bad news on the health front could weaken consumer demand for soy products.

What Do the Experts Think About Soybeans?

Experts see both potential risks and rewards from investing in soybeans.

“In general, I think the commodity complex is poised to move higher.”

– Robert Chesler, vice president of the foods group at INTL FCStone

Jim Rogers, who co-founded the Quantum Fund and created the Rogers International Commodity Index, has been a long-time bull on the agricultural commodity sector and believes it will make traders very rich in the coming years.

“You can open a chain of restaurants in the agricultural areas of the world because the farmers are going to be much more successful in the next 30 years than in the last 30 years. “

However, the US Department of Agriculture notes some data that should give traders reasons to be cautious.

US farmers have been producing record amounts of corn, soybeans, and wheat in recent harvests. Furthermore, farmers are increasing their allocation of acreage to soybeans at the expense of corn.

How Can I Invest in Soybeans?

Method of Investing Storage Costs? Security Costs? Expiration Dates? Management Costs? Leverage? Regulated Exchange?
Soybeans Futures N N Y N Y Y
Soybeans Options N N Y N Y Y
Soybeans ETFs N N N Y N Y
Soybeans Shares N N N N N/A Y
Soybeans CFDs N N N N Y Y

Soybean traders have several ways to invest in the commodity:

Soybean Futures

The Chicago Mercantile Exchange (CME) trades a soybean futures contract. The soybean contract settles into 5,000 bushels, or 136 metric tons, of soybeans.

The CME contract trades globally on the CME Globex electronic trading platform and has expiration months of January, March, May, July, August, September, and November.

Futures are a derivative instrument that allow traders to make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions. At expiration, traders must either accept physical delivery of soybeans or roll their positions forward to the next trading month.

Investing in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.

What Are the Different Types of Soybean Futures Contracts?

The CME offers trading on soybeans, soybean meal and soybean oil. Each of these products has unique specifications associated with it. We assembled this comparison of the three futures contracts:

Soybeans Soybean Meal Soybean Oil
Contract Unit 5,000 bushels 100 short tons 6,000 pounds
Price Quote Cents per bushel Dollars and cents per short ton Cents per pound
Min. Price Fluctuation 1/8 of one cent per bushel ($6.25 per contract) 10 cents per short ton ($10.00 per contract) 1/100 of a cent ($0.0001) per pound ($6.00 per contract)
Listed Contracts Monthly contracts listed for 3 consecutive months and 9 months of January, March, May, July, August, September and November plus next available November. January (F), March (H), May (K), July (N), August (Q), September (U), October (V) & December (Z) January (F), March (H), May (K), July (N), August (Q), September (U), October (V) & December (Z)
Settlement Method Deliverable Deliverable Deliverable

How Do You Read Soybean Futures Prices?

In order to understand pricing for soybean and other grain futures markets, you should begin by examining the contract information at the Chicago Mercantile Exchange (CME), which operates the leading marketplace for the commodity. The CME posts the specifications for each product traded on its exchange. The relevant pieces of information for each commodity are its symbol, contract size, minimum tick (trading increment), the dollar value of each tick and the contract months.

In the case of soybeans, the contract symbol is ZS and the contract size is 5,000 bushels. Soybeans and other grains trade in cents per bushel, and the minimum tick (trading increment) is $0.00125 (one-eighth of a cent) per contract. Each tick is equivalent to $6.25, so each one cent move in soybean prices equates to $50 per contract. As for the contract months, the CME assigns a code to each month. In the example below, the product is the July 2020 soybean future (ZS is the symbol for soybeans, N is the symbol for July and the 8 indicates the year 2020).

The LAST” in the chart above shows the most recent price of soybeans in cents per bushel. The amount after the (‘) mark indicates one-eighths of a cent. Therefore, 1048’6 is read as 1,048 and 6/8 of a cent, or, in other words, $10.48 and ¾ of a cent.

The CHANGE” in the chart above shows the change in price for the trading session. Again, the amount after the (‘) mark indicates one-eighths of a cent. Therefore, -4’4 means a decline of 4 and 4/8 cents or 4 and ½ cents.

The GLOBEX VOL” shows the number of contracts traded for the session. Traders should pay attention to the sessions where commodities trade because different times of the day can lead to variations in the amount of liquidity present.

Soybean Options on Futures

The CME also offers an options contract on the soybean futures contract.

Options are also a derivative instrument that employs leverage to invest in commodities. As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.

Options buyers pay a price known as a premium to purchase contracts. An options bet succeeds only if the price of soybean futures rises above the strike price by an amount greater than the premium paid for the contract. Therefore, options traders must be right about the size and timing of the move in soybean futures to profit from their trades.

Soybean ETFs

These financial instruments trade as shares on exchanges in the same way that stocks do. Currently, only one ETF –Teucrium Soybean Fund (NYSEARCA: SOYB) offers a pure play on soybean investing. The fund invests in soybean futures contracts.

Top 3 Soybean ETFs by Assets Under Management

* PowerShares DB Agriculture Fund and UBS ETRACS CMCI Agriculture Total Return ETN invest generally in the agricultural sector.

Shares of Soybeans Companies

There are no pure-play public companies engaged exclusively in the production and sale of soybeans. However, there are many large agribusinesses that provide products such as fertilizers, pesticides and seeds to soybean producers:

Teucrium Soybean Fund PowerShares DB Agriculture Fund* UBS ETRACS CMCI Agriculture Total Return ETN*
Company Current Price Description Exchange
Monsanto
Global agricultural company that provides seeds, genomic and other products to farmers. New York
(NYSE) The Mosaic Company Global agricultural company that sells crop nutrients to farmers. New York
(NYSE) Potash Corporation Global agricultural company that sells fertilizer and feed products. New York
(NYSE)

Soybean CFDs

One of the ways to invest in soybeans is through the use of a contract for difference (CFD) derivative instrument. CFDs allow traders to speculate on the price of soybeans. The value of a CFD is the difference between the price of soybeans at the time of purchase and the current price.

CFD traders open an account with a regulated broker and deposit funds. The funds serve as a margin against the change in the value of the CFD. Many regulated brokers worldwide offer CFDs on soybeans. The advantage of CFDs is that a trader can have exposure to soybean prices without having to purchase shares, ETFs, futures or options.

Investing in CFDs does not require the trader to pay for soybean storage or roll futures contracts forward every month. Traders also don’t have to worry about getting the timing and size of markets move correct in order to profit on their trades.

CFDs are still high-risk financial instruments, however, and your capital is at risk . Therefore, you should be an experienced trader or should seek out a broker that offers a demo account which allows you to develop your knowledge before risking real money.

Which CFD Broker is Best for Trading Soybean?

  • If you’re in the UK, Europe or one of their 30+ other approved countries, we think Plus500 is the best CFD broker. (76.4% of retail CFD accounts lose money).
  • If you’re in India then eToro is the best broker for you. (65% of retail trader accounts lose money when trading CFDs with this provider).
  • However, if you’re in the US, CFDs aren’t allowed, so we suggest trading options on futures.

Important: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail trader accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Soybean Trading FAQs

What Information Should Soybean Traders Follow?

The United States Department of Agriculture (USDA) produces its grain stocks report four times each year. This report, which details the capacity of on- and off-farm storage for all grains, is arguably the most important information for soybean traders.

The report contains the following information that market participants watch closely:

  1. Stocks: The report details the year-over-year change in the stocks of soybeans stored in all positions (on-farm as well as off-farm). Larger than expected increases in stocks could put downward pressure on prices, while larger than expected depletions of stocks could cause prices to rise.
  2. Grain Stocks by Position: This chart shows the year-over-year change in stocks broken down by positions (on- or off-farm). The chart looks as follows:
  • Soybean Stocks by State: a state by state breakdown of soybean stocks broken down by on- and off-farm positioning
  • *The report breaks out on-farm and off-farm storage because it uses different survey methods for gathering storage data from farms and off-farm locations. On-farm storage is subject to sampling variability since not all operations holding on-farm stocks are included in the USDA sample. As a result, the report includes a sampling error percentage.

    The bottom line, however, is that this quarterly report often plays a crucial role in moving soybean markets.

    What Are Some Soybean Trading Strategies?

    Soybean traders don’t have to have an absolute opinion on the direction of soybeans in order to trade the commodity. Rather, there are a variety of ways to bet on soybeans relative to the price of other commodities or instruments. These are called spread trades and they involve simultaneously buying and selling two different soybean contracts.

    Here are three ways you can execute popular spread trades used by soybean traders:

    1. Crush Spread: Soybeans are processed into soybean oil and soybean meal in a process known as crushing. The crush spread is the difference between the price of soybeans and its byproducts (soybean oil or soybean meal). Traders who go long with the crush spread will buy soybeans and sell soybean oil or soybean meal.
      Many producers of soybean oil or soybean meal use the crush spread as a means to hedge the risk that the prices they receive for their final products will fall in value.
    2. Reverse Crush Spread: In the reverse crush spread, traders buy the final products (soybean oil or soybean meal) and sell soybeans. In essence, these traders benefit if supply and demand factors lead to a rise in the price of the finished products relative to the input costs (soybeans).
    3. Grain Spreads: Other popular spread trades involve trading soybeans against other grain crops, such as corn or wheat. Since these commodities often move in tandem with one another, this allows traders to capture divergences in the price of one relative to another.

    Since soybean prices are correlated with the price of other grains and with finished soy products, spread trades are generally much less volatile than buying soybeans outright.

    Start Trading Soybean

    One of the leading CFD brokers for trading commodities, like soybean, is Plus 500. Here’s why:

    • No commission on trades (other charges may apply)
    • Free demo account
    • Easy to use (mobile-friendly) platform
    • Industry-leading risk management tools
    • Trade soybean and hundreds of other markets
    • Your funds are safe – publicly listed company regulated by the UK’s Financial Conduct Authority and Cyprus’ Securities and Exchange Commission

    Start Trading at Plus500.com 76.4% of retail CFD accounts lose money.

    One of the leading CFD brokers for trading commodity CFDs, like soybean, is Plus 500. Here’s why:

    • No commission on trades (other charges may apply)
    • Free demo account
    • Easy to use (mobile-friendly) platform
    • Industry-leading risk management tools
    • Trade soybean and hundreds of other CFDs
    • Your funds are safe – publicly listed company regulated by the UK’s Financial Conduct Authority and Cyprus’ Securities and Exchange Commission

    Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. Mr. Pines has traded on the NYSE, CBOE and Pacific Stock Exchange. In 2020, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts.

    Soybean May ’20 (ZSK20)

    Soybean Futures Market News and Commentary

    Following the WASDE updates, soybeans are 7 to 8 cents higher. May soymeal futures are up by $1.10/ton. May bean oil futures are 14 points higher at midday. USDA updated the 19/20 soybean projected carryout to 480 mbu, which is more than the pre-report estimates of 446. That is up 55 mbu from the March estimate but still 47.2% lower than the carryin from last year. The export cut lowered the average cash price for soybeans to $8.65/bu. The soybean meal cash price was UNCH @ $305/ton. The average cash price for bean oil was 150 points lower at 30 cents/lb. The WASDE update lowered World bean carryout by 1.94 MMT, with traders looking for a smaller 900k MT cut. USDA estimated Brazilian soybean production at 124.5 MMT, which is down from the March WASDE but by less than pre-report estimates. Argentina’s 19/20 bean production is estimated at 52 MMT, which was a bigger than anticipated cut from the March forecast. Soybean bookings from the weekly USDA Export Sales report were down 45% wk. Read more

    grains Futures News

    Howard Tyllas – www.futuresflight.com Thu Apr 9, 11:08AM CDT

    WASDE REPORT FOR 4/9/20

    Jack Scoville – The PRICE Futures Group Thu Apr 9, 9:59AM CDT

    DJ U.S. April Grain, Soybean Stockpiles Estimates — Survey CHICAGO–The following are analysts’ estimates in millions of bushels for U.S. ending stockpiles.

    Jerry Welch – Thu Apr 9, 9:41AM CDT

    There are three.

    Darren Carlat – SpreadEdge Capital Thu Apr 9, 8:01AM CDT

    I expect further declines into seasonal weakness

    Tfm Intelligence Solutions – Total Farm Marketing Thu Apr 9, 5:44AM CDT

    Grains steady overnight ahead of USDA data and day off for Good Friday

    Ben Dicostanzo – Walsh Trading, Inc. Wed Apr 8, 6:27PM CDT

    Cattle holds rally while hogs fail

    Stocks: 15 20 minute delay (Cboe BZX is real-time), ET. Volume reflects consolidated markets. Futures and Forex: 10 or 15 minute delay, CT.

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    cmdtyNewswires Commentary

    cmdtyNewswires is Ag market commentary for Grains and Oilseeds, Energy, Gold, Silver, Cocoa, Coffee, and Sugar markets.

    Futures News

    View the latest top stories from our trusted partners, with a focus on today’s futures and commodity markets.

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    For our soy comparison, we found 10 brokers that are suitable and accept traders from Russian Federation.

    We found 10 broker accounts (out of 147) that are suitable for Soy.

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    The Ultimate Guide to

    Commodity Trading: Soybean Futures

    What are Soybeans?

    Soybeans are an agricultural crop grown for their edible bean. Sometimes known as soya bean, soybeans are a type of legume originating from East Africa. They are able to grow in a variety of soil types and in a wide range of climates. Soybeans require less energy to grow and produce fewer greenhouse gases than many other crops – which makes them better for the environment.

    Most beans are classed as pulses, however soybeans are classified as oilseeds as they are rich in oil, at around 18%. Like pulses though, their seeds grow in pods. Soybeans are also rich in protein, making up around 35% of their composition, so soybeans are often divided into their component parts – soybean oil and soybean meal – which are then put to different uses.

    Soybean Uses

    The bean has numerous uses in today’s society. The oil is one of the main products extracted from soybeans, as it can be used for cooking and dressing salads etc. The protein is used to make tofu, cheese, and other products for consumption. The actual bean itself can be eaten fresh as edamame, which are premature soybeans that are cooked and served in, or are fresh from, the pod.

    Soybeans are one of the top animal feed sources. Soybean meal can be used as a food supplement, but the vast majority is used for animal feed, primarily because of its high concentration of protein.

    Modern Statistics for Soybeans

    The United States has been the biggest producer of soybeans since its introduction into the US in 1765 by Samuel Bowen, a former sailor with the East India Company.

    Countries with Largest Soybean Production 2020 (WorldAtlas)

    Country – Million Metric Tonnes

    The global production of soybean oil in 2020/16 was 52 million metric tons (statista).

    What Influences the Soybean Market?

    There are numerous influencing factors:

    The supply and demand for the two main products – soybean and soymeal – are related. In order to hedge against the effect of market forces, a strategy used by soybean traders is to purchase a contract of soybeans, and then sell a contract of soybean meal and soybean oil. This is known as a crush spread, named after the industry to separate the components – the crushing industry.

    Soybeans were one of the first crops to be genetically modified, however this can be a controversial issue. If public opinion turns against GM products, then this could have a significant impact on soybean markets.

    Environment groups in Brazil are in opposition with the soybean industry about its impact on the Amazon Rainforest. This could lead to a dramatic effect on the price of soybean.

    Corn impacts the price of soybeans as they compete in the cooking industry.

    How is Soybean Traded?

    Soybeans can also be traded by commodity traders. Exposure can be gained using soybean futures, which are available from the Chicago Mercantile Exchange (CME), with contract months of January, March, May, July, August, September and November. CME contract sizes are 5,000 bushels (136 metric tons) and carry a ticker symbol of ZS on CME Globex (electronic trading).

    Soybean oil futures are also available from CME, with a contract size of 60,000 pounds, and soybean meal futures are available with a contract size of 100 tons. These are all physically delivered futures, which means that the contract is settled on a future delivery date at an agreed price.

    Soybean futures are also available on Japanese, Indian and Argentinian exchanges.

    A more convenient way to trade soybeans is using Exchange Traded Funds (ETFs). There are various agricultural ETFs that offer a limited exposure to the soybean market, however the Teucrium Soybean Fund (SOYB) is purely based on the soybeans market.

    Soybeans – Plus500 CFD

    Traders also may opt for contracts for difference (CFDs) in order to speculate on the future price of soybeans. These contracts allow traders to take a view on whether the price of the underlying CME futures contract will increase or decrease, and therefore buy or go short on contracts, respectively. Various regulated brokers offer easy to access and easy to use online platforms through which these contracts can be accessed. One example is Plus500, which allows a minimum trade of 4,000 bushels on their CFD, with a leverage of 1:152, and a spread of 0.93. This means at the buy price of 922.47, the minimum margin required would be $247.20 (or £191.22) and this would expose the trader to $37,474 (or 28,974) of the stock. (Prices taken from Plus500 30/08/2020.) It should be noted that this increased exposure due to leverage can also go against the trader, leading to further capital depletion, although most regulated brokers offer negative balance protection.

    Conclusion

    Trading soybeans can be popular, however it can also be subject to extreme price fluctuations making it a volatile market to trade on. It is important therefore to understand the risks involved and to always choose a regulated broker to obtain reassurance that they are subject to stringent regulations when dealing with their clients.

    Why Choose XTB
    For Soy?

    XTB scored best in our review of the top brokers for soy, which takes into account 120+ factors across eight categories. Here are some areas where XTB scored highly in:

    • 16+ years in business
    • Offers 1,500+ instruments
    • A range of platform inc. MT4, Mirror Trader, Web Trader, Tablet & Mobile apps
    • 24/7 customer service
    • Tight spreads from 0.20pips
    • Used by 230,000+ traders.
    • Offers demo account
    • 3 languages

    XTB offers three ways to tradeForex, CFDs, Social Trading. If you wanted to trade SOYBEAN

    The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.

    XTB have a AAA trust score. This is largely down to them being regulated by Financial Conduct Authority, segregating client funds, being segregating client funds, being established for over 16

    Trust Score comparison

    XTB AvaTrade IG
    Trust Score AAA AAA AAA
    Established in 2002 2006 1974
    Regulated by Financial Conduct Authority Central Bank of Ireland, ASIC, IIROC, FSA, FSB, UAE and BVI Financial Conduct Authority and ASIC
    Uses tier 1 banks
    Company Type Private Private Private
    Segregates client funds

    A Comparison of XTB vs. AvaTrade vs. IG

    Want to see how XTB stacks up against AvaTrade and IG? We’ve compared their spreads, features, and key information below.

    Soybean Futures – ETF Tracker

    This product invests in futures contracts linked to the commodity of soybeans.

    ETFs Tracking Other Mutual Funds

    ETFs Tracking The Soybean Futures – ETF List

    ETFs tracking the Soybean Futures are presented in the following table.

    ETFs Tracking The Soybean Futures – ETF Returns

    The following table presents historical return data for ETFs tracking the Soybean Futures.

    ETFs Tracking The Soybean Futures – ETF Fund Flow

    The table below includes fund flow data for all U.S. listed Highland Capital Management ETFs. Total fund flow is the capital inflow into an ETF minus the capital outflow from the ETF for a particular time period.

    Fund Flows in millions of U.S. Dollars.

    ETFs Tracking The Soybean Futures – ETF Expenses

    The following table presents expense information for ETFs tracking the Soybean Futures.

    ETFs Tracking The Soybean Futures – ETF Dividends

    The following table presents dividend information for ETFs tracking the Soybean Futures, including yield and dividend date.

    ETFs Tracking The Soybean Futures – ETF Holdings

    The following table presents holdings data for all ETFs tracking the Soybean Futures. For more detailed holdings data for an ETF click the ‘View’ link in the right column.

    ETFs Tracking The Soybean Futures – ETF Tax Rates

    The following table presents sortable tax data for ETFs currently tracking the Soybean Futures.

    ETFs Tracking The Soybean Futures – ETF Technicals

    The following table presents certain technical indicators for ETFs tracking the Soybean Futures. To see complete technical metrics click the ‘View’ link in the right column.

    ETFs Tracking The Soybean Futures – ETF Analysis

    The following table presents links to in-depth analysis for ETFs tracking the Soybean Futures.

    ETFs Tracking The Soybean Futures – ETF Realtime Ratings

    The following table presents a proprietary ETFdb rating for ETFs tracking the Soybean Futures.

    Soybean Futures – ETF Tracker

    ” data-striped=”true” data-toggle=”table”>
    Symbol ETF Name Asset Class Total Assets* YTD Avg Volume Previous Closing Price 1-Day Change Overall Rating 1 Week 4 Week 1 Year 3 Year 5 Year YTD FF 1 Week FF 4 Week FF 1 Year FF 3 Year FF 5 Year FF ETFdb.com Category Inception ER Commission Free Annual Dividend Rate Dividend Date Dividend Annual Dividend Yield % P/E Ratio Beta # of Holdings % In Top 10 Complete ST Cap Gain Rate LT Cap Gain Rate Tax Form Lower Bollinger Upper Bollinger Support 1 Resistance 1 RSI Advanced Fact Sheet ETF Holdings Chart ETF Home Page Head-To-Head Liquidity Rating Expenses Rating Returns Rating Volatility Rating Dividend Rating Concentration Rating
    SOYB Teucrium Soybean Commodity $21,769 -12.4% 39,323.0 $13.86 0.65% 0.8% -2.8% -13.7% -23.3% -29.7% Agricultural Commodities 2020-09-19 1.15% N/A $0.00 N/A N/A 0.00% N/A 0.11 1 100.0% View 23% 23% K-1 $13.50 $14.22 $13.79 $13.91 41.09 View View View View View View B C

    Sort By: Largest in Assets Highest YTD Returns Lowest Expense Ratio

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