Crush Spread

DEFINITION of 'Crush Spread'

A trading strategy used in the soybean futures market. A soybean crush spread is often used by traders to manage risk by combining soybean, soybean oil and soybean meal futures positions, into a single position. The spread position is used to hedge the margin between soybean futures, and soybean oil and meal futures.

BREAKING DOWN 'Crush Spread'

By simultaneously purchasing soybean futures and selling soybean meal futures, a trader is attempting to establish an artificial position in the processing of soybeans, created through the spread. Since the spread relationship between the futures will vary over time, traders can gain directional exposure to the movements.