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The Crush Spread Meaning & Definition

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Definition of The Crush Spread

The crush spread is often used by bean crushers who purchase soybeans and through the process of crushing create the refined products which are soybean meal and soybean oil. The crush spread may be used by bean crushers to hedge the purchase of the raw input soybeans and to hedge the later sale of the soybean meal and soybean oil. The crush spread would be established as follows:

Buy June soybeans

Sell June soybean meal

Sell June soybean oil

Applying "The Crush Spread" to Securities Exams:

Bean crushers operate based on the gross processing margin of the crush. The gross processing margin is the difference between the cost of one bushel of beans and the value of the refined soybean meal and oil produced from the bushel. If the gross processing margin is positive the business of crushing beans is profitable. The gross processing margin only takes into consideration the price of the raw soybeans and the value of the refined products. The overheard and other expenses of the crusher’s business are not taken into consideration for the gross processing margin. The reverse crush spread may be established by speculators who feel that the gross processing margin will decline and may profit from business conditions that hurt the crushers. A reverse crush would be established as follows:

Sell June soybeans

Buy June soybean meal

Buy June soybean oil

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