In the soybean industry, the term 'crush' represents bath a physical process as well as a value calculation. The physical crush is the process of converting soybeans into soybean meal and soybean oil. The crush 'value' is a dollar amount determined by the price of soybeans relative to the combined price of soybean meal and soybean oil. This value is traded in the cash or futures market based on expectations of future price movement of soybeans versus the components.
When a bushel of soybeans weighing 60 pounds is crushed, the conventional result is 11 pounds of soybean oil, 44 pounds of 48% protein soybean meal, 3 pounds of hulls, and 1 pound of waste. If the hulls are retained, the result is 44% protein soybean meal. In October 1992, the CBOT® switched the soybean meal futures contract specifications from 44% to 48% protein.
The Gross Processing Margin (GPM) is the relation between the cash market price of the soybean products (meal and oil) and the cash market price of soybeans. Since soybeans, soybean meal, and soybean oil are priced differently, conversion factors are needed to equate them when calculating the GPM.
The GPM (crush) is equal to the price of 48% protein soybean meal (dollars/ton) multiplied by .022 plus the price of soybean oil (cents/pound) multiplied by 11 minus the price of soybeans ($/bushel).
The same calculation used for the Gross Processing Margin is also used with futures contract prices from the Chicago Board of Trade and is referred as the Board Crush.
For example, if September Soybean Meal, Soybean Oil and Soybean futures prices were at $152.60/ton, $.1662/pound and $4.6075/bushel, respectively, the Board Crush would be calculated as (152.60 x .022) + (.1662 x 11) - 4.6075 = $.58/bus.
Although the Board Crush can be traded in a 1:1:1 ratio (1 Soybean futures, 1 Soybean and 1 Soybean Oil futures), a more precise ratio is 10:11:9 (10 Soybean futures, 11 Soy futures, and 9 Soybean Oil futures).