In the commodity futures chapter, CFAI briefly touched on crush spread. What’s the purpose of crush spread? You long soybean futures, and short soybean milk futures. I guess the investor want to lock in the prices for both of them so that he can lock in the profit? Is there a difference between that and buy both soybean futures and soybean milk futures? Long/short here are exchange, right? since they are betting on the same trnasaction? Thanks.
Crush spread: you long the futures on the raw material (e.g soybean) and short the futures on final product (soybean milk). => lock in the cost of buying the raw material and price of selling price on final product.