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Top Tips to Sow the Seeds of Grain Trading Success

June 23, 2020 by Daniels Trading| Futures 101

Every year, the changing of the seasons has a profound impact on a broad spectrum of futures markets. For ag products, the planting, harvesting, and marketing months create a multitude of pricing tendencies. Within the ever-shifting ag environment, there are a few grain trading tips that have proven historically useful for farmers.

Let’s take a look at the concept of seasonality and how it impacts ag futures.

Pay Attention to Seasonality

At the crux of any commodity’s value is the relationship between supply and demand. Simply put, if demand outpaces supply, prices rise; if supply exceeds demand, prices fall. Seasonality refers to evolving supply/demand levels and the subsequent commodity pricing trends of a certain month(s). A best practice for producers is to maintain awareness of the effects of seasonality on commodity markets, specifically as it pertains to grain trading.

A well-known example of commodity seasonality deals with the pricing of crude oil. Essentially, prices of North Sea Brent (Brent) and West Texas Intermediate (WTI) crude oil rise during summertime in the Northern Hemisphere (June-August). The increase in price is caused by a spike in the demand for refined fuels, stemming from travel and industrial activity. Conversely, wintertime (December-February) sees lower prices because reduced consumption decreases the demand for refined fuels. Although the ag futures markets are very different from Brent and WTI, there are similar seasonal tendencies to be found.

New to Ag Marketing? Our Hedgucation 101 blog series is perfect for beginners >>

It is important to understand that countless fundamentals are capable of impacting supply and demand levels and, in turn, pricing. Weather, global economic cycle, and outliers such as the 2020 coronavirus pandemic can quickly send any commodity market into flux. Nonetheless, seasonality is among the most valued concepts for farmers and traders because it provides them a firmer grip on how commodity futures markets tend to behave.

Prepare for Harvest

For farmers, every year brings a new cycle of “out with the old and in with the new.” Old crops are marketed, new crops are planted, and existing crops are harvested. As the cycle unfolds, new seasonal pricing tendencies are created. Depending on whether you plant corn, soybeans, or wheat, these trends may vary greatly.

Although grain trading strategies based on concepts such as seasonality aren’t gospel, they do give market participants a place to start. Here are a few historically sound ag futures pricing trends to keep in mind:

Product Harvest Spring/Summer Fall/Winter
Corn September-December Rising Declining
Soybeans September-November Rising Declining
Wheat July-August Declining Rising

The key element driving the trends above is the relationship between old crop supplies and new crop supplies. During the planting and growing seasons, the old crop is the driver of supply and is being marketed to the public; given normal demand levels, dwindling old crop stocks lead to higher prices. Upon harvest, new supplies become available and hit the open market, which frequently leads to lower prices because depleted supplies are restored by the new crop.

Although the old crop/new crop dynamic does not always hold true for grain trading, it is historically recognized by the Chicago Mercantile Exchange (CME). In addition to this phenomenon, astute farmers also monitor carryout levels, per acre yields, and currency inflation to inform their trading in commodity futures markets

Looking for More Grain Trading Tips?

If you’re an ag producer searching for more grain trading tips to add to your toolbox, one great resource is your broker. An experienced broker has the knowledge and insight to recommend season-specific futures strategies in a timely fashion. No matter whether you want to lock in profits or augment your operation’s bottom line, a good futures broker can help.

Of course, the best trader tips come from the best brokers. With more than two decades in the futures industry, the team at Daniels Trading  knows ags. From trading ideas to management advice, we’ll help you build a robust, actionable marketing plan that is tailored to your unique resources and goals.

Daniels Trading Ag Marketing Articles

Filed Under: Futures 101

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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