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Why Are Seasonal Vegetables Not Cash Crops?

December 9, 2020 by Daniels Trading| Ag Marketing

According to the Merriam-Webster dictionary, a cash crop is a “readily salable crop produced or gathered primarily for market.” In layman’s terms, these are growable commodities that are harvested, stored, and marketed instead of being directly consumed. In the U.S., the most common cash crops are corn, cotton, and assorted fruits. Globally, wheat, corn, rice, and soybeans are among the crops most frequently planted solely for the purpose of sale.

In contrast, seasonal fruits and vegetables are those grown for immediate consumption. If you’ve ever tended a garden or been to a farmer’s market, then you are familiar with seasonal goods such as carrots, asparagus, apples, and tomatoes. Let’s take a look at three reasons why seasonal vegetables aren’t considered cash crops.

1. Perishability

Perishability is a term used in marketing that alludes to a good or service having a finite shelf life. This concept is especially important in the agricultural sector because certain products are deemed unfit for consumption sooner than others.

Are you prepared for this year’s planting season? If you work with Daniels Trading, we’ll provide you with a customized approach to ensure you save time and money and to help you protect against volatile markets. Schedule a consultation with an ag marketing expert today. 

As a general rule, cash crops have a much longer shelf life than seasonal vegetables. For instance, a harvest of corn or soybeans can be stored for up to a year at low temperatures, if thoroughly dried. Unless canned, seasonal vegetables such as tomatoes or cucumbers can go bad in a week’s time.

An ag commodity’s ability to be stored for an extended period makes year-round delivery possible. Thus, producers are given the freedom to market goods as circumstances dictate. Unfortunately, the perishability of seasonal vegetables makes them a high-risk proposition and not an ideal means of revenue for many ag producers.

2. Locality

The production of agricultural products is largely regional. Climate, soil quality, and logistics all impact which fruits, vegetables, or grains are grown and marketed. For producers, these are important considerations to make when building a business strategy.

A simple look at U.S. wheat production illustrates the concept of locality. Wheat flourishes in dry, temperate climates. Accordingly, America’s leading wheat producing regions are located in Kansas, North Dakota, and Montana.

These locations are also conducive to post-harvest shipping by truck, rail, or barge. Given wheat’s lengthy shelf life, it may be delivered to market with a moderate risk of spoilage, as are most other cash crops.

Conversely, seasonal fruits and vegetables are more likely to be direct farm-to-table commodities. For instance, during the North American autumn, various locations produce apples and pumpkins. In summer, cherries, peaches, and Swiss chard may be found in specific locales. Although these items are certainly marketed, most marketing happens on a small, local scale to avoid spoilage and the perils of transport.

3. Tradability

Another key reason why seasonal fruits and vegetables are not cash crops is tradability. For most cash crops, futures and options contracts are traded on public exchanges. As an example, the Chicago Mercantile Exchange (CME) offers a lineup of standardized ag futures products:

Contract Symbol Settlement Intraday/Overnight Margins
Corn ZC Deliverable $467.50/$850
Soybeans ZS Deliverable $990/$1,800
Wheat (SRW) ZW Deliverable $701/$1,275

In addition to these products, derivatives facing cotton, coffee, and rice are also tradable. Hedgers and speculators alike can buy or sell these contracts in the pursuit of their financial goals.

However, seasonal fruit and vegetable derivatives aren’t typically offered on public exchanges. Reasons for this vary but include increased perishability and minimal public interest. So if you’re looking to go short on this year’s Washington apple crop, chances are you’re out of luck.

Cash Crops Aren’t Just for Farmers

The ag futures markets offer an array of possibilities for both producers and speculators. To learn more about the key grain, oilseed, and livestock contracts available for trade, check out Daniels Trading’s ag marketing portal. Featuring industry reports and expert insights, it’s an all-in-one resource for anyone active in ag futures and options.

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Filed Under: Ag Marketing

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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