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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 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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