GET Financial Education Series - Futures
Seasonality of Supply and Demand – Lesson 9
You need at least Flash Player 7 to view this website.
Please go to:
http://www.adobe.com
to download the latest version.
"I always keep these seasonal patterns in the back of my mind. My antennae start to purr at certain times of the year."
— Kenneth Ward
Futures contract prices ebb and flow with the seasons of the year. Moving in what seems to be a predictable rhythm, prices seem to always go up at certain times of the year and down at other times of the year. Whether it is spring planting season for agricultural commodities, a summer vacation for equities or Christmas demand for precious metals, there always seems to be something on the calendar that influences supply and demand in the marketplace.
This ebb and flow of prices is certainly not perfect—remember, many factors other than seasonality affect the price of a Futures contract too - but knowing how the Futures contracts you are watching progress through the calendar can help you plan your trading year and prepare for future trades.
To help give you a broad overview of your investment calendar and which Futures contracts you may want to be buying and selling at any given time, we will discuss the characteristics of the four seasons of the year:
- Winter
- Spring
- Summer
- Autumn
Before we jump into the seasons, however, it is important to know who the major suppliers of each commodity are so you can better understand why the changing seasons affect each one.
Commodity Suppliers
In today's global economy, the commodities we consume can come from virtually anywhere around the globe. Often we hear about economic powerhouses like the United States, the European Union and China and we start to think that everything we buy comes from these places. When you're dealing with raw commodities, however, that is not the case.
Countries like Brazil, Argentina, India and even Vietnam are dominant producers of many of the commodities that trade on the global Futures markets. Let’s take a look at the top three producers for each of the following commodities:
- Moving average
- Bollinger bands
Energy
Crude Oil - The top three global producers of crude oil are as follows:
- Saudi Arabia
- Russia
- United States
Natural Gas - The top three global producers of natural gas are as follows:
- Russia
- United States
- European Union
Precious metals
Gold - The top three global producers of gold are as follows:
- South Africa
- Australia
- United States
Silver - The top three global producers of silver are as follows:
- Peru
- Mexico
- China
Agriculture
Soy Beans - The top three global producers of soy beans are as follows:
- United States
- Brazil
- Argentina
Wheat - The top three global producers of wheat are as follows:
- European Union
- China
- India
Corn - The top three global producers of corn are as follows:
- United States
- China
- Brazil
Sugar - The top three global producers of sugar are as follows:
- Brazil
- India
- European Union
Coffee - The top three global producers of coffee are as follows:
- Brazil
- Vietnam
- Indonesia
Cotton - The top three global producers of cotton are as follows:
- China
- India
- United States
As you think about these commodity producers - especially those that produce agricultural commodities - it is important to remember which hemisphere they are in because that will affect crop cycles. When it is summer in the Northern Hemisphere, it is winter in the Southern Hemisphere, and vice versa.
Now that you know who the major producers of each commodity are, let's take a look at what you should be watching for in each season of the year.
January, February & March
Sugar
Winter in the Northern Hemisphere is harvest time for sugarcane and sugar beets. The sugarcane and sugar beet harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of sugar. If it is a poor harvest, supply will decrease, which should increase the price of sugar.
April, May & June
Crude Oil
Crude oil prices typically start to rise in the spring as gasoline producers begin to anticipate the summer driving season in the United States.
Corn
Spring in the Northern Hemisphere is planting time for corn. The corn planting season has a direct impact on supply in the market. If it is a productive planting season, supply will increase, which should decrease the price of corn. If it is a poor planting season, supply will decrease, which should increase the price of corn.
Spring in the Southern Hemisphere is harvest time for corn. The corn harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of corn. If it is a poor harvest, supply will decrease, which should increase the price of corn.
Cotton
Spring in the Northern Hemisphere is planting time for cotton. The cotton planting season has a direct impact on supply in the market. If it is a productive planting season, supply will increase, which should decrease the price of cotton. If it is a poor planting season, supply will decrease, which should increase the price of cotton.
Soy beans
Spring in the Northern Hemisphere is planting time for soy beans. The soybean planting season has a direct impact on supply in the market. If it is a productive planting season, supply will increase, which should decrease the price of soy beans. If it is a poor planting season, supply will decrease, which should increase the price of soy beans.
Spring in the Southern Hemisphere is harvest time for soy beans. The soybean harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of soy beans. If it is a poor harvest, supply will decrease, which should increase the price of soy beans.
Sugar
Spring in the Northern Hemisphere is planting time for sugarcane and sugar beets. The sugarcane and sugar beet planting season has a direct impact on supply in the market. If it is a productive planting season, supply will increase, which should decrease the price of sugar. If it is a poor planting season, supply will decrease, which should increase the price of sugar.
Autumn in the Southern Hemisphere is harvest time for sugarcane and sugar beets. The sugarcane and sugar beet harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of sugar. If it is a poor harvest, supply will decrease, which should increase the price of sugar.
July, August & September
Crude Oil
Crude oil prices typically rise the most during the summer months as more and more people drive during the summer and producers of winter heating oil are increasing their supplies to sell at the beginning of autumn.
Wheat
Summer in the Northern Hemisphere is harvest time for wheat. The wheat harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of wheat. If it is a poor harvest, supply will decrease, which should increase the price of wheat.
Coffee
Winter in the Southern Hemisphere is harvest time for coffee. The coffee harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of coffee. If it is a poor harvest, supply will decrease, which should increase the price of coffee.
Sugar
Winter in the Southern Hemisphere is also harvest time for sugarcane and sugar beets. The sugarcane and sugar beet harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of sugar. If it is a poor harvest, supply will decrease, which should increase the price of sugar.
October, November & December
Crude Oil
Crude oil prices typically fall the most during the autumn months as people start driving less. Also, people tend to buy most of their heating oil at the beginning of the season—leaving little demand during the rest of the season.
Wheat
Autumn in the Northern Hemisphere is planting time for wheat. The wheat planting season has a direct impact on supply in the market. If it is a productive planting season, supply will increase, which should decrease the price of wheat. If it is a poor planting season, supply will decrease, which should increase the price of wheat.
Corn
Autumn in the Northern Hemisphere is harvest time for corn. The corn harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of corn. If it is a poor harvest, supply will decrease, which should increase the price of corn.
Cotton
Autumn in the Northern Hemisphere is harvest time for cotton. The cotton harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of cotton. If it is a poor harvest, supply will decrease, which should increase the price of cotton.
Soy beans
Autumn in the Northern Hemisphere is harvest time for soy beans. The soybean harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of soy beans. If it is a poor harvest, supply will decrease, which should increase the price of soy beans.
Sugar
Autumn in the Northern Hemisphere is also harvest time for sugarcane and sugar beets. The sugarcane and sugar beet harvest has a direct impact on supply in the market. If it is a good harvest, supply will increase, which should decrease the price of sugar. If it is a poor harvest, supply will decrease, which should increase the price of sugar.
Spring in the Southern Hemisphere is planting time for sugarcane and sugar beets. The sugarcane and sugar beet planting season has a direct impact on supply in the market. If it is a productive planting season, supply will increase, which should decrease the price of sugar. If it is a poor planting season, supply will decrease, which should increase the price of sugar.
Coffee
Spring in the Southern Hemisphere is blooming time for coffee. The coffee blooming season has a direct impact on supply in the market. If it is a good blooming season, supply will increase, which should decrease the price of coffee. If it is a poor blooming season, supply will decrease, which should increase the price of coffee.
Energy
