Seasonal Price Patterns for Crops

Agricultural commodities have historically exhibited seasonal price movements which are tied to the annual nature of the crop cycle. Crop prices in the cash and futures markets are usually the lowest near harvest and the highest near the end of the marketing year. Seasonal price movements will vary, however, depending on supply and demand fundamentals. In particular, deviations of actual from expected supplies can have a pronounced impact on seasonal price patterns.

"Seasonal Price Patterns for Crops" presents a derivation and application of seasonal patterns for cash and futures prices for a number of commodities with different levels of new crop supplies (Flaskerud & Johnson, 1993). Addressing price patterns in this manner will likely make Extension educators and others working with producers more effective, and make producers more effective marketers.

Using these price patterns as a guide for developing a marketing plan is examined in the first part of the publication. Several steps are involved: supply and demand fundamentals are used to determine an expected seasonal average price. A distribution of prices during the marketing year is forecast with the help of seasonal price indexes. Price objectives are determined, keeping storage costs in mind. Those times of the year when prices are usually the highest for various supply situations are used as time deadlines for selling a percentage of the crop.

Analytical techniques for analyzing price patterns in years with different supply conditions are described in the second part of the publication. Moving averages were used to calculate seasonal indexes for cash prices over the study period 1978-1992. A different method, based on annual averages, was used to calculate seasonal indexes for prices during those years with smaller and larger-than-expected supply deviations and for select futures prices. Calendar years were classified according to whether new crop supplies were actually smaller or larger than expected at the time of planting. One standard deviation of the differences between actual and expected supplies was the guideline used in classifying the years. Situations in closely related markets were incorporated into the classifications.

The seasonal price patterns are presented in part three. The price patterns tended to deviate considerably from the usual pattern during "short" or "large" crop years. Prices tended to peak later than usual during "short" crop years and earlier during "large" crop years.

Applications of the indexes to marketing plans are presented in the fourth part. Results indicated that seasonal price patterns can be used as a guide for developing a marketing plan when they are examined along with supply and demand information and other marketing concepts. Examples are presented illustrating price forecasting and, when it is appropriate to use, the moving average index and the annual average index.

Flaskerud, G., & Johnson, D. (1993, August). Seasonal Price Patterns for Crops (Bulletin 61). Fargo: North Dakota State University Extension Service.