what is Seasonality, and how does it affect commodities futures prices?
Seasonality is the tendency for commodities futures prices to rise or fall at a particular time of year, every year. In many agricultural commodities, seasonality is a result of harvest cycles. Prices fall when supply becomes abundant, and they rise when supply dwindles. In other commodities like gold or crude oil where supply tends to be steadier, barring any natural disasters, seasonality is determined by changes in seasonal demand patterns. For example, crude prices tend to rise in the spring ahead of the summer driving season, and again near the end of the summer to factor in the winter heating season. A ten year study of most commodities corroborates this phenomenon, and seasonal price tendencies ought to be respected more often than not. Now that we know what seasonality is, let’s discuss its relevancy to coffee futures for this spring. Coffee has some of the strongest seasonal tendencies among all tradable commodities. The most dramatic seasonal pattern occurs in June, where pri
