Spring Wheat Seasonality: A Tougher Market to Grasp
Rounding out my blogs on seasonality, I’m finishing with an analysis of September Hard Red Spring Wheat. If you haven’t already, be sure to check out my previous posts on corn and soybeans:
Understanding the Complexity of Wheat Seasonality
One of the biggest challenges in analyzing wheat seasonality is the different classes and their varying harvest times. This complexity makes wheat more challenging to assess compared to corn and soybeans. Additionally, wheat had the highest skew value among the three crops when I calculated skewness (a measure of asymmetry in probability distribution).
The image below, sourced from Wikipedia, visually demonstrates why skewness matters. In short, higher positive or negative skew values indicate a greater difference between the average and median, which has significant implications for seasonal charts.
20-Year Median Trends
Comparing Median vs. Average in Seasonal Trends
To get a clearer picture, let’s compare the 20-year seasonal chart based on median values versus the 20-year seasonal chart based on average values. I opted for a 20-year dataset because, generally, a larger sample size provides more reliable results, even though market conditions have evolved over time.
The difference between the two charts is striking:
The median suggests the best time to sell is immediately after harvest, a full year in advance.
The average indicates a peak selling window from mid-May to mid-July.
This variation underscores why it’s crucial to be cautious when hearing about “seasonality.” The methods used to create a seasonal chart will likely impact decision-making.
Examining Seasonality Over Different Time Periods
Since I lean toward median values to avoid outliers, let’s overlay the 5, 10, 15, and 20-year median trends on a single chart to assess consistency. What stands out? There’s a significant amount of overlap among these timeframes. Yes, the 5-year trend deviates in May, which makes sense—median values with less data point tend to bounce around more.
The key takeaway: Growers tend to benefit from locking in prices in October for the following September. Keep in mind that this applies to futures prices for the September contract, meaning the simplest way to capitalize on this strategy would be selling futures in a hedge account (not exactly easy to maintain) or doing HTA contracts but a fee is likely associated for a year in advance.
Evaluating Two Distinct 10-Year Periods
To further test consistency, I examined two separate 10-year periods:
2005–2014: Seasonal trends were sporadic, with peaks in October/November, June, and August/September.
2015–2024: The trend is more stable, showing a clear downtrend and a stronger October/November peak.
Final Thoughts: Timing Matters
Wheat is grown in several countries, with U.S. production making up a smaller percentage of the global supply. This means that external risk factors, such as international weather conditions and several growing cycles, are critical to watch.
Historically, when adverse weather conditions arise in the U.S., May and June have shown seasonal selling opportunities. Median trends indicate higher patterns in October, with enough evidence to support the idea of forward contracting sooner rather than later.
By understanding these trends and leveraging historical data, growers can make informed marketing decisions to maximize profitability and make sales at opportune times.
Sources: Barchart | Wikipedia
Casey Christianson
Quantitative Analyst | CODAK Market Advisor, Northern Plains
With a background in advanced mathematics and statistics, Casey’s expertise helps CODAK increase objectivity, speed, and precision in risk management decisions, driving greater client profitability.
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