New-Crop Price Patterns
Seasonal price behaviour is an important signal for market timing and direction; we talk about it a lot. Our analysis so far though has only looked at seasonal patterns for spot (nearby) prices, but we were challenged to see what happens with new-crop bids in the lead-up to the next marketing year. We also wanted to see whether there are differences between the patterns for old-crop and new-crop bids at this time of year, either in terms of timing or direction.
We calculated average new-crop bids over the last nine years, which provide a reasonable view of seasonal price behaviour. These historical patterns may not apply every year, but they do reflect “normal” or typical pattern during the forward-contracting period from January to July.
When we compare prices for new-crop delivery with spot bids during the Jan-Jul timeframe, new-crop bids are almost always lower than old-crop; that’s hardly a surprise. Toward the end of the Jan-Jul time period, old-crop and new-crop bids tend to converge. Again, that’s expected, but the price movements that cause the convergence are different for various crops. In some cases, most of the move is caused by declines in old-crop bids while for other crops, the convergence occurs as new-crop bids rise. Most times though, old-crop and new-crop bids move somewhere toward the middle.
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