Seasonality in Commodities – Understanding Recurring Market Cycles
Commodities often move in recurring annual patterns driven by planting, harvest, weather, and demand cycles. This section explains how to read seasonal tendencies, how I apply them in trading, and why they still matter in modern markets.
1) What Seasonality Means
Seasonality describes the tendency of certain markets to move in similar directions during specific times of the year. It reflects fundamental cycles — such as planting and harvest periods, energy demand, and consumer behavior — that repeat year after year. In agricultural markets, these cycles are strongly linked to the crop calendar; in energy and metals, they follow production and consumption patterns.
2) How to Identify Seasonal Patterns
- Historical averages: Analyze average monthly or weekly returns across 10–20 years.
- Seasonal composites: Combine multiple years into one line chart to see recurring trends.
- Cross-check: Confirm with fundamental triggers like WASDE reports or energy inventories.
I build my seasonal frameworks using long-term data and verify them with COT signals and planting/harvest statistics.
3) Why Seasonality Works
The main drivers of seasonal behavior are physical cycles and predictable demand windows:
- Agriculture: planting → growth → harvest → storage → consumption.
- Energy: winter heating demand, summer driving season, refinery cycles.
- Metals: industrial production peaks in spring and autumn.
- Financials: fund rebalancing and tax-year flows.
4) How I Apply Seasonality in Trading
- Identify recurring windows: I maintain fixed seasonal zones for each futures contract (e.g. Wheat, Corn, Soybeans).
- Combine with positioning: I look for COT extremes or commercial shifts that align with seasonal turning points.
- Trade rules: entries at start of seasonal upswings, exits at predefined calendar dates, no re-entry within the same window.
This structured timing approach helps me reduce noise and focus on periods with statistically favorable behavior.
5) Common Seasonal Tendencies (Examples)
| Commodity | Typical Strength Period | Typical Weakness Period |
|---|---|---|
| Wheat (ZW) | Sep → Dec | Jun → Aug |
| Corn (ZC) | Apr → Jul | Oct → Dec |
| Soybeans (ZS) | Feb → Jun | Oct → Jan |
| Crude Oil (CL) | Feb → Jul | Aug → Nov |
| Natural Gas (NG) | Nov → Mar | May → Aug |
| Gold (GC) | Dec → Feb | Jun → Aug |
| Coffee (KC) | Jan → Apr | Sep → Nov |
Source: long-term average performance (10–15 years). Not predictive; used for context and timing confirmation.
6) Tools & Resources
- Seasonax – historical pattern analysis.
- USDA WASDE – monthly supply & demand updates.
- cot-trader.com – my Planting & Harvesting Script.
- NOAA – global weather data and temperature outlooks.
7) Risks & Limitations
Seasonality is a probabilistic concept, not a guarantee. Structural changes, policy shifts, or major weather events can override historic trends. That’s why I combine seasonal setups with current positioning (COT) and macro reports to confirm trade direction.
8) Summary
- Seasonal cycles exist because of fundamental timing in production and demand.
- Use historical averages as a guide, not a rule.
- Combine with COT and fundamentals for robust entries.
- Backtest before applying live – seasonal edges fade if blindly followed.