T2W Trading Community

Cocoa:
The yearly seasonal low tends to occur in January with the Bahia (Brazil) main crop, rather than in May or June with the Temporao (Brazil) crop, because of consumer demand. Consumer demand tends to rise into late fall and early winter, which boosts prices during that timeframe. As demand peaks and then begins to decline, cocoa prices fall into January. It's important to note that seasonal tendencies in cocoa are not very strong.

Coffee:
The frost season in Brazil occurs during the May through early-August period. In anticipation of this frost, prices tend to rise from January into June. This seasonal tendency is not very strong, however, because coffee can come from other producing countries, such as Mexico. Still, the potential for a Brazilian frost should be monitored. The other seasonal influence is during the winter, when U.S. coffee consumption tends to rise.

Cotton:
Cotton is a market where the "trade" has very heavy participation and seasonals tend to be a function of heavy deliveries issued against the expiring futures contracts -- December, March, May, July, and to a lesser degree, October. In November, the market tends to recover from harvest lows, and then in January the market tends to back off to lower levels.

Orange Juice:
Seasonal price movement of FCOJ (Frozen Concentrated Orange Juice) does not usually reflect the December-February freeze period in the southern U.S. Seasonal tendencies are caused by harvest, production (also called "pack") and demand ("movement"). The most significant seasonal move in O.J. is that prices generally fall from November to January. Freezes cannot be completely ignored, however.

Sugar:
Prices tend to peak in November because of a combination of supply and demand. Production at this time is not complete, as the European crop is not yet on the market. Demand in the Northern Hemisphere, however, is usually at its peak in the fall.

In conclusion: I would classify seasonal tendencies as "secondary" technical indicators in my "Trading Toolbox." I do follow seasonals, but they are not my "primary" trading tools. I have seen much hype in the marketplace regarding seasonals. I remember one summer hearing a radio advertisement from a futures brokerage that went something like this: "Colder weather is just around the corner and heating oil demand will increase. Thus, you should buy heating oil futures now, and profit from the increase in demand." If only futures trading were that easy! Every professional trader and commercial firm knows that heating oil demand rises in the winter -- and even in the summer months they have already factored that rise in demand into the prices of the farther-out (deferred) futures contracts. The same is true for other markets' seasonal price patterns. The professional traders and commercials all know about seasonals in the markets, and position themselves accordingly. It is always good that we speculators have as much information on markets as possible. Seasonal price patterns are just one more bit of information to factor into our trading decisions.