• Ag production commodity markets, at their core, are weather derivatives. 

• Seasonal patterns reflect a “normal” flow of supply and demand over the course of a 12-month period, including changes in weather. 

• It could be argued Dec25 corn is two weeks into a typical 6-week weather market, also known as a short-supply market. 

A good friend of mind in the brokerage industry introduced me to the idea of 6-week weather markets in the Grains sector a number of years ago. I have talked about weather markets for as long as I can remember, expanding the discussion to the idea that ag production commodities, at their core, are weather derivatives. But I had not broken it down to general time frame that these markets last. Granted, my friend will be the first to remind us that the 6-week timeframe he has observed is not a hard and fast rule, but rather a guideline. This fits with my definition of Seasonal Analysis, a topic I’ll talk about later this week based on a question that came in over the weekend. 

Before we dive into this discussion, though, let’s define the subject. A weather market in ag production commodity complex sectors (Grains, Softs, etc.) means a tightening of supply, or threat of a possible tightening of supplies, occurs due to weather. Over the past few years, we’ve seen this situation play out countless times in the Softs sector as one market after the other took the adverse weather baton and raced to new all-time highs. One of the hallmarks of a market being driven by a supply scare is an inverted, or backwardated, forward curve. A look at my Barchart cmdyView quote screen for the Softs sector (excluding cotton) early this morning and I see cocoa (CCK25), coffee (KCK25), and orange juice ((OJK25) all still with backwardated forward curves while lumber (LBK25) and sugar (SBK25) have moved into a carry (contango). 

A definition within this definition: What do inverted/backwardated forward curves tell us about supply and demand? In the world of storable commodities (Grains, Softs, Energies), a backwardated forward curve reflects tight supplies in relation to demand. It tells us the commercial side of the market, those traders involved in the underlying cash commodity, are pushing nearby prices in relation to deferred issues in an attempt to source supplies to meet demand. We don’t apply this same analysis to non-storable commodities (e.g. Livestock), though. Here we take each spread as its own market and compare it to previous highs, lows, and averages. Given this, a livestock spread can show the nearby contract priced well below a deferred issue, yet the spread reflects bullish supply and demand based on its history (e.g. May-August feeder cattle spread at the end of March). On the other hand, a spread where the nearby contract is priced well above the deferred issue, what would be inverted in a storable commodity, can indicate bearish fundamentals (e.g. April-June live cattle spread at the end of March). 

Lastly, weather markets, also known as supply-driven markets, are generally viewed as short-term. The situation tends to resolve itself with a change in weather patterns, or the next harvest, whichever comes first. With all that in mind, let’s address the question at hand: Is it too early for a weather market in Grains? (If this sounds familiar to you, I wrote a similar piece back in May 2023.) 

For now, I’m going to focus on the leader of the Grains sector, King Corn. And since we are focusing on the weather, and the calendar has turned to April meaning planting season is upon us, the new-crop December 2025 issue (Dec25) has taken center stage. The Dec25 (ZCZ25) weekly chart shows the contract completed a bullish spike reversal the week of March 31, including a weekly close of $4.4675, up 4.25 cents from the previous Friday. Last week the contract extended this move to a high of $4.6475 before closing at $4.6350. The general chatter surrounding new-crop corn is US planting season is off to a slow start due to wet weather across the US Eastern Corn Belt. If we view this as an early weather market, then this morning would mark the beginning of the third week of a potential 6-week move. 

Does this fit with the seasonal pattern of December corn futures? Oddly enough, yes. My analysis is based on indexes that show the percent change for weekly closes only. The 5-year index shows the December corn contract tends to rally 8% from the third weekly close of March through the second weekly close of May. Dec25 has a recent low weekly close of $4.4250 the fourth week of March. Using that price as a starting point, the upside target for the seasonal high weekly close, again based on the 5-year index, would be near $4.80 (roughly), throwing corn’s characteristic Round Number Reliance into the equation. Recall last Friday’s close was $4.6350, with the previous high at $4.7975 from the week of February 17. 

For those of you wondering: If Dec25 corn is two weeks into a potential 6-week weather market, then four weeks from last Friday’s close would be the second weekly close of May. In line with Dec corn’s 5-year index.