Agricultural CFDs and weather

Agricultural CFDs and weather

One of the unique aspects of trading CFD markets presents itself when you trade agricultural commodities. Unlike many other CFD markets, there is a lot of risk in the markets based upon something that is very difficult to forecast: the weather. It is because of this that you need to understand what weather is doing in certain parts of the world.

Without a doubt, the biggest agricultural influence is going to be in the central part of the United States when it comes to weather. Corn, wheat, soybeans, and many other “softs” are produced in massive quantities and that area. The weather forecast can be very difficult to get a grasp on, but it is going to be crucial if you’re going to trade these markets.

For example, I have a Corn CFD chart in front of you. Understanding what the weather is doing in a place like Kansas is crucial. The cyclical part of what we are going through during the year also has a major effect on price. For example, pricing corn typically drops from Midsummer into the harvest. In July, it’s quite common that prices are high, because the factors associated with the old crop supplies and uncertainty over how much new crop will be planted. This is where weather can come into play as well, because if the weather is not favorable, it can shrink yields, or perhaps even wipeout crops. This is going to be different for every market, but there is a great page on seasonality at the Chicago Mercantile Exchange website.

Also, the occasional flood can wipeout crops as well, and of course there’s always drought to worry about. It is because of this that you need to have a source of information for weather in the central part of the US for some of these crops. Intellicast, AgWeb, and several other websites have excellent weather forecast pages that you can pay attention to. Some trading platforms and the futures markets even have weather maps included for agricultural trading as well.

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