Interesting Chart Of The Day #4

30/08/13 -- Ladies and genitalmen, today's chart d'jour is a comparison between the 30 year, 20 year and 5 year CBOT front month soybeans seasonal trend.

The thing that sticks out like a Rolf Harris' didgeridoo at a High School music recital is that whilst the 20 year chart does show a degree of increased volatility when compared to the 30 year chart, in the 5 year chart the magnitude of the fluctuations between the highs and lows of the year is much greater. The highs are much higher, with soybeans typically gaining more than 20% in value (versus Jan 1st) by the summer, before ending up lower than where they started at by harvest time. (Click the chart - not the didgeridoo - to enlarge).

As you might expect last year's price movements exaggerated the "normal" trend even more. If only we had a chart to show us what that looked like too, I'd think that I'd died and gone to soybean chart heaven. (There's one here you muppet - buy one get one free). Although we saw soybean prices rise by almost 48% versus the start of the year by late August/early September, they'd still given up a very large chunk of those gains by the time that they harvest was over. Indeed the blue line for 2012 on the chart does broadly conform to the "normal" seasonal pattern, even if the percentage movements involved are much higher than normal.

Whilst we can attribute some of the blame for last year's particularly dramatic fluctuation in prices to the historic drought in the US, it is interesting to note that there does seem to be a trend developing for more volatility in recent years don't you think? Which is where the relatively recent phenomena of much larger volumes of money than previously flooding in and out of the markets on a whim comes in.

If 2013 is to be a "normal" year then right now could be a bad time to be thinking about buying soya, or any other protein for that matter, for this winter.

They've done studies, you know, 60% of the time it works every time.

Footnote: In 1999 the Commodities Futures Trading Commission (CFTC) deregulated the US futures markets, enabling funds to hold as large a position in the grain markets as they liked. It took a few years for hedge fund managers to realise the significance, and earnings potential, of this apparently innocuous move. In 2003 Index Funds had around USD13 billion invested in commodities futures, by 2008 that amount had risen around 2000% to approximately USD300 billion.