I was chatting with a newer trader in our Discord last week who was excited about a “hot new strategy” he’d discovered: trading seasonal patterns in commodities.
“I’ve been researching corn futures,” he told me. “Every year, they drop like clockwork during harvest season. I’m going to short the hell out of it in September!”
I didn’t have the heart to tell him that his “discovery” was about as groundbreaking as noticing that ice cream sales go up in summer.
But his excitement reminded me of my own naive enthusiasm when I first stumbled onto commodity seasonality many years ago. I thought I’d found the holy grail – a predictable, repeating pattern I could exploit year after year.
Then I lost money on my first three seasonal trades in a row.
It turns out that trading seasonality is like owning a swimming pool – it looks amazing in the brochure, but the maintenance is a real pain.
Today, I want to walk through what actually works in seasonal commodity trading, how these patterns have evolved over time, and how you can implement them without blowing up your account.
Let’s start with the obvious: yes, many commodities do follow predictable seasonal patterns. This isn’t voodoo or astrology – it’s basic economics.
Corn prices typically drop during the September-October North American harvest. Natural gas jumps during the winter heating season. Gasoline prices rise during the summer driving months.
These patterns exist because of fundamental, physical realities that haven’t changed for decades:
The seasonal effects are amplified by commercial hedging activity. Farmers sell futures to lock in prices before harvest, creating predictable supply pressure. Energy companies buy winter gas contracts to hedge inventory, creating reliable demand spikes.
But here’s where most retail traders mess up: they see these patterns, assume they’re free money, and dive in without understanding how markets adapt.
The truth? While seasonality persists, it’s gotten messier and less reliable over time.
Back in the 1980s, you could practically set your watch by commodity seasonal patterns. U.S. grain harvests would tank prices like clockwork, and winter natural gas spikes were nearly guaranteed.
Today? The edges still exist, but they’ve been dulled by five major changes:
1. Globalization smoothed out supply chains
Northern hemisphere wheat harvest lows now face offsetting demand from southern hemisphere production. Those 25% seasonal swings from the old days have compressed to 10-15% since 2010.
Brazilian soybean production (harvested February-May) now buffers U.S. fall harvest gluts. This has weakened the October price drops from 20% in the 1980s to 10-12% today.
2. Wall Street discovered commodities
After 2000, financial players flooded into commodity markets. Gold’s traditional September strength weakened after 2010 as ETF flows became more important than physical demand.
The 2008 commodity index investment boom further compressed returns. Natural gas winter peaks now average 8% versus 15% pre-2005, as speculative capital flattened term structures.
3. Climate change increased volatility
Agricultural seasonality now has “volatility clusters” during planting and harvest windows. Drought probability has increased summer corn rallies beyond historical norms.
Energy markets show disrupted winter heating demand patterns, as warmer Arctic winters reduced natural gas’s December-February consistency from 85% (1970-2000) to 65% occurrence post-2010.
4. Technology changed supply dynamics
U.S. shale gas production smoothed traditional winter/summer natural gas spreads by 40% since 2010. Biofuel mandates linked corn prices to gasoline seasonality, creating hybrid patterns unseen before 2005.
5. Information moves faster
Real-time satellite crop monitoring and other data improvements accelerated market efficiency. Corn’s pre-harvest rally period compressed from 12 weeks in the 1980s to 6-8 weeks today as traders anticipate weather impacts faster.
Despite all these changes, the core seasonality persists where physical bottlenecks remain. Natural gas storage limitations maintain winter premiums. Perishable commodities like coffee and cocoa still show sharp harvest-cycle volatility.
Not all seasonal patterns are created equal. The ones worth trading meet three critical criteria:
Based on these criteria, here are some seasonal trades worth looking at:
Commodity | Seasonal Window | Driver |
Natural Gas | Dec-Feb | Heating demand |
Corn | Jun-Jul | Pre-harvest uncertainty |
Gasoline | May-Aug | Summer driving demand |
Gold | Aug-Oct | Cultural/central bank demand |
Wheat | Feb-Mar | Southern hemisphere harvest |
Low-probability patterns that you should avoid come from transient factors like speculative positioning or isolated weather events. Coffee’s inconsistent Q4 rallies are a perfect example – despite harvest cycles, they don’t appear with enough regularity to be reliably tradable.
And don’t even think about blindly mining for seasonal patterns without thinking about the fundamental drivers – you’ll just turn up stuff that happened to look good in the past that has almost no chance of making money in the future.
Okay, so you’ve identified a high-probability seasonal pattern. How do you actually trade it without getting your face ripped off?
Of course, the answer lies in sizing your positions appropriately.
But you can also consider trading a calendar spread rather than taking an outright long or short position.
Instead of shorting corn during harvest season (and potentially getting steamrolled if something goes wrong), sell December corn and buy July corn during September-October.
This spread approach lets you isolate the seasonal component while neutralizing broader market moves.
ETF Investors
If futures trading isn’t your thing, sector ETF rotation works too. Consider shifting allocations between commodity sector ETFs 4-6 weeks before seasonal windows open. For example, move into WEAT or CORN for grains pre-harvest or UGA for gasoline pre-summer (just watch those fees and roll costs).
The key is timing – you sometimes need to front-run the seasonal patterns by several weeks since ETF flows often anticipate the actual physical market changes.
Seasonal trading looks easy on paper. But in reality, it’s remarkably easy to get destroyed if you don’t manage risk properly.
You need protection against three specific hazards:
1. Being Wrong
You’ll be wrong a lot when you trade seasonality. Accept the variance of this return source and size accordingly.
2. Event Shock Vulnerability
Seasonal patterns tend to break during periods of extreme market stress. If volatility spikes, you should cut size anyway, but this might also be a decent trigger to exit your seasonal trades altogether.
During the 2020 COVID crash, nearly every seasonal relationship temporarily broke down. Those who had volatility filters sidestepped massive losses.
3. Carry Cost Decay
In contango markets (where future prices are higher than spot), the cost of rolling futures contracts can eat you alive. During these periods, options might make more sense than futures – long calls for upside with capped carry costs.
Most of you probably don’t have the $100K+ that would traditionally be needed for commodities trading. Good news – there are ways to adapt seasonal strategies for smaller accounts:
Instrument Selection
Position Sizing
Don’t try to trade every seasonal pattern. Small accounts need concentration:
Execution Timing
Front-run institutional flows by entering 2-3 weeks before historical seasonal start dates. Use limit orders 0.5-1% below spot price to improve entries.
But here’s the reality: small accounts face serious disadvantages in seasonal trading:
You can mitigate these issues by combining seasonal positions with negatively correlated assets (e.g., long gold ETFs during equity-seasonal weakness) and using free alternatives to premium data: NOAA weather forecasts, EIA/USDA reports, and Commitment of Traders data.
Here’s something nobody tells beginners about seasonal trading: it requires extraordinary psychological resilience.
Backtests show only 40-50% win rates even in robust patterns, with 3-5 consecutive losses occurring in 30% of years. That means you’ll frequently look wrong and feel frustrated – unless you have an appropriate appreciation for the mayhem of the markets.
I’ve seen many traders abandon seasonal strategies right before they would have worked, all because they couldn’t handle the psychological pressure of being temporarily wrong.
The best way to deal with this is to come in with the right expectations.
I alluded to this already, but let’s make it more tangible.
It’s frighteningly easy to find seasonal patterns that worked perfectly in the past but will fail miserably going forward. To avoid these data snooping traps:
The most dangerous words in seasonal trading are “this time it’s different”. Usually, it’s not different – the pattern is just noisy, and you’re seeing the noise rather than the signal.
One often-overlooked benefit of commodity seasonality strategies: they provide unique portfolio diversification during equity stress.
Gold’s Q4 strength and grain’s Q2 rallies showed negative correlation to the S&P 500 during 7 of 10 recent bear markets. This “crisis alpha” makes seasonal commodities trading valuable even when the raw returns don’t look spectacular.
In practical terms, a 10-15% portfolio allocation to seasonal commodity strategies can significantly reduce drawdowns during equity bear markets.
While traditional commodity seasonalities have been studied to death, emerging markets offer fresh opportunities:
Carbon Futures
EU carbon allowances (EUA) show repeatable May/June strength as utilities hedge annual compliance needs.
Cryptocommodities
Bitcoin futures exhibit 15-20% Q4 rallies linked to tax-loss harvesting rebounds and institutional year-end rebalancing. This pattern has shown up in 6 of the last 7 years.
Regional Power Markets
ERCOT (Texas) electricity futures spike predictably during July-August cooling demand, with 30-40% average moves. Most retail traders don’t even know these markets exist, creating opportunity – if you can get access.
Commodity seasonality’s effectiveness depends entirely on how you use it.
The patterns exist because of immutable physical constraints – crops need growth cycles, energy demand follows temperature shifts, and storage limitations create cyclical supply gluts. Despite market evolution, focused implementation on high-probability windows can still deliver decent annualized excess returns over buy-and-hold.
For independent traders, I recommend starting with simple seasonal effects that you can easily understand.
The greatest value comes when you combine seasonal strategies with other systematic edges – they’re often uncorrelated, making it a powerful portfolio construction tool rather than isolated speculation.
Seasonal trading isn’t easy money. It’s messy, noisy, and psychologically challenging. But for those willing to embrace its probabilistic nature and implement with discipline, it remains one of the few edges available to independent traders in an increasingly efficient market landscape.
Kris Longmore is the founder of Robot Wealth, where he trades his own book and teaches traders to think like quants without drowning in jargon. With a background in proprietary trading, data science, engineering and earth science, he blends analytical skill with real-world trading pragmatism. When he’s not researching edges, tinkering with his systems, or helping traders build their skills, you’ll find him on the mats, in the garden, or at the beach.