How markets behave: making sense of futures and non-futures traded crops


Many crops grown in Canada are traded on an active futures market: corn, soybeans, canola, and wheat being the most common.

But plenty of other crops don’t trade on futures, instead relying on cash prices, actual deliveries, and contracts for price discovery and risk management.

Jon Driedger of LeftField Commodity Research says that when market run-ups happen, such as what we’ve seen recently with durum, peas, and canaryseed, it can be more difficult to get a handle on where prices are headed, and when.

Driedger says that with futures markets, you’re dealing with an actively traded market, which allows speculators, traders, and industry players (read: farmers) to “buy paper” without a physical transaction taking place. This allows for anticipation of weather, world events, trade, and more, to be built into the price.

That makes futures markets more predictable, to an extent, but also far more complicated to read, as there are so many factors to work in, plus there is the spillover effect from dominant crop markets: in Canada’s case, that’s corn and soybeans.

Non-futures markets, however, have far less liquidity, on the way up — and down.

Driedger explains that because so much of the market price and outlook is tied to a physical transaction, and is usually concentrated in a geographic area, that creates an environment of less liquidity — larger swings in prices in both directions.

Listen on to hear more from Driedger, including insight into the upcoming StatsCan report expected Monday, production predictions, and what might weigh on corn and soybean markets this winter. 

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