The twelve-month accounting period for a commodity's supply and demand, running from one harvest to the next — 1 September to 31 August for US corn and soybeans.
Everything in agricultural analysis is stated per crop year, so a contract expiring before the harvest belongs to the old crop and one expiring after belongs to the new. The two are priced off different balance sheets and can move independently.
This is why the July-December corn spread and the July-November soybean spread are the headline agricultural intramarket-spread trades: they price old-crop scarcity against new-crop expectations, and they are not held together by cost-of-carry in the way two same-crop months are.
Example: a drought that destroys old-crop supply can send July corn to a 40-cent premium over December, an inversion, even though storage economics would normally put December 25 cents above July.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Contango and backwardation. A futures curve shows what buyers will pay for delivery in one month, two months and so on. When later contracts cost more than the spot price the curve is in contango; when they cost less it is in backwardation.
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