Santa Claus is coming to...corn?

Key points:

• A short timeframe during December has tended to see higher prices for corn futures
• This period has seen corn gain in price 89% of the time since 1960
• For 2024, this typically favorable period will begin soon

Corn seasonality set to turn positive

As always, seasonality is NOT a roadmap; it is simply an average of what has happened in the past. In any given year, anything can happen, and short-term seasonal windows can miss badly from year to year. That said, there are a handful of shorter-term opportunities that have proven reliable enough to be useful over many decades.

Let's focus on the following short-term window for corn, which extends from Trading Day of the Year (TDY) TDY #236 through TDY #250-highlighted below. For 2023, this period runs from the close on December 6 through the close on December 27.

For this test, we will examine the performance of corn futures between Trading Day of the Year (TDY) #236 and TDY #250. The chart below displays the cumulative dollar return achieved by holding a long 1-lot position in corn futures only during this period every year starting in 1960.

Over the past 64 years, corn futures gained 57 times during this roughly 3-week period. The lopsided nature of gains versus losses over $1,000 (14-to-1) suggests a true edge. However, the sheer size of 2012's loss of-$2,813 reminds us of the need for risk management in every trade, regardless of any perceived edge. For the record, the second largest loss during this window was-$700 in 1974.

An alternative for non-futures traders

The Teucrium Corn Fund ETF (ticker CORN) may be an alternative for non-futures traders to play the corn market. Ticker CORN can be traded like shares of stock and is designed to expose traders to fluctuations in the price of corn.

The Teucrium Corn Fund seeks to have the daily changes in the NAV of the fund's Shares reflect the daily changes in the corn market for future delivery as measured by the Teucrium Corn Index. The Benchmark is a weighted average of the closing settlement prices for three futures contracts for corn traded on the Chicago Board of Trade. Under normal market conditions, 100% of the fund's assets are expected to be invested in benchmark component futures contracts and in cash and cash equivalents. The fund seeks to achieve its investment objective by investing in benchmark component futures contracts.

Shares of CORN do not offer the potential leverage associated with a futures contract, so there is less potential for a significant percentage return on investment. That said, there is also not unlimited risk. 

What the research tells us...

During the approximately 3-week seasonally favorable timeframe coming soon, corn futures have shown a gain 89% of the time. This tendency for strength offers traders an edge, but success is never guaranteed from year to year. The significant loss in 2012 reminds us that - from a real-world trading perspective - no matter how consistently any price trend, strategy, factor, or seasonal trend performs, the first job of a trader is risk control.