According to the Merriam-Webster dictionary, a cash crop is a “readily salable crop produced or gathered primarily for market.” In layman’s terms, these are growable commodities that are harvested, stored, and marketed instead of being directly consumed. In the U.S., the most common cash crops are corn, cotton, and assorted fruits. Globally, wheat, corn, rice, and soybeans are among the crops most frequently planted solely for the purpose of sale.
In contrast, seasonal fruits and vegetables are those grown for immediate consumption. If you’ve ever tended a garden or been to a farmer’s market, then you are familiar with seasonal goods such as carrots, asparagus, apples, and tomatoes. Let’s take a look at three reasons why seasonal vegetables aren’t considered cash crops.
Perishability is a term used in marketing that alludes to a good or service having a finite shelf life. This concept is especially important in the agricultural sector because certain products are deemed unfit for consumption sooner than others.
As a general rule, cash crops have a much longer shelf life than seasonal vegetables. For instance, a harvest of corn or soybeans can be stored for up to a year at low temperatures, if thoroughly dried. Unless canned, seasonal vegetables such as tomatoes or cucumbers can go bad in a week’s time.
An ag commodity’s ability to be stored for an extended period makes year-round delivery possible. Thus, producers are given the freedom to market goods as circumstances dictate. Unfortunately, the perishability of seasonal vegetables makes them a high-risk proposition and not an ideal means of revenue for many ag producers.
The production of agricultural products is largely regional. Climate, soil quality, and logistics all impact which fruits, vegetables, or grains are grown and marketed. For producers, these are important considerations to make when building a business strategy.
A simple look at U.S. wheat production illustrates the concept of locality. Wheat flourishes in dry, temperate climates. Accordingly, America’s leading wheat producing regions are located in Kansas, North Dakota, and Montana.
These locations are also conducive to post-harvest shipping by truck, rail, or barge. Given wheat’s lengthy shelf life, it may be delivered to market with a moderate risk of spoilage, as are most other cash crops.
Conversely, seasonal fruits and vegetables are more likely to be direct farm-to-table commodities. For instance, during the North American autumn, various locations produce apples and pumpkins. In summer, cherries, peaches, and Swiss chard may be found in specific locales. Although these items are certainly marketed, most marketing happens on a small, local scale to avoid spoilage and the perils of transport.
Another key reason why seasonal fruits and vegetables are not cash crops is tradability. For most cash crops, futures and options contracts are traded on public exchanges. As an example, the Chicago Mercantile Exchange (CME) offers a lineup of standardized ag futures products:
In addition to these products, derivatives facing cotton, coffee, and rice are also tradable. Hedgers and speculators alike can buy or sell these contracts in the pursuit of their financial goals.
However, seasonal fruit and vegetable derivatives aren’t typically offered on public exchanges. Reasons for this vary but include increased perishability and minimal public interest. So if you’re looking to go short on this year’s Washington apple crop, chances are you’re out of luck.
Cash Crops Aren’t Just for Farmers
The ag futures markets offer an array of possibilities for both producers and speculators. To learn more about the key grain, oilseed, and livestock contracts available for trade, check out Daniels Trading’s ag marketing portal. Featuring industry reports and expert insights, it’s an all-in-one resource for anyone active in ag futures and options.