Introduction

As with any commodity, the price of grain changes over time depending on buyer demand and global factors. For example, below is the weekly average spot price of feed wheat bid for on Hectare Trading and Graindex since 2021.

Most trades not on Hectare Trading are spot, ex-farm trades. But as these trades are most commonly done directly, there is no external marketplace to compare this price to.

Commodities can also be sold in the form of Forward Selling (also known as Futures Contracts). In which the buyer chooses to pay (usually) a higher price for the commodity to be delivered at an agreed later date which is known as the movement date or movement month.

These futures contracts can be traded on exchanges such as the ICE (formally known as the LIFFE). The price of these Futures Contracts is tracked publicly by external institutions such as the beloved Noggers Blog. These are normally offered at a set range of fixed movement months, for example: during the spring of 2025, you could buy a contract for feed wheat moving in November 2025.

For example, here's the ICE Exchange's price for a London Feed Wheat Future Contract for the movement of July 2024 from six months before the movement date. Use the selector below to view the price of other Movement Months over time.

In theory, both our buyers and sellers are using this data to make decisions on when is best to list and bid. For buyers, the data helps set what price they will offer when bidding for commodities. For sellers, it informs on when better prices are likely to be offered.

If this is true, the volatility in commodity prices will have a direct effect on our marketplace price and activity. This analysis will investigate the following questions in regards to this effect:

• Do bid prices on Hectare Trading correlate with external marketplaces?

• How do market prices affect Hectare Trading activity?

Futures and Hectare Trading Price Correlation

The ICE offers futures contracts at five set movement months in the year (January, March, May, July and November), while Hectare Trading gives buyers and sellers the ability to trade at any movement month. So to compare the price on Hectare Trading to the price on the ICE we need to use bids placed on Hectare Trading in ICE's set movement months. For example, below is the daily closing price of a May 2024 LFW Future Contract on the ICE exchange vs the closing bid made on Hectare Trading for listings with a May 2024 movement month over time.

HT trading data is plotted as points rather than a line because we will not always receive a bid every day for a given movement month.

We can see from the above that there is some correlation between the price of bids on Hectare Trading and the ICE. Next, let's plot the ICE Exchange price vs Hectare Trading price for all days and movement months when we have data from both marketplaces.

The above correlation between the price of future contracts on Hectare Trading and the ICE exchange has an R number of 0.76, with 336 samples this means that it has a p-value of >0.001. The gradient of the regression line is 0.98 This means that:

• The prices of Future Contracts on the ICE exchange and Hectare Trading are strongly correlated.

• The chance of the observed correlation being due to random chance is less than 0.001%.

• On average, for every £1 that the price of a future contract increases on ICE Exchange, the price of a future contract on Hectare Trading rises £1.02.

But how does this compare to our spot prices? Let's take the average weekly price of spot trades on Hectare Trading from the introduction section, and compare it to the price of the next upcoming future's contract in the ICE exchange. For example, we would compare the spot price for a week in June to the July future contract price in the same week, and the price for a week in September to the value of the November contract and so on.

We can see clearly that the bid prices we see on platform are strongly correlated to the market prices on external marketplaces such as the ICE.

How do market prices affect Hectare Trading activity?

As the price of arable commodities changes over time, naturally some weeks the price will be more appealing to buyers than other weeks. For example, as the price of crop rises, sellers will want to take advantage of this to achieve greater margins. We can use the Freddie Mac index using our data to give us an idea of if the price is increasing this week, and where it sits in the range of prices over the last 52 weeks.

This gives a good idea of how hot the market is at a glance. Especially the range on the bottom of the card, when our weekly line is high (on the right), then the market is at a higher than normal price.

Let's use the metrics on the cards above: the weekly average price and the change in price from last week, and see how they correlate to activity on the platform.

Average Price vs Activity

Now let's plot each week's difference from the 52 week average price, against our metrics for marketplace activity. Number of listings created, bids created, conversion rate and logins.

If we calculate the R number and P values of these correlations we find the following relationships between price and marketplace activity:

We can conclude from this data that there is a weak correlation between the average price being offered on Hectare Trading and the activity observed on the marketplace, most notably the number of listings created. This relationship is mirrored somewhat with futures contracts but with a less significant correlation.

However there is no correlation between the price offered on the market and the conversion rate of the listing.

How does this compare to the ICE Exchange?

So it doesn't look like there's any strong correlation between trading activity and the price of commodities on Hectare Trading. Should we expecting this behavior? Barchart.com is our source for historic future's data, their data source also contains the volume of trades on a given day for each movement month. If we look at the correlation in price and activity in their pricing data we can see a similar lack of correlations between the two variables.

The barchart data has an R number of and a p value of >0.0001, indicating the volume of trades on the ICE and the price of the Future's Contract on offer are weakly correlated. This is very similar to the observed R values on Hectare Trading.

Did we have a better price/conversion correlation on Graindex?

Neither spot or future contracts displayed a significant correlation between the weekly average price of feed wheat and the conversion rate. On Graindex or Hectare Trading.

Weekly Volatility vs activity

Perhaps our marketplace becomes more activity when the price of Feed Wheat changes rapidly week-to-week. If last week the price of Wheat was £200 per tonne, then the next week it has climbed to £220 sellers may want to capitalise on this high price, and we should see marketplace activity. This variance in the price of a commodity is also commonly known as it's Volatility.

On the other hand, sellers may want to offload crop quickly if a high price is suddenly dropping. To capture this let's also calculate the absolute value of the change in price per week.

To test this let's first get the week-on-week change in absolute and percentage terms over time.

Now let's plot these weekly price changes against the same activity metrics as before to see if there's any correlation.

While some metrics provide R numbers that would indicate a weak correlation between the weekly change in price and marketplace activity, the p values for most of these correlations is too high to provide a statistically significant result. Simply put, there's too much change that the correlation could be due to random events to draw any concrete conclusion from it.

Conclusion

📈 The price of bids on Hectare Trading are strongly correlated with external marketplaces

As the price of london feed wheat futures contracts rise on the ICE, the price of equivalent futures contracts rise roughly 2% faster on Hectare Trading.

• This indicates that our buyers are acutely aware of the price on offer on different exchanges, and are most likely benchmarking the prices they offer on Hectare Trading on them.

• We are performing slightly ahead of this price, and should be confident in informing sellers what prices they should expect based on this data.

💸 Marketplace activity on Hectare Trading is weakly correlated with the price being offered

• When the price of feed wheat increases, we see a slight increase in marketplace activity, most notably in the amount of listings created.

• This is comparable to the correlation between price and activity on the ICE exchange (according to Barchart's data).

• This could indicate that while the price of the crop is an important factor for sellers, it isn't as strong of a driver to list crop as other factors.

• It could also indicate that less than the majority of sellers are aware of the price on a week-to-week basis, and are more driven by other factors such as storage or cashflow when making decisions to list their crop.

• Another suggestion could be that a seller's decision to list is initiated by outreach calls by merchants or internal decisions (i.e storage, cashflow) opposed to timing trades on the market to achieve the highest possible.

🚫 Weekly Conversion Rate does not correlate with the average price being offered

• As the average price offered to our sellers rises, it does not mean that the overall conversion rate for the week will rise.

• This could indicate a number of things, but certainly that there are many factors other than the price offered that effects the seller's decision to trade.

• To better understand this decision, we should investigate these other factors and analyse individual listings rather than aggregating to a weekly level.

🚫 We cannot confidently say if the magnitude of price weekly change effects marketplace activity

• There is not a strong enough correlation to determine if the weekly change in price has an effect on marketplace activity.