Chartered Financial Analyst Level 2

Explanation

Grains (Option A) are the correct answer because they exhibit the most pronounced seasonal variability in demand among the given options.

Key Reasons:

1. Agricultural Growing Cycles:

• Grains like wheat, corn, and soybeans have distinct planting and harvesting seasons
• Demand patterns follow agricultural production cycles
• Seasonal weather patterns significantly impact supply and demand

2. Energy (Option B) Characteristics:

• While some energy commodities like natural gas have seasonal patterns (winter heating demand), the variability is generally less pronounced than in agricultural commodities
• Energy demand is more influenced by economic activity and weather patterns rather than strict seasonal cycles

3. Livestock (Option C) Characteristics:

• Livestock has some seasonal patterns (e.g., increased meat demand during holidays)
• However, the seasonal variability is less systematic and predictable than in grains
• Livestock production cycles are more continuous throughout the year

4. Investment Strategy:

• Commodity investors seeking to exploit seasonal demand patterns typically focus on agricultural commodities
• The predictable seasonal patterns in grains allow for systematic trading strategies based on planting, growing, and harvesting cycles
• This makes grains particularly attractive for seasonal trading strategies

Therefore, grains offer the most consistent and exploitable seasonal demand variability for commodity investors.