Spot basis is the difference between the local cash price of a commodity at grain delivery points and the futures market price for that commodity. It’s the basis for immediate (as opposed to deferred) delivery of your grain. Basis can fluctuate due to local supply and demand, storage costs, transportation costs and more.
Basis is often weakest right around harvest, when a surplus of grain hits the local market as farmers hope to deliver grain. To look at typical changes in spot basis for corn and soybeans at harvest and where it occurs, we analyzed 8 years of spot basis pricing data from roughly 2,000 corn and soybean buyers.
For each buyer, we compared spot basis prices during a two-week period at harvest (we define “harvest” for this dataset as the date where 25 percent of the crop is harvested, according to USDA data, by state and year) to the spot basis during the two-week period two months before harvest. The maps below show, by region, the typical basis change between two months before harvest and harvest.
As you think through pricing strategies for your crop, it is important to take into account historical performance of different strategies available in the market. (It is also crucial to remember that past performance is not indicative of future results.)
That’s why we’re using data to analyze those strategies and their performance — things like historical performance of traditional corn pricing contracts, and the difference in corn and soybean basis when locking in basis in the spring with a forward contract for fall delivery versus the basis for spot delivery in the fall. And the results are powerful.
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The risk of trading futures and options can be substantial and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. Past performance is not necessarily indicative of future results. For the purposes of quality assurance and compliance, text messages and phone calls to and from FBN BR LLC may be recorded and archived.
Disclaimer: Futures and Option trading involves substantial risk, and may not be suitable for everyone. Trading should only be done with true risk capital. Past performance, either actual or hypothetical, is not necessarily indicative of future results.
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