Basis

Basis is the price difference between the cash price and the futures price for a particular commodity. Basis varies from one location to another, so it is specific to a particular cash market. Freight, handling, storage and quality, as well as local supply and demand factors typically affect the basis price.

Local Cash Price – Futures Price = Basis

If a spot corn price is $2.42 and nearby futures are $2.52, the prevailing basis level is then -$0.10.

Terminology

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