Victor Aideyan, Senior Risk Management Consultant with HISGRAIIN Commodities Inc., explains how basis price is determined and how it can effect your bottom line.
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- The term ‘basis’ refers to the price of a commodity adjusted by your local elevator.
- Basis price is the local cash price for a commodity, minus the futures price set for the commodity by the Chicago Futures Exchange.
- The price a producer receives is made up by adding the basis price to the futures price.
- Basis price is influenced by transportation and carrying (interest and storage) costs.
- Pick the selling price that offers you the best net price to your bottom line, while factoring in the storage and interest costs of delaying selling.