Basis price, futures and your bottom line
Victor Aideyan, Senior Risk Management Consultant with HISGRAIIN Commodities Inc., explains how basis price is determined and how it can affect your bottom line.
- 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 by the Chicago Futures Exchange
- Producer price - adding the basis price to the futures price
- Basis price influenced by transportation and carrying (interest and storage) costs
- Pick selling price that offers you best net price, while factoring storage and interest costs of delaying selling