Illustrative example only. Not a current quote or a sale recommendation. Fees and discounts can change your net proceeds.
The futures market is the starting point.
The futures market is the starting point.
Futures prices reflect a standardized commodity contract. Your local cash bid also reflects what buyers will pay for grain at a specific place and delivery period.
Basis brings it closer to your farm.
Basis brings it closer to your farm.
Basis is the difference between a local cash price and the relevant futures price. Local supply, demand, transportation, and delivery timing can all affect it. A stronger basis can improve a cash bid even when futures are unchanged.
Two decisions. Different tools.
A cash forward contract typically fixes a cash price for delivery later. A hedge-to-arrive contract generally fixes the futures component while leaving basis to be set later. Terms, fees, and delivery obligations vary by buyer.
Ask before you commit.
Which futures month is used? When must basis be set? What are the fees and delivery requirements? What happens if production falls short? Review the actual contract with your advisor and grain buyer.
Educational example only. Not a recommendation to use any particular contract. Source: Michigan State University Extension, Introduction to Grain Marketing.
Next: does it pay to store grain?
General education, not personalized trading advice. Futures and options involve substantial risk.