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G78-416 The Importance Of The "Basis" In Trading On The Futures Market, Lynn H. Lutgen

University of Nebraska-Lincoln Extension: Historical Materials

This NebGuide contains information on understanding the basis aspect of hedging.

The producer who wants to employ hedging as a marketing alternative needs to understand "basis." Hedging as used here is the selling of a futures contract to establish a price for a commodity the producer has on hand that will be sold at some later date. An example is corn held in storage in November that the producer plans to sell in May. This is formally known as a selling hedge. In hedging the producer is establishing in advance the price he will receive when the grain is sold …