An Introduction to Basis

Abstract

This guide is one in a series designed to help you better understand available marketing strategies. The focus of this guide is to help agricultural producers and agribusinesses better understand commodity basis. As will be discussed, commodity basis provides a significant amount of information to producers and agribusinesses for making production, forward pricing, hedging, and storage decisions. Many producers believe that understanding basis patterns is the most fundamental means of evaluating marketing decisions. That is, basis tends to follow historical and seasonal patterns, and by understanding these patterns a producer or agribusiness person can make better management decisions and reduce risks involved in those decisions.