A useful website for collecting basis information for Georgia auctions is Readers in southeastern states may also find the Southeast Cattle Advisor website (useful for obtaining local cash market and futures price information. Current futures quotes can be obtained from most newspapers, radio stations and private vendors. Commercial vendors also provide price quotes for a fee. Local cash livestock prices are available from state and federal market news services or farm organizations. In general, reasonably accurate basis estimates can be obtained by selecting a day during the week to collect a cash and futures price quote and averaging this value over a three- to five-year period. If the local price for 500- to 600-pound steers is $175.00/cwt. Estimating the Basisīasis is defined as the cash price minus the futures price (Basis = Cash Price - Futures Price). This eagerness or reluctance is communicated in the changing basis in other words, comparing the local Georgia price relative to the futures market price. Georgia buyers signal their eagerness or reluctance to purchase a commodity by bidding a higher or lower price for it.

Basis reflects the supply and demand situation in the local Georgia market, and changes as local conditions change. The difference between Georgia cash prices and the futures market prices is called the basis. However, there is usually a difference between the local Georgia cash price and the price on the CME. Similarly, when futures market prices fall, Georgia prices fall. So, when futures market prices rise, Georgia prices rise. Local cash prices and futures market prices are usually positively correlated for a given commodity. Georgia prices are heavily influenced by - but seldom identical to - the futures market prices on the Chicago Mercantile Exchange (CME). Commodity prices in Georgia are directly influenced by worldwide supply and demand factors reflected in the futures markets. In today's world, futures markets reflect a market of global proportions. Even if a producer never uses the commodity futures market directly, knowledge of the basis can be of great value when making marketing decisions.Ĭommodity futures market price quotations reflect the collective opinion of thousands of traders concerning the overall supply and demand balance for a commodity. A more formal definition of basis is the difference between the cash price and the futures price for the time, place and quality where delivery actually occurs. Basis refers to the relationship between a commodity's cash price in a local market and its futures market price. Understanding the concept of basis is a key element in developing a sound marketing plan. McKissick, Professor Emeritus and Distinguished Marketing Professor, University of Georgia Introduction Griffith, Assistant Professor and Extension Economist-Livestock, University of TennesseeĪnd John C. Curt Lacy, Associate Professor and Extension Economist-Livestock, University of GeorgiaĪndrew P.

Feeder cattle futures graph