Basis

Basis is the difference between the futures price and the local cash price. It is referred to as basis, basis price or price basis.

Example: May futures contract trading at $2.96 with a local cash price of $2.63, the basis is considered -$0.33, which means 33 cents lower than or under May.

Factors affecting basis include transportation costs, storage costs, supply and demand, local conditions and others. These factors vary throughout the year.

Source: Iowa State University Extension and Outreach. For additional information visit www.extension.iastate.edu/agdm/crops/html/a2-40.html.