Texas/New Mexico Stateline | Basis= Difference between the local cash price of a commodity and the futures price. Elevators base their prices off the futures, i.e. $-.40 under Dec 2010 CBOT Corn. Basis fluctuates depending on local demand and supply. Futures price fluctuates on worldwide demand and supply.
Nobody delivers on a futures trade. When you want out of your position you offset your trade with an opposite contract. Short(sell) a Dec 2011 CBOT corn now, next fall before that contract expires go Long(buy) another Dec 2011 CBOT corn contract. Hopefully the price next fall is lower and you keep the difference in $$. EDIT: You then sell your crop on the local cash market and add those $$ from your futures trade to the price, effectively giving you the hopefully higher earlier trade.
Input prices will generally follow the price of the commodities. No reason to expect chemical and fertilizer companies to not cash in on the higher commodity prices. And the theoretical increased demand. Higher corn prices = higher demand for inputs.
Edited by milofarmer1 11/13/2010 17:02
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