Basis and basis patterns

One of the most effective ways to predict local cattle prices is to use historical market trends averaged across a period of time.

Basis is a fairly simple concept, but its importance and impact should not be underestimated. Basis is the difference between the local cash market price and the futures (CME Group) market price. It is important because it can be used to create price expectations based on the futures market, which can in turn inform marketing and risk management decisions. This approach assumes that futures markets are unbiased predictors of cash prices.

Cash Market Price - Futures Market Price = Basis

This simple equation shows how your local state-graded feeder cattle auction differs from the futures market. 

Need answers to questions like these?

• Where should I market my cattle?
• Should I fall or spring calve?
• When should I market my cattle?
• Should I retain my own heifers?
• Is the cost of feeding my cattle worth the added profit?