How to use bases in the hedge


Price cash – price p & # 39; yuchersav = basis (at a time)

manufacturer's decision as to when and how to implement their crops and livestock, can have just as big an impact on their net rate of return, as well as any production decisions, they can take throughout the year. Today, farmers have more alternatives to marketing than in the past, and faced with a complex and fast-paced marketing system. They need to compare the traditional marketing methods of sale of cash at harvest (or until the harvest, the bushes on the guaranteed insurance) or when livestock is ready for the market, to transfer the contract or hedging with f & # 39; yuchersami or options. To do this, they need to thoroughly understand the relationship between different prices to be able to compare them equally over time, space and quality.

As mentioned above, the relationship between current and f & # 39; yuchersnymi prices is called "the base". The basics of marketing usually means the difference between the price of a particular market and the specific cash price f & # 39; yuchersnaga contract. Framework "localize" f & # 39; yuchersnuyu price in relation to the place, time and quality. Understanding the basics allows you to compare the market price quotes f & # 39; yuchersav cash quotes and prices commerce "forward contracts".

calculation base

The formula for the bases of calculation is as follows: the cost of cash – the price f & # 39; yuchersav = base at a time. From a negative basis, it follows that f & # 39; yuchersnaya price exceeds the price of cash, and a positive basis means that the f & # 39; yuchersnaya price is lower due to the cash.

In this formula, "current price" is designed for a specific location, time and product quality. Position may be a particular elevator, ethanol plant, package, etc., or may be an average cost for the total area. Time can be a particular day, or perhaps the average for the week. Quality can be, what grade or corn you have, or the weight of your cattle. "F & # 39; yuchersnaya price" in the formula – is a contract which simultaneously represents both the existing price. product quality in the price f & # 39; yuchersnaga standardized contract.

The basis is most often calculated as the difference between the cash value and the closest to the term of the (next) f & # 39; yuchersnym contract. For example, in June, corn basis is calculated using the current price of cash, minus the cost of the contract for the July F & # 39; yuchersy. The basis of the grain can also be calculated using the value of cash and more distant f & # 39; yuchersny deal to learn, the market offers a refund of the deposit ( "NEST").

Livestock is different in that you will consider only the adjacent substrate (not deferred) for the purpose of hedging and sale of cash because, unlike grain, livestock perishable and can not be stored for a long time, as the grain is.

In the next game, we will discuss ways of "bases of forecasting," as well as ways to start properly monitor and record baseline data in your region.