2019 Spring Farm Outlook

2019 Logan County Farm Outlook Magazine Lincoln Daily News March 21, 2019 Page 31 By evaluating the futures market and your own basis bids, you can often find the best time to enter the market. Remember, though, that there is still a risk to be had. Hart warns that “the risk by using a basis contract is that I’ve locked in one piece of the price, but the other part could still decline… once committed to that buyer, if a better price comes along later on, I can’t move those same bushels to a different buyer for a better price.” To summarize, then, the futures market reflects forward pricing and hedging opportunities for producers and buyers. Cash prices reflect the futures price, less or plus the basis. Basis is then adjusted to either encourage or discourage delivery of product. Basis is a signal of market forces at work and will change over time, as it reflects both the cost of marketing grain and the competition between buyers. Farmers should carefully observe basis, cash, and futures market prices to select the perfect time to price their grain. Refusing to sell grain just because the basis is too weak could be worth the risk later, or it could mean a lower cash price at a later date when time is running short. By studying basis patterns and using those patterns, your hard work can pay off big in greater dividends. The futures market is often very volatile and difficult to estimate, but careful attention can get you through ever- changing economic times. Sources Alberta Agriculture and Forestry, et al. “Basis- How Cash Grain Prices Are Established.” Alberta Agriculture and Forestry , 23 Oct. 2017, www1.agric.gov.ab.ca/$department/ deptdocs.nsf/all/sis16505 . Kluis, Alan. “Understanding Basis Signals In The Grain Markets.” Farm Progress , Prairie Farmer, 31 Mar. 2000, www.farmprogress. com/understanding-basis-signals-grain- markets. Swoboda, Rod. “Understand Basis Contracts for Grain Marketing.” Farm Progress , Prairie Farmer, 11 Dec. 2017, www.farmprogress. com/marketing/understand-basis-contracts- grain-marketing. Turner, Craig. “The Basics of Grain Basis Trading.” Daniels Trading, 28 Apr. 2014, https://www.danielstrading.com/2014/04/28/ the-basics-of-grain-basis-trading.