Live beef cattle basis patterns in North Dakota and related hedge-lifting strategies
1983
Petry, Timothy A. | Toman, Norman E. | Lindseth, Duane F.
Extract: A cattle producer considering futures market hedging as a means of reducing risk from adverse price movements needs to "localize" the futures price so it relates more closely to a local cash market price. The method used to localize or adjust the futures market price is called "basis." Basis values are computed by subtracting a local cash price from the futures market price. When a hedge is placed and a futures price "locked in," it is movement in the basis that determines the success of the hedge rather than changes in the price level.
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