Definition Basis is defined as the continuous and ever-changing relationship between cash grain and futures prices. As a measure, basis reflects how prices that are bid locally in the cash market follow the underlying commodity in the futures market, generally referred to as the nearby futures contract. It is the amount that the local cash price for a commodity is above or below the futures price for a specific delivery month. The basis for grain and oilseed commodities differs from one delivery point to another. Typically, basis bids are different within the region for each cash grain delivery point.
Basis has a tendency to narrow as the delivery month approaches.
This means that the cash price is 25 cents over the December futures price. In a basis table this number is recorded as 25. Basis bids vary over time, sometimes from day to day, or even within a trading day. The basis level reflects a certain set of circumstances that are effecting the market at that given point in time. Basis level is far more predictable than the price level for commodities.