Cash buyers of field crops are primarily elevators and processors and the most common way of selling crops to them is spot cash sales. However, these buyers increasingly offering a variety of cash contracts as alternative grain marketing methods. Before comparing these cash marketing alternatives, an understanding of basis is needed.
Basis is the difference between the local cash price and a particular futures price.
To determine the West Memphis basis the soybean futures contract that corresponds best with the cash delivery date is used. In this case, the November 1997 soybean futures contract is selected. Basis is important because it shows the relationship between the local cash price and the futures price. Over time, basis is more predictable than price and basis records can provide information about when to sell or which marketing alternative to use. Knowing local and seasonal basis patterns and transportation costs can help improve marketing returns.