Long hedgers, seeking to protect against increasing price, prefer that the basis weaken. That is, hedgers pay less in the cash market relative to the futures market and may gain more from their position in the futures market. Direction and impact of basis movement for short and long hedger. Basis loss Basis gain Short hedgers, seeking to protect against decreasing price, gain from a strengthening basis. That is, the hedgers realize a cash price increase relative to the futures price and may gain more from their position taken in the futures market.
Basis tends to vary over time and within a marketing year for grains, oilseed crops, and livestock.
As will be shown, basis trends tend to persist over time and provide opportunities to those who understand these trends. Figures 3 through 7 provide various examples of how basis patterns vary over time and within a marketing year. Historically, soybean basis has strengthened considerably from mid-November until early January. Figures 4 and 5 show the seasonal trends and difference in seasonal trends across years, respectively. The reason for the relatively low basis in 1996 was the relatively high grain prices at that time.