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Using Basis and Futures Prices as a Barometer in Deciding Whether to Store Grain or Not

  • Siaplay, Mounir
  • Anderson, Kim B.
  • Brorsen, B. Wade

The purpose of this paper is to determine the importance of the strength and weakness of basis and futures prices as barometers for producers to use in deciding whether to store or not. Basis is the single most important market signal for wheat producers to use when deciding whether to store or sell their wheat at harvest. While some models indicated low futures prices were a signal to store, results were fragile and inconsistent.

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File URL: http://purl.umn.edu/37575
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Paper provided by NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2007 Conference, April 16-17, 2007, Chicago, Illinois with number 37575.

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Date of creation: Apr 2007
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Handle: RePEc:ags:nccsci:37575
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  1. Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66, pages 233.
  2. Fama, Eugene F & French, Kenneth R, 1987. "Commodity Futures Prices: Some Evidence on Forecast Power, Premiums,and the Theory of Storage," The Journal of Business, University of Chicago Press, vol. 60(1), pages 55-73, January.
  3. Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September.
  4. Kastens, Terry L. & Dhuyvetter, Kevin C., 1999. "Post-Harvest Grain Storing And Hedging With Efficient Futures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(02), December.
  5. Kastens, Terry L. & Schroeder, Ted C., 1996. "Efficiency Tests Of July Kansas City Wheat Futures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(02), December.
  6. Hazuka, Thomas B, 1984. " Consumption Betas and Backwardation in Commodity Markets," Journal of Finance, American Finance Association, vol. 39(3), pages 647-55, July.
  7. Yoon, Byung-Sam & Brorsen, B. Wade, 2001. "Market Inversion In Commodity Futures Prices," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18962, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  8. repec:jaa:jagape:v:34:y:2002:i:3:p:459-476 is not listed on IDEAS
  9. Dusak, Katherine, 1973. "Futures Trading and Investor Returns: An Investigation of Commodity Market Risk Premiums," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1387-1406, Nov.-Dec..
  10. Seamon, V. Frederick & Kahl, Kandice H. & Curtis, Charles E., Jr., 2001. "Regional And Seasonal Differences In The Cotton Basis," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 19(2).
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