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Is the Local Basis Really Local?

Author

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  • Manfredo, Mark R.
  • Sanders, Dwight R.

Abstract

Conventional wisdom suggests the local cash - futures basis is determined from local supply and demand conditions. However, it may be the case that local elevators look to other locations, such as terminal locations, and adjust for transportation differentials when determining the basis for their particular market. If so, certain grain marketing locations (e.g., export and interior terminal locations) may play an important role in discovering and ultimately determining the basis for other local markets. This hypothesis is examined for the #2 yellow corn basis at various export terminal (Gulf; Toledo), river terminal (Illinois River; Omaha) and interior (S. Central Illinois; N. Central Iowa; Denver) locations. Specifically, if the basis calculated at one market location is found to lead the basis at another market location, then this suggests that the leading market plays a role in determining the basis for the other market. The findings suggest that corn basis calculated at the export terminal markets of Toledo and the U.S. Gulf, as well as the Illinois River, may indeed provide valuable information in determining the basis for other river terminal and interior locations.

Suggested Citation

  • Manfredo, Mark R. & Sanders, Dwight R., 2006. "Is the Local Basis Really Local?," 2006 Conference, April 17-18, 2006, St. Louis, Missouri 19001, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:ncrsix:19001
    DOI: 10.22004/ag.econ.19001
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    File URL: https://ageconsearch.umn.edu/record/19001/files/cp06ma02.pdf
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    Cited by:

    1. Bullock, David W. & Wilson, William W., "undated". "Factors Influencing the Gulf and Pacific Northwest (PNW) Soybean Export Basis: An Exploratory Statistical Analysis," Agribusiness & Applied Economics Report 288512, North Dakota State University, Department of Agribusiness and Applied Economics.
    2. O'Brien, Daniel M., 2009. "The Effects of the Micro-Market Structure for Kansas Grain Elevators on Spatial Grain Price Differentials," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53041, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    3. William Wilson & Prithviraj Lakkakula, 2021. "Secondary rail car markets for grain transportation and basis values," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 472-488, July.
    4. Adjemian, Michael K. & Kuethe, Todd & Breneman, Vince, 2011. "A Spatial Approach to Estimating Factors that Influence the Corn Basis," 2011 Conference, April 18-19, 2011, St. Louis, Missouri 285339, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    5. Lewis, Daniel A. & Kuethe, Todd H. & Manfredo, Mark R., 2010. "Uncovering Dominant-Satellite Relationships in the U.S. Soybean Basis: A Spatio-Temporal Analysis," 2010 Conference, April 19-20, 2010, St. Louis, Missouri 285328, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    6. Mobarok, Mohammad Hasan & Marcillo-Yepez, Edgar & Thompson, Wyatt & Skevas, Theodoros, 2025. "Understanding Crop price spread Spillovers Through Spatial Transportation Cost Dynamics," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 360840, Agricultural and Applied Economics Association.
    7. Bullock, Shaina S. & Bullock, David W. & Wilson, William W., 2023. "Short-Term Factors Influencing Corn Export Basis Values in the Pre- and Post-COVID Periods: A Comparison of Econometric and Machine Learning Approaches," 2023 Conference, April 24-25, 2023, St. Louis, Missouri 379019, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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