![]() The feedlot operator needs to know what basis the buyer is offering in his bid. The packer buyer has bid C$ 148/cwt for the animals. Today is June 4 and a feedlot has a pen of finished steers. This basis will show the difference between today's cash price and what the futures market believes, today, that cattle will trade for at a point in the future. Once this conversion is done, a simple subtraction from the local cash market price will give a basis for that class of animal. Since futures contracts are traded in US dollars and based on US grades of cattle, futures prices must be converted to a Canadian dollar equivalent. The changing basis level can provide opportunities for pricing cattle. ![]() The basis will usually change over time as the nearby futures month gets closer to the present time. The difference between the two markets is the basis. As time passes, the cash price and futures price typically converge or come together. For Canadian producers, the spot basis means the difference between the Canadian cash market and a US futures price, since the only futures market in North America that trades cattle futures contracts is the Chicago Mercantile Exchange (CME) located in Chicago, Illinois.Ī futures contract price reflects what traders think today that cattle will be worth at a specific future time, and the cash market reflects the actual selling price of a physical commodity. Often a basis quote refers to the "spot" basis, which is the difference between the current cash price for slaughter or feeder cattle and the "nearby" futures price. Basis is the difference between a cash price and a futures price.
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