While December 2013 corn futures remain near $4.20 per bushel, basis levels are all over the board in big corn areas. Basis might be 20¢ higher only a few miles down the road from your local elevator.

Basis is considered one of the most misunderstood aspects of corn or other commodity marketing. But it can impact your actual sale price as much or more than futures prices.

Many university agricultural economists closely monitor basis activity in different regions.  Basis is typically calculated using the nearby futures price; the futures contract closest to expiration without going into the delivery month.  This futures price is subtracted from the cash price to obtain the basis level.

Kansas State University Extension economists say basis captures the effect of local supply and demand, as well as transportation costs, on commodity prices. K-State documents basis levels for corn, soybeans, sorghum and wheat across Kansas, Nebraska, Missouri and Oklahoma, as well as parts of Texas and Colorado.

Normally, the farther an area is away from the heart of the Corn Belt, the better the basis, assuming strong demand in these regions, says Kevin Dhuyvetter, K-State professor and Extension farm management specialist.

For example, in southwest Kansas and Nebraska and northwest Texas and Oklahoma, where there is strong local demand for corn from feedyards, the mid-November corn basis was in the 5¢ over to 75¢ over or more. On Nov. 20, when December futures closed at just over $4.19, the cash corn price in the Texas Panhandle was still over $5 per bushel in some areas, compared to a $4.15 average across Iowa and $4.03 in Illinois.

The mid-November Nebraska basis map showed how basis can differ within a short distance. Southeast Nebraska farmers were seeing a 20-30¢-under basis. But a county or two northeast showed a 20¢ stronger basis.

Like what you're reading? Subscribe to CSD Extra and get the latest news right to your inbox!

“Farmers often have a sense of loyalty to their local elevator,” Dhuyvetter says. “But they should be willing to do a little bit of shopping around. Basis can jump more than we might think.”

Chad Hart, Iowa State University Extension grain marketing economist, notes that Iowa’s corn basis has been stronger in some areas due to more ethanol production. He says the stronger-than-usual basis and lower futures provide an avenue for growers to lock in the basis and hold off on locking in a futures price until stored corn is marketed.

“These are strong basis levels for this time of the year,” Hart says, “and they offer some marketing opportunities.”

K-State offers historical basis information for particular areas served by its basis-monitoring program. Check it out at. Other states also have links to basis charts.

You might also like:

Winterize propane-powered equipment

Lower crop insurance guarantees in 2014

Prepare for downturn in agriculture