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Kelley Aline
209 Smelter Ave NE
Ste 2
Great Falls, MT 59404
406-452-1339
Michael Plummer
1321 8th Ave N
Ste 101
Great Falls, MT 59401
406-727-7433
Eric Borggard, CFP
®
720 River Dr S
Ste 300
Great Falls, MT 59405
406-727-3427
Amanda Maher
702 2nd St S
Ste 1
Great Falls, MT 59405
406-952-0413
Tom Katz
720 River Dr S
Ste 300
Great Falls, MT 59405
406-727-5540
www.edwardjones.com
Member SIPC
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The solution: using the combination of basis (historical
information) and futures prices (rational expectations).
Historically, basis tends to be more stable than either the local
or futures prices alone. This is because the volatility in prices
caused by market fundamentals tends to affect both local and
futures prices in the same direction. That is, when futures prices
rise, local prices generally also increase. Similarly, decreases in
local prices are associated with lower futures prices. Therefore,
the difference between the local and futures prices, basis, is not
likely to change by the same magnitude as prices themselves. The
stability of basis over time makes it useful for predicting local cash
prices for a given commodity and point in time.
While the www.montana.edu/basis tool does not directly predict
basis or price levels, you can use historical basis information to
understand historical market conditions for specific products at
certain locations and time periods. You can then combine that
information with futures contract prices to obtain additional
insights about potential future market conditions.
For access visit: www.montana.edu/basis.
This work was supported by funding from the Montana Wheat
and Barley Committee.
