Basis represents the difference between futures and cash prices. Each ADM facility determines its own basis. It reflects what grain is worth in certain areas by assessing local supply and demand factors, market delivery locations and freight costs associated with moving grain to those facilities. Delivery locations change constantly. They can be export facilities, local…
This price is reflected on ADM contracts to determine the final cash price once the basis has also been established. The futures reference price relates directly to exchange futures prices for that specific commodity. Futures reference prices may be established in many ways depending on the contract type.
A spot price is determined by the flat cash price at the delivery location on the date of delivery. A customer may utilize this price if they don’t have contracts that apply.
