The numerical difference between the local cash price offered by an elevator and the prevailing futures price on a commodity exchange. It accounts for local supply and demand, transportation costs, and storage availability. A strong basis means local buyers are paying a premium, while a weak basis indicates an oversupply or high freight costs in the immediate area.
The local elevator is offering a strong basis on soybeans this week because they need to fill a unit train.
Farmers track basis just as closely as the futures price, since a weak basis can wipe out the profits of a market rally.
Related terms
Commodity exchange
A centralized market where agricultural products are bought and sold through standardized contracts.
Cash crop
An agricultural crop grown specifically to be sold for profit rather than for the farmer's own use.
Grain elevator
A towering agricultural facility used to stockpile and transfer bulk cereal crops.