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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchA CME grain or oilseed futures price is an exchange quote for a standardized commodity contract and delivery month. A cash price is what a buyer bids or pays for physical grain at a particular place and time. Basis is the difference between those prices, usually calculated as cash price − relevant futures price. The three figures describe connected parts of a grain market, but they are not interchangeable: the futures quote is not a guaranteed local bid, and basis explains why a local cash price can be above or below it.
What each price tells you
Futures: a standardized exchange contract
A grain or oilseed futures quote applies to a defined contract, including a commodity, contract month, contract size, quotation unit, and delivery terms. CME futures let market participants trade exposure to a standardized price without negotiating a separate physical-grain transaction for every trade. The quote is therefore a market price for that contract, not a quote for every grade of grain at every local elevator.
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The contract month matters. A futures quote for one delivery month may differ from a quote for another, so a basis calculation must use the contract month that is relevant to the cash bid or the marketing decision. For corn, CME lists a contract size of 5,000 bushels and quotes prices in U.S. cents per bushel. Its contract specification also sets deliverable settlement and contract-specific termination and delivery dates. Check the current contract specification before relying on those terms for a transaction.
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A cash price is a bid or transaction price for physical grain. It is tied to a buyer and a set of practical terms: where grain is delivered or picked up, when it is delivered, and the grade or quality accepted. Two buyers can post different bids for the same commodity because they face different local needs, costs, delivery points, or contract terms. A cash bid is consequently more specific than a broad futures quote.
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Basis: the bridge between them
Basis expresses the cash-futures price difference. CME Group’s grain education material defines it as cash price minus futures price. This makes basis a local-market measure: it captures the relationship between a physical bid and a selected futures contract, rather than the outright value of either price by itself.
In grain quotations, basis is commonly stated in cents per bushel as “over” or “under” a futures month. Cash above futures is positive basis, or “over”; cash below futures is negative basis, or “under.” The words refer to the arithmetic sign of the spread, not to whether the grain is expensive in an absolute sense.
How to calculate basis from a grain bid
Subtract the relevant futures price from the local cash price. Make sure both numbers refer to the same commodity and use compatible units and currency. For a quoted basis in cents per bushel, convert dollars per bushel into cents per bushel after subtraction, or convert both prices to cents first.
- Identify the local cash bid. Note the buyer or location, delivery timing, and any grade or quality conditions attached to it.
- Choose the relevant futures month. Use the commodity’s futures contract that the bid or marketing plan references, rather than assuming every nearby or deferred month is interchangeable.
- Align the units. For example, compare dollars per bushel with dollars per bushel, or convert both figures to cents per bushel.
- Subtract futures from cash. A positive result is “over”; a negative result is “under.”
Illustrative corn calculation, not a current market quote: if local cash corn is $4.20 per bushel and the relevant corn futures month is $4.35 per bushel, then $4.20 − $4.35 = −$0.15 per bushel. The basis is 15 cents under. If cash is instead $4.40 against the same futures quote, $4.40 − $4.35 = +$0.05 per bushel, or 5 cents over.
When reading a bid displayed as “July futures minus 15,” the stated basis is 15 cents under that July contract. The implied cash price is the futures price less 15 cents, provided the quote’s commodity, units, location, and delivery terms match the bid being evaluated. If the bid names a different contract month, calculate from that month rather than substituting another quote.
Why local cash and futures prices differ
Futures represent a standardized contract, while cash bids respond to conditions at physical locations. CME’s materials identify several influences on that local relationship. These factors can raise or lower cash relative to futures, and their effect can vary between locations and over time.
- Local supply and demand: A buyer’s need for grain and the amount available nearby affect the bid. A location seeking grain may bid more aggressively than one with ample nearby supply.
- Transportation availability and cost: Moving grain to or from a market takes capacity and money. Freight constraints or higher transportation costs can change what a local buyer can offer relative to the exchange price.
- Handling and storage: Facilities, capacity, and the timing of delivery influence the value of grain at a particular point in the supply chain.
- Quality and specifications: A physical lot may not match every buyer’s quality requirements or the futures contract’s standards. Discounts, premiums, or eligibility conditions can affect its cash value.
- Substitutes and competing supply: Buyers may have alternatives from other locations or commodities. The availability and price of those substitutes can influence local bids.
- Delivery location and terms: A bid is attached to a delivery point and schedule. A quote for grain delivered at one place or date should not automatically be treated as the price available elsewhere or at another time.
These local factors explain why a cash bid may be below futures in one place and above futures in another, even when both locations reference the same contract month. They also explain why a futures market move does not necessarily pass through to a local bid by exactly the same amount: the basis can change at the same time.
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What it means when basis strengthens or weakens
Basis strength describes the direction of the cash-futures spread, not the direction of the absolute futures or cash price. A stronger basis becomes more positive or less negative; a weaker basis becomes less positive or more negative.
- A move from 50 cents under to 40 cents under is a strengthening basis, even though the basis remains negative.
- A move from 20 cents over to 15 cents over is a weakening basis, even though the basis remains positive.
- A basis can strengthen while futures fall, or weaken while futures rise. The basis movement alone does not tell you whether the outright cash price went up or down.
To assess the cash-price change, track both components. Since cash equals futures plus basis, the cash price can move because futures moved, because basis moved, or because both changed. For example, an unchanged futures price paired with a stronger basis raises the implied cash price; a futures rise paired with a weakening basis has a partly offsetting effect. The size of the net cash move depends on the size of each component’s change.
How basis affects a hedge
A futures hedge can reduce exposure to a change in the broad market price, but it does not lock in the local cash-futures relationship unless the physical sale or purchase terms fix it too. That remaining uncertainty is basis risk: the basis at the time the hedge is completed may differ from the basis expected when it was started. CME’s hedger guide explains the practical consequence: hedgers remain exposed to basis changes even when they use futures to offset price exposure.
Producer selling grain with a short hedge
A producer who expects to sell grain later may sell futures as a short hedge. The physical sale and futures position work in opposite directions as the market changes, but the eventual net sale price still depends on the basis realized when the grain is sold and the futures position is offset or otherwise handled.
CME’s educational wheat example uses a producer selling physical wheat and holding a short July futures hedge. If the expected basis is 35 cents under, that discount is part of the intended net sale price: the relevant futures value less 35 cents, before other transaction-specific costs or adjustments. If the basis at sale is 30 cents under instead, the realized relationship is five cents stronger than expected and improves the net sale price by five cents relative to that expectation. If it is 40 cents under, basis is five cents weaker and the net sale price is five cents worse than expected, all else equal.
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Buyer using a long hedge
A buyer expecting to purchase grain later may buy futures as a long hedge. For this buyer, a stronger basis is unfavorable: it means the local cash price is higher relative to futures and raises the effective purchase price compared with the expected basis. A weaker basis is favorable because it reduces that local premium or discount relative to futures. The same basis movement therefore has opposite practical implications for a seller and a buyer.
These examples isolate basis to make its effect clear. They are not a guarantee of the final transaction price: the relevant cash bid, futures month, timing, quality, delivery arrangement, and the way the futures position is closed all matter. A hedge is a risk-management tool, not a promise that a particular local cash price will be achieved.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why prices tend to converge near delivery
As a futures contract approaches its delivery month, cash and futures prices tend to converge because the deliverable contract remains connected to the physical market. CME’s grain delivery lesson describes convergence as the cash and futures prices coming together as delivery approaches. This relationship helps keep the futures contract tied to the commodity it represents.
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Convergence does not mean every local cash bid must equal the futures quote at all times. Local cash reflects location, quality, timing, and other market terms, whereas the contract has defined delivery specifications. The connection is strongest around the contract’s delivery process and applicable delivery terms, not as a guarantee that any particular elevator’s bid will match a screen quote.
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Most futures positions are offset or rolled rather than taken through delivery. A trader who does not intend to make or take delivery should understand the contract’s dates and position-handling requirements and close or roll a position in accordance with the applicable exchange and broker rules. The CME contract page sets out the specific termination and delivery dates for corn; do not assume those dates or procedures apply identically to another commodity or contract month.
How to compare a local bid with a futures quote
Before deciding that a bid is unusually high or low, line up the details that determine what each number represents. A comparison that uses the wrong futures month, ignores a delivery difference, or mixes units can produce a misleading basis.
| Comparison detail | What to verify | Why it matters |
|---|---|---|
| Commodity and quality | Confirm the commodity and any grade, quality, or buyer specifications. | A local lot may not be equivalent to the standardized futures contract or the buyer’s accepted grain. |
| Physical location | Record the elevator, delivery point, or other location to which the cash bid applies. | Local supply, demand, transportation, and handling can make basis differ by place. |
| Cash delivery timing | Check the delivery window or date attached to the bid. | A bid for one timing may not be comparable with a price for another. |
| Futures month | Use the contract month named in the bid or relevant to the hedge. | Different delivery months are separate contract prices; the basis depends on the selected one. |
| Unit and currency | Make both prices comparable, such as U.S. dollars per bushel or cents per bushel. | Subtraction only gives a meaningful spread when the values use compatible units. |
| Basis sign and movement | Note whether the basis is over or under and compare it with the prior or expected basis. | The sign shows the current spread; the change shows whether the basis strengthened or weakened. |
For corn, the quoted unit matters in particular: CME’s contract specification states 5,000 bushels and U.S. cents per bushel. A contract specification is not the same thing as a local cash-price unit or a statement about the price available to a grower. Confirm the active contract details and the quote convention before translating an exchange quote into a physical-market comparison.
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Common interpretation mistakes
- Treating futures as a local bid: The futures quote is for the defined exchange contract. It does not guarantee what a particular buyer will pay at a particular location.
- Using the wrong futures month: A basis quoted against one month cannot be interpreted as though it referred to another. Always retain the contract month with the basis figure.
- Reading “stronger” as “positive”: Basis can strengthen without crossing zero, as in a move from 50 under to 40 under.
- Equating basis change with cash-price change: Basis measures only the spread. To know how cash moved, account for the corresponding futures move as well.
- Assuming delivery convergence erases all local differences: The contract’s delivery mechanism ties futures to the physical market near delivery, but local cash bids carry location, quality, timing, and other terms.
- Comparing unlike terms: A cash bid and futures quote are not a clean comparison if commodity, quality, location, timing, currency, or units do not align.
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