Farming’s Futures By David K. Saucier Commodity Advisor Trade Tech, Lancaster Why .does the basis differ from one location to another? ' Saying that the basis differs -from one location to another is the same as saying that prices differ from one location to another. On the same day the cash price is Localviile is $l.OO, it may be J 1.76 in some other location.' And ?1.U45 in another, and $1.91 m still another. In each of these communities, there is obviously a different basis. One reason is that locations with lower-cost transportation to the primary areas of grain demand generally enjoy a price advantage over less favorable locations. UPDATE YOUR MILKING SYSTEM NOW For added performance and profit here are some options to consider. UNIVERSAL MILKER TAKEOFF • can actually increase production by hundreds of pounds per cow • dual sensing control assures no Over- or undermilkmg (both are major causes of mastitis) • automatically shuts oil vacuum when cow is milked out • avail able for parlor installa tions (model shown) and now (or around the barn pipeline systems SUPER 1050 PANEL RECEIVER N 0 installed and SERVICED BY ABWAY through Telmark, Agri-Lease. Check Al , Agway installation and Service Agway tor detain. people are well trained, well equipped, A T and backed by complete parts inven- A , I lories lor fast repairs. Agn-lsaai AGWA The excent to which a local price happens to be below the current Chicago cash price at a particular time may nor may not be the same as the current cost ot tran sportation to Chicago: While local prices for gram of comparable quality are not usually below the Chicago price, by more than the cost of available transportation, they may be below the Chicago price by less than this amount. Reason: Elevators and other owners ot gram sell to whoever offers them the highest net price. Thus, if a bidder from some other location offers a higher price than buyers from Chicago are currently MILKER UNITS • large capacity, scientifically balanced designs for improved udder adaptability • see-through claw lets you check milk flow • built-in air bleed reduces vacuum fluctuations and gently elevates milk m _ lanel senribied opacity s .on- . lomatic neets 3 A id ed lor ter units willing to pay, the local price is likely lo.be lugher-than the Chicago pnre'flunus transportation cost. How Is the basis affected by the passage of time? The most predictable feature ot the basis is the tendency to narrow—by the amount of reduced storage costs—as the delivery month is approached. Thus, it storage costs of 4 cents a month are included in the basis, the likelihood is that the basis will narrow at the rate of' 4 cents a month. This, ot course, assumes that the other basis components remain unchanged. Example: In January, the LocalviUe price ot $l.BO is under the March futures price of $2.10 by 80 cents. That is, the basis (which includes storage costs) is 80 cents. By February, all else remaining unchanged, the basis should harrow to 28 cents. By March, all else remaining unchanged, it should narrow to 22 cents. The tendency ot the basis to become narrower as the delivery month is approached is known as convergence, indeed, at the tune and place ot delivery, the cash price and futures price are nor mally the same. This convergence VACUUM PUMPS # the right pump can increase the efficiency of your whole system • available in 3. 5. or Th hp • easily matched to the vacuum require ment of your system 24-VOLT SOUQ STATE PULSATOR • solid-state reliability • never needs adjustment e water- and air-tight protects against dust dirt and moisture ♦ provides individual pulsation control for a single milKei* unit • built-m circuit breaker For details, contact your Agway Farm Systems salesperson, Universal dealer or local Agway store. is assured by the tact that if prices were higher in the tutures market than in the cash market, or vice versa, traders would buy or take delivery in the low-priced market and sell or make delivery in the high-priced market, thereby quickly minimizing any price difference. The drawing below illustrates the "normal” relationship between cash prjees and tutures prices as the delivery month is approached. In the real world ot continuously fluctuating prices, of course, the cash-futures price relatmship is seldom as exact as depicted in the drawing. Much more typical is the chart ot actual cash and futures prices over a several month period. How do futures differ from one marketing year to next? .. Each harvest begins a new marketing year with its own supply and demand arthimetic. Simply put, the start of a new marketing year is the start of a "new ball game.” Price levels may be higher or lower than during the previous year. As a result, the futures price for OIL RECLAIMER pays (or itself in oil savings, icreased pump efficiency and longer >ump life * baffled to retain oil more ifficiently and to entrap more dust ind dirt Lancaster Fanning, Saturday, November 28,1981—AS SLOW PCy^O-- Call Now To Place Your CLASSIFIED AD Ph! 717-394-3047 or 717-626-1164 ijuiinnnnnnnrnrtmi * ■«. ■■»««*«»» WANTED Laying Hen Contracts 50,000 Bird Capacity or More Reply: Lancaster Farming P.O. Box 366 J-203 Utitz, PA 17543 00000000000000000000000000009 r -« ‘‘TEP TRAfyt,> no 1 • Hmhiy. Pmo»yl»anli 17033 • 717-9 M Z 24! Providing «xp«rt cira and dß*nilfi«»loryoitr cattlf by illhir goounatkortratW»*UiHertrucking. Ifw#'-’ LOCALLY or NATIONWIDE COMFORT GLOW™ KEROSENE HEATERS clean, odorless heat wherever it's needed ...for pennies an hour. ;MBER GRWBA 9300 BTU has a wide array of popular features Attractively priced $ 139 95 $ 209 95 We Ship UPS...Add $5.00 per Unit. (Pa. residents add 6% sales tax) FISHER ENGINE SERVICE 3141 Old Philadelphia Pike BIRD-IN-HAND, PA 17505 the last delivery month of one marketing year may differ sharply from the futures price for the first delivery month of the next marketing year. For example, if the remaining supply of "old crop” corn is expected to be roughly equal to the needs of feeders, processors and exporters during the summer and fall months but a bumper “new crop” is expected to be harvested in December, the stair-stepping of futures prices might be as shown on the chart. This is not to say “old crop” and “new crop” prices are always or totally unrelated. Such is not the case, if there is an over-abundance of old crop supplies as the marketing year draws to a close and a big new crop is in the offing, the large impending harvest will ' almost certainly have some depressing effect on old crop prices. Conversely, if old crop supplies are barely adequate for the remainder of the year and a small new crop is in prospect, the possibility ot a potential shorh •; - is likely to lend strength both to old and new crop prices. Send questions on futures trading to Farming’s Futures, Lancaster Farming Newspaper, Box 366, Lititz, PA 17543. RAY R. HARBOLD >R9A 1300 BID impact heater ch attractive 'ood grain linish is built-in 'talyticair ;shener $ 164 95 GCI9A 19,500 BTU Comfort Glow's biggest output heater Operates II hours on one filling of fuel
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