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Prairie Farmer - September 2007

Make a Plan for Local Bids

Garrett Stoerger
Department of Agricultural and Consumer Economics
University of Illinois at Urbana-Champaign

The month of September marks the start to two of my favorite pastimes: football and harvest. While FAST doesn't have any tools to help your team win a championship, it does have some useful tools to help make difficult marketing decisions.

No two marketing plans are quite the same. Some producers subscribe to market advisory services; others read free market outlook updates; and some will stick to USDA reports. Regardless of where and how you choose to get your market information, it is common to see data in a visual form such as a chart or graph. But how relevant is all of that data if they aren't using local cash prices.

You can use the Corn and Soybean Basis Tool to track historical futures prices, local cash prices and their corresponding basis levels over a number of years. The benefit to this model over anything you will find in publications? It's your data. The tool is available for download, free of charge, at www.farmdoc.uiuc.edu/fasttools .

Unlike some of farmdoc's other tools, the Basis Tool is able to generate its analysis from only two sources: futures and cash prices. At the bottom of the tool's main menu, you will find a button that reads “Import futures prices.” Futures data from an up-to-date external database will automatically update the spreadsheet with the most current prices.

Getting started

In order to make this spreadsheet your data, it does require that you gather cash price information for each observation. The tool has been designed using the following rules:

• One observation per week is made on Thursdays.
• The model will begin on the third Thursday of September and continue for 49 observations.
• Contracts roll forward as the date approaches the contract's maturity.
• Overnight cash bids should be used in the model for consistency.

On the main menu, you can input cash prices, as well as view futures prices and corresponding basis levels by selecting the year and crop that you wish to analyze. In order to view and compare historical basis data over time, you will need to establish a baseline to work from. While I realize that you most likely don't have the overnight spot cash price bid for every Thursday laying on your coffee table, your local elevator should be able to provide you with this information.

Once you have your database up and running, it is time for some analysis. If you proceed back to the main menu, you will notice that Step 2 refers to a “Data output page.” By clicking this link, you can view data in both tabular and graphic form. First, select the type of data you wish to view, followed by the crop, range of years and number of observations that you wish to make. The table will display the selected data in terms of an average, minimum and maximum level for each of the 49 weekly observations selected. Highlighted cells indicate a maximum and minimum level of price across all weeks.

The button in the upper right-hand corner will give you the option to view the data as a chart, if you like your data a little more visual.

In summary, if you would like a way to track futures price — your own local cash price and corresponding basis – look no further than the Corn and Soybean Basis Tool that the economists at U of I farmdoc have created.

Stoerger is FAST coordinator with University of Illinois Extension .