The map below shows the basis for corn at the end of May in Nebraska and a few o
ID: 1119366 • Letter: T
Question
The map below shows the basis for corn at the end of May in Nebraska and a few other states. Using this map as an example, discuss all factors that may have explained the differences in basis across the attached map. Note that you are not required to provide an accurate explanation of why these basis were different, but instead provide a detailed explanation of what might have caused these differences.
Corn Basis, 05-24-2017 Basis = Cash Price-Nearby Futures Price CBT Jul Futures Price: S3.71 S/Bushel -.39 .47 .50 -·59 -.66 -,73 www.agmanagerinfo K-State Research and ExtensionExplanation / Answer
Corn basis means the difference between the cash price of corn and the future price in different places. That means the prices are not uniform even though the product is homogeneous. There can be different factors that might cause the difference. One of the factors is difference in taxes from one state to another. The future tax rate in one state may be higher than the other. The taxes included purchase fee, sales tax, market fee etc.
Another factor can be weather conditions in different regions. Unfavourable weather conditions can spoil huge crops quantities of crops as a result the supply of corn will decrease and the price may increase. Whereas the region with favourable weather condition can have fair price which is less than that of the region with adverse environment condition. Thus the variations in corn basis can happen.
Other factors may be increase in cost of production, different techniques of productions and so on.
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