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Cash hog prices higher than futures

Agriculture.com Staff 03/15/2006 @ 1:40pm

What is going on with this cash market, shouldnít it be below the futures? Confused Producer Who Likes Cash Contracts.

We do have a situation that is confusing to many producers who price their livestock using fixed pricing strategies. We have the futures following the normal Lenten break while the cash market has gained and is holding above the futures market. Your typical basis for this time of year is $3-4 under the futures as an average.

Most forward contracts typically use the worst historical basis due determine the cash prices to the futures market. For a specific price the packers will leave themselves plenty of room to guarantee a profit for themselves. Producers who are willing to take the basis risk they definitely have a price advantage in this situation. With everything being offered in the market producers have the tools to protect profits or prevent huge losses.

What is going on with this cash market, shouldnít it be below the futures? Confused Producer Who Likes Cash Contracts.

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