1 Managing for Today’s Cattle Market and Beyond Understanding and Using Feeder and Slaughter Cattle Basis

Basis is defined as the difference between the local cash market and a futures contract price (Basis = Cash Price- Futures Price). Knowledge of historical basis patterns can be useful when estimating expected sale or purchase prices at the conclusion of a futures or options hedge, when evaluating a current cash market quote, and when evaluating forecasted cash prices. This fact sheet explains how feeder and slaughter cattle basis is computed, outlines an approach to developing a history of local basis levels, and discusses how historical basis data can be used to forecast basis