A CME grain or oilseed futures quote is the exchange price for a standardized contract and delivery month. A cash price is the local bid or transaction price for physical grain. Basis is the difference between those prices, commonly calculated as local cash price minus the relevant futures price. Because each figure describes a different part of the market, a futures quote is not a guaranteed local bid.
What the three prices describe
Futures, cash and basis are related, but they are not interchangeable. CME Group’s Learn about Basis: Grains lesson and Grain and Oilseed Hedgers’ Guide explain basis as the cash-futures price difference. Each price answers a different question:
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| Measure | What it describes | What it does not tell you by itself |
|---|---|---|
| Futures price | The exchange-traded price for a specified standardized commodity contract and delivery month. | The exact price a buyer will pay for grain at a particular local delivery point. |
| Cash price | A physical-market bid or transaction price for grain at a particular place and time, subject to the buyer’s terms. | How much of the quoted value comes from the broader futures market versus local conditions. |
| Basis | The relationship between the local cash price and a relevant futures price, expressed as their difference. | The absolute level of either cash or futures prices, considered alone. |
A local cash bid incorporates the terms of a physical sale—such as location, delivery timing and the grain’s quality—whereas the futures contract has standardized terms. That distinction is why a futures screen can help explain a local bid without being a substitute for checking the bid itself.
How to calculate basis and read “over” or “under”
For the usual grain-market convention, subtract the relevant futures price from the local cash price:
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Basis = local cash price − relevant futures price
Use the same commodity, consistent units and a futures month that is relevant to the cash bid’s delivery timing. CME’s basis lesson uses this cash-minus-futures convention.
| Illustrative prices (not current market quotes) | Calculation | How to describe the result |
|---|---|---|
| Cash corn: $4.20/bu; relevant futures: $4.35/bu | $4.20 − $4.35 = −$0.15/bu | 15 cents under futures; negative basis. |
| Cash corn: $4.40/bu; same futures quote: $4.35/bu | $4.40 − $4.35 = +$0.05/bu | 5 cents over futures; positive basis. |
“Under” means cash is below the referenced futures price; “over” means cash is above it. The number must be interpreted alongside the commodity, location, delivery timing and futures month. A statement such as “10 under” is incomplete without those reference points: it communicates a spread, not a complete physical offer.
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Futures prices capture a standardized contract traded in an exchange market. Local cash bids also reflect the balance of buyers and sellers around a particular place and the cost and practicality of getting grain to that buyer. CME’s Corn and Soybean Basis whitepaper and its basis education materials identify several factors that can affect this local relationship:
- Local supply and demand: The amount of grain available near a buyer, and that buyer’s need for it, can push the local bid relative to futures.
- Transportation: Availability and cost of moving grain influence what a buyer can offer at a location.
- Handling and storage: The facilities and services needed to receive, handle or hold grain affect local-market economics.
- Quality and specifications: Physical grain is sold under quality requirements; differences in quality or the buyer’s specifications can affect the bid.
- Substitutes: Buyers’ access to alternative supplies can change how strongly they compete for local grain.
These factors need not move together. A futures price can rise while a local bid rises by less, or even falls, if the local cash-futures relationship weakens enough. Conversely, a local bid can improve relative to futures when nearby demand or transportation conditions change. The causes depend on the location and timing; a basis number alone does not identify which factor is responsible.
Compare quotes on matching terms
Before interpreting a basis figure or comparing bids, line up the relevant details. Differences in any of these can make two numbers look comparable when they are not:
- Commodity and quality: Confirm the crop and the grade or other specifications attached to the physical bid.
- Physical location: Identify the delivery point or location for the cash price. A bid at one site need not match a bid elsewhere.
- Delivery timing: Check when the buyer wants delivery; a cash bid for a different delivery period may relate to a different futures month or basis.
- Futures contract month: Record the exact delivery month used to calculate or discuss basis, rather than relying on an unspecified “futures” quote.
- Units and currency: Make sure both prices use the same unit and currency before subtracting them.
- Transaction terms: Read the buyer’s actual bid and delivery conditions. A futures quote does not promise that a buyer will accept grain at that price.
For example, CME lists its corn futures contract in U.S. cents per bushel and specifies a contract size of 5,000 bushels. That is a corn contract specification, not a universal quantity or unit for every grain and oilseed contract. The relevant contract’s current specifications and dates should be checked directly before using a quote or planning a transaction; CME’s live corn specification page is the source for the current corn terms.
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What it means for basis to strengthen or weaken
Basis strength describes a change in the cash-futures spread, not whether the absolute price of grain went up or down. Basis strengthens when it becomes more positive or less negative; it weakens when it becomes less positive or more negative.
| Change in basis | Direction | Why |
|---|---|---|
| 50 cents under to 40 cents under | Strengthens | The spread becomes less negative, or closer to zero. |
| 20 cents over to 15 cents over | Weakens | The spread becomes less positive, or closer to zero from above. |
Do not infer basis direction from the futures chart alone. To find the change, compare cash minus the relevant futures price at each point, using consistent commodity, location, delivery timing, unit and contract month. If those reference terms change between observations, the apparent movement may not represent a like-for-like change in basis.
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How basis affects a futures hedge
A futures hedge can offset some movement in the broader futures market, but it does not fix the local cash-futures spread in advance. That leaves basis risk: the chance that the basis when grain is bought or sold differs from the basis expected when the hedge is put on. CME’s hedger guide and glossary describe this distinction.
Producer selling physical grain with a short hedge
A producer expecting to sell grain may sell futures as a short hedge. The futures position is intended to offset some futures-price exposure before the physical sale. The producer’s eventual cash result still depends on the basis realized at sale, as well as the actual cash bid and the hedge outcome.
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CME’s educational wheat example uses a short July futures hedge and an expected basis of 35 cents under. If basis at sale is 30 cents under instead, it is five cents stronger than expected; the resulting cash sale price is five cents better relative to the expected basis. If basis is 40 cents under, it is five cents weaker and the cash sale price is five cents worse relative to that expectation. The example illustrates the basis effect; it is not a promise about any market’s future bid or a complete calculation of a particular hedger’s net proceeds.
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Buyer purchasing physical grain with a long hedge
A buyer expecting to purchase grain may buy futures as a long hedge. For that buyer, the basis effect runs in the opposite direction: a stronger basis raises the effective purchase price relative to the planned basis, while a weaker basis lowers it. The physical bid and futures position both matter; neither side of the hedge should be treated as the entire purchase cost.
In either case, “stronger” is not automatically good for every market participant. It describes the spread’s direction. A seller may prefer a stronger basis because the local cash price is higher relative to futures; a buyer generally prefers a weaker basis because the local cash price is lower relative to futures. Those preferences do not say whether the absolute futures market rose or fell.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why cash and futures tend to converge near delivery
The physical delivery process links a deliverable futures contract to the physical commodity market. CME’s Understanding the Grain Delivery Process lesson explains that cash and futures prices tend to converge as the contract’s delivery month approaches. The connection gives the futures contract a relationship to physical grain rather than leaving it as an unrelated financial quote.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchConvergence does not mean every local bid must equal a futures quote at every moment. Local cash prices still reflect place, quality, delivery arrangements and local market conditions. Nor should a futures trader assume that owning a contract automatically means the trader will take or make delivery: CME notes that most positions are offset or rolled rather than delivered. Delivery procedures and dates are contract-specific, so anyone whose position could remain open into delivery should check the applicable exchange terms rather than assume all contracts follow identical details.
A practical way to read a grain bid
- Start with the physical offer. Note the buyer, delivery location, delivery period, quality requirements and quoted cash price. Those terms establish what the local bid actually covers.
- Identify the futures reference. Match the commodity and choose the relevant delivery month for the comparison. Do not calculate basis against an unrelated contract month simply because its quote is easy to find.
- Normalize the numbers. Convert the cash and futures prices to the same unit and currency. For corn, CME specifies a 5,000-bushel contract quoted in U.S. cents per bushel; confirm current contract terms rather than extending that specification to other commodities.
- Subtract futures from cash. Apply cash minus futures and retain the sign. A negative result is under; a positive result is over.
- Compare basis only on comparable terms. When assessing a change over time or between bids, keep commodity, location, delivery timing and futures month consistent. If a term changes, identify that difference before drawing a conclusion.
- Separate the spread from the price direction. A stronger basis means more positive or less negative, not necessarily a higher cash price in absolute terms. Check both the cash bid and futures quote to understand what moved.
This sequence helps answer three different practical questions: what a buyer is offering for the physical grain, how that offer relates to a relevant exchange price, and whether the local spread has changed. It does not replace reading the sale terms or evaluating a hedge’s full cash-and-futures result.
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