Agricultural Economics Department

 

Date of this Version

April 2001

Comments

Published in Cornhusker Economics. April 18, 2001. Produced by the Cooperative Extension, Institute of Agriculture and Natural Resources, Department of Agricultural Economics, University of Nebraska - Lincoln.

Abstract

In December 1998 hog prices fell to unprecedented levels. Adjusted for inflation these were some of the lowest prices received by pork producers. The basis relationship (the difference between a futures contract price for a commodity and a local cash price for that commodity) between the cash markets and the Chicago Mercantile Exchange (CME) futures contract on lean hog carcasses increased to record proportions as well. Was the record wide basis a one time event, based on the futures markets inability to drop as quickly as the cash bid, or are there underlying fundamental changes in the basis for hogs?

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