On June 15, the spot price for corn stands at $5.20 a bushel, while the October futures contract for corn stands at $5.32 per bushel.

a. determine what the basis is for corn on June 15.

b. Based upon this basis value, would you expect normal backwardation or contango to occur in the futures market as the  October corn futures contract moss toward settlement?

c. the following month (July 10) the spot price for corn goes to $5.25 per bushel, while the October futures contract price moves to $5.10 per bushel.

    1)  determine what the basis is for corn on July 10.

    2) has the basis for corn strengthened or weakened between June 15 and July 10?

    3)based upon this new basis value for July 10, would you expect normal backwardation or con tango to occur in the futures market as the October corn futures contract moves toward settlement.

Answer rating: 100% (QA)

SOLUTION a The basis for corn on June 15 can be calculated by subtracting the spot price from the futures price Basis Futures Price Spot Price 532 520 012 per bushel b Based on the given basis value o... View the full answer