Market data charts can be configured to visualize and assess trends in basis and futures data. While the tool allows you to create charts using the entire data library, the following recommended configurations offer insights into current market trends.

Comparing current basis levels to short- and long-run average values can provide insights about the extent to which prevailing market conditions are more or less favorable. Additionally, comparing current basis to averages could help indicate whether basis is likely to increase or decrease as it returns to its long-run average. For more information on the one-week or three-year averages, click What is basis? at the upper left-hand corner of the screen, and scroll down to "What is the difference between average basis and basis volatility?"

To compare current basis to averages, add the following items: basis for the region, wheat class, and protein level of interest; one-week (short-run) and/or three-year (long-run) average basis.

Comparing current year's crop market conditions to next year's crop market conditions could provide insights about storage and marketing timing decisions. Comparing the nearby basis to harvest basis can also be a signal of market expectations for the new crop (harvest basis) relative to supply and demand conditions for the current crop (nearby basis). The most relevant comparison is between nearby and harvest basis in the same region and for the same class and protein of wheat.

To compare nearby and harvest period basis, add the following items: nearby basis for the region, wheat class, and protein level of interest; harvest period basis for the region, wheat class, and protein level of interest.

Montana elevators offer premiums and discounts for wheat with different levels of protein content. Assessing the level of premiums and discounts upon delivery can help develop a more strategic marketing plan. Additionally, comparing current protein premiums relative to short-run and long-run premiums can also signal whether market supply and demand conditions for higher-quality wheat are particularly different from average conditions. Similarly, it is useful to track protein premiums over time to understand the evolution of market trends.

To visualize protein premiums, add the following items: nearby basis for the region, wheat class, and protein level of interest; nearby basis for the region, wheat class, and a higher or lower protein level of interest. The difference in prices of these two items represents the protein premium.

Assessments of local protein premiums can be useful to understand Montana's marketing landscape. The spread between the futures contract at the Minneapolis Grain Exchange (MGEX) and the Kansas City Board of Trade (KCBT) can provide insights about the national and global valuation of higher-protein wheat at nearby and harvest periods. It may be useful to examine how the spread changes over time and whether the current spread is higher (i.e., higher-protein wheat is valued more) or lower (i.e., higher-protein wheat is valued less) on the national and global marketplace. For more information on the MGEX-KCBT spread measure, click What is Basis? at the upper left-hand corner screen and scroll down to "What is the MGEX-KCBT spread and why is it useful?"

To examine the MGEX-KCBT spread, add the following items: choose the MGEX-KCBT Spread from the Region/Exchange and plot the default (nearby) selection over the date range of interest to you. Now choose Add Selection and do the same, except choose "MGEX-KCBT spread, $/bu, harvest" from the Data Item menu.

Assessing basis levels at different locations around Montana can provide insights about different marketing conditions in the state. For example, if current basis levels in a location are higher than current and average basis in nearby regions, it could be beneficial to consider marketing to that location. Another example is to compare differences in basis offered for different protein levels across locations, which could help assess marketing conditions for wheat quality.

To compare basis in different locations, add the following items: basis for a region of interest, wheat class, and protein level of interest; basis for a comparison region, wheat class, and protein level of interest.

Volatility is a measure of uncertainty in the local, national, and global markets. Visualizing volatility across time can help assess the stability of markets. For example, assessing how one-week volatility changes over time can help provide insights about whether markets are more or less likely to change within a short marketing period. Lengthier measures of volatility can help understand market stability more generally. Comparing how shorter-run volatility (e.g., one-week or one-month) compares to longer-run uncertainty (e.g., six-months, one-year) could help assess the relative stability of current markets.

To examine and compare volatility measures, add the following items: basis volatility measure for a region of interest, wheat class, and protein level of interest; additional basis volatility measures for a region of interest, wheat class, and protein level of interest.

Kate Binzen Fuller
Assistant Professor/Extension Specialist
Agricultural Economics and Economics
P.O. Box 172800
Bozeman, MT 59717-2920
Phone: 406-994-5603
E-mail Kate

 

Anton Bekkerman
Associate Professor
Agricultural Economics and Economics
P.O. Box 172920
Bozeman, MT 59717-2920
Phone: 406-994-3032
E-mail Anton