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Abstract

The implied costs of forward contracting Illinois corn and soybean prices at planting-time are estimated. Thirty years of basis data are collected for seven regions in Illinois. Forward basis quotes are collected at planting-time (May) and actual basis levels are recorded at harvest time (October). Costs embedded in the forward basis quote are estimated and the implications for producer marketing strategies are examined. The results suggest that elevators' embedded premium-producers' cost of forward contracting-are rather small, especially for corn. Forward contracting costs vary significantly across the state. Implications for producer risk management strategies are explored.

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