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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.