The nearby hog futures contract closed at $49.80 with a local basis of $1.85 under. The local cash market price was what?

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Enhance your skills with the FFA Farm Business Management Test. Learn and practice with detailed multiple choice questions, complete with explanations and insights. Elevate your farm business acumen and ace your exam.

Multiple Choice

The nearby hog futures contract closed at $49.80 with a local basis of $1.85 under. The local cash market price was what?

Explanation:
Basis is the difference between the cash price and the futures price. When the basis is described as under by 1.85, it means the cash price is 1.85 dollars lower than the futures price. So the local cash price equals the futures price minus 1.85: 49.80 − 1.85 = 47.95. Therefore, the local cash market price is $47.95 per cwt.

Basis is the difference between the cash price and the futures price. When the basis is described as under by 1.85, it means the cash price is 1.85 dollars lower than the futures price. So the local cash price equals the futures price minus 1.85: 49.80 − 1.85 = 47.95. Therefore, the local cash market price is $47.95 per cwt.

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