Maryland Soybeans: Historical Basis and Price Information
Fact Sheet 496
Dale M. Johnson, Farm Management Specialist
James C. Hanson, Professor and Chair
Kevin McNew, Adjunct Professor, Founder and President of Cash Grain Bid, Inc.
Department of Agricultural and Resource Economics, University of Maryland
The local basis, defined as the cash price minus futures price, reflects important information about regional
supply and demand for a commodity. Soybean basis estimates can be used by farmers, grain marketing firms,
processors and feed buyers to forecast regional prices, make production or storage decisions, or assess different
grain purchasing alternatives. This fact sheet gives monthly average estimates of soybean basis and cash prices
for five regions in Maryland.
Methodology and Interpretation
Tables 1-4 display the 10-year average monthly soybean basis for four regions in Maryland: Western Maryland,
Central Maryland, Upper Eastern Shore, and Lower Eastern Shore. The regional average cash price bid is
collected weekly by the Maryland Department of Agriculture. The crop year for soybeans begins on September
1 and ends August 31. Weekly regional prices were collected for the ten marketing years 2005/2006 through
2014/2015. For each day a cash price is quoted, the array of futures prices for that day for each futures contract
of the marketing year is merged with the cash price to construct a profile of basis values. The basis is computed
by subtracting the futures price from the regional cash price for a specific contract month. Monthly average
basis values are computed for each contract month and then averaged over the ten marketing years. The average
and standard deviation (SD) of the basis for the ten years is presented in the tables.
The columns for Tables 1-4 represent the futures contract month while rows signify the calendar month of the
marketing season. For example, in Table 1, the intersection of the October calendar row and the November
futures column shows that the basis is -74 cents and would be read as follows: “In the calendar month of
October, the cash price for soybeans in Western Maryland averages 74 cents below the November futures
price.” The nearby basis can be obtained from the left hand entry in every row.
A standard deviation (SD) is associated with each average basis estimate; it represents the variability from the
average basis estimates. As a general rule, the actual basis is likely to fall within plus or minus one SD of the
average basis 67% of the time. An optimistic basis is the average basis estimate plus the SD, while a pessimistic
basis estimate is the average basis minus the SD. If the basis is normally distributed, 67% of the time, the actual
basis will fall within the bounds of the optimistic and pessimistic basis values. Figures 1-4 show graphs of the
optimistic, average, and pessimistic basis for each calendar month and the nearby futures contract. In the
calendar month of October, the cash price for soybeans in Western Maryland averages 74 cents below the
November futures price and the standard deviation is 12 cents. The optimistic basis would be -62 cents (-74 +
12) and the pessimistic basis would be -86 cents (-74 - 12) as shown in Figure 1. The basis in most predictable
when the optimistic and pessimistic lines are closest to the average basis line in figures 1-4.
Using the Basis Tables: Some Examples
In this section, various examples are presented that show how the basis tables can be used.
1.
Harvest-Time Storage Decisions
For deciding whether to store grain after harvest it is important to recognize the market signals that encourage
storage. The first thing to examine is the current harvest time basis. Is the current basis stronger or weaker
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than normal? A general rule, which can improve storage profitability, is to store grain after harvest whenever
the harvest-time basis is below the pessimistic basis level and sell grain if the basis is above the optimistic
basis value. A producer harvesting soybeans in October would want to compare the current November basis
with the average November basis in October. For the Lower Eastern Shore, the average November basis in
October is -31 cents with a standard deviation of 18 (see Table 5). A basis less than -49 cents (-31 - 18) is a
good indicator to store. In contrast, a basis higher than -13 cents (-31 + 18) is a good indicator to sell grain at
harvest in lieu of storing. If the current basis falls between the optimistic basis and the pessimistic basis, as it
does 67% of the time, then there is not any marketing signal to store or to sell.
The second piece of important information for analyzing a post-harvest storage decision is comparing the
current futures spread with historical futures spread. The futures spread represents what the futures market is
willing to pay to have grain stored from a nearby contract month to a distant contract month and is computed
from the price spread between consecutive contracts (i.e., distant futures price minus nearby futures price).
For example, suppose that in October, the November and March futures soybean prices are $9.00 and $9.20
per bushel, respectively. Given these prices, the market is willing to pay 40 cents to store grain from
November to March. This difference in futures contracts is most relevant for delivery locations near the
Chicago futures exchange, but it can be useful for determining storage returns for Maryland.
To help farmers make harvest-time storage decisions, this current futures spread of 20 cents can be compared
to the historical futures spread found in the basis tables. The historical futures spread can be obtained by
taking the nearby basis and subtracting a distant basis. Using Lower Eastern Shore (Table 5), as an example, in
the calendar month of October the historical futures spread between November and March is calculated as
follows:
November basis in October – March basis in October = -31 – -41 = 10 cents
Thus, in October the historical futures spread (average price difference between the March futures contract and
the November futures contract) is 10 cents per bushel for 4 months or 2.5 cents per month. Comparing it to the
current futures spread of 20 cents or 5 cents per month, indicates that it might be a good idea to store. On any
given day, one can obtain the current futures spread by looking at the difference between consecutive futures
contract prices. When the current futures spread is higher than historical futures spread, this indicates it is a
good year to store; while lower than normal current futures spread (compared to the historical futures spread)
indicate that it is not good to store.
2.
Optimal Selling Month of Stored Grain
The basis tables can be used to calculate the average return to grain storage. By placing soybeans in storage
after harvest and simultaneously selling a distant futures contract, a producer earns a return whenever the
contracted basis increased over the season. Thus, instead of storage returns being dependent on cash price
appreciation, a hedged storage position earns profits if a contract month basis increases over the season. Using
the Lower Eastern Shore, as an example, suppose a producer wants to store soybeans from October to
February. The futures side of this hedging decision is to sell the March contract in October and, when the cash
grain is sold in February, buy back the March futures contract. The return to storage accounts for the short
futures position and long cash position. On average, this return is as follows:
March basis in February – March basis in October = -16 – -41 = 25 cents
Thus, on average, storing from October to February earns 25 cents per bushel when hedging with a March
futures contract.
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The tables can also be used to calculate the optimal month to sell stored grain. If a product harvests in October
and has a storage cost of 5 cents per month, average storage profit is equal to the average storage return (i.e.,
basis appreciation) for each month less storage cost. This is illustrated below using the Lower Eastern Shore
May soybean basis. Average return is computed from the amount of appreciation in the May basis from
October (i.e., harvest) until grain is sold. For example, the average return in January is 9 cents per bushel,
which reflects the difference between the May basis in January (-30 cents) and the May basis in October (-39
cents).
Lower Eastern Shore Soybean Storage Profit with 5 Cents/Month Storage Cost
May Futures Contract, and Storing Soybeans in October
Selling
Month
November
December
January
February
March
April
Average
Return
(¢/bushel)
-5
-1
9
17
32
24
Storage
Costs
(¢/bushel)
5
10
15
20
25
30
Average
Profit
(¢/bushel)
-10
-11
-6
-3
7
-6
The producer’s optimal selling month is October or March, since all other months storage costs exceed the
average return from storing the crop. This only illustrates what the best strategy would be on average. For any
given year, it may be best to store and sell grain at a different time during the season.
Farmers should estimate their own storage costs for this analysis. Storage costs should include monthly cost for
storage facilities, monthly interest rate (opportunity cost) multiplied by the price of soybeans, and costs
associated with loss in crop quality, if any. Many farmers use their storage facilities for at least a short time
each year to assist them in managing the flow of grain at harvest. These farmers consider drying costs to be a
harvest cost.
Price Information
Figure 5 and Table 5 show the change in average Maryland soybeans prices between September 2005 and
August 2015. Prices increased from a low of $5.00/bushel in September, 2006 to a high of $16.47/bushel in
August, 2012. Typically grain markets are characterized as having sharp peaks with long valleys.
Table 5 shows average monthly increases in cash prices from November through selected storage months. As
illustrated above, storage costs vary with the price of grain. However, in general, several of these ten years
were profitable for storage since average monthly price increases exceeded monthly storage costs. However,
storing grain without some type of forward pricing is speculation. There is no guarantee that the next nine
years will be profitable for storing soybeans.
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Table 1. Average Western Maryland Soybean Basis
Crop years 2005/06 – 2014/15
2005/06-2014/15 Average Soybean Basis - Western Maryland (cents/bushel)
November
January
March
May
July
August
Futures
Futures
Futures
Calendar Month
Futures
Futures
Futures
-52
-52
-46
-48
-37
September avg
-43
56
59
76
80
SD
53
69
-74
-82
-84
-84
-78
October
avg
-82
11
18
32
45
SD
12
38
-80
-84
-85
-88
-79
November avg
22
19
21
24
28
SD
-72
-79
-82
-86
-74
December avg
19
18
22
28
36
SD
-74
-80
-87
-78
January
avg
20
22
20
23
SD
-66
-68
-71
-77
February avg
22
21
23
26
SD
-62
-67
-59
March
avg
22
28
37
SD
-66
-67
-47
April
avg
28
33
59
SD
-62
-41
May
avg
38
53
SD
-61
-37
June
avg
46
55
SD
-37
July
avg
54
SD
August
avg
SD
4
September
Futures
n/a
n/a
n/a
n/a
-62
41
-51
55
-59
32
-46
39
-37
55
-19
84
-3
94
-4
88
1
94
-20
77
Calendar Month
September avg
SD
October
avg
SD
November avg
SD
December avg
SD
January
avg
SD
February avg
SD
March
avg
SD
April
avg
SD
May
avg
SD
June
avg
SD
July
avg
SD
August
avg
SD
Table 2. Average Central Maryland Soybean Basis
Crop Years 2005/06 – 2014/15.
2005/06-2014/15 Average Soybean Basis - Central Maryland (cents/bushel)
August
November
January
March
May
July
Futures
Futures
Futures
Futures
Futures
Futures
-44
-53
-53
-47
-48
-37
53
54
54
62
72
68
-70
-78
-79
-77
-80
-74
13
14
24
38
44
52
-77
-81
-82
-85
-77
13
16
23
28
34
-65
-72
-75
-79
-67
18
17
21
28
37
-61
-69
-76
-67
14
16
20
24
-64
-50
-57
-56
15
16
20
27
-47
-53
-44
14
22
34
-45
-46
-26
23
14
53
-39
-18
24
47
-38
-13
23
42
-18
33
5
September
Futures
n/a
n/a
n/a
n/a
-60
50
-45
57
-48
36
-34
45
-22
57
2
82
19
92
20
81
21
79
10
69
Table 3. Average Upper Eastern Shore Maryland Soybean Basis
Crop Years 2005/06 – 2014/15.
2005/06-2014/15 Average Soybean Basis - Upper Eastern Shore Maryland (cents/bushel)
May
November
January
March
July
August
September
Calendar Month
Futures
Futures
Futures
Futures
Futures
Futures
Futures
-10
September avg
-1
-10
-4
-6
5
n/a
SD
44
45
50
65
73
82
n/a
October
avg
-53
-61
-62
-60
-63
-57
n/a
SD
15
11
18
32
38
46
n/a
November avg
-53
-57
-58
-61
-53
-36
SD
21
18
19
22
28
39
December avg
-50
-57
-60
-64
-53
-30
SD
19
15
18
25
36
56
-44
January
avg
-36
-46
-53
-24
SD
13
11
12
16
29
February avg
-31
-39
-46
-37
-15
12
13
17
24
43
SD
March
avg
-26
-31
-22
0
SD
20
21
32
54
April
avg
-36
-36
-17
12
SD
14
15
44
72
May
avg
-26
-5
33
SD
9
34
82
5
June
avg
-20
38
SD
17
31
71
July
avg
-3
36
SD
30
76
August
avg
25
SD
58
6
Table 4. Average Lower Eastern Shore Maryland Soybean Basis
Crop Years 2005/06 – 2014/15.
2005/06-2014/15 Average Soybean Basis - Lower Eastern Shore Maryland (cents/bushel)
January
November
March
May
July
August
September
Futures
Futures
Calendar Month
Futures
Futures
Futures
Futures
Futures
September avg
10
1
1
7
16
n/a
5
SD
47
48
50
61
68
77
n/a
October
avg
-31
-39
-41
-39
-41
-35
n/a
SD
18
16
20
33
39
45
n/a
November avg
-39
-43
-44
-47
-38
-21
SD
18
16
19
23
29
41
December avg
-30
-36
-40
-44
-32
-9
SD
14
11
16
23
33
53
January
avg
-23
-30
-37
-28
-9
SD
13
12
13
15
29
February avg
-16
-22
-28
-19
3
SD
12
15
19
25
43
-3
March
avg
-7
-12
18
SD
22
23
33
55
-15
April
avg
-16
4
32
SD
12
20
49
77
May
avg
-6
15
53
SD
14
40
88
June
avg
-1
23
56
SD
19
40
80
July
avg
18
36
SD
32
66
August
avg
44
SD
40
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Figure 5. Monthly Soybean Prices and Nearby Soybean Futures Price
Prices not collected
Price source: Maryland Department of Agriculture. Prices computed as the simple average among Western MD,
Central MD, Upper Eastern Shore, and Lower Eastern Shore Markets.
Table 5. Maryland Average Soybean Prices with Monthly Increases in Prices
during the Storage Season, 2005/06 – 2014/15 ($/bushel).
Calendar
Month
September
October
November
December
January
February
March
April
May
June
July
August
2005/06
5.44
5.32
5.27
5.52
5.53
5.54
5.53
5.42
5.66
5.60
5.68
5.23
January
March
May
0.13
0.06
0.06
Maryland Average Soybean Prices ($/bu)
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13
8.94
11.26
9.53
10.56
12.94
16.41
9.27
8.45
9.12
11.24
11.55
14.65
10.13
8.44
9.57
11.95
10.97
13.65
10.99
7.90
9.87
12.79
10.84
13.88
12.05
9.34
9.38
13.39
11.58
13.60
13.32
8.81
9.04
13.50
12.17
14.07
13.30
8.75
9.22
13.21
12.98
14.22
12.55
9.78
9.40
13.30
13.84
13.69
12.89
10.98
9.22
13.37
13.77
14.46
14.74
11.63
9.18
13.44
13.70
15.00
14.38
10.43
9.97
13.58
15.99
14.63
12.36
10.85
10.58
13.74
16.47
13.54
Average monthly increases in price ($/bu) from November to
0.17
0.96
0.45
-0.09
0.72
0.30
-0.02
0.22
0.79
0.08
-0.09
0.32
0.50
0.14
0.17
0.46
0.42
-0.06
0.24
0.47
0.14
2006/07
5.00
5.53
6.29
6.25
6.63
7.24
7.16
6.98
7.32
7.81
8.06
8.07
2013/14
13.09
12.23
12.26
12.69
NA
NA
NA
14.77
14.69
14.28
13.01
12.50
NA
NA
0.41
2014/15 Average
10.74
10.01
9.12
8.64
9.77
8.94
9.71
9.17
9.61
9.70
9.64
9.95
9.56
10.02
9.48
10.18
9.39
10.46
9.43
10.87
10.00
11.15
9.45
11.04
-0.08
-0.05
-0.06
0.38
0.27
0.25
February 2016
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