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

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

• A. $49.80
• B. $49.85
• C. $51.65
• D. $50.00

Answer: (B)

The local cash price is the futures price plus the basis. Basis is defined as cash price minus futures price, so a positive basis means the cash market is higher than the futures market. With a futures price of 49.80 and a basis of 1.85, the cash market price equals 49.80 + 1.85 = 51.65. So the local cash market price would be 51.65 per hundredweight. This reflects how local conditions can push cash prices above or below futures, and helps explain hedging decisions and price risk in the market.

The local cash price is the futures price plus the basis. Basis is defined as cash price minus futures price, so a positive basis means the cash market is higher than the futures market.

With a futures price of 49.80 and a basis of 1.85, the cash market price equals 49.80 + 1.85 = 51.65. So the local cash market price would be 51.65 per hundredweight. This reflects how local conditions can push cash prices above or below futures, and helps explain hedging decisions and price risk in the market.