Using Historical Basis Information for Hedging Indiana Hogs

Purdue University 1999 Swine Research Report. Low hog prices in the winter of 1998 encouraged more Indiana producers to take another look at hedging hogs. One of the critical elements in the decision to hedge is the basis. The basis used in this study is the price relationship between the Indiana-Ohio direct hog price and the nearby futures price. Two important uses of the basis are for localizing the expected net returns from a futures hedge, and to examine the possible variation in price that may arise due to basis uncertainty.