ABSTRACT
Organized commodity markets such as the Chicago Board of Trade, the Kansas City Board of Trade, and the Minneapolis Grain Exchange have played an important role in the development of an efficient grain-marketing system in the United States. By providing centralized futures trading under rules and regulations, organized commodity markets have helped make grain marketing a highly competitive business. These markets serve as clearinghouses of grain supply and demand information for efficient price discovery. Futures prices, as derived from the trading of futures contracts, are central to the entire grain-pricing and marketing mechanism. Grain production is highly seasonal, and the delivery months for grain futures contracts are related to the harvesting, marketing, and consumption of grain throughout the year. The basis is much more meaningful to the grain merchant or processor than the flat price of the commodity; therefore, basis trading is dominant in all grains that are traded on futures markets.
