BASIS VARIABILITY ON THE FEEDER CATTLE CONTRACT VERSUS THE FAILED STOCKER CONTRACT

Basis variability is compared across markets, over time, between stocker and feeder cattle and the impact of market volume is determined. Variability was significantly greater with the Stocker contract. Volume varied seasonally by market. Increased market volume significantly reduced basis variability. Increased variability in market volume significantly increased basis variability.Livestock Production/Industries,

Basis Variability on the Feeder Cattle Contract Versus the Failed Stocker Contract

Basis variability was compared in 10 markets for 550 and 750 pound steers using the Chicago Mercantile Exchange (CME) stocker and feeder indexes as a proxy for futures prices. Basis variability for 550 pound steers was significantly greater than basis variability for 750 pound steers. As market volume decreased and as volume variability increased, basis variability also increased. The failed CME stocker contract never attracted enough volume to remain a viable contract. One possible explanation for this contract failure is the basis risk associated with it was large enough to discourage producers from using the contract to hedge calves

BASIS VARIABILITY ON THE FEEDER CATTLE CONTRACT VERSUS THE FAILED STOCKER CONTRACT

Basis variability is compared across markets, over time, between stocker and feeder cattle and the impact of market volume is determined. Variability was significantly greater with the Stocker contract. Volume varied seasonally by market. Increased market volume significantly reduced basis variability. Increased variability in market volume significantly increased basis variability