I’ve had many questions recently about the wheat market. Most of the questions have been about convergence, or lack thereof, in the July CBOT wheat futures market. Before we answer that question, let’s review some futures basics. A futures market is a market in the price of a good for
delivery at some time and location in the future. Because prices vary over time and space, there is typically a difference between the price of the good ‘here and now’ and ‘there and then.’ We call this difference ‘basis.’ One of the tenets of futures markets is that the cash and futures prices
should converge, i.e. the basis should go to zero, at the delivery point as the futures contract approaches expiration.
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http://aede.osu.edu/people/roberts.628/extension/newsletter/n06.pdf