Trends in U.S. Cotton Basis Since 2001

Stephen MacDonald and Leslie Meyer

MPRA Paper from University Library of Munich, Germany

Abstract: Price volatility in 2008 generated interest in underlying cotton cash and futures markets and highlighted the importance of market participants’ expectations about basis changes over time in production, marketing, and hedging decisions. This analysis examines trends in average U.S. cotton basis and changes in the convergence of cash and futures prices as cotton futures contract expiration dates near between 2001 and 2008 to provide perspective for the average basis movements experienced in 2008. Though this analysis does not identify the factors leading to differences in average convergence paths since 2001, it finds that, while average cotton cash and futures prices converged in all years, the pattern in 2008 was significantly different from the other sample years.

Keywords: cotton; futures; spot prices; basis (search for similar items in EconPapers)
JEL-codes: G13 Q13 (search for similar items in EconPapers)
Date: 2009-06
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