Basis risk and its volatility on the soya trade at Mato Grosso (2009 to 2019)

Abstract:

This research analyzes the basis volatility in soybean hedges in the municipalities of Mato Grosso (Sorriso, Sapezal, Rondonópolis, Nova Mutum, and Querência) with the contracts’ future prices maturing in January, March, and May traded in Chicago, in the period of 2009 to 2019. The theoretical approach analogous to the inventory theory evaluated the behavior of the basis and the differences between the basis in the planting and the maturation of the futures, aiming to identify the existence of patterns of basis gains or losses, as well as the periods that optimize them. The theory of convergence between future and spot prices at contract maturity has not been confirmed; in general, there are basis’s losses and the basis does not remain in its historical values, as pointed out in North American literature for soybeans. For contracts maturing in January and March, the closer to the maturity of the contract, the greater the loss from the basis differential, unlike the May contract.

Keywords:
commodity; spot prices; future prices; basis risk; hedge