Master of Science
Sanders, Dwight R.
The purpose of this paper is to identify soybean basis relationships between differing regions of the state of Illinois. Time-series analysis using a Granger Causality framework is conducted to identify lead-lag relationships between seven geographical regions of Illinois. The regions are identified as Northern, Western, North Central, South Central, Wabash, West-Southwest, and Little Egypt. There has been considerable research describing the factors that influence grain basis; the most consistently identified being local production and consumption, stocks, storage capacity and cost, and transportation costs. However, there has been minimal inquiry into tracking grain basis relationships through time in different marketplaces. This area of research has a high level of importance because if a lead-lag relationship is found between any two regions, the leading region soybean basis can be used as a tool to assist in predicting future soybean basis in the lagging region. The time-series analysis results indicate that lead-lag relationships do play a role in determining Illinois soybean basis. The Western and West-Southwest regions are the most dominant while the Southern Illinois regions of Wabash and Little Egypt are the least. These findings can help soybean basis users in making important decisions regarding expected basis levels during the marketing year.