represent nearly the same commodity. But frequently, the local cash

market and the futures market are not closely related, and the basis

fluctuation is quite large. Here, the price risk to the producer could

conceivably be as large as with no forward pricing alternative.

 As evident from the above explanation, the basis is fundamental to

successful use of futures contracts. The more removed a local market is

from the mainstream of the particular industry, the greater the probability

of increases in basis fluctuations. If one knows the probability and

range of basis changes during the period hogs are being marketed, then

one can easily calculate an expected price by taking the established

forward price and adjusting for the range of closing basis. As a general

rule, the price risk from this type of transaction is substantionally less

than only being in the cash market.

 The basis reflects changes in the difference between futures and

local cash prices and, as such, it is extremely important over the pro-

duction period as a determining factor influencing hedging returns [2].

If, for example, the basis narrows from the time when the hedge (selling

contracts or "short hedging") was placed until the contract is closed,

the hog producer would have benefited from such favorable basis narrowing.

On the other hand, a widening of the basis works to the disadvantage of

short hedgers. Consequently, understanding the basis is central to any

successful hedging program [1].

 The subsequent analysis is not intended to provide a detailed dis-

cussion of hedging. Rather, an analysis of basis patterns is presented

which Florida hog producers can use to develop successful hedging pro-

grams. As such, the following analysis presents: (1) basis analysis

giving tables and charts using Live Oak hog prices from January, 1972