through October, 1980; (2) further explanation of "basis" as it relates

to Florida hog producers.

 Methodology


 Futures price data were obtained from The Yearbook of the Chicago

Mercantile Exchange (CME) for the years 1972-1978 and daily reports for

1979 and 1980 [4]. The daily closing quote is from Monday while the Live

Oak auction is held on a Wednesday. The cash prices were obtained from

the Florida Livestock Market Report published weekly in Winter Park by

the Florida Depattment of Agriculture and Consumer Services (in conjunc-

tion with the Federal-State Market News Service). The data shown are

from the Wednesday market but are recorded as a Friday date to confirm

with the Report's release time. The cash prices are subject to limitations

of Market News Service data. For example, the prices are simple averages

of the market rather than being weighted by market volumes.

 Cash prices are subtracted from futures prices to calculate the basis,

 i.e. B = F-C. A positive number means that the futures price is higher

 than the particular cash price. A negative number means the futures

 price is lower than the cash price. Also, the basis reported is tied

 to the nearby contract, i.e., the contract closest to the month the pro-

 duct is being sold [3].

 Judgement is required in determining the time to change from one

 contract to the next one. Our approach is to switch to a new contract

 month beginning the first day when the current contract is in the termi-

 nating month even though trading in the current contract continues through

 the 20th of the month or the last business day preceding the 20th. For

 example, the April contract is traded until the 20th of April at the