Another source of error, which could either benefit or harm the

Florida hedger, is the fluctuations in any given week between years.

For example, in week 49 when the average basis was -$0.74, the standard

deviation was $4.33. This means that 68 percent of the time the basis

will not fluctuate more than $4.33 above the average basis and $4.33

below the average. In other words, if a hedge were placed with the in-

tention of lifting it the second week of December, a Florida producer

should be prepared to have a final or realized basis that varies sub-

stantially from the average of -$0.74. If there is a desire to minimize

the risk of reduced profit potential from a widening basis, then the

potential hedger would want to use a more conservative basis estimate

than the average shown in the tables for the week being considered. If

the basis is a positive number, this means using a smaller positive

number or perhaps even a negative number. If the average basis is a

negative (because the Florida cash price is higher than the futures

price) then a larger negative number would be used.

 Further examination of the tables indicates that the highest standard

deviations occur in December and January. Relatively small standard de-

viations ($1.00-2.00) are found in many months during the year which means

that the risk from basis fluctuations is minimized at this time.

 Summary and Conclusions

 Basis tables and charts are presented for two weight groups of Florida

hogs, 180-200 pounds, and 200-240 pounds. The rather wide seasonal fluc-

tuations, combined with significant fluctuations in any week between years

(as shown by the standard deviation) indicates that while the futures

market can be an effective tool for reducing price risk, considerable


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