Predicting the Corn Basis in the Texas Triangle Area
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Shifting patterns of corn use as a result of the ethanol boom may be causing
basis levels to change across the United States, creating the need for methods to
predict basis levels in dynamic conditions. This study develops a new and
straightforward economic model of basis forecasting that outperforms the simple
three-year average method suggested in much of the literature. We use monthly
data of the corn basis in the Texas Triangle Area from February 1997 to July
2008. The results show the new model based on economic fundamentals
performs better than basis estimates using a three-year moving average.