Rolling Basis Contracts: The Math
A May basis contract needs to be rolled or priced by the close of business Thursday. We recommend all corn and bean basis contracts be rolled to July. Here is how it is done:
Your merchandiser maintains a long (buy) futures position in the May contract. That long position can only be liquidated by selling May futures to offset the long position (previous May futures buy). To maintain a long position in the futures market, a July contract (or any deferred futures contract) must be bought.
May corn as of this writing is $6.52 and July corn is $6.08. The May would be sold at $6.52 and the July would be bought at $6.08. The selling price is 44¢ higher than the buying price. That is the American way: Sell high and buy low! No matter what your May basis was, add 44¢ to it. If there is a roll fee of 1 or 2¢, that will come off the 44¢. A May basis contract 10 over the May becomes 54 over the July. A 16 under the May contract becomes 28 over the July.