Our guide to understanding canola basis ended on a specific promise: once you have a real basis history, you can separate the basis decision from the futures decision instead of pricing both at once. This is the post that makes good on that promise.
A basis contract is the tool that does the separating. It lets you lock in today's basis — the local piece of your price — while leaving the futures piece open for later. Used well, it can capture value that a straight cash sale leaves on the table. Used carelessly, it introduces a deadline you can miss and a storage window you still have to manage.
What a Basis Contract Actually Is
A basis contract splits the two components of your price — basis and futures — into two separate decisions with two separate timelines:
Basis: locked now. You and the buyer agree on a basis level today, against a specific futures month. That number is fixed for the life of the contract.
Futures: priced later. The futures leg stays open. You choose when to price it — anytime up until the contract's pricing deadline — by calling the buyer and telling them to fix it at the current futures price.
Once both pieces are set, your final cash price is simply:
Cash Price = Locked Basis + Futures Price (at the moment you price it)
Compare that to a straight cash sale, where you agree to one flat price today and both components are locked simultaneously — you get certainty, but you give up the ability to act on either piece independently.
Why a Producer Would Use One
The case for a basis contract comes down to one situation: you like what basis is doing, but you don't yet like — or don't yet know — what you want to do with futures.
A real example from our archive shows the two moving in opposite directions at once: in Hard Red Spring Wheat: Futures Fall as Basis Improves, HRS futures dropped while Saskatchewan basis strengthened at the same time. A grower locked into a single flat-price sale before that split would have caught the falling futures and the improving basis together — a wash, or worse. A grower holding a basis contract could have locked the strengthening basis right away and left the futures decision for a better day.
That's the entire case for the tool in one example: futures and basis don't always move together, and a basis contract lets you act on the one that's moving in your favor without being forced to act on the other.
The Mechanics: A Worked Example
Say it's October. The crush plant's basis for November delivery is running unusually strong at +$6/tonne against November futures, which are sitting at $645/tonne. You're not sold on where futures go from here, but you know a +$6 basis is well above what you've tracked in past Octobers.
You sign a basis contract: basis locked at +$6/tonne against November futures, with a pricing deadline of March 31 to fix the futures leg.
If futures rally to $680 by February and you price then, your cash price is $680 + $6 = $686/tonne — you captured the higher futures price with the strong basis still attached.
If futures instead fall to $610 by February and you price then, your cash price is $610 + $6 = $616/tonne — the strong basis softened the blow, but you still carried the futures risk you chose to hold.
If you take no action by March 31, the buyer typically prices the futures leg for you at their discretion under the contract's default terms — rarely to your advantage.
Nothing here predicts which way futures move. The point of the example is mechanical: the basis stays fixed at +$6 no matter what futures do, and the futures decision stays entirely in your hands until the deadline forces it.
The Real Risks
A basis contract isn't free optionality. Two risks are built into the structure, and both are worth taking seriously before signing:
The pricing deadline. Every basis contract has a firm date by which you must price the futures leg. Miss it, and the buyer usually prices it for you — often at a time and level that isn't in your favor. Know the deadline before you sign, and put it somewhere you'll actually see it again.
Storage condition risk. The grain typically has to stay in storage — either on-farm or at the elevator — until you price and deliver. Moisture, heat, and spoilage don't pause because you've locked a favorable basis. A great basis contract on grain that goes out of condition before delivery isn't a win.
Neither risk is a reason to avoid the tool. They're reasons to use it deliberately — with a deadline you'll track and grain you're confident you can keep in condition for the life of the contract.
When It Beats a Straight Cash Sale
This comes back directly to the strong/weak basis framework from our basis guide:
Basis is strong relative to its own history, and you're unsure about futures. This is the textbook setup. Lock the strong basis now — it may not stay that strong — and give yourself room to make the futures call separately.
Basis is weak relative to its own history. Locking a weak basis just to have it locked usually isn't the priority. A straight cash sale, or simply waiting for basis to improve, is often the better move.
You need price certainty on both pieces right now. If the deadline risk or storage risk makes you uneasy, a straight cash sale removes both — at the cost of giving up the flexibility a basis contract provides.
None of this requires a futures forecast. It requires knowing whether the basis in front of you is genuinely strong for your area and month — which is exactly what tracking basis over a season teaches you to recognize. Our guide to basis trading signals covers how to read that strengthening or weakening pattern before you sign.
Where This Fits in Your Marketing Plan
A basis contract is a tool, not a strategy on its own. It fits inside the broader approach we lay out in Canola Prices in Canada: The Complete Producer's Guide — sell incrementally, separate your futures and basis decisions where it makes sense, and let objective signals rather than headlines drive the timing.
Watching the crush margin alongside your basis history gives you an early read on whether basis is likely to strengthen or weaken before you lock it — one more piece of context before you sign.
Frequently Asked Questions
How is the final price set on a basis contract?
You lock in the basis today and set a firm price for the futures portion by an agreed deadline. Cash Price = Locked Basis + Futures Price at the time you price the futures leg.
What happens if I miss the pricing deadline on a basis contract?
Delivery deadlines and pricing deadlines are usually set separately in the contract, but the futures pricing deadline is the one that matters most — miss it and the buyer typically prices the contract for you at their discretion, often on unfavorable terms.
Is a basis contract the same as a deferred delivery contract?
A basis contract locks basis now and leaves futures open; a deferred delivery contract sets a full flat price now for delivery later. A basis contract is the tool when you like the basis but not the futures price yet — or the reverse.
When does a basis contract make the most sense?
Basis contracts work best when basis is strong relative to its own history and you expect it to weaken, or when you're comfortable with the futures price risk and want to keep that decision open. In a weak or weakening basis environment, locking basis early may not be the priority.
Does a basis contract protect my grain from storage risk?
Yes. Storing canola under contract still carries the ordinary risks of moisture, heat, and spoilage, and the terms of the sale don't protect the grain itself — you're responsible for keeping it in condition until delivery.
The Klarenbach Grain Report provides objective, chart-based analysis of Canadian grain markets. This guide is educational and is not individualized trading or marketing advice.
