DEFINITION of 'Price Basing'

A method of pricing commercial commodity transactions that bases these prices on related futures contract prices. This method is used by commodity producers, processors, merchants and consumers.

BREAKING DOWN 'Price Basing'

Using futures contracts with similar underlying commodities as a pricing benchmark for commercial commodity transactions allows smaller participants in the commercial market for commodities to factor-in different variables. Price basing permits these individuals and companies to reach a more informed price without the related cost of research.

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