Cash Price
Categories: Trading, Metrics, Company Valuation
You own a farm with 10,000 pigs. You start looking in your silos, and realize that you’re running out of food for your precious little pre-sausages. You’re going to need food within the next two weeks or else you’re going to hear the sound of hungry pigs squealing and haunting your dreams.
But the next futures contract doesn’t expire for another month. What do you do? You go to the spot market where physical commodities are sold, and you buy contracts for all the corn, soymeal, or other feed commodity that you need to get you through the month.
The price you pay at the spot market is called the cash price, and it will typically factor in transportation costs.
